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Russian stocks have reached their highest level since the start of the war of aggression in Ukraine. At the beginning of the week, the ruble-based MOEX index on the Moscow Stock Exchange climbed to 3,422 points and has remained just below this level since then. In view of the attack in February 2022 and the sanctions imposed by the West, Russian stocks initially crashed and reached a low point in the fall of that year. Since then things have been looking up again.

There are several reasons for this development: Russian investors have hardly any alternatives to the domestic stock market. Before the war, wealthy Russians and oligarchs had moved assets abroad, especially to the West. But given the financial sanctions, this path is now largely blocked. Added to this is the pressure from the Kremlin: Russian business people know that they are now expected to leave their money in the country.

But it’s not just Russian money that’s trapped there. Western investors who put money into Russian stocks before the war cannot sell them. The Kremlin has banned investors from “unfriendly states” from selling their shares in Russian companies.

In addition, the Russian economy is developing much better than expected after the invasion of Ukraine – even if the official data does not show the complete picture. The Kremlin has found ways to circumvent or at least cushion Western sanctions. In addition, the economy is stimulated by the war-oriented economy. The Russian research institute CAMAC assumes that around two thirds of the increase in industrial production in the past two years can be attributed to the war.

Against this background, the Russian economy, which was affected by enormous war spending, recovered last year from the economic downturn caused by the invasion of Ukraine. According to official statistics, the gross domestic product increased by 3.6 percent. In 2022, when Russia began the war called a “special military operation,” the economy had shrunk by 1.2 percent.

The increased oil price also contributes to the better development of the economy and thus the Moscow stock market. On the one hand, Russia’s state budget is based on the proceeds from oil sales. On the other hand, the oil companies have a lot of weight on the stock market.

For Russian small investors, the situation is not very different from that before the war: the economy is going well and some companies are paying out high dividends – including the oil companies Lukoil and Rosneft as well as Sberbank. Russia’s largest financial institution made a record profit of the equivalent of 15 billion euros last year, five times the previous year’s figure. Rosneft earned around $13 billion and Lukoil $12 billion.