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Author`s name Alex Naumov

Decreasing oil prices destroy Russian stock market

The Russian stock market went lower than 1,400 points due to the reduction of the oil prices and the ongoing of outflow of capital, which investors currently conduct. Finance Minister Aleksei Kudrin added more fuel to the fire when he said that Russia’s oil companies would not be provided with an additional reduction of tax burden.

The RTS index dropped by 7.51 percent to 1,395.11 points. This level was previously reported in June 2006. MICEX index dropped by 9.08 percent to 1,158.07.

The price of a barrel of oil reduced to $104.23, having lost $1.25 in comparison with Monday.

Rosneft’s shares slipped by 9.54 percent, Gazprom – by 8.47, Lukoil – by 9.29 and Surgutneftegaz – by 6.16 percent.

Ore-mining companies followed the oil sector. The shares of Norilsk Nickel reduced by 12,76 percent.

Russia’s Finance Minister Aleksei Kudrin said in Moscow during the annual Reuters Investment Summit that there would be no additional tax concessions made for oil companies in the nearest future because the concessions from 2009 would be enough.

“As an economist, I can say that Russia has reached the line when we can not reduce taxes anymore. I hope the president will put an end to the tax debate in September,” Kudrin said.

The opening of US stock exchanges exacerbated the situation on the Russian market even further. The Dow Jones Industrial Average dropped by 0.23 percent to 11483,95. Standard & Poor's 500 lost 0.55 percent and made up 1260,78 points.

The positive effect from the news about the nationalization of Fannie Mae and Freddie Mac lasted for only one day.

It became clear to everyone that it was short-term news that would only give the market a short break. Market members paid attention to the general situation on the market, which remains negative.

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