Russian stock market down 30% since Georgian invasion

[muriel_volestrangler]

Some international banks estimating that between up to $20bn (£11bn)in foreign capital has been pulled out of Russia in the last month alone.

Since the invasion the value of the rouble has slumped, reportedly leading to the central bank stepping in.

So whereas Russia may have got away with a slap on the wrist from Europe for its invasion, Moscow is being punished much more directly by international investors.

Analysts in Moscow say Russia is now seen as a risky place to invest and it will be a long time before confidence returns.

http://news.bbc.co.uk/1/hi/business/7600784.stm

[TornadoTN]

1. This is even more threatening than Warships and "harsh words"

Russia knows that they are heavily dependent on foreign investment, especially from the west. The power's that be in Moscow can't afford a major economic crisis and a repeat of the bread lines and hardships that helped seal the fate of the Soviet Union. They know to repeat this would seal their own fate.

So where does that leave them?

1. Cozy back up to the west (for the time being)

or

2. Rally intense nationalism by drumming up a "war economy" - either by waging a war with someone (anyone) or engage in a stand-off

[tuckessee]

3. I think they'll go for option #2

Do they really have any choice? The West has backed them into a corner.

What can they do cozy up to the west except pull out of South Ossttia, renounce any claims on it or any other disputed territory, and sit back while NATO encircles them with missiles?

[hogwyld]

5. I see them continuing to reintegrate former provinces

If the west is going to continue to poke at the bear and encirle it, it makes sense to regain a buffer zone which will include the rest of Georgia, retake Ukraine, and the baltic states. I can assure you that if the shoe was on the other foot, we would do the same.

[scisyhp1]

6. Russia is not dependent on foreign investment at all.

In fact, they have more money than thay know what to do with.
They have about $600 billion in reserve and stabilization funds.
They even invested tens of billions in the Fannie Mae paper here
in the US. They collect about $250 billion in gas and oil revenue
annually. They were dependent on foreign investment 15 to 10 years
ago, and did attract some billions of what turned out to be a very
good investment then. Now they are having second thoughts on letting
the foreigners in on those valuable assets so cheaply. So they
are trying to get those assets back now by hook and crook, from
enforced buyouts, to court action, to sudden vigilance of their
environmental protection agency, to refusing visas for joint venture
executives, to direct confiscation of the assets. Now they can also
use the falling stock market to get the shares back from the panic
stricken foreigners in an even easier and completely legal way.
If you are smart, stay with Russian stocks or get in while they are
cheap, paticularly in oil and gas. Those companies make real profits
and pay real dividents, all of which will be only going up.

[pampango]

2. This is Russia's first war as a capitalist country, so reactions in their stock market

and international investments are probably new concepts for them to consider.

In the "good ol' days" of Hungary, Czechoslovakia, and Afghanistan none of those considerations mattered.

[TornadoTN]

4. Which is why its even more concerning

Since they haven't had to deal with this before and this is all new to them, they are more apt to buy into even more of their Soviet roots - preemptive war to rally the economy. Short term, it will help - but long term, well, you can see whats happening with us today.

The fact that their economy is responding in this way isn't unexpected, but it should worry us all as to what steps they will take from this point forward. Putin has been hitting the press with extreme criticisms of the west and the United States, expect that to heat up a great deal as their economic situation worsens. From there I'm very concerned on where that could lead.