The Collapsing Russian Economy

By William D. Zeranski

You don't have to be an economist to see that the Russian economy is in trouble, especially when the Kremlin shuts down both of its leading stock markets:

Russian markets suspend trading after sharp falls
2 hours ago

MOSCOW (AFP) - Russia's two leading stock markets suspended trading on Wednesday as stocks continued to fall sharply amid global market turmoil.

Trading was halted on the dollar-denominated RTS on the orders of a government agency after falling 6.39 percent in the first two hours. The index has lost 57 percent since hitting an all-time high in May.

"Trading was stopped at 12:10 pm (0810 GMT) on the orders of the Federal Service for the Financial Markets," an RTS spokesman said. "We do not know when trading will resume, this is not our decision."

Of course, it's American's fault:

Analysts said the fall was due to turmoil on Wall Street in the wake of the Lehman Brothers investment bank collapse, a massive US government bailout of insurance giant AIG [. . .]

These analysts say that falling oil prices are also to blame. But there's more to it.

Russia's incursion into Georgia last month has accelerated a financial downturn, creating a credit crisis that could impact Moscow's increasingly muscular foreign policy.

The downturn began several months before the Aug. 8 escalation in the Caucasus and has as much to do with global trends and other political and economic developments as it does with Russia's actions in Georgia, specialists here say.

The downturn begun before the Russia-Georgia War, but the conflict surely hasn't helped, and probably accelerated the financial crisis. Starting in August, "investors have pulled funds out of Russia at the fastest rate since the country's 1998 debt crisis, in the wake of the conflict with Georgia, official figures have shown." As reported in the Washington Times yesterday, "The picture has clearly worsened since the fighting erupted in the Caucasus. Estimates of capital outflow in the past month range between $15 billion and $20 billion."

The Russia economy has been bleeding for sometime, and it appears that Vladimir Putin's military venture into Georgia has only deepened Russian's economic woes.