A Note On The 14% Stock Market Drop In Moscow

Overnight, the Moscow MICEX stock exchange had the biggest decline of all exchanges worldwide. Could that be an unintended consequence of market intervention?

Moscow has a penchant for closing its exchanges whenever there is a severe decline. In the last few weeks, I can recall at least three times when they have done this. Perhaps the fear by Russian market traders that the exchange would again be closed caused them to sell immediately, instead of waiting around to see how great the downside action would be.

Of course, the Russian officials, true to form, then came in and closed exchanges until Friday.

Russia Injects $19.5 Billion

Russia’s president, Dmitry Medvedev, said on Thursday that the country would spend $19.59bn to support and stabilise its financial markets as share trading on its two main exchanges remained shut.

In addition, Alexei Kudrin, finance minister, said Russia’s mortgage agency would get a cash injection of 60 billion roubles, while major banks Sberbank, VTB and Gazprombank would lend $2.37bn to stock market players.

Trading on the country’s two biggest exchanges, MICEX and RTS, would resume on Friday.

-EPJ Newsdesk

Russia's Markets Halted For Second Day

Russian markets stopped trading for a second day.

The ruble-denominated Micex Stock Exchange suspended trading indefinitely at 12:10 p.m. after its index erased a 7.6 percent gain and plunged as much as 10 percent within an hour. The benchmark fell 17 percent yesterday. The dollar- denominated RTSalso halted trading after similar declines.

The government yesterday injected $20 billion into the interbank lending market via its central bank and Finance Ministry auctions. The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent today.

The Finance Ministry attempted to stop the selloff by offering 1.13 trillion rubles ($44 billion) of budget funds to the country's three biggest banks,OAO Sberbank, VTB Group and OAO Gazprombank, for at least three months. That measure came as KIT Finance, a Russian brokerage, said it's in talks to find a buyer after failing to meet some financial obligations related to repurchase agreements.

-EPJ Newsdesk

Russia May Use Wealth Fund to Support Markets

Russia is considering using money from its national wealth fund and pension fund to support financial markets where necessary in the future, Alexei Kudrin, finance minister said on Thursday as the country’s stock market inched higher following moves to bolster confidence.

On Thursday the RTS index opened 0.5 per cent higher at 1341.32, having lost almost 12 per cent during the previous two sessions. The market fell 4.4 per cent on Wednesday as investors ignored bullish remarks by President Dmitry Medvedev and an injection of $10 billion by the central bank to alleviate a chronic credit shortage.

The Russians still need to learn a few things about capitalism, like A. You don't use pension fund money to prop up the stock market. In the old days stock brokers in the U.S. used to use their cash to prop up individual stocks, they would always fail, and
B. central bank monetary injections will only cause inflation.

What? You say the U.S. uses its pension fund money, aka Social Security, to prop up the Treasury securities market and the U.S.'s central bank, the Federal Reserve, prints money to bailout financial institutons. Oh well, never mind.

-Robert Wenzel

Russia Props Up Ruble

Speculators should be thnking about buying the ruble while there is blood in the streets of Georgia.

Russia’s central bank intervened heavily yesterday to support the ruble, FT is reporting. Reports indicate that as much as  $21 billion of foreign capital might have been pulled out of the country in August in the wake of the conflict with Georgia. The central bank said that the capital outflow from Russia last month were only $5 billion.

The ruble fell as low as R30.41, yesterday, its weakest level since the Russian central bank adopted its euro/dollar basket in February 2007. The central bank governor admitted there had been capital outflows since the war but said the amount was much lower.

The currency intervention was the first since the height of the war with Georgia at the beginning of August. Before the conflict the central bank’s interventions in the market were aimed at stemming the rise of the rouble, which it manages to a basket weighted 55 per cent in dollars and 45 per cent in euros.

As a result of strong oil prices and other natural resources ,Russia’s central bank still has a huge war chest to defend its currency. Its reserves measured in this week at $582  billion, the third-largest foreign currency reserves in the world.

