Today the Financial Times and BBC reported that Russia’s central bank reserve figures were down $16.8 billion dollars a week after the fighting began in Georgia. The FT goes on to say that the drop in currency reserves is the sharpest decline seen since the financial crisis of 1998. A week before the events in Georgia investors were already skittish about a future in Russia with PM Putin’s comments thrashing Mechel.
Russia’s leaders are quick to point out the the withdrawal of liquidity in the country is temporary and that investors will soon return. But already President Medvedev has a heckling oligarch, Mr. Potanin of Norilsk Nickel, who is calling for tax reforms and better administration.
This week’s Economist sums the situation up nicely:
So Russia will keep its tanks in Georgia if it wants to. But the longer it does so, the less Europe will want to rely on Russia for its energy, the longer it will wait to join the World Trade Organisation, the more hostile the next American president will be and the more its nervous neighbours will be tempted to turn to the West for safety. The job now is to explain to Russia that this may not have been such a victory for machismo, after all.
Published Date: August 22, 2008