Battered Russian market awaits West’s next move: analysts
MOSCOW — Russia's battered stock market yesterday struggled to come to terms with the fallout from rising tensions over Georgia as investors waited for signs of retaliation from the West. The benchmark RTS index plunged four per cent on Tuesday when Moscow defied the West by recognising the breakaway Georgian regions of Abkhazia and South Ossetia.

A further one per cent fall yesterday brought the index to a new low, 15 per cent down from its level on August 7, the eve of the Georgia conflict. "In the short term, the main force moving the market will be fear of a serious rupture with Russia's Western partners," said Chris Weafer, an analyst with Moscow-based investment bank Uralsib.

"Investors are waiting for a sign from the West," he said. Since Russian tanks entered Georgia on August 8, Western politicians have made a number of threats of retaliation. Investors are now waiting to see if they can back them up, said Moscow-based analyst Mikhail Parshin. "Now that Russia has made its position clear, everything depends on Georgia's allies," Parshin said in a note for Moscow's First Republican Bank.

"The reaction of the West is now vital." US officials have warned that Russia's long-standing bid to join the World Trade Organisation could be threatened by its actions. Russia's place in the prestigious Group of Eight industrialised nations has also been threatened. But other market watchers feel that Russia is safe, as a divided West will be loath to cut ties with Russia, the world's largest energy exporter and a fast-growing, huge consumer market for European exporters.

"Despite their political confrontation with Russia over its recognition of the independence of Abkhazia and South Ossetia, these countries do not have serious economic levers to pressure Russia," said Angelika Genkel with the Moscow-based Alfa Bank. "Russia is capable of answering its opponents' foreign policies," she said. An emergency summit on Monday of the leaders of the European Union, Russia's largest trading partner, will be a key test of the West's resolve — and a key date for Russian bourses — said Uralsib's Weafer. — AFP