Georgia War Hits Russian Investment

Strained relations with the West is only one headache. A slew of disputes and scandals also threatens the status of foreign investors
A woman hangs her laundry on a balcony of a damaged building in the South Ossetia town Tskhinvali on Aug. 27, 2008. VIKTOR DRACHEV/AFP/Getty Images

Out of the frying pan and into the fire. When Russia recognized the independence of the breakaway Georgian regions of Abkhazia and South Ossetia on Aug. 26, the benchmark Russian Trading System (RTS) stock index dropped 4%, sending the market to its lowest level in almost two years. The Russian move seriously exacerbates the strain in relations between Russia and the West, already in a state of crisis following the war between Russia and Georgia (BusinessWeek.com, 8/22/08).

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