2008 Russian financial crisis

The 2008 Russian financial crisis is an ongoing crisis on Russian markets, as nervousness over the global banking crisis has been compounded by political fears after the war with Georgia, as well as renewed concern about state intervention in corporations of strategic interests. Russia's economy is also heavily dependentFact|date=October 2008 on energy prices, especially oil which has lost more than a third of its value since its record peak of USD 147 on July 11, 2008. [cite news|title=Oil prices slip to 90 dollars|publisher=AFP|date=2008-09-16|url=http://afp.google.com/article/ALeqM5jItdaIYf1Zb5_hsmcHbyPlf_sVBg|accessdate=2008-09-17] [cite news|title=OIL PRICES BELOW 100 USD, GAS PRICE STILL THE SAME|publisher=www.worldbulletin.net, Turkey|date=2008-09-10|url=http://www.worldbulletin.net/news_detail.php?id=27961|accessdate=2008-09-17]

Background

Russia is a major exporter of commodities such as oil and metals, its equity market has been hit hardFact|date=October 2008 by the decline in the price of many commodities. In addition, investors have pulled billions of dollars out of Russia on concerns over escalating geopolitical tensions with the West following the military conflict between Georgia and RussiaFact|date=October 2008, as well as concerns about state interference in the economyFact|date=October 2008. Those concerns were underscored in July by Prime Minister Vladimir Putin's criticism of steel company Mechel which wiped out billions of dollars of its market capitalizationFact|date=October 2008. By September 2008, the RTS stock index plunged almost 54%, making it one of the worst performing Fact|date=October 2008 markets in the world. [ [http://www.marketwatch.com/news/story/financial-turmoil-accelerates-russia/story.aspx?guid=%7BAD559BFE%2D5E6C%2D4033%2D87C6%2D36EA9D4DFA18%7D Financial turmoil accelerates in Russia] , MarketWatch, September 17, 2008.] Compounding the volatile situation in Russia's financial system has been also involvement in the US subprime mortgage crisis with the Russian Central Bank owning US$100 Billion of mortgage-backed securities in the two American mortgage giants Fannie Mae and Freddie Mac that were taken over by the US government that most likely will have to be written off [cite news |first= Julian |last= Delasantellis |title= Paulson placates China, Russia - for now |url= http://www.atimes.com/atimes/Global_Economy/JI10Dj03.html |work= Asia Times Online |publisher= |date= 2008-09-09|accessdate=2008-09-17 ] .

Timeline

July 24

*Mechel's stock plunged by almost 38 percent on July 24, 2008 after Russia's Prime Minister Vladimir Putin criticized its CEO Igor Zyuzin, and accused the company of selling resources to Russia at higher prices than those charged to foreign countries. The comments, which raised fears of another attack similar to that made on Yukos in 2004, contrasted sharply with previous efforts by President Dmitry Medvedev to improve Russia's reputation as an investor-friendly country.cite news
title= Putin’s Criticism Puts a $6 Billion Hole in a Company
url= http://www.nytimes.com/2008/07/26/business/worldbusiness/26steel.html
last= Kramer
first= Andrew E
date= July 26, 2008
publisher= The New York Times
accessdate= 2008-08-10
]

July 25

*On the following day, Mechel issued a contrite statement promising full cooperation with federal authorities, while share values rebounded by nearly 15 percent. Presidential aide Arkady Dvorkovich also sought to restore calm on July 28, declaring that all parties would "act in a civilized way," and confirming that Mechel was cooperating with antitrust authorities. [cite news
title= Putin blasts steel firm Mechel for tax evasion
url= http://www.businessweek.com/ap/financialnews/D9273QLO0.htm
last= Stewart
first= Catrina
date= July 28, 2008
publisher= BusinessWeek
accessdate= 2008-08-10
] Just hours later, however, Putin announced that Mechel had been avoiding taxes, by using foreign subsidiaries to sell its products internationally. His renewed attack caused share prices to tumble once more—this time by almost 33 percent. [cite news
title= Fresh criticism by Putin sends Mechel shares tumbling again
url= http://www.marketwatch.com/news/story/fresh-criticism-putin-sends-mechel/story.aspx?guid=%7B8C4B2044-12EA-4F2A-A20B-5E640B836CA2%7D&dist=msr_9
last= Lesova
first= Polya
date= July 28, 2008
publisher= MarketWatch
accessdate= 2008-08-10
]

eptember 16

*Russia's most liquid stock exchange MICEX and the dollar-denominated RTS were suspended trade for one hour after the worst one-day fall in 10 years as Finance Minister Alexei Kudrin reassured markets there was no "systemic" crisis. [ [http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLG65392720080916 Russian stocks suspended in worst plunge since 1998] , Reuters, September 16, 2008.]