Cheney Begins Visit to Georgia

Despte the fact that it was U.S. puppet Georgia whch first invaded South Ossetia, Vice President Dick Cheney condemned Russia today for what he called an "illegitimate, unilateral attempt" to change Georgia's borders by force.

The U.S. is at Georgia's side, Cheney told Georgia's President Mikhail Saakashvili, "as you work to overcome an invasion of your sovereign territory and an illegitimate, unilateral attempt to change your country's borders by force, that has been universally condemned by the free world."

"Russia's actions have cast grave doubts on Russia's intentions and on its reliability as an international partner," Cheney said.

Russia Threatens Military Response to US Missiles

Russian President Dmitry Medvedev is warning his country may respond to a U.S. missile shield in Europe through military means.

Medvedev says that the deployment of an anti-missile system close to Russian borders "will of course create additional tensions."

"We will have to react somehow, to react, of course, in a military way," Medvedev was quoted as saying Tuesday by the RIA-Novosti news agency.

As Bush Instigates Russia...

...a bit of historical perspective from Pat Buchanan, here.

Is The Curtain About To Fall On Globalization?

Paul Krugman has a thought provoking column, including historical perspective, on the potential ramifications of the Russian-Georgia war, here.

Money Flowing Out of Russia In Wake of War

Since the conflict began on August 8, yields on domestic rouble bonds have increased by up to 150 basis points.

The tight credit conditions have been exacerbated by foreign capital flight since the war. Data released by Russia’s central bank showed a drop in foreign currency reserves of just over $16.4bn in the week beginning August 8. This was one of the largest absolute weekly drops in 10 years, according to Ivan Tchakarov at Lehman Brothers.

Credit conditions are to be discussed at next month’s “summit of oligarchs”, the Russian Union of Industrialists and Entrepreneurs meeting that former President Vladimir Putin held annually to discuss economic issues.

Crude Oil Soars on US Mischief With Russia

GW has found a new way to drive up the oil price. The war in Iraq and the threat of war with Iran are not enough. GW has decided to surround Russia. First by turning Georgia into a US proxy and then by placing a military defense shield in Poland.

The plan(?) is working.

Crude oil futures are above $120, again.

Crude for October delivery rose $5.64, or 4.9%, to $121.20 a barrel on its first full trading day on the New York Mercantile Exchange.

To understand the national psyche of Poland that would allow the US to plant a missile defense shield there, see Peter S. Rieth's important analysis,Oh, Me! Me! Shoot Me!: A Summary of Contemporary Polish Foreign Policy

Russia Sponsors Concert In South Ossetian

The Principal conductor of the London Symphony Orchestra will lead a defiant performance from the shattered steps of the South Ossetian parliament tonight.

Valery Gergiev, an ethnic Ossetian who has been an outspoken critic of Georgia's action during the conflict, will conduct the Mariinsky Theatre of St Petersburg in a performance that is expected to feature Vladimir Putin, the Russian Prime Minister, as guest of honour.

The concert in the South Ossetian capital Tskhinvalii is expected to coincide with rallies demanding the recognition of South Ossetia as an independent state, a move confirmed today by the separatist leader Eduard Kokoity.

The performance would be "a requiem for those who died at the hands of the aggressors, for those who sacrificed their lives defending their homeland from a treacherous attack by Georgia", a South Ossetian spokesman said.

"The world should know what is happening. There were a thousand or more South Ossetians were killed at that time," he told the BBC last week. "The arrival of Russian troops saved maybe a thousand or more lives."

Russian Response To US Missle Shield In Poland Will Go Beyond Diplomacy

Russia's Foreign Ministry has issued an official statement saying the U.S. missile shield plans are clearly aimed at weakening Russia.

Russia says its response to the further development of a U.S. missile shield in Poland will go beyond diplomacy.

And the egging on of Russia continues:

"When you threaten Poland, you perhaps forget that it is not 1988," Secretary of State Condoleezza Rice said. "It's 2008 and the United States has a ... firm treaty guarantee to defend Poland's territory as if it was the territory of the United States. So it's probably not wise to throw these threats around."

Does GW have a mad plan to takeover the world before he leaves office?

