Wednesday brought some clarity when Russia’s Central Bank announced that, starting on September 18, the rates of the minimum obligation reserves for credit organization dealing with private parties (in rubles) will be lowered by 4 percent, from 5.5% to 1.5%, while for obligations of non-residential banks (in rubles and foreign currencies) the rates will drop from 8.5% to 4.5%, and for all other obligations, from 6% to 2%. Later, starting in 2009, these rates will be slowly increased.

Overall, Russian experts were quoted as praising these actions. “Central Bank did exactly what the market was expecting it to do, but almost too radically -- 4 percent points is too much liquidity,” said Elena Sharipova, an economist with Renaissance Capital, one of the leading investment banks in Russia. “We are expecting that tomorrow there will be 200-250 billion of additional rubles ($8.4 – $10.4 billion). That’s a noticeable injection. The rate cuts will affect all the banks -- small, medium and large ones. Everyone is going to get money proportionally to their reserves,” she said.

“Russia's government will lend the country's three biggest banks, OAO Sberbank, VTB Group and OAO Gazprombank, as much as 1.13 trillion rubles ($44 billion) for at least three months to boost liquidity,” reported Bloomberg.

Some experts say that a lot of what has happened to the market is the Russian government’s fault. “Our government did too much for this crisis to happen,” said one analyst who was quoted anonymously in an interview with Gazeta.ru.

Said another economist, also quoted anonymously, “Just remember the not-so-careful statements about metallurgical companies and the indecisiveness regarding the tax cuts. All this negativity had a strong impact on the investment climate for foreign investors. We entered unprecedented situation because of the concerns regarding [the bankruptcy of] Lehman Brothers and AIG and the consequences for the entire investment and insurance markets.”

No news agency in Russia directly linked the market failure to the war in Georgia, despite the fact that a huge outflow of foreign capital followed the recent rise of international tensions in the Caucuses. The usually anti-government newspaper Moskovsky Komsomolets [Moscow Komsomol - not to be confused with the popular tabloid Komsomolskaya Pravda - RB] published a short front page article titled USA is Satisfied with the Failure of the Russian Market and Withdrawal of the Capital from Russia. The MK mocked William Burns, US Undersecretary of State for Political Affairs, for saying that Russian markets were paying for the “unwise decision of the Russian government to invade Georgia.” According to Burns, in part due to the war in Georgia, the Russian stock markets lost a third of their value. However, the Russian stock market began its decline well before the war started in August, and was already showing signs of volatility even as global oil prices reached unprecedented levels in July 2008.

Most Russian media seem to regard the market failure as a combined result of the financial crisis in America and controversial statements of the Russian government regarding metallurgic companies and oil industry tax cuts -- not the war. In the United States the subject of the Russia’s market collapse was not much in the news at all, buried under the flood of news from a closely contested presidential election and Wall Street's own problems.

Prime Minister Vladimir Putin said that the government had been preparing for this type of economic emergency, and he was convinced that Russian economic reserves and governmental emergency measures will calm the markets down fast.

The reaction from Russian members of parliament was much more colorful than from the reserved Russian media and Putin. An MP, who also happens to be one of the biggest Russian entrepreneurs, and who insisted to the newspaper that he stay anonymous, advised everyone to “quickly cash out your checking accounts. We’re talking about a matter of hours!” There were other MPs sharing his position, but only off the record and in off the cuff hallway conversations.

Russian nationalist Vladimir Zhirinovsky, leader of the LDPR (Liberal Democratic Party of Russia), insisted that there is no “crisis,” and suggested that people “forget that word.” Zhirinovsky said that “America is in a fever. It is going through a crisis suitable for any banking system that is based on private capital and long-term credits. We’re barely touched by it.” Gazeta.ru commented, saying that Zhirinovsky sounded cheerful, but not convincing.

The Duma’s Vice-Speaker Oleg Morozov, MP of the ruling pro-government United Russia party, said that crisis is taking place in the West, not in Russia. “There are things linked to the world financial crisis that do have an effect on the Russia’s financial system, but one should be careful choosing words. If we see clear manifestation of a financial crisis in America, where major companies are going bankrupt, we see no signs like that in Russia.” The Russian newspaper was sarcastic regarding this statement as well, and added “he wanted to believe it” at the end of the official’s quote.

MP Pavel Medvedev [not President Dmitry Medvedev – RB], unlike his colleagues, was pessimistic. A financially educated member of National Banking Council, he said that “government and the Central Bank keep on trying to intervene, but unsuccessfully so far. Trading on the stock exchanges is halted, and not just for an hour, but without a scheduled re-opening time. This is very alarming. If the crisis continues it will affect banks (and two banks already said that they suffered). Then the banking system of Russia can fall apart and it will be the end of the world.”

The End of the World later became a title of several articles in the Russian media, mocking the official’s words.

An even more fanciful point of view emerged from a member of the Communist Party of the Russian Federation, Nikolai Kharitonov. “I wouldn’t say that there is a financial crisis in Russia. It’s too early to talk about it. I think that people can feel a financial crisis when they go to buy bread, milk, potatoes, and other necessary things. When that becomes challenging then there’s a crisis. Right now there is not crisis in Russia.” Kharitonov said that he doesn’t have many savings, and added: “I have been and continue to be one of the exploited people myself! Thus, I won’t feel the crisis and am not going to get ready for it.”