Political instability, scandals keep financial markets low

The ability of some organisms to survive drying or freezing conditions in a state of suspended animation is known as anabiosis.

In a way, the Russian financial market today is also in the state of anabiosis. Basic market indices are down: in reality the activity of foreign and domestic investors isn't remarkable, the fund market does not attract even speculators, there are not plenty people giving and receiving credits.

Maybe only the currency sector preserves visible vital features. However, generally speaking it does not change the overall picture. The reason for such remarkable natural accommodation of the financial market is not the advent in the near future of a cool weather but the well-known factor of the future parliament and presidential elections.

It is a particular pity that contrary to the financial sector the manufacturing branch of economy and other markets are inclined towards an uninterrupted continuation of work, and they didn"t want lose time by drawing away the attention from the elections (with the exclusion, perhaps, of big corporations).

Nevertheless, without the support from the financial circles they did not see the possibility to actively operate and develop economy. It is quite clear. With any political scheme it is impossible to pack a suitcase with oil wells, lathes and plants and send them abroad. Furthermore, manufactured goods and services are largely apolitical. The other issue is financial means. The industrial sector depends on the state of financial system, and consequently the current "political" turmoil for financiers hits also this industry.

Therefore, the policy is slackening through the financial component the whole economy in Russia. Time after time free elections as a part of democracy turn into a "hindrance for economy."

Financiers are afraid of the lack of clarity, they are apprehensive of politicians with unforeseeable decisions coming to power and of the appearance of political anarchy. Can it really be true that a dismissal of President and Duma should for one year dislodge the markets from a normal working situation and turns into a turmoil?

However it is not likely to blame the cautious financiers because, probably, the are reasons for the fears. Here we can search culpable figures also among politicians so far not having ensured the complete confidence in the day coming tomorrow.

Therefore, plenty of financiers create emergency scenarios of events. What does it mean? Following the principle "let"s hope for the better, but at the same time let prepare for the worst" it is necessary to disengage maximally actives in order to dispatch them for a short time abroad and set up a scheme for a possible quick siphoning out of remaining capital by transferring it into the best liquid form, cash.

Working procedures are going down passing into a "submarine" regime, the staff, expenses on marketing, advertising, producing of new goods and services, etc are also cutting down. The number of operating banks is down to 1,400. Subsidiary banks are closing. It seems, there are only three investment companies left operating.

Naturally, not everyone sits expecting the tide to turn. There are "fighters" already today counting on a positive outcome, and although they are at risk nevertheless they expect a big gain. However, there are only several banks and financial companies in this sphere. It is interesting that today the enterprises issuing their bonds to the financial market are more visible but for them it is not easy to reckon on the secondary market for their bonds.

Under current situation it would be likely not to fix the situation but try to give advise to financiers to take an active and not passive stand. Because the financial anabiosis is capable to bring a collapse for economy when the whole market economy can be erroneously recognized as having no prospects in our country and being "buried alive."

Meanwhile western "representatives" guided by "election round" of our economic development set up and play regarding to us their own scenarios. Due to the start position of Russian capital at the one side of the frontier their financial means can in the future play for us a role of a strong regulation's factor.

If they are not satisfied with the results of the parliamentary poll they will always have the option of cutting off the money supply. If this would be convenient it is possible to join again the fight for the market. For this it is advisable to carry out a bear play on the cutting of Russian actives values in order to reach cheaper prices for all goods. This refers to shares, ruble, psychological self-appraisal and credits' values.

Which brings us to the Bank of New York scandal. In the end, the case may rank as one of the great swindles of the 20th century - or it may just be another case of vast capital flight from the wreckage of the Russian economy.

Nor is the Clinton administration admitting defeat, yet. "Calm down, world," Deputy Secretary of State Strobe Talbott said in a recent interview with Newsweek. "We have been aware from the beginning that crime and corruption are a huge problem in Russia and a huge obstacle to Russian reform." Talbott insisted: "Russian reform is not over." But "it's going to take decades [and] the problem will only get worse if you isolate Russia." Others note that some reform, like the banishment of central planning, has taken hold.