Russian markets to remain closed until Friday

September 18, 2008

The Russian government has continued to hold all stock markets closed until Friday, including the MICEX and RTS exchanges. Facing its worst financial crisis since 1989, the government is fighting to stem off a crash and restore consumer confidence.

President Dmitry Medvedev went on national television to appease the public. "There is no more important task for Russian authorities than stability of our financial system under the current circumstances. This is our top priority," Medvedev said. "The market should be given all the necessary support."

Finance Minister Alexei Kudrin announced that 500 billion rubles (US$ 19.7 billion) would be infused into the stock markets when they opened on Friday, with half of that amount coming from the federal budget. In addition, the Central Bank responded by offering to loan an additional 60 billion rubles (US $2.63 billion) on top of the 1.13 trillion rubles (US$ 44.6 billion) that it offered yesterday to Sberbank, VTB Group and Gazprombank. The Central Bank is encouraging the nations top banks to provide the money to smaller lenders. Central Bank chairman Sergei Ignatiev also announced on Wednesday that mandatory reserve requirements for banks would be slashed, freeing up an additional 300 billion ruble. "We hope that banks will spend these funds not on long-term crediting or other kinds of crediting of clients," he said, "but on the maintenance of the necessary volume of their liquidity and on making settlements."

In the aftermath of Russia's invasion of neighboring Georgia, the markets saw investors pull out nearly US$ 36 billion in wealth since early August. Further compounding economic woes are the recent slump in oil and gas prices, which have bolstered Russia's economy for several years. To help with this, starting on October 1 regulators will lower the export duty on oil, saving Russian oil companies around US$ 5.5 billion.