|This may explain why RENN was hit particularly hard yesterday: |
Medvedev Nukes Russia’s Stock Market
Walter Russell Mead
May 19, 2012
It was just a short aside in a speech; the junior member of Russia’s rotating leadership team was talking about how conflicts like the one in Syria could have broader implications for world politics and pointed out that great powers could get involved in unpredictable ways:
“At some moment, such actions, which undermine sovereignty, can end with a full-fledged regional war, or even, and I don’t want to scare anybody, the use of nuclear weapons.”
(From the New York Times.)
It was intended as a veiled threat to the United States — more as an expression of Russia’s strong displeasure with the US approach to Syria than as an actual announcement that Russia would consider a nuclear strike if the US intervenes in Damascus.
But it was enough to cause the fragile Russian stock market to fall 3.5 percent, wiping, the Times estimates, $24 billion from the values of Russia’s listed companies.
The market fall was not, I think, caused by investors wondering what nuclear war would do to Gazprom’s earnings. It was due to their perception that a Russian government given to random and pointless saber-rattling was not going to move forcefully on economic reforms and transparency issues, and that the long term interests of the country are going to be sacrificed for short term demagoguery. Instead of a moderate, responsible and focused leadership aimed at reforming and restructuring an increasingly ramshackle economic structure, Putinocracy 3.0 would be, if anything, a little worse than the 2.0 model when Medvedev was the president and Putin the prime minister. More, it suggested that the prime minister is on a short leash; Medvedev has been presented as a modern minded reformer. If he is mouthing stale and unconvincing Cold War threats, it looks as if he has even less autonomy than markets feared.