View Full Version : Ruble, Russian Stocks Fall as Putin Says Georgia `War' Started

08-08-2008, 11:15 AM
-- The ruble dropped the most in 3 1/2 years and Russia's 30-stock Micex Index fell to a 22-month low after Prime Minister Vladimir Putin said ``war has started'' in the breakaway Georgian region of South Ossetia.

Credit-defaults swaps, a measure of bond risk, climbed the most since March after Georgia's Interior Ministry said jets bombed the towns of Gori and Kareli near the breakaway region of South Ossetia.

The ruble fell the most against the central bank's basket of dollars and euros since that gauge was introduced in February 2005. The Micex plummeted, bringing its decline this year to 28 percent after oil slid 19 percent. Russian ``volunteers'' are pouring over the border to help defend South Ossetia from Georgian forces, Putin told U.S. President George W. Bush in Beijing, according to Putin spokesman Dmitry Peskov.

``We didn't need this,'' said Ivan Mazalov, who helps manage $5 billion in shares of companies from the former Soviet Union at Prosperity Capital Management in Moscow. ``It's not going to break the Russian economy, but war is bad for investor sentiment.''

Bombings by Russian warplanes followed an attack by convoys from Russia on Georgian forces near the South Ossetian capital of Tskhinvali, Georgian Interior Ministry spokesman Shota Utiashvili said by phone today from Tbilisi, Georgia. Russia's government earlier denied the bombing claim, and the Defense Ministry accused Georgia of ``unleashing a dirty, reckless scheme.''

`Last Nail'

The dispute between the countries ``adds to bruised investor sentiment'' in Russia and is ``potentially damaging to Russia's external relations, particularly with the West,'' JPMorgan Chase & Co. wrote in a note to investors. ``Clearly a war would not support investor confidence and would further fuel the debate about political risk.''

08-08-2008, 11:18 AM
Analysis: why the Russia-Georgia conflict matters to the West

It would be a serious mistake for the international community to regard the dramatic escalation of violence in Georgia as just another flare-up in the Caucasus.

The names of the flashpoints may be unfamiliar, the territory remote and the dispute parochial, but the battle underway will have major repercussions well beyond this volatile region.

The outcome of this struggle will determine the course of Russiaís future relations with its neighbours, will shape President Medvedevís presidency, could alter the relationship between the Kremlin and the West and decide the fate of future energy supplies from the Caspian basin.

Quite what triggered the Georgian offensive, on the day that the world was supposed to gather in peace for the start of the Beijing Olympics, is not yet clear.

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But it is known that a major confrontation has been building up. Indeed, British intelligence earlier this year predicted that a war in the Caucasus was probable in the near future.

Part of the responsibility must lie with President Mikheil Saakashvili. The US-educated politician has rightly been praised for turning around his countryís dire economy, for transforming his former Soviet-style army into a modern Western force and for standing up to the Kremlinís intimidation.

Georgia has for the best part of two decades been saddled with breakaway regions in Abhazia and South Ossetia, both supported by Russia as part of the Kremlinís strategy to weaken Tblisiís authority.

Nevertheless, seeking to reintegrate the separatist provinces by force is a risky, some would say reckless, move that threatens to trigger an all out war between Russia and Georgia.

On paper, the small Georgian military is no match for the might of the Russian armed forces. But Mr Saakashvili has calculated that his friends in the West, notably America and Britain, will protect him against an all out Russian attack.

08-08-2008, 11:24 AM
Fiercest Fighting in Years Near Georgian Border

MOSCOW ó Fighting in the border region between the former Soviet republic of Georgia and a breakaway Georgian enclave escalated sharply Friday morning to its highest level in years.
Soldiers from South Ossetia, a breakaway Georgia enclave, on Thursday near Tskhinvali, where heavy fire was reported.
Georgian officials said their troops had made a significant incursion into the breakaway region, South Ossetia, in response to what the officials contended were provocations from over the border, including shelling. The Georgian officials said they had taken up positions outside the capital of the enclave, Tskhinvali.

At least 25 civilians and troops were killed in the fighting that started Thursday, officials from both sides said.

The move by the Georgian troops followed a day of attacks by both sides, as well as an offer from the Georgian president to agree to a cease-fire.

The Georgian side suggested that its troop movements were not intended as the beginning of an all-out push to retake the enclave, but were rather a defensive effort to prevent shelling from the other side.

The deaths were part of an intense, new round of fighting that has continued sporadically since last weekend, when six people in South Ossetia, the breakaway enclave, were killed and more than 20 were wounded on both sides.

South Ossetia has reported evacuating women, children and the elderly from the conflict zone, sending them north into Russia.

The United Nations Security Council called an extremely rare nighttime emergency session Thursday to discuss the situation after a request from Russia, according to Peter Van Kemseke, a spokesman for the Belgium mission, which holds the rotating presidency of the Security Council this month.