Friday, October 03, 2008

Russia Sees in Credit Crisis, End of U.S. Domination

The Russian president said in a speech Thursday that the financial crisis in the United States should be taken as a sign that America's global economic leadership is drawing to a close, reiterating an argument that leaders here have been making for some time, though investors in recent weeks have been fleeing Russia and depositing money in U.S. Treasury bills.

Perhaps inevitably for a country long lectured to by the United States, Russia is using the occasion of the U.S. financial crisis to do some lecturing of its own.

President Dmitri Medvedev said Thursday that the U.S. crisis showed that "the times when one economy and one country dominated are gone for good." Speaking of the United States, Medvedev said the world no longer needed a "megaregulator."

Russia has argued that the freewheeling Anglo-American style of capitalism is to blame for the crisis, a position echoed by Germany and other Continental European nations. Medvedev even called it financial "egoism."

A drumbeat of similar pronouncements has been heard in Russia in recent days. Prime Minister Vladimir Putin made a major speech Wednesday on U.S. financial "irresponsibility," blaming the plunge of more than 50 percent in the Russian stock market on the global economic slowdown and U.S. financial turmoil, rather than on any troubles endemic to Russia.

"The saddest thing is that we can see an inability to take appropriate decisions," Putin said in his speech after the U.S. House of Representatives rejected the Bush administration's bailout plan. In contrast, the Russian bailout was decided by decree.

"This is not the irresponsibility of some people but the irresponsibility of the system, which, as it is known, claimed to be the leader," Putin said.

Medvedev spoke Thursday at St. Petersburg State University during the eighth annual Petersburger Dialog, a forum devoted to developing relations with Germany and where he met with Chancellor Angela Merkel. Members of Merkel's government have also been critical of U.S. regulators.

Germany will "always support a multilateral approach" to market regulation, Merkel said, adding that officials from the European members of the Group of 8 industrialized nations would meet to discuss new market regulations, Bloomberg News reported.

But in contrast with other European countries Russia's own financial system has been in steep decline over the past weeks, and regulators suspended stock trading three times. As in other emerging markets during periods of turmoil, investors have had a tendency to pull money out of Russia and to deposit it in U.S. Treasury bills.

Since the second week in August, when the war in Georgia and political tension with the West heightened concerns about stability in Russia, $52 billion in net private capital has left Russia, according to an investor note from Goldman Sachs.

Russia has promised a total of about $150 billion for loans to banks, tax cuts and other measures. The moves seek to stimulate the economy, restore liquidity to the banking sector and return confidence in the stock market.

Still, the global credit crisis could trim about 1 percent from Russian growth next year, according to Finance Minister Alexei Kudrin.

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