Russia halts trading after 17% share price fall
By Catherine Belton and Charles Clover in Moscow and Rachel Morarjee in London
Published: September 16 2008

Russian shares suffered their steepest one-day fall in more than a decade on Tuesday, losing up to 20 per cent, as a sharp slide in oil prices and difficult money market conditions triggered a rush to sell.

The heads of the Russian central bank, the finance ministry and the financial market regulator met on Tuesday night for an emergency discussion on ways to halt the crisis.

Earlier, trading had been suspended on both the Micex and RTS stock exchanges as investors ignored assurances by Russian officials and a cycle of distrust set in amid liquidity fears.

Margin calls forced domestic traders to liquidate positions and brokers pulled credit lines. At least one Moscow bank failed to meet payments.
Link to Article

Wow. The investor class in the Russian markets (limited as it is) just moved "en masse" to the exits. No doubt about this one. And the biggest problem is that the Russian government's got no cards to throw out there, because nobody trusts them. And for a bigger hit, oil prices today (Light, sweet crude for October, 2008 delivery settled at $91.15 a Bbl.), with Ural crude normally running $4-6 a Bbl. cheaper, so Russia's getting close to facing some serious economic problems.

Right about now, Russia should contact the Western powers and tell them that for $300 billion, continued G8 membership, and guaranteed WTO membership in 2 years, they'll pull totally out of Georgia (including the 2 disputed provinces) and sign a ten (10) year peace treaty type deal with Georgia, and for that matter, the Ukraine also. For Russia, this type of deal (a) Gets you additional financial resources before you actually hit crisis time; (b) Get both territorial issues out of your hair - they are costing you scarce resources you don't have to spare; & (c) Re-creates a working geopolitical and economic environment and gets you out of this "Mexican Standoff" environment you are in right now. Will this cause political problems at home - you bet, but guess what, you're already there.

Now's the time to get creative, because if you are Russia, your biggest threat you have to deal with is that there is a complete lack of both confidence and trust on any basis at all. Your neighbors, business partners, the markets, and virtually all other nations - virtually nobody's in your corner. You've got to get them back, and the longer you wait, the deal's only going to get you less.

There's a lesson to be learned from Lehman Brothers - don't wait, tomorrow it will only get worse, and the deal gets worse.

Ok, this is my "Hopelessly Optimistic" post of the day.