Lehman Brothers has folded, markets are diving, and a lot of powerful people in Russia are beginning to feel the heat. Tightening access to international credit and mounting stock losses are hurting Russian billionaires as well as state-owned corporations, prompting calls by some businessmen to heed Western complaints over Kremlin policy in Georgia. It appears that when it comes to containing Russia, the invisible hand of the markets may in fact be the best way for the West to temper the Kremlin’s actions in its near abroad. As reported by Bloomberg:
The head of the country’s biggest business association, the Russian Union of Industrialists and Entrepreneurs, met President Dmitry Medvedev today, urging him to take “anti-crisis” measures. “The stock market is plunging, capital is fleeing, there is a severe shortage of liquidity in the banking system, prices for many core exports are falling and inflationary pressures are strengthening,” the business group’s Alexander Shokhin said in a live televised Kremlin meeting. Current policies “may turn out to be inadequate,” he said.
After rejecting Western appeals not to recognize breakaway Georgian regions, Medvedev last week signaled compromise for the first time. He agreed to implement an EU-brokered cease-fire and pull troops back into the disputed territories of South Ossetia and Abkhazia.Mevedev told the gathering of Russian billionaires that the government doesn’t want “either confrontation or isolation.”Last month’s five-day war sent equity, debt and currency markets reeling, reflecting investor worries that commercial ties would fray.“This is a natural alarm clock,” Igor Yurgens, an adviser to Medvedev, said in an interview before today’s meeting. “It’s a concern to big owners, it’s a concern to the Russian economy. There are limits to what Russia can do alone if it chooses to be isolated.”Finance Minister Alexei Kudrin acknowledged the impact on Sept. 11, saying Russian companies felt a “jolt” as reaction to the war added to the fallout from turmoil in global financial markets.Medvedev has called for officials to do “everything necessary” to attract capital. Central-bank chairman Sergey Ignatiev said the bank was taking “massive measures” to provide extra funds to lenders. It may indeed be necessary to adjust policy to temper investor economic worries from becoming woes.