Russia bleeds cash as investors pull out
Five months ago the Russian stock market was among the world's top performer, peaking after a steady rise in share prices that had lasted since early 2009.
Since then, the market has taken a tumble, with Russia's Micex index of leading shares losing more than a quarter of its value and the RTS index of 50 Russian shares falling by some 40% to levels not seen since this time last year.
According to the Russian government, investors are pulling back because they have been spooked by falling oil prices and global economic turmoil.
But many observers are instead blaming internal political turmoil for the retrenchment, which last year saw capital flight to the tune of some $30bn (£19bn) - only to accelerate this year, with some $31bn leaving the country during the first six months alone.
Wheeling cash out of Russia has become a sport shared by wealthy Russians and foreign investors alike, with one Russian opposition party leader, Boris Nemtsov, predicting that capital flight could rise to $100bn this year.
The capital flight is matched by a brain drain as the country's much needed skilled and educated people head for better opportunities abroad.
A recent survey suggests more than a fifth of Russia's adult population would like to emigrate, compared with 7% in 2007.
'Pillar of stability'
This week's ousting of Russia's long-standing finance minister, Alexei Kudrin, did little to mollify neither the people nor the markets.
So the Russian rouble, already weakened by the turmoil in the world economy, has plunged and is trading around its lowest level against the US dollar since May 2009.
Mr Kudrin's main cheerleaders, Western investors and analysts, have long applauded the way his conservative budget policies have helped restore the country's financial health in the wake of the global financial crisis.
To them, his departure is seen as a deep blow to Russia's economy.
"The surprise factor of Kudrin leaving is bigger than the nomination of Putin to be the next president," according to Roland Nash, senior partner of Verno Capital.
"Kudrin personifies fiscal stability in Russia. It was really his big success that we've had this fiscal stability now for more than 10 years - him and the oil price.
Neil Shearing, chief emerging markets economist at Capital Economics, a private-sector think tank in London, agrees.
"It's difficult to see how Kudrin's resignation can be anything but market-negative," he says.
Mr Kudrin's departure after 11 years in the job could not have been announced at a worse time, coming hot on the heels of President Dmitry Medvedev announcing that that he will swap jobs with Prime Minister Vladimir Putin in March of next year.
The Russian media initially speculated that Mr Kudrin may have openly rebelled to bolster his own ambitions to become Russia's next prime minister.
Mr Kudrin has accused President Medvedev of economic mismanagement and excessive spending.
In particular, in the latest of the two politicians many disagreements over economic policy, Mr Kudrin has been vocal in his opposition to President Medvedev's efforts to raise military spending by some 2.1 trillion over three years, insisting the plan would create "additional risks for both the budget and the economy".
President Medvedev has been dismissive of Mr Kudrin's criticism, insisting Russia "cannot avoid defence spending worthy of the Russian Federation, which is not some 'banana republic' but a very large country, a permanent member of the UN Security Council that possesses nuclear weapons".
In the end, the conflict came to a head with President Medvedev telling Mr Kudrin to step down after the rebellious finance minister said he would be unwilling to work with the next prime minister.
And if investors were concerned about Mr Kudrin's departure, then they were far from mollified by the man Prime Minister Putin appointed to succeed him.
Mr Putin described the new acting finance minister, the rarely heard of former deputy Anton Siluanov, as a "good, strong specialist", which investors immediately took to mean he would tow the party line and as such be a safe bet for the Russian leaders during the upcoming election season.
Mr Siluanov's first challenge will come next week, when Russia's government will have to submit its 2012 budget for approval by parliament.
It will be a challenge because the budget is calculated on a rather optimistic assumption, namely that price of oil will rise to $116 (£72)per barrel next year.
According to the ousted Mr Kudrin, Russia needs oil to average $112 in 2012 to balance its budget.
However, the price of Russia's main export, Urals crude oil, has recently tumbled and is currently trading close to the $105-a-barrel level.
If the price of oil fails to bounce back, then Mr Kudrin will be proven right about the need to curb spending and plan for a future when Russia's earnings will be much lower than they have been in recent years.