COMMENT: Medvedev raises spectre of new cold war as popularity fades

By Eugene Kasevin.

Russian President Dmitry Medvedev has kicked off his own little Cold War just in time for the upcoming parliamentary elections.

The move will be widely perceived as rhetorical shot across the bows of the US administration which is planning to build a missile-defense system in Europe. It also serves a rallying cry to the apathetic masses as his ruling party struggles with waning popularity.

How this might impact Russian capital markets, if at all, is yet to be seen, but it certainly supported the earlier dismissal of the ex finance minister Alexei Kudrin. A darling of investors for his fiscal prudence, Kudrin dared to criticize federal budget and defense spending proposals before he was ousted by Medvedev in late September.

If this is more then just a pre-election bluster, foreign investors may perceive that the statists within the Kremlin are out-muscling the so- called liberal camp. Russia’s 1 trillion privatization programme, which is already been delayed because of global stock market volatility, may be pushed off the buffers entirely.

Ultimately, Russia’s ability to sabre-rattle and to alienate the West all depends on the price of crude. If oil remains well above $100, the tandem can afford to poke Uncle Sam’s eye with its red stick. If oil tanks to 2009 levels, Russia’s leaders will be far too occupied with domestic issues to resort to cold war propaganda.