eptember 17

* Trading was suspended for the second day in succession on Russia's two main stock exchanges (the MICEX and the dollar-denominated RTS) after shares fell dramatically, forcing the central bank in Moscow to intervene. [ [http://business.timesonline.co.uk/tol/business/markets/article4772350.ece Russian markets suspended again after shares plummet] , The Times, September 17, 2008.] [ [http://www.bloomberg.com/apps/news?pid=20601085&sid=arNaiuHTXLbs&refer=europe Russian Exchanges Halt Trading for Second Day; VTB Declines] , Bloomberg, September 17, 2008.]
* Russia's government lent the country's three biggest banks, Sberbank, VTB Bank and Gazprombank, as much as 1.13 trillion rubles ($44 billion) for at least three months to boost liquidity. [ [http://www.bloomberg.com/apps/news?pid=20601085&sid=a1sZsKZ32kvU&refer=europe Russian Exchanges Halt Trading for Second Day; VTB Declines] , Bloomberg, September 17, 2008.]

eptember 18

* Trading is suspended for the third day in succession on Russia's two main stock exchanges, the MICEX and the dollar-denominated RTS, amidst fear of financial collapse. News agencies are quoting Russia's finance minister Alexei Kudrin as saying trading on Russian exchanges won't resume until 19 September 2008. [ [http://www.marketwatch.com/news/story/russian-stock-markets-remain-hold/story.aspx?guid={8901F86A-FF6D-4658-BC1C-4D926CA478BF}&dist=msr_5=MarketWatch] ]
* Officials at MICEX stock exchange describe conditions in the Russian markets as "extraordinary" [ [http://business.timesonline.co.uk/tol/business/economics/article4780314.ece] ]
* Russia is facing its worst stock market decline in a decade mainly because of a confidence crisis rather than liquidity problems, Deputy Finance Minister Pyotr Kazakevich says. [ [http://www.hurriyet.com.tr/english/finance/9930871.asp?scr=1] ]
* Russian President Dmitry Medvedev orders ministers to inject another 500 billion roubles of funds from the state budget into the markets and pledges that the financial system would receive "all necessary support". [ [http://business.timesonline.co.uk/tol/business/economics/article4780314.ece] ]

October 7

* Russian blue chips have seriously augmented in price at London LSE with OGK-2 (RTS|OGKB) stocks 605.82% surplus (UTC 13.15), Severstal (RTS|CHMF MICEX|CHMF) and Polyus Gold (MICEX|PLZL RTS|PLZL) 45% surplus. Oil and gas companies stocks are also at rise, with Gazprom Neft (RTS|SIBN) +21.8%, Rosneft (MICEX|ROSN RTS|ROSN), LUKoil ADR(RTS|LKOH lse|LKOD nasdaq|LUKOY) ADR +22%. [ru icon [http://top.rbc.ru/economics/07/10/2008/251100.shtml Russian stocks have risen in price at LSE] ]

Reaction to the crises

*SWE - Foreign minister Carl Bildt said on September 17 that the current Russian financial crisis is "obviously more worrying" than the ongoing subprime mortgage crisis in view of the political development in Russia. [sv icon [http://di.se/Avdelningar/Artikel.aspx?stat=0&ArticleID=2008%5c09%5c17%5c301279&SectionId=Ettan&menusection=Startsidan;Huvudnyheter Carl Bildt bloggar om krisen] , Dagens industri, September 17, 2008.]

ee also

*Financial crisis of 2007-2008
*Economic crisis of 2008
*Russian property bubble

References

External links


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