Russian Economy Hurt by Decision to Invade Georgia

A senior U.S. official says Moscow's decision to invade Georgia is having a major impact on the Russian economy with financial markets losing nearly a third of their value. VOA correspondent Meredith Buel has details from Washington.

U.S. Under Secretary of State for Political Affairs, William Burns, told members of Congress that Russia's five-day war with Georgia last month was filled with mistakes and miscalculations on all sides.

"Georgia's decision to use force to reassert its sovereignty over South Ossetia, against our strong and repeated warnings, was short-sighted and ill-advised," said William Burns. "But there was no justification for Russia's disproportionate response, for its provocative behavior in the run-up to the crisis, or for sending its military across international boundaries to attack Georgia and seek to dismember a sovereign country."

Burns told Senators on the Foreign Relations Committee that Russians are paying a considerable price for the country's military action against Georgia.

"In many ways the most damaging consequences thus far for Russia have been self-inflicted economic and political wounds," he said. "Since August 7th investor confidence has plummeted. At least in part because of the Georgia crisis, Russian financial markets have lost nearly a third of their value, with losses in market capitalization of hundreds of billions of dollars."

Burns says capital is fleeing Russia and points out the ruble has depreciated by nearly 10 percent since the conflict in Georgia began.

He says Russia needs to abide by its commitments to an internationally brokered cease-fire and withdraw most of its forces from Georgia's separatist regions of South Ossetia and Abkhazia.

Burns says as the result of the Russian military action the U.S. has pulled out of an agreement with Moscow for civilian nuclear cooperation and suspended bi-lateral military programs.

Senator Chris Dodd, who was presiding over the Senate hearing, agreed Russia is paying some real costs for its behavior.

"If Russia does not reestablish a reputation as a country that abides by the rules, both at home and abroad, then it may sacrifice both its international standing and, I might add, its economic success," said Senator Dodd.

Georgia's August offensive to regain control of South Ossetia from Moscow-based separatists prompted a massive retaliatory thrust by Russia into Georgian territory.

Russia argues it repelled Georgian troops to protect thousands of people who were granted Russian citizenship following the collapse of the Soviet Union.