- The Washington Times - Saturday, July 26, 2008

MOSCOW | Russian stocks continued their nosedive Friday after the abrupt departure from the country of a foreign oil boss and the prime minister’s unexpected severe criticism of a large steel firm.

MICEX, the exchange where the bulk of trading in Russian stocks takes place, plunged 5.5 percent by the close of markets, while the RTS Index lost 5.6 percent to sink to its lowest point since March.

After Prime Minister Vladimir Putin’s scathing attack on Mechel late Thursday, heavy trading in New York sent the steel and coal company’s stock down nearly 40 percent, wiping more than $5 billion off its value - though shares rose around 20 percent in early trading in New York on Friday.

The losses were mirrored Friday in Russian trading.

Mr. Putin criticized the company, which is the largest supplier of coal for steelmakers in Russia, for charging much higher prices for raw materials domestically than it does for its exports. He called for an antitrust investigation into Mechel’s activities.

Earlier Thursday, Robert Dudley, CEO of the embattled Anglo-Russian oil producer TNK-BP, left the country three days before his visa was due to expire. Russia has not renewed the visa on the grounds that he does not have a valid work contract.

Mr. Dudley, who said his departure follows a sustained assault on the company in the past several months, vowed to run the company from abroad.

The developments rattled investors, leading to a heavy sell-off in Russian equity, which is dominated by oil stocks.

“Sentiment is moving against Russia,” said James Fenkner, managing partner at Red Star Asset Management in Moscow. “If oil has any kind of bounce, the market will look kindly on Russia. If oil (prices) begin to slip, there will be a great unwind.”

Observers say soaring oil prices have largely masked the political tensions bubbling beneath the surface, and investors are tensely watching how the corporate conflict plays out at TNK-BP, widely seen as a test case for foreign investment under new President Dmitry Medvedev.

Mr. Medvedev, who campaigned on an anti-corruption ticket, has insisted the conflict is a matter between shareholders. Many analysts are convinced, however, that the state wants to take a controlling stake in the company at a later date via a state-owned entity.

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