Special Extra: Another Brutal Day in the Russian Markets

Uh-oh . . .

Uh-oh . . .

As if by order as we publish the full version of the second part of Boris Nemtov’s brilliant White Paper, which shows the fundamental failure of the Gazprom oil monopoly, the Russian stock market had another horrifyingly bad day on Monday, closing below 1,200 on the RTS index, down over 7%.  The oil and gas index was down below the market average, closing off over 7.5%. 

As the chart above shows, the ridiculous charade that began on September 17th when the Russian government simply closed the market entirely as it plunged towards the 1,000 level, and continued through September 22nd as the state used its vast network of banks to simply create demand for stocks nobody wanted, is now unmasked. The market is heading right back down on the path it had previously selected, currently 50% down from the level it had reached six months ago. The price of oil is plummeting (down over $20/barrel over the past week) as Western demand dries up due to the economic downturn, and Russia stands at the precipice of a bottomless abyss.

And it should strike extra fear into the hearts of Russian investors that the Russia market was long closed before the U.S. bailout deal collapsed, and the U.S. market took a plunge of just under 7% (interestingly, however, it was revealed that the $700 billion “bailout” number was wholly illusory).  What ghastly horror may Tuesday morning hold in store for the Russian market? Will the Kremlin’s solution be to shut it down once more?  Another fevered round of Kremlin cash infusions was announced in the vague hope of staving off the inevitable with yet another Potemkin sham.

8 responses to “Special Extra: Another Brutal Day in the Russian Markets

  1. Medvedev must be getting nostalgic. Here is a blast from the not-so-distant past (one year ago):

    Gazprom could become world’s richest company-Medvedev

    MOSCOW, August 9 (RIA Novosti) – Russian gas giant Gazprom could become the richest company in the world, a Russian first deputy prime minister said in an interview with a German magazine Thursday.

    “Gazprom has the largest natural gas reserves in the world. When I joined the board of directors (in 2000), the concern was worth about $8 billion, but today it is more than $250 billion. One day it could become the world’s most valuable company,” Dmitry Medvedev, who is also chairman of the Gazprom board of directors, said in an interview with Stern magazine.

    He said enterprises that own strategic resources must be under state control.

    “The entire country, its population, depends on Gazprom. We do not want to risk an economic or political collapse that could occur should the enterprise be sold to a dozen or so private owners,” he said.

    Medvedev said Gazprom has always honored its contractual delivery obligations, and nothing in the future would change in this respect.

    “And please don’t forget that German firms have a 6% share in Gazprom,” the first deputy prime minister said.

    Source: http://en.rian.ru/russia/20070809/70680642.html

    GAZPROM shares peaked in May and have lost more than half of their value since then. So much for Medvedev’s dreams of making GAZPROM the world’s richest company.

    If the entire country of Russia depends on GAZPROM as Medvedev said, then I truly feel sad for the Russian population.

  2. Donald Trump who predicted the real estate crisis said that the economic slump is going to send the price of oil down to $20 to $30 a barrel.
    Talk about bursting Russia’s economic bubble.

  3. And, this just out: Putin announces that the Russian state will lend another 50 billion to Russian banks to help them pay off their loans (i.e. money borrowed on foreign markets that Russian banks wouldn’t have been able to refinance). This 50 billion, plus the 130 billion pumped into banks and stocks plus other billions spent to prop up the ruble certainly totals over 200 billion dollars by now. How much money did Russia have in its reserves? 600 billion? Officially, Russia has already spent at least a third of its reserves, and much of the remainder is actually tied up in the American market (read subprime loans fiasco). At this rate, Russia will be officially broke before the end of the year.

  4. Pingback: Cyber Cossack » Blog Archive » Russian Markets Plunge Again

  5. Funny little tea gathering of “podrostok” who happily dance around bonfire and hysterically scream about Russian failure.

    It is touching that only commentators in this blog are the ones who agree with the official line of Kapitan Kim (or whoever tribe leader happens to be in control)


  6. MOSCOW, Sept 30, 2008 (AFP) – Trading of shares on both of
    Russia’s main stock markets, the RTS and the MICEX, was halted by
    government regulators as they opened Tuesday, the exchanges said.
    “In accordance with an order from the Federal Service for
    Financial Markets, trading on the RTS stock market has been
    suspended,” the RTS said in a statement on its website.
    “Trading is stopped,” Yelena Kislitsyna, a MICEX spokeswoman,
    told AFP.

    what a great policy, when things go bad just close the stock market

  7. Gazprom and the rest have to face up to falling prices *and* rising capital investment costs. Therefore to maintain production levels in order to sell it at lowering prices they need to borrow money at loanshark rates……

    Russia players slash capex on rates rise

    Russian energy players will have to cut their investment programmes as they face a steep increase in interest rates from their local lenders amid a closure of foreign funding, according to local media.

    Kommersant business daily quoted deputy chief executive of gas producer Itera, Sergei Vorobyov, as saying that large Russian banks have raised annual rates for rouble-denominated loans for energy companies to 11% to 13% from 7% to 8% before.

    Smaller banks have increased the rates to 18% , Kommersant said quoting acting general director of energy player Trans Nafta, Sergei Stepanov.

    “We have already cut our credit portfolio by 10% to 15% and are planning to decrease it by 25% to 30% from last year by the end of this year,” said Vorobyov.

    Kommersant said gas export monopoly Gazprom, Russia-s second largest gas producer Novatek and BP’s local venture TNK-BP, have all confirmed a steep increase in rates.

    Russian oil producers have said they need to steeply raise their capital investment programmes in the next years to sustain production growth, which is heading for its first decline in a decade this year.


  8. Real problem with Nemtcsov, he does not have a plan of action. He criticizes Russian government, but it looks like there is no alternative he is offering. Illarionov looks much better in this crisis situation; I absolutely agree that the way Kudrin and Medvedev performed first two days of October, statements they make, are clearly unacceptable. Though America has fundamental economical influence on Russian stock market, I would strongly disagree that problems that we see in the beg of October, are not exactly related. I would expect a good Micex/RTS rally on $700B plan approval, but instead there is a sharp decline. Too bad.


    You’re simply not paying attention. Nemtsov’s goal is not to correct the problem, but to get the people of Russia to see that there IS a problem. He’s educating them now, just as Lenin did before he tried to take action. You are putting the cart before the horse and your criiticism is totally baseless. Most Russians have no idea what state Gazprom is in now or what their future holds. Your comment simply shows how far ahead of folks like you Mr. Nemtsov really is.

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