MOSCOW (Reuters) - Russian stocks have shed more than $1 trillion during Dmitry Medvedev's presidency as investors dump Russian assets on concerns the economy is sinking into the worst crisis for a decade, investors said on Thursday.
Stocks, bonds and the rouble have plummeted since a brief period of euphoria following Medvedev's May 7 inauguration.
The dollar-dominated RTS exchange .IRTS said the capitalization of the stocks it handles has fallen more than $1 trillion to $385 billion since a market peak on May 19.
The crisis has further undermined confidence, already shaken by a series of corporate conflicts, worries about state intervention in companies and the war in Georgia.
"Things are as bad as they possibly could be: the Russian market no longer functions," said James Beadle, an asset manager at Pilgrim Asset Management, which invests in stocks and bonds.
"The main reasons are obviously what is going on globally, particularly with commodity prices, and political issues within Russia," said Beadle.
The crisis has undermined the Kremlin's ambitions to take Russia to the top table of world finance and illustrated the weaknesses of Russia's economy, which is heavily reliant on the export of oil, gas and natural resources.
The price of Urals crude, the main type of oil sold by Russia, fell to just over $50 on Thursday, the lowest since the start of 2007, from more than $140 in July.
Russia's MICEX rouble denominated stock index fell as much as 17 percent before closing down 7.6 percent at 598.43 at 10:45 a.m. EST.
Gazprom GAZPPE.RTS (GAZPq.L), the world's largest natural gas company by reserves, has seen its market capitalization slide $270 billion since late May to less than $100 billion.
The Russian stock market is now in what some investors are calling a "death spiral." Sovereign bond yields have soared and the central bank is being forced to sell tens of billions of dollars of reserves to support the rouble.
The meltdown has revived memories of the 1998 devaluation of the rouble and Russia's default on $40 billion in debt, an event which sent a wave of volatility through world markets.
"This is on par with 1998 in terms of value destruction though it is not as structural as it was in 1998 -- it is now more about confidence and liquidity issues," said Beadle.
Economists say falls in the price of oil threaten a ten-year economic boom and the stability that former President Vladimir Putin, who is now prime minister, was credited with enforcing after the chaos of the 1990s.
The market falls under Medvedev -- whose name derives from the Russian word for bear -- have even spawned a series of quips from traders about bear markets.
But investors said Medvedev, a 43-year-old former corporate lawyer, has fallen victim to the failure of his predecessor to reform the Russian economy.
"This crisis shows what we all knew: that the Russians have not implemented any of the reforms they really needed to over the past four or five years," said one investor who asked not to be named because of the sensitivity of the situation.
The political fallout from the market slump has so far been muted, with opinion polls giving high popularity ratings to Putin and Medvedev. Critics say the Kremlin uses its power to contain any dissent.
Russia had a net capital outflow of $50 billion in October, the biggest on record, and more than $100 billion has been shaved off gold and forex reserves in three months.
The turnaround in Russia's fortunes could not be sharper: in July Medvedev told an investor conference that the rouble should be a reserve currency and Moscow a financial capital. He repeated those policy aims at a speech in France on Thursday.
Russia has hoarded the third largest gold and forex reserves in the world during the bull market for oil but all eyes are now on the ruble.
Dollars were on sale in Moscow at exchange offices on Thursday at 28.25 roubles. In May, the dollar cost about 24 roubles.
"The population has seen its savings destroyed several times in the last twenty years, and will not take any chances," Beadle said. "Popular as Russia's current leaders are, citizens have learned to be cautious with their savings."
Editing by David Cowell