Taking the plunge...

BBC News reports that "...the Russian stock market has plunged more than 30% since the country's invasion of Georgia last month."

My first thought on this development was, 'good, that'll give them pause for thought'. My hope was that such a sharp reversal in investment would show the Kremlin that while an adventurous wars can manipulate oil prices to their benefit, it will also significantly affect the level of financial risk investors are exposed to. This uncertain climate will inevitably cause investment to flood out of the country, which it did, with the foreign capital draining from Russian markets at $670 million dollars on average per day since the war in Georgia began. Feeling the pinch, this newting of the hawkish but pragmatic leaders in the Kremlin would force a draw-down and encourage Russia to cease it's action.

On reflection however, it must be remembered that Russia successfully managed to avert market-capitalism for over 80 years while amassing a colossal military machine to challenge the richest nation in the world - a very costly exercise. It should also be noted that the ex-CIS countries, Russia's closest trading partners after the EU, has a population of 278 million which are at the least obliged to purchase first from Russia. And then there is the oil which for every $1 per barrel increase provides Russia with an additional $1 billion per year. The Russian economy appears better equipped at weathering economic storms than was first thought.