Russia Hit The Rocks Hardest

By rights, this year’s Sochi Economic Forum should have been a victory lap for Vladimir Putin. Russia’s president turned prime minister had just, in his own words, “punched the face” of upstart Georgia, and a year of record oil prices had boosted Russia’s currency reserves to $700 billion.

But instead of triumph, Russia’s premier business-schmooze event was deep in gloom. Since the Georgian war in early August, an estimated $45 billion in foreign investment has left Russia as spooked investors have fled. Now Russian stocks are 57 percent off their May peak


Putin was quick to blame the United States for the market’s crash: “A systemic breakdown has occurred in global finances,” he told an audience of businessmen, bureaucrats and oligarchs. “This is because of the unsatisfactory economic and financial policies of the world’s leading economies, including the U.S.” As for the 30 percent difference between Russia and other emerging markets, Putin just ignored it, insisting that Russia was in “a rather stable political and social situation.”

Investors beg to differ. What with Georgia, the falling price of oil and a growing record of abuse of foreign investors, Russia seems more and more a broken BRIC. President Dmitry Medvedev tried to stabilize the market by promising a $44 billion credit line to secure banks, and even offering $19.6 billion to buy up flagging shares. But with inflation rising, business costs soaring and the state apparently unwilling to protect investors, the promises aren’t working.

Newsweek