U.S. Links Market Crisis to Georgia

WASHINGTON — Russian markets are paying a big price for Moscow's "reckless" decision to invade Georgia, which spurred capital to flee Russia and weakened its currency, a senior U.S. official said on Wednesday.

"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," William Burns, undersecretary of state for political affairs, told a Senate hearing.

The ruble has depreciated nearly 10 percent since Russia crushed an attempt last month by Georgia to retake South Ossetia, Burns, a former U.S. ambassador to Russia, told the Senate Foreign Relations Committee.

"Capital is fleeing Russia, with $7 billion leaving on Aug. 8 alone," he said.

Opportunity costs for Russia are even greater, with its plans to diversify the economy and rebuild infrastructure at risk, he said. "Russia and the Russian people are paying a considerable price for their country's disproportionate military action," Burns said.