Benefits and risks

Let me make a reservation right away: the fall of the Russian stock market began long before the start of the Georgian-Ossetian conflict, which very quickly escalated into the Georgian-Russian one. Having reached historical highs in the second half of May, domestic stock indices began to decline, which turned into a fall after the Russian prime minister suddenly became interested in the pricing policy of a single private mining and metallurgical company Mechel, and culminated in a collapse when a message about the march appeared last Friday. -throw of units of the 58th Army towards Tskhinvali.

On Monday, after the start of trading, the capitalization of the Russian market fell by another 5% and was one third lower compared to the close on May 19. The dollar exchange rate soared by one and a half rubles in two days, and the ruble fell not only due to the serious strengthening of the dollar against the euro - over the month the European currency “lost weight” by 11 cents - the ruble fell against the bi-currency basket. Panic selling of shares gave way to rapid growth after reports that Georgian President Mikheil Saakashvili agreed to sign an agreement on the non-use of military force. Despite the fact that there was no ceasefire, growth continued thanks to the Ministry of Finance, which announced that at the auction for placing public funds on deposits of commercial banks on August 12, not 10 billion rubles would be offered, as originally planned, but 300 billion. Investors rightly regarded the Ministry of Finance’s actions as indirect support for the market and rushed to buy cheap shares.

Let us leave the moral and political assessments of the current war on the territory of Georgia to people who specialize in such assessments. Personally, for me, all people who give orders for artillery, missile or bomb attacks on cities, be it Grozny, Sarajevo, Belgrade, Baghdad, Haifa, Beirut, Tskhinvali, Gori or Tbilisi (if such an order follows), are equally disgusting and worthy of an international tribunal. , and enough of that.

Instead, let's try to estimate the economic consequences of the war. No matter how cynical it may sound, the fact remains: a small war on foreign territory can give additional impetus to flagging economic growth by stimulating the military industry with additional orders. This rule works, although not always. If military expenditures place an unbearable burden on the state budget, forcing the government to go deeper and deeper into debt to domestic and foreign creditors, then growth gives way to depression, and more “severe” than that which could come “naturally.” But another rule has no exceptions: economic growth caused by military action is always paid for with the blood of innocent civilians. In addition, if a war drags on, it almost inevitably leads to excessive costs, as well as a reduction in the rights and freedoms of citizens, and the destruction of democratic institutions.

As for the country on whose territory hostilities are taking place, there is no need to talk about economic growth. The longer and more intense the fighting goes, the more economic potential is undermined, infrastructure is destroyed, and sales markets are lost. A country through which the steamroller of war has rolled, as a rule, has been set back in its development by decades. Especially when we are talking about “peace enforcement operations,” which have been popular for some time, implying causing maximum damage to the infrastructure and economy of the “coerced” side. Recovery after such operations is only possible thanks to massive external assistance. At the same time, those involved in restoration receive a significant share in the newly created property. So, if we are guided by the principle “look who benefits from this”, Georgia, which, among other things, risks being left without a significant part of its territory - South Ossetia and Abkhazia - the current war is completely unnecessary, and for the Russian economy, which is showing clear signs of slowing down , war can, willingly or unwillingly, play a “tonic role.” Even the weakening of the ruble, to which the Central Bank did not make any efforts, can be considered a gift, because the printing press did not have to be used, and the economy will feel the stimulating effect in the foreseeable future. And a correction in the stock market is long overdue, and fallen stocks are becoming more and more attractive to investors. This does not mean at all that I am inclined to turn a blind eye to obvious facts, such as the salvos of Georgian Grads on the night from Thursday to Friday or the morning march of Georgian tanks along the streets of Tskhinvali. And yet, so far the Russian economy is only benefiting from the war. The only problem is that the longer this war drags on, the higher the political and economic risks will be. Oil prices are falling almost faster than they were rising recently. No responsible analyst can predict where this decline will stop. This means that the government may need the accumulated reserves much earlier than would have been expected a month ago. Additional unbudgeted military expenditures, while still manageable, may prove to be too much of a burden over time. Therefore, Russian “hawks”, who now and then remember Afghanistan and Iraq, would like to remind that the American economy is going through far from the best times, not least because of the hole in the budget made by financing military operations.

PS

While this text was being written, a message appeared on the news feeds that the Russian president had decided to end the military operation. On this news, the Russian stock market soared vertically. If the fighting does end, there will be great cause for celebration.