Former finance minister Alexi Kudrin projects up to $160 billion in capital will flee this year.
April 20, 2014
Just how much is Vladimir
Putin's
Ukrainian adventure actually costing Russia? Quite a lot, it turns out.
New
statistics from the Central Bank of Russia indicate that almost $51
billion in capital exited the country in the first quarter of 2014. The
exodus, says financial website Quartz.com, is largely the result of
investor jitters over Russia's intervention in Ukraine and subsequent
annexation of Crimea.
As Quartz notes,
this was the highest quarterly outflow of capital from the Russian
Federation since the fourth quarter of 2008. While Russia can mitigate
some of the damage because of its extensive foreign-currency
reserves—estimated at more than $400 billion—the new Central Bank
statistics signal that worse is still to come.
Russia's
economic development ministry has downgraded the country's forecast to
less than 1% growth this year; an earlier estimate had been 2.5%. The
World Bank projects that the Russian economy could shrink nearly 2% in
2014. That would cost Russia in the neighborhood of $30 billion in lost
economic output.
Meanwhile, the Russian government's bid to pressure Ukraine could end up backfiring. The state-controlled natural-gas giant,
Gazprom,
OGZPY -2.23%
recently jacked up the price of gas to Ukraine by 80% and levied
an $11.4 billion bill on Kiev for previously discounted energy sales.
But observers say that the price hike could lead to a reduction in
purchases as Kiev diversifies away from Russia toward friendlier
European suppliers. This may already be happening. On April 9 the
Ukrainian government retaliated by temporarily ceasing purchases of
Russian gas, pending resolution of the pricing dispute.
Moscow's international standing is
becoming increasingly tenuous. Russia has already been ejected from the
G-8 and its path to accession in the Organization for Economic
Cooperation and Development has been halted, at least temporarily. In
the latest development, the Parliamentary Assembly of the Council of
Europe stripped Russia of its voting rights in protest over its
interference in Ukraine.
Russia's
annexation of Crimea is turning into a costly boondoggle. The Kremlin
has already earmarked nearly $7 billion in economic aid for the
peninsula this year, funds that will be spent on everything from
infrastructure to beefed-up pensions for local residents. Even when
balanced against anticipated gains from Crimea's energy resources and
savings on naval basing arrangements, among other factors, that's a cost
Russia's sluggish economy can ill afford.
The
situation could become even more dire if Western economic pressure,
which is still minimal, is ratcheted up. U.S. Secretary of State
John Kerry
has threatened additional sanctions against Moscow in response to
its instigation of pro-Russian protests in the Ukrainian cities of
Kharkiv, Donetsk and Luhansk. Such measures, Mr. Kerry has indicated,
could include broad restrictions against Russia's energy, banking and
mining. These sanctions could have significant, far-reaching effects on
the country's long-term economic fortunes.
President
Putin is currently riding a surge of popularity at home, propelled in
no small measure by his assertive moves in Ukraine. When tallied in
mid-March by state polling group VTsIOM, Mr. Putin's approval stood at
nearly 72%, a gain of almost 10 percentage points from earlier in the
year.
But the longer the crisis over
Ukraine lasts, the higher the economic costs to Russia are likely to be.
Former Finance Minister
Alexei Kudrin,
for example, has projected that Moscow's maneuvers in Ukraine
could result in up to $160 billion in capital flight this year, and he
concluded that the Russian economy will stagnate as a result.
Sometime
in the not too distant future, it might become considerably more
difficult for the Kremlin to continue to ignore the real-world price
that is associated with its policies.
Mr. Berman
is vice president of the American Foreign Policy Council in Washington, D.C.
http://online.wsj.com/news/articles/SB10001424052702303663604579503433988345564?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303663604579503433988345564.html
No comments:
Post a Comment