Rice Signs Missile Defense Deal With Poland

Secretary of State Condoleezza Rice and her Polish counterpart signed a deal today to build a U.S. missile defense base in Poland.

The deal calls for the installation of 10 U.S. interceptor missiles just 115 miles from Russia's westernmost border.

The Donald Raising Prices of His Manhattan Real Estate Properties by Millions; For Sale To Russians

Problems selling your house? Take a page from Donald Trump. Sell it to the Russians.

Trump has hired a Russian-speaking broker to market some of his properties to Russian oligarchs.

Oh, and to further follow Trump's lead, you need to raise the price. A duplex penthouse at Trump Park Avenue has been on sale since 2005 for $32 million, since he had no takers at $32 million, he just raised the price to $51 million.

Trump recently sold his Palm Beach estate Maison de L'Amitie to a Russian fertilizer baron for a reported $100 million.

Here are more Trump, price increases (Via StreetEasy):

PH#23 Now Asking: $31,120,000
Last Week's Ask: $21,784,000Increase: $9,336,000
First Listed: November 2005 (at $18.9 million)
Days on Market: 1020[Listing]

PH#24 Now Asking: $31,000,000
Last Week's Ask: $20,433,600Increase: $10,566,400
First Listed: January 2006 (at $18,375,000)
Days on Market: 935[Listing]

#19A Now Asking: $14,449,500
Last Week's Ask: $9,633,000
Increase: $4,816,500
First Listed: November 2005 (at $9,104,000)
Days on Market: 1020[Listing]

Curbed.com thinks #23 might be the penthouse rented by Donny Deutsch.

Raimondo on Russia and the Nature of Oil

Raimondo gets it:

The sudden resurgence of Russia on account of its status as a major oil roducer has got the Americans and the Brits in a real lather...Russia's prosperity sticks in their collective craw, and, in response, the Russophobes have developed an entirely novel theory of political economy, which is an outgrowth of the environmentalist fad and the extreme nationalism of our ruling elites. It is the absurd idea that any and all countries that depend on oil to generate the bulk of their national income are unnatural, inherently flawed, and even intrinsically aggressive and a threat to the security of the West. Oil-producing states are inclined, by their very nature, to authoritarianism, they argue, although somehow I don't think they mean the state of Texas.

The Bizarro World "logic" of this new economic fallacy is based on the concept that oil is, somehow, not a commodity like any other, that it has some special status over and above all others, and yet this is clearly not the case. Oil – like wheat, cow's bellies, and platinum – is subject to market forces and is unevenly distributed geographically. The economic arrangements that go into the production, distribution, and sale of oil are not fundamentally different from those related to any other commodity, from bananas to high-grade steel. The U.S. has been a major oil producer, at least in the past, and that didn't distort or retard our economic and political development: quite the contrary, it fueled a new era of industrial and intellectual innovation, freeing the individual from the land and inaugurating a new era of political and economic liberalism.

Yet now we are told that oil is a curse that empowers tyrants, who can't be entrusted with such a precious commodity in any event. This is what is behind much of the buzz against Putin's Russia, flush with oil revenues, and the real source of friction between the Kremlin and the West. It is pure nonsense, economically, but, then again, like most war propaganda, it doesn't have to make sense; it only has to demonize the enemy from as many different angles as possible.

Read Raimondo's full column, here.

U.S.' Gates Dismisses Russian Warnings to Poland

Ok, get this straight. We attacked Iraq because of non-existant weapons of mass destruction. We may attack Iran because they may have nuclear missiles some time in the future.

At the same time, Russia which has nuclear weapons (lots of them), threatens Poland wth them. The US reaction: "Hey, no biggie."

Reuters reports:

Pentagon chief Robert Gates dismissed as "empty rhetoric" on Sunday Russian warnings that Moscow would target Poland for a possible military strike because
Warsaw agreed to host part of a U.S. missile shield.

"Russia is not going to launch nuclear missiles at anybody," Defense Secretary Gates said on ABC News' "This Week." "The Poles know that. We know it."...

