Russian Stocks Tumble As A Result Of Georgia Adventurism



(image via dailymail)

The RTS Index -- an index of 50 Russian stocks -- fell six percent today according to the words and actions of Vladimir Putin, thus making Russia, flush with oil revenues and trying mightily to be seen as a global power, a rather dodgy place to do business. While a strong leader standing up to The West meets with little internal resistance in Russia, the business community is taking a hit. The question is: Can the West use the teetering of the RTS Index as one of several levers to coerce Russia to constrain itself under the rule of law? Will Secretary Condoleeza Rice take advantage of this? From Bloomberg:

"Russia's RTS Index fell to the lowest level since 2006, the ruble extended its drop and the cost of protecting the country's bonds rose as the government recognized the independence of Georgia's breakaway regions.

"The RTS index of 48 companies posted the biggest decline among 89 global equity measures tracked by Bloomberg, while Russia's currency slid to the lowest level in almost seven months against the dollar. Credit-default swaps on Russian debt climbed 7 basis points, according to CMA Datavision prices in London, as President Dmitry Medvedev risked a deepening rift with the West by recognizing South Ossetia and Abkhazia.

"Investors have pushed the RTS to this quarter's steepest retreat among the world's stock markets as Russia invaded Georgia and tumbling oil prices sent energy producers lower. Medvedev's statement followed a unanimous call by Russia's parliament to back the enclaves' aspirations for statehood in the aftermath of a five-day war that began on Aug. 8.

"'The sentiment here remains pretty bad because of the events in Georgia,' said Jean-Louis Tauvy, who manages $300 million at Atria Advisors Ltd. in Moscow.

"The dollar-denominated RTS Index fell 5.3 percent to 1,560.14 at 4:19 p.m. in Moscow, extending its third-quarter drop to 32 percent. The ruble-denominated Micex Index slumped 3.3 percent to 1,276.47, the lowest level since September 2006."

The real question of "What Is To Be Done" about Russia is vexing the foreign policy Establishment right now. Andrew Meier writes a controversial op-ed in the LA Times this week on the possibility of Russia joining NATO. That may be too much, but something, to be sure, needs to be done about Russia's relationship to the West.