World Financial Crisis Sheds Light on Vulnerabilities of the Russian Economy

Posted on Wednesday, October 8th, 2008 | In Russia

Contributed by: Jim Musselwhite (http://www.straightstocks.com) -

Throughout the world financial system a series of shocks have been felt over the last months, from the US meltdown to the sharp decline of the Russian economy, seen in its stock market. The Russian economy is facing its greatest banking crisis since that of 1998.

The vulnerability of the Russian economy has been demonstrated by these crises. Without such inherent weaknesses, the Russian economy would not have been so hard hit by the fluctuations of world markets.

The crises in the Russian economy most lately reach a peak on September 16-17, 2008, after the indexes of the two leading stock exchanges fell by 13-24 percent on the first day, and then 6 and 3 percent on the second.

Sergei Grechishkin, president of the KIT-Finance bank declared, “This has been something absolutely irrational. We are witnessing comple16/278
tely senseless closing quotes, since, if you look at several indicators for the companies, the good news is phenomenal, but nobody wants to buy those shares, everyone wants to sell them.” He went on to say that the latest financial crisis in the Russian economy has entered a phase where “no one is making rational decisions anymore.”

Andrei Kilin, assets manager at Alfa Capital, said September 17, “The current prices cannot be adequately explained. Many companies are trading lower than their actual capital, and the capitalization of several is even lower than the monetary resources of the companies’ own bank accounts.”

So the problems in the Russian economy appear to be a combination of factors. While it has striven to become independent of world markets, the Russian economy has shown its vulnerability and dependency on foreign markets.