Friday, August 29, 2008

The Georgia Invasion -- What Has Been The Cost To Russia

Red Square

Russian Markets and Currency Hit by
Georgian Conflict -- Voice Of America

Russia's currency and stock market have suffered substantial losses since the outbreak of hostilities in Georgia three weeks ago. VOA Moscow correspondent Peter Fedynsky reports investors are nervous going into the weekend over the possibility that European heads of state may apply sanctions against Russia during a special summit on Monday to discuss the Georgian crisis.

Russia's RTS Index of leading stocks fell more than six percent the day hostilities broke out in Georgia and reached their lowest point in nearly two years when President Dmitri Medvedev formally recognized the independence of Abkhazia and South Ossetia.

Bloomberg News reports the Russian ruble is headed for its biggest monthly decline against the U.S. dollar in more than nine years as investors reduce their Russian holdings. In addition, Russia's Central Bank says the country lost more than $16 billion in the week following the launch of military operations in Georgia on August 8. Financial observers attribute the loss to nervous investors pulling capital from Russia.

Read more ....

My Comment: President Dmitri Medvedev and Prime Minister Putin come from the old school of Soviet economics. Todays world of economics is different. The cost of their Georgian venture was measured in territory lost and/or gained, soldiers killed, equipment destroyed, and military/diplomatic gains. The economic costs were never calculated.

Russia may obtain their objectives in the Caucasus with a minimum of military casualties, but the cost in economics will negate the whole adventure. A financial decline and/or economic isolation will leave millions of Russians as victims .... a consequence that I am sure that they never contemplated.

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