MOSCOW — As Russia fights to reassert influence abroad, the Kremlin is suddenly dealing with a crisis at home: the crumbling of its financial powerhouse built on high oil prices and a growing stock market culture.
Russian stocks, already hurting before U.S. investment bank Lehman Brothers went bankrupt and the Federal Reserve took over insurer AIG, have suffered heavy losses during a week of turmoil on world financial markets, while its banking system has run alarmingly short of cash.
Russia’s primary stock indexes, MICEX and RTS, edged up in early trading Wednesday, but then resumed their decline, plummeting to the lowest points in nearly three years. Since May, the RTS has fallen by more than 55 percent.
The Kremlin — which still sits on massive reserves from its oil earnings — raced to restore confidence in its banking system with a wave of emergency loans, and the financial markets watchdog suspended stock trading for the rest of the day to halt the slide and give officials breathing space to cobble together further measures.
“There’s the potential for major disaster if this is not handled properly,” said Chris Weafer, chief strategist at Moscow-based UralSib bank. “Russia has the financial resources to weather this, but if they don’t use those resources properly or deal with the issues properly, then it doesn’t matter how much money they have, we could still certainly have a crisis. And that’s why the market is down.”
