Russian Government unveils steps to stop financial meltdown

Moscow, Sep 18 (UNI) Moscow's stock markets will be closed until tomorrow, as the Russian government tries to stem a plunge in share prices and restore confidence in the economy.

Russian President Dmitry Medvedev today asked the government for an injection of 20 billion dollars to prop up the financial system as its 'most important priority'.

Finance Minister Alexy Kudrin promised to cut export duty on crude from October 1, saving around 5.5 billion dollars for Russian oil companies. He also pledged additional emergency loans.

'We have made the decision to ask three banks -- Sberbank, VTB and Gazprombank -- to support small and medium-sized banks, using the 'budget money', Kudrin said, 'They will also loan out about 2.5 billion dollars to the stock market, using equity as collateral. This will boost liquidity and stabilise the stock markets', he added.

Meanwhile, The Central Bank yesterday slashed its reserve requirements for all commercial banks, leaving them with more cash to lend.

The markets have already responded as Russian ADRs traded abroad have moved into a positive territory. Now all eyes are on the the US markets to see if the positive momentum is here to stay.

The crash had brought back memories of Russia's financial crisis in 1998. Then the rouble was devalued, the country defaulted on its debts, and many banks failed.

While the country's economy as a whole is now in a far better shape, there is still great uncertainty over what is around the corner, leading to a collapse in confidence.

Financial regulators halted trading yesterday after stocks fell to the lowest level in nearly three years.

While the global turmoil and a slide in the prices of Russia's abundant oil are some of the causes, analysts also point out to the investors fleeing Russia in the aftermath of its war with Georgia.

The executive board of Micex, one of Russia's two main exchanges, called the situation "extraordinary".

Facing a liquidity squeeze, Central bank officials cut the reserves, banks were allowed to hold, forcing them to release billions of roubles.

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