Has The Global Financial Meltdown Forced A Truce In US-Russia Political Tift?

Recently Russia indirectly confronted the US by partly invading Georgia, a staunch US ally.

Not contended with its recent political-military victory, Russia appears to have been flexing its military muscles by parading its warships in the Mediterranean aside from its recent military exercise with Venezuela a formidable political foe of the US.

Courtesy of Timesonline

It has also been capitalizing at US social-economic-financial pressures at home by expanding its influence outside its region. In short, the Putin led Russia have been rebuilding up on the scale of its old “Soviet Union” networks. A possible revival of the former US-Soviet “Cold war” looks likely at work. Or so it seems.

Now we read that the US and Russia are having unannounced highly confidential top level military meeting at Finland (Hat tip: Charleston Voice).

According to Turkish Daily News, ``A U.S. Embassy official says American and Russian military leaders are meeting for unannounced talks in Finland, the highest-level military meeting between the two countries since Russia's war with U.S. ally Georgia in August.

``U.S. Embassy spokesman Kim Hargan says the participants include Adm. Michael G. Mullen, the chairman of Joint Chiefs of Staff, and Gen. Nikolai Makarov, who was appointed the Russian Armed Forces' Chief of General Staff in June.

``Hargan declined to give any details on Tuesday's talks, which had not been previously announced in Finland.

``The Finnish Defense Ministry said the head of the Finnish defense forces, Admiral Juhani Kaskeala organized the meeting at an isolated manor house outside Helsinki. It gave no other details.”

Of course, such a meeting could mean anything and is subject to anyone’s interpretation or speculation. But considering how Russia has felt the brunt of the financial meltdown, to see its stocks collapse, its currency slammed and its bonds toast, while its main source of export revenues-oil and energy-getting walloped, maybe such a meeting puts on hold the political showboating of both camps.

Perhaps misery loves company.

An Epitome of A Full Scale Bear Market:: Russia

Russia's financial market seems to exhibit what we might call a full scale bear market.

chart courtesy of Danske Bank

We previously featured part of this in our previous post " A Government Cardinal Sin That Results To A Bear Market? War!"

Collapsing equity and currency markets, soaring interest rates as funds flee, and declining currency reserves hallmark a true bear market. Major contributing variables: Russia's recent military activities in Georgia, falling oil/energy/commodity prices, global deleveraging and rising risk aversion.

A Government Cardinal Sin That Results To A Bear Market? War!

What is one of the government prompted cardinal sins that results to a bear market? The answer is War! We have dealt with this in our past article, Phisix: Learning From the Lessons of Financial History.

So now it appears we have a LIVE unfolding showcase: Russian assets have been collapsing since the military conflict with Georgia erupted!

Courtesy of Danske Bank

From Lars Christensen and Lars Rasmussen of Danske Bank (highlight mine),

``Russia’s financial markets remain under pressure today following the news. Performance has been negative in FX, fixed income and equity markets, and among derivatives. The Russian rouble (RUB) at one point weakened more than 1.3% against its dual currency basket (45% EUR and 55% USD) to trade around 30.10. The Russian central bank (CBR) has since stepped in to support the currency. The RUB basket currently ranges between 29.70-29.90, a few percentage points weaker than last week.

``Meanwhile, Russian share indexes have hit their lowest levels for almost two years. Russia's benchmark RTS stock index fell more than 4% this morning, to its lowest level since November 2006, although it has rebounded somewhat in the last couple of hours. Overall, Russian equities are down more than 30% from their peak in mid-May.

``Going forward, the Russian markets will remain under pressure for as long as there is no move towards a resolution of the conflict. In addition, further falls in oil prices could add to the downward pressure on Russian assets. Caution is thus clearly warranted in the Russian financial markets.”

Additional observation…

From the New York Times,

``Mr. Saakashivili, the Georgian president, said Russia’s oil riches and desire to assert economic leverage over Europe and the West had emboldened Kremlin country to attack. Georgia is a transit country for oil and natural gas exports from the former Soviet Union that threatens Russia’s near monopoly.

“They need control of energy routes,” Mr. Saakashvili said. “They need sea ports. They need transportation infrastructure. And primarily, they want to get rid of us. ”

Hmmmm. It seems to sound more like a conflict premised on commodity geopolitics!