US, Russia Heading for Confrontation?

[makapaaa]

Russian Stocks, Ruble Tumble as Medvedev Recognizes Regions

By William Mauldin and Emma O'Brien
Aug. 26 (Bloomberg) -- Russia's RTS Index fell to the lowest level since 2006, the ruble extended its drop and the cost of protecting the country's bonds rose as the government recognized the independence of Georgia's breakaway regions.
The RTS index of 48 companies posted the biggest decline among 89 global equity measures tracked by Bloomberg, while Russia's currency slid to the lowest level in almost seven months against the dollar. Credit-default swaps on Russian debt climbed 7 basis points, according to CMA Datavision prices in London, as President Dmitry Medvedev risked a deepening rift with the West by recognizing South Ossetia and Abkhazia.
Investors have pushed the RTS to this quarter's steepest retreat among the world's stock markets as Russia invaded Georgia and tumbling oil prices sent energy producers lower. Medvedev's statement followed a unanimous call by Russia's parliament to back the enclaves' aspirations for statehood in the aftermath of a five-day war that began on Aug. 8.
``The sentiment here remains pretty bad because of the events in Georgia,'' said Jean-Louis Tauvy, who manages $300 million at Atria Advisors Ltd. in Moscow.
The dollar-denominated RTS Index fell 5.3 percent to 1,560.14 at 4:19 p.m. in Moscow, extending its third-quarter drop to 32 percent. The ruble-denominated Micex Index slumped 3.3 percent to 1,276.47, the lowest level since September 2006.
VTB Group, Russian's second-biggest bank, plunged 6.3 percent to 6.42 kopeks, the lowest level since its initial public offering last year.
`Follow its Example'
``I signed decrees on the recognition by the Russian Federation of the independence of South Ossetia and Abkhazia,'' Medvedev said on television from Sochi today. ``Russia calls on other states to follow its example.''
OAO Gazprom, the country's biggest publicly traded company, sank for a third day, losing 2.7 percent to 226.50 rubles. Crude oil for October delivery fell as much as $2.75, or 2.4 percent, to $112.36 a barrel on the New York Mercantile Exchange.
Russia's ruble declined as much as 1.3 percent to 24.7676 to the dollar, the lowest since Feb. 7.
`Prolonged Period'
``This adds to the uncertainty of doing business in Russia and so people are reducing their positions,'' said Lars Rasmussen, an emerging-markets analyst at Danske Bank A/S in Copenhagen. ``It now seems like this conflict could go on for a prolonged period.''
Credit-default swaps on Russian government debt rose 7 basis points from Aug. 22 to 135, according to CMA Datavision prices at 12 p.m. in London. Contracts on Gazprom rose 11 basis points to 267, CMA prices show.
Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A rise indicates a deterioration in the perception of credit quality; a decline signals the opposite.
A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
To contact the reporter on this story: William Mauldin in Moscow at [email protected]; Emma O'Brien in Moscow at [email protected].
Last Updated: August 26, 2008 08:33 EDT

 

[makapaaa]

Russia Recognizes Independence of Georgian Regions (Update2)

By Sebastian Alison and Lyubov Pronina
Aug. 26 (Bloomberg) -- Russia recognized the independence of Georgia's breakaway regions, South Ossetia and Abkhazia, risking a deepening rift with the West and striking a blow against NATO's expansion toward its border.
``I signed decrees on the recognition by the Russian Federation of the independence of South Ossetia and Abkhazia,'' President Dmitry Medvedev said on television from Sochi today. ``Russia calls on other states to follow its example.''
European governments condemned the move. The U.K. Foreign Office ``categorically'' rejected it, while Italy and France expressed regret.
Russia's unilateral recognition of the two regions stems from its military rout of Georgia, which came this month in response to a Georgian operation to retake South Ossetia. It echoes the West's establishment of ties to Kosovo in February, a step Russia bitterly opposed after the enclave broke away from Serbia, a Russian ally. U.S. President George W. Bush has opposed any move to divide Georgia.
Medvedev's statement at his summer residence in Sochi, about 100 kilometers (62 miles) along the Black Sea coast from the Abkhaz capital, Sukhumi, followed a unanimous call by Russia's parliament to back the enclaves' aspirations for statehood.
``Russia has legalized what it was threatening to do for a long time now,'' Kakha Lomaia, head of Georgia's Security Council, said by phone. ``This means these two regions are about to join Russia. Make no mistake about it.''
Ossetians Celebrate
In the South Ossetian capital Tskhinvali, residents greeted Medvedev's announcement by firing guns into the air, RIA Novosti reported. Russian and south Ossetian flags were hung from buildings across the city, the state-run news service said.
``It's a very serious situation for Russia,'' said Alexander Rahr, a Russia and Eurasia expert at the German Council on Foreign Relations in Berlin. ``Russia now risks getting itself into complete international isolation.''
Russia and Georgia have had tense relations since 2003, when President Mikheil Saakashvili came to power in the non- violent ``Rose Revolution,'' pledging to steer his country towards membership of the North Atlantic Treaty Organization and the European Union. NATO announced at a summit in April that Georgia will eventually join the military alliance, alongside Ukraine, another ex-Soviet republic, without giving a timeframe.
Medvedev Comments
Medvedev said Russia had reacted patiently, and had called for a return to negotiations ``even after the unilateral declaration of independence of Kosovo.'' He added that ``a peaceful solution to the conflict was not in Tbilisi's plans. The Georgian leadership methodically planned for war.''
``Saakashvili chose genocide to achieve his political ends,'' he said.
Medvedev's move ``further complicates an already complicated situation,'' Italian Foreign Minister Franco Frattini told lawmakers in Rome. ``It's a unilateral decision that doesn't have international support that makes it legally binding.''
It could also have economic consequences, UniCredit SpA analyst Vladimir Osakovsky said by telephone in Moscow.
``It opens the door for possible sanctions against Russia by Europe or the U.S.,'' he said. ``The effect of this decision on the economy will be determined by the scale of the West's reaction.''
``The continued presence of the Russian army in Georgia will most likely now be viewed as Russian occupation. This could trigger personal or business restrictions against government officials or companies,'' Osakovsky said.
To contact the reporters on this story: Lyubov Pronina in Sochi via the Moscow newsroom at 7732 or [email protected]; Sebastian Alison in Moscow at [email protected]
Last Updated: August 26, 2008 08:21 EDT

 

[BlueCat]

just as i guess,must be at Georgia.
look like Bush wants to go out with a big bang and left the next president with a lot of shits to clean up.