War versus global markets

This could be an interesting test of the relative importance of economic factors in restraining violence:

Ruble, Russian Stocks Fall as Putin Says Georgia `War' Started

By William Mauldin and Emma O'Brien

Aug. 8 (Bloomberg) -- The ruble dropped the most in 3 1/2 years, Russia's Micex Index fell to a 22-month low and bond yields climbed after Prime Minister Vladimir Putin said ``war has started'' in the breakaway Georgian region of South Ossetia.

Credit-defaults swaps, a measure of bond risk, jumped the most this year after Georgia's Interior Ministry said jets bombed the towns of Gori and Kareli near South Ossetia. Yields on government bonds rose.

The ruble fell the most against the central bank's basket of dollars and euros since that gauge was introduced in February 2005. The Micex plummeted, bringing its decline this year to 28 percent after oil slid 20 percent from its July high. Russian ``volunteers'' are pouring over the border to help defend South Ossetia from Georgian forces, Putin told U.S. President George W. Bush in Beijing, according to Putin spokesman Dmitry Peskov.

``We didn't need this,'' said Ivan Mazalov, who helps manage $5 billion in shares of companies from the former Soviet Union at Prosperity Capital Management in Moscow. ``It's not going to break the Russian economy, but war is bad for investor sentiment.''