"I'm not quite sure why this deputy chief of staff felt compelled to make those kinds of threats," said Gates, an expert on Russia, terming his words were a throwback to
the old Soviet Union, when Moscow was Warsaw's overlord.

"We just want those in Russia who seem to be willing to look to the future, people perhaps like President (Dmitry) Medvedev, to perhaps begin to exercise more influence here and get some of these people's rhetoric under control," he said.

GW Looking To Cause Some Trouble

GW said this morning that the breakaway regions of South Ossetia and Abkhazia must remain part of Georgia.

Bush said in a speech at his ranch in Crawford, Texas that the two regions are "a part of Georgia," and "they will remain so."

"There is no room for debate on this matter," Bush added.

What the hell does this mean?

Are US troops going into Georgia to enforce this declaration?

Kremlin Agrees to Framework for Cease-Fire in Georgia

A day after Secretary of State Condoleezza Rice went to Georgia to press Russia to withdraw, President Dmitri A. Medvedev of Russia signed a six-point settlement, officials said, according to NYT.

A Russian Journalism Student in America, on the American Press Coverage of the Russia/Georgia War

Olga Ivanova is an intern at the Washington Post and writes:

For years I have respected American newspapers for being independent. But no longer. Coverage of the conflict between Russia and Georgia has been unprofessional, to say the least. I was surprised and disappointed that the world's media immediately took the side of Georgian President Mikheil Saakashvili last week...

Many accounts made it seem as though the conflict was started by an aggressive Russia invading the Georgian territory of South Ossetia. Some said that South Ossetia's capital, Tskhinvali, was destroyed by the Russian army. Little attention was paid to the chronology of events, the facts underlying the conflict.

Last week, Georgia's president invaded South Ossetia during the night...Within hours, Georgian troops destroyed Tskhinvali, a city of 100,000, and they killed more than 2,000 civilians. Almost all of the people who died that night were Russian citizens. They chose to become citizens of Russia years ago, when Georgia refused to recognize South Ossetia as a non-Georgian territory.

The truth is that, in this case, Russian aggression actually made some sense. Russia defended its citizens.

Yet American newspapers published stories that omitted mention of the Georgian invasion. And American media as a whole have been disturbingly pro-Georgian...

Over the past week, American media have achieved one thing for sure: They have lost prestige among a generation of young Russians who believed that America is a country of true, uncorrupted, independent information. Many Russian youths come to the United States for college and then go back to Russia to help build our own democracy. Russians believe in democracy. But I don't know whether many Russians will ever trust American media reports again.

U.S. newspapers have lost esteem among Russian journalists as well. These reporters have long looked to American newspapers as icons of quality journalism. They are supposed to stand for truth and serve the people's interests. But whose interests did newspapers serve by publishing stories in the best traditions of the Cold War?

Ivanov's full commentary is here.

Buchanan On Agitating The Bear

Pat Buchanan writes:

Bush, Cheney, and McCain have pushed to bring Ukraine and Georgia into NATO. This would require the United States to go to war with Russia over Stalin's birthplace and who has sovereignty over the Crimean Peninsula and Sebastopol, traditional home of Russia's Black Sea fleet.

When did these become U.S. vital interests, justifying war with Russia?

The United States unilaterally abrogated the Anti-Ballistic Missile treaty because our technology was superior, then planned to site anti-missile defenses in Poland and the Czech Republic to defend against Iranian missiles,though Iran has no ICBMs and no atomic bombs. A Russian counter-offer to have us together put an antimissile system in Azerbaijan was rejected out of hand.

We built a Baku-Tbilisi-Ceyhan pipeline from Azerbaijan through Georgia to Turkey to cut Russia out. Then we helped dump over regimes friendly to Moscow with democratic "revolutions" in Ukraine and Georgia, and tried to repeat it in Belarus.

Read Bucahnan's complete commentary here.

Russia: Poland Risks Nuclear Attack

A top Russian general, Gen. Anatoly Nogovitsyn, said Friday that Poland's agreement to accept a U.S. missile interceptor base exposes the ex-communist nation to attack, possibly by nuclear weapons, the Interfax news agency reported.

