The Russian "August War" is still rumbling on, despite the fading of Western media interest. Russian troops continue to hold their positions well inside Georgia proper, and continue to harass Western deliveries of aid to shattered Georgia.
However already, the Kremlin is starting to have to pay the price for their aggression.
The FT reports this morning that the Central Bank of Russia has been forced to intervene to support the Rouble. The Bank confirms this, suggesting outflows of around $ 5 billion, however more independent voices suggest that he outflows over the month were more in the region of $15-$20 billion.
It is, of course, not just the impact of the war- significant though that has been. The threats by Mr. Putin against Mechel, the announcement that grain trading was to be considered a "strategic" sector, the continued attacks against BP-TNK all have unsettled the markets substantially.
Now, the perception has hardened that the risk profile of Russia needs to be significantly reviewed. The failure to enact a system based on the rule of law is undermining any attempt to attract vital international capital into Russian infrastructure. So, while Russia continues to hold significant international reserves, it will need to use them to ensure that the critical upgrading of electrical infrastructure, for example, is not so delayed as to force major power outages this Winter. It remains a race against time, and the state of the UES grid is now a considerable concern.
Russia is being repriced- the fall in commodity prices will reduce still further its attraction as an investment market- though at some point the markets should stabilise, the fact is that Kremlin contempt for law, both domestically and internationally, is already having a significant impact on Russia- and that impact is likely to grow stronger over the next few months.
The fat lady has yet to sing on the Georgian crisis.