What's up with Russia?

As many of you have probably heard the Russian market has experienced quite a decline recently. The decline in the Russian market is only outdone by the Chinese stock markets. The decline stems from the fall in oil and commodity prices, drop in the demand from China, and the fall of the ruble.

But what is lost in all of this is the effect of a certain Mr. Putin and his politics. It seems to me that Putin believes that he can bring back the old Soviet Union, but what he doesn't understand is that the current Russia is much more intertwined into the world economy than the Soviet Union ever was. This is precisely why his authoritarian tendencies are really hurting the Russian economy.

For instance, what investor will feel comfortable when even large companies such as BP cannot escape the grasps of the government. The track record of Yukos, Mechel, already painted a dim picture of the Russian rule of law, but the past Georgian war has really hurt.

Now I'm not defending Russia or Georgia, but the fact that this war drove a sharp decline in foreign investment is evidence of irresponsible leadership. Somehow I highly doubt that China with all of its authoritarianism would be willing to start a war with a foreign country or Taiwan. That is because when a regime is already viewed as shaky and potentially unfriendly to foreign business, something as dubious as a war with a tiny neighbor isn't going to do much for investor confidence.

In the end it appears that Russia might come to realization that the economy and not Georgia should be its primary focus. I don't exactly see how adding two tiny and impoverished republics to its territory, should be the government's priority. If Russia remains ignorant of such realities, it risks economic collapse which is likely to bring about a regime change that even Mr. Putin won't be able to avoid. Russia must make a choice capitalism and rule of law or authoritarianism and murky economics.