Poland and the United States on Thursday signed a deal for Poland to accept a missile interceptor base as part of a system the United States says is aimed at blocking attacks by rogue nations. Moscow, however, feels it is aimed at Russia's missile force.

"Poland, by deploying (the system) is exposing itself to a strike — 100 percent," Nogovitsyn, the deputy chief of staff, was quoted as saying.

Clearly, the United States is egging on Russia on many fronts. It appears it was first moves by American influenced Georgia that provoked Russia's attack into Georgia.

Is this George Bush's endgame to his presidency, to get the entire world at war?

BP Reopens Georgia Gas Pipeline

BP resumed exports of Azerbaijani natural gas exports through a pipeline across Georgia to Turkey on Thursday. However its oil pipeline to the Georgian Black Sea port of Supsa remained out of action because of fears of fallout from Georgia’s conflict with Russia.

Oil exports from Azerbaijan were drastically reduced last week after an explosion on the Turkish section of the Baku-Tbilisi-Ceyhan pipeline to the Turkish Mediterranean, the main artery for Azerbaijan’s oil exports. Kurdish separatists claimed responsibility for the accident on the pipeline which was carrying about 850,000 barrels a day of oil to western markets at the time.
Repair work on BTC is expected to take several weeks.

Russia invited Azerbaijan on Wednesday to increase its oil exports through a pipeline from Baku to Novorrosiysk on the Russian Black Sea. Exports of Azerbaijani oil through the pipeline to Russia have slowed to a trickle since the Baku-Tbilisi-Cehyan pipeline began working in 2005.

Russia is also pressing Azerbaijan to export gas through Russian pipelines, diverting supplies away from the route across the Caucasus.

Another Take On Russia versus Georgia

Robert Lawson has been to Georgia and is headed back next week. Here's his view.

Russia Halts Attack on Georgia

Well, of course.

The cover of the Olympics is almost gone.

Georgian Invasion of South Ossetia: The Start of the New Cold War

Jutin Raimondo explains:.

The anti-Russian bias of the Western media is really something to behold: "Russia Invades Georgia," "Russia Attacks Georgia," and variations thereof have been some of the choice headlines reporting events in the Caucasus, but the reality is not only quite different, but the exact opposite. Sometimes this comes out in the third or fourth paragraph of the reportage, in which it is admitted that the Georgians tried to "retake" the "breakaway province" of South Ossetia. The Georgian bombing campaign and the civilian casualties – if they are mentioned at all – are downplayed and presented as subject to dispute.

The Georgians have been openly engaging in a military buildup since last year, and President Mikhail Saakashvili and his party have been proclaiming from the rooftops their aim of re-conquering South Ossetia...


Please don't tell me Saakashvili just woke up one day and decided to attack Ossetia, and that the Americans weren't notified well in advance. Georgia depends on U.S. military and economic aid, and Saakashvili is a savvy operator: he is pulling a Lebanon, having learned from the Israeli example, and the Bush administration is more than glad to oblige him. Georgian tanks would never have rolled into South Ossetia without being given a green light by Washington.

Georgia has embarked on a very dangerous course, and it's important to realize it hasn't done so alone. Saakashvili has the implicit backing of Washington in his quest to re-conquer the "lost" provinces of Ossetia and Abkhazia (and don't forget Adjaria!) – or else what are 1,000 U.S. troops doing engaged in "joint military exercises" with the Georgian military, just as the crisis reaches a crescendo of violence?

Putin Blasts The Unted States; Cheney Calls Saakashvili

Vladimir Putin, now Russia's prime minister lashed out at the US for airlfiting Georgia troops from Iraq. ”It’s a shame that some of our partners are not helping us, and are trying to interfere,” he said. ”I am talking about US military planes airlifting the Georgian military contingent from Iraq practically into the conflict zone.”

”I am suprised by the extent of this cynicism, the ability to pass off white as black and black as white. The ability to present the aggressor as a victim of aggression and to lay the responsibility for the consequences on the victims.”

