Moscow
29 August 2008
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 leading
stocks fell more than six percent the day hostilities broke out in
Georgia and reached their lowest point in nearly two years when
President Dmitri Medvedev formally recognized the independence of
Abkhazia and South Ossetia.
Bloomberg News reports the Russian
ruble is headed for its biggest monthly decline against the U.S. dollar
in more than nine years as investors reduce their Russian holdings. In
addition, Russia's Central Bank says the country lost more than $16
billion in the week following the launch of military operations in
Georgia on August 8. Financial observers attribute the loss to nervous
investors pulling capital from Russia.
The RTS index reached its
peak in April and has been ratcheting down since. Timur Nazardinov,
chief trader at the Troika Dialogue Investment Bank in Moscow says the
Georgian conflict accelerated the decline.
Nazardinov says
events in Georgia brought uncertainty into the market, which naturally
reacted negatively. He adds that investors witnessed declines of five
to ten percent in the course of a day and the market reached bottom on
Tuesday when President Medvedev recognized South Ossetian and Abkhaz
independence.
Nazardinov notes the market experienced a late
session rally that day as investors bought stocks at bargain prices.
But Russian stocks going into the weekend are mostly down. The stock
trader says there is some nervousness ahead of Monday's special EU
summit to discuss a European response to the Georgian crisis.
French
Foreign Minister Bernard Kouchner said Thursday that Europe may apply
sanctions against Russia. While a source in the office of French
President Sarkozy now says that sanctions will not be considered, Timur
Nazardinov says the very mention of them has made investors nervous.
He
says the word sanctions is a considerable negative on the market, and
if the summit imposes serious measures, then the market will, at the
very least, fall to those minimum levels seen two or three days ago, if
not worse.
But Sergei Karykhalin, chief analyst at the Capital
Investment Bank in Moscow is not concerned about any negative Western
influence on Russia, because he has confidence that Kremlin leaders
factored possible retaliation into their overall strategy.
Karykhalin
says Russian leadership added everything up and concluded that the
United States and Europe cannot inflict any painful measures on the
country, because it supplies Europe with 40 percent of its natural gas
and is probably the world's number two oil producer behind Saudi
Arabia. For that reason, Karykhalin says very few levers can be used
to influence Russia.
But Timur Nazardinov notes the Russian
market has not had any influx of fresh capital for about six months.
Analysts say Western concerns about investing in Russia could
complicate Kremlin plans to modernize and diversify the country's
economy, which currently relies on the commodity trade, particularly
the sale of oil and gas.