MOSCOW—By any measure, Russia's stock markets have been on a sickening ride.
On Thursday, authorities cautiously reopened trading on Russia's main exchange, the Micex, where action was halted yet again Wednesday after shares fell 14 percent in just the opening hour. As trading resumed, the Micex, buoyed by the coordinated rate cut by western central banks, recovered much of the previous day's loss. But that hardly begins to repair this year's financial carnage, which has panicked investors and undermined Russia's oil-fueled economic resurgence.
Moscow's two main stock markets, the Micex and the RTS Index, have been closed repeatedly in recent weeks to stem their dives. By early October, both had fallen about 70 percent from a May high, and Monday was the worst day of trading in Micex's history. In response to the financial sector's woes, the Russian government has announced a rescue package of about $200 billion.
On the political front, Russia's leaders have seemed happy recently to chart a lone course in international relations. They batted aside western criticism when they ordered the invasion of Georgia and, later, unilaterally recognized the breakaway Georgian republics of Abkhazia and South Ossetia.
But when it comes to the economy, Russia is in the same boat as much of the rest of the world—a boat being swamped by the tide of financial problems.
For Russia, the effects of the global credit crunch are compounded by domestic factors, particularly a lack of confidence on the part of foreign investors in Russia.
The impact of the crisis on most Russians has so far been minimal, partly because the crisis has received little attention in the largely state-linked mainstream media. And it has not done much damage to the image of the country's popular but increasingly authoritarian government.
Some of Russia's powerful oligarchs, though, are facing tough times. And their firms could be wrested from them as the state proceeds with a bailout. "The ones that are in crisis are those that have been borrowing," says Alexander Lebedev, part-owner of the national airline, Aeroflot. "The biggest, those that are in raw materials, metals, telecommunications...they might or might not lose their controling stake to the market or to Prime Minister (Vladimir) Putin," says Lebedev, who is ranked by Forbes magazine as No. 358 among the world's billionaires, worth $3.1 billion. (Lebedev denies that the value of his own holdings has sunk about 60 percent, as he was reported to have said at a recent Moscow party—he says it was a joke that was misinterpreted.)
The precipitous decline of Russian stocks began in May, fueled by fears about the U.S. economy and a conflict between the British and Russian shareholders of oil company TNK-BP that seemed an ominous sign for foreign investment in Russia.
In late July, investors' jitters increased after Putin publicly criticized giant mining and metals company Mechel for selling raw materials cheaper abroad than at home. In response, Mechel's shares fell 38 percent, losing $6 billion in value.
The case seemed to reinforce the perception, stemming from the jailing of oil tycoon Mikhail Khodorkovsky and the dismantling of his company, that companies operating in Russia depend on government goodwill for their survival.
More foreign investors pulled out after the Georgian war. Russian Finance Minister Alexei Kudrin announced in mid-August that $7 billion of hard currency left the country during the conflict.
Many Russians have adopted a wait-and-see attitude toward the crisis. But it comes as an eye-opener for Russia's nouveau riche. "If things start turning sour in banks and companies, in retail, we might see a slowdown in clients," says Alexei Gorichev, who runs Velvet Club, a firm that uses executive jets for scheduled flights between Moscow and destinations in Europe and the Middle East. A one-way executive-jet ticket to London costs 4,000 euros ($6,800). "The hedge-fund managers who were making $5 to $10 million a year will not be flying to London for the weekend if they lose their shirts," Gorichev says.