Russian Markets and Currency Hit by Georgian Conflict | Voice of America - English
Russia's currency and stock market have suffered substantial losses since the outbreak of hostilities in Georgia three weeks ago.  VOA Moscow correspondent Peter Fedynsky reports investors are nervous going into the weekend over the possibility that European heads of state may apply sanctions against Russia during a special summit on Monday to discuss the Georgian crisis.
Russia's RTS Index of leadingstocks fell more than six percent the day hostilities broke out inGeorgia and reached their lowest point in nearly two years whenPresident Dmitri Medvedev formally recognized the independence ofAbkhazia and South Ossetia. Bloomberg News reports the Russianruble is headed for its biggest monthly decline against the U.S. dollarin more than nine years as investors reduce their Russian holdings. Inaddition, Russia's Central Bank says the country lost more than $16billion in the week following the launch of military operations inGeorgia on August 8. Financial observers attribute the loss to nervousinvestors pulling capital from Russia. The RTS index reached itspeak in April and has been ratcheting down since. Timur Nazardinov,chief trader at the Troika Dialogue Investment Bank in Moscow says theGeorgian conflict accelerated the decline. Nazardinov saysevents in Georgia brought uncertainty into the market, which naturallyreacted negatively. He adds that investors witnessed declines of fiveto ten percent in the course of a day and the market reached bottom onTuesday when President Medvedev recognized South Ossetian and Abkhazindependence. Nazardinov notes the market experienced a latesession rally that day as investors bought stocks at bargain prices. But Russian stocks going into the weekend are mostly down. The stocktrader says there is some nervousness ahead of Monday's special EUsummit to discuss a European response to the Georgian crisis. FrenchForeign Minister Bernard Kouchner said Thursday that Europe may applysanctions against Russia. While a source in the office of FrenchPresident Sarkozy now says that sanctions will not be considered, TimurNazardinov says the very mention of them has made investors nervous. Hesays the word sanctions is a considerable negative on the market, andif the summit imposes serious measures, then the market will, at thevery least, fall to those minimum levels seen two or three days ago, ifnot worse. But Sergei Karykhalin, chief analyst at the CapitalInvestment Bank in Moscow is not concerned about any negative Westerninfluence on Russia, because he has confidence that Kremlin leadersfactored possible retaliation into their overall strategy. Karykhalinsays Russian leadership added everything up and concluded that theUnited States and Europe cannot inflict any painful measures on thecountry, because it supplies Europe with 40 percent of its natural gasand is probably the world's number two oil producer behind SaudiArabia. For that reason, Karykhalin says very few levers can be usedto influence Russia. But Timur Nazardinov notes the Russianmarket has not had any influx of fresh capital for about six months. Analysts say Western concerns about investing in Russia couldcomplicate Kremlin plans to modernize and diversify the country'seconomy, which currently relies on the commodity trade, particularlythe sale of oil and gas.