The price of Putin
09/11/2008 | montrealais
сьогоднішній редакційний коментар Financial Times з приводу подій на російському фондовому ринку:
http://www.ft.com/cms/s/0/da1a61c8-7f64-11dd-a3da-000077b07658.html
James Carville, campaign manager to President Bill Clinton back in 1992, put it with characteristic directness. “If there was a reincarnation,” he said, “I want to come back as the bond market. You can intimidate everybody.”
Perhaps Russia’s Vladimir Putin, the prime minister who still seems to be calling the shots in Moscow, ought to pay a bit more attention to such sentiments. In a matter of weeks, the markets in Russia have turned on a combination of economic doubts, business fears and a sudden change in the assessment of political risk. An exodus of foreign capital, a dearth of credit from Russian banks and a loss of confidence among Russian as well as foreign shareholders have transformed the mood in Moscow from over-confidence to gloom.
The process did not begin with Russia’s bloody war with Georgia, although that has badly unsettled international investors. The biggest shock came from Mr Putin’s own intemperate use of language, when he publicly threatened to “purge” one of Russia’s billionaire businessmen, owner of the New York-listed coalminer Mechel, for alleged price-gouging. His comments wiped almost $60bn off the Russian stock market at the end of July. They were seen as a grim reminder that power, not the rule of law, runs Russia.
Until then, many investors saw the market as a one-way bet on rising oil and gas prices, well-insulated from the international credit crunch. They dismissed warnings of political risk from the transfer of power in the Kremlin. The rising Russian middle classes believed in Mr Putin’s narrative of a resurgent Russia, combining political stability with prosperity.
The reality is that the economy has been rebuilt on a single pillar – energy. Its banks and capital markets are clumsy and inefficient. The domestic market has been unable to step in when foreign credit has dried up. That is compounded by a government whose economic competence is limited.
As prime minister, Mr Putin is now most responsible for the economy. Not only has he spooked the markets by talking of businessmen as if they were Chechen terrorists; he has also shocked ordinary Russians by dismissing rising inflation – their greatest concern – as none of his business. He blamed the central bank. After eight years of energy-fuelled growth, he is ill-prepared for any downturn.
Russia’s reassertion of its military muscle in Georgia makes matters worse, even if most Russians believe the action was justified. Being at loggerheads with the US and the western world will not make access to global capital markets any easier. Western investors are not going to pull out of Russia, but they will demand a higher risk premium. The cost to Russia may be far higher than that of invading a small country in the Caucasus.
http://www.ft.com/cms/s/0/da1a61c8-7f64-11dd-a3da-000077b07658.html
James Carville, campaign manager to President Bill Clinton back in 1992, put it with characteristic directness. “If there was a reincarnation,” he said, “I want to come back as the bond market. You can intimidate everybody.”
Perhaps Russia’s Vladimir Putin, the prime minister who still seems to be calling the shots in Moscow, ought to pay a bit more attention to such sentiments. In a matter of weeks, the markets in Russia have turned on a combination of economic doubts, business fears and a sudden change in the assessment of political risk. An exodus of foreign capital, a dearth of credit from Russian banks and a loss of confidence among Russian as well as foreign shareholders have transformed the mood in Moscow from over-confidence to gloom.
The process did not begin with Russia’s bloody war with Georgia, although that has badly unsettled international investors. The biggest shock came from Mr Putin’s own intemperate use of language, when he publicly threatened to “purge” one of Russia’s billionaire businessmen, owner of the New York-listed coalminer Mechel, for alleged price-gouging. His comments wiped almost $60bn off the Russian stock market at the end of July. They were seen as a grim reminder that power, not the rule of law, runs Russia.
Until then, many investors saw the market as a one-way bet on rising oil and gas prices, well-insulated from the international credit crunch. They dismissed warnings of political risk from the transfer of power in the Kremlin. The rising Russian middle classes believed in Mr Putin’s narrative of a resurgent Russia, combining political stability with prosperity.
The reality is that the economy has been rebuilt on a single pillar – energy. Its banks and capital markets are clumsy and inefficient. The domestic market has been unable to step in when foreign credit has dried up. That is compounded by a government whose economic competence is limited.
As prime minister, Mr Putin is now most responsible for the economy. Not only has he spooked the markets by talking of businessmen as if they were Chechen terrorists; he has also shocked ordinary Russians by dismissing rising inflation – their greatest concern – as none of his business. He blamed the central bank. After eight years of energy-fuelled growth, he is ill-prepared for any downturn.
Russia’s reassertion of its military muscle in Georgia makes matters worse, even if most Russians believe the action was justified. Being at loggerheads with the US and the western world will not make access to global capital markets any easier. Western investors are not going to pull out of Russia, but they will demand a higher risk premium. The cost to Russia may be far higher than that of invading a small country in the Caucasus.