Earlier, the US, which backs the Georgian government, stepped up confrontational rhetoric in an effort to get Russia to back down. Vice President Dick Cheney telephoned Gergia President Mikheil Saakashvili to express US solidarity in the conflict with Russia and told him “Russian aggression must not go unanswered,” the vice president’s office said on Monday.

Russan Oligarch Pays $750 Million for Mansion

An unidentified Russian billionaire has bought the Villa Leopolda, a Belle Époque mansion on the heights of Villefrance, for $750 million.

He bought the house from Lily Safra, the widow of Edmond Safra, a Lebanese banker who was killed under mysterious circumstances by an arsonist's fire.

Russia Bombs Pipeline

As the South Ossetia war escalates, Russian jets have reportedly bombed a pipeline in Georgia that supplies oil to the West.

The pipeline is 30 per cent owned by BP and supplies 1 per cent of the world’s oil, pumping up to a million barrels of crude per day to Turkey. It is the only oil and gas route that bypasses Russia’s stranglehold on energy exports from the region.

Georgia declared a state of war, recalled all its 2,000 troops from Iraq and ordered a mass call-up with reservists being sent to the war zone to ‘defend the motherland’.

Russia claimed that it had ‘completely liberated’ the capital of South Ossetia, Tskhinvali – a claim denied by Georgia.

Most of the 70,000 South Ossetians hold Russian passports and are allied to Moscow, while Georgia is an ally of the US and has applied to join Nato.

The Georgians are outnumbered and outgunned in every department. Russia has about 697,000 troops, while Georgia has only 19,500 full-time regulars.

And with Russia’s 1,200 combat aircraft confronting Georgia’s seven outmoded support planes, and 6,000 tanks against 100 ageing machines, Georgia appears to have no chance of winning.

Cyber Attacks in South Ossetia War

As part of the war effort, both sides in the South Ossetian war have reportedly launched cyber attacks as part of their war efforts.

South Ossetian officials stated that two Ossetian news media sites were hacked. Dmitry Medoyev, the South Ossetian secessionist envoy in Moscow, claimed that Georgia was trying to cover up reports of deaths.

The National Bank of Georgia website ahs been attacked. It was defaced and replaced with a gallery of known dictators of 20th century with Georgian President Mikheil Saakashvili added to the mix.

Georgian news portals were under Internet denial-of-service attacks and reportedly the site of the Georgian Ministry of Defence was hacked as well.

The Georgian Ministry of Foreign Affairs website was also defaced and replaced with a collage of Saakashvili and Adolf Hitler photos.

Websites of the National Bank and Ministry of Foreign Affairs have been knocked offline.

Loose Wire speculates that this may be the first simultaneous physical war and cyber war.

Wikipedia has impressive coverage here.

Is Moscow Learning to Manage News Amercan Style?

On Wall Street they always issue news they want to hide at 4:01 PM Eastern Time on Fridays. Who is going to be around to see that news?

In American politics they issue problem news when the news cycle is busy.

So was it an accident that Russia launched a full scale invasion of Georgia's breakaway province of South Ossetia, under the news cover of the start of the Olympics, when cameras around the world will be focused on Beijing?

UPDATE: Although MSM in the United States reported the Russia/Georgia conflict as an invasion by Russia, and continues to do so,in fact, the conflict was started by American proxy state, Georgia, invading South Ossetia and Russia responded to protect its Russian citizens in South Ossetia. Thus, the timing of the Georgia invasion into S O falls into the lap of U.S. operatives, where PR timing, of course, is standard operating procedure here in America.

Russian President Dimitri A. Medvedev Gets The Fundamentals

NYT's Clfford J, Levy, in Moscow, interviewed Russia's new president, Dmitri A. Medvedev.

From the interview:

Mr. Medvedev often says his background as a lawyer plays a crucial role in his worldview, and when he was asked about his reputation, he returned to that theme. He said that when he was a student, he learned of the importance of the law, and of the right to private property. He said he also realized that there needed to be a struggle in Russia against what he has termed “legal nihilism.”

A leader who understands the importance of property rights and the rule of law, and attempts to implement such, can take a country a long way. This is, by far, the most important positive comment that could have been made by Medvedev.

The rest of the informative interview is here.