THURSDAY, APRIL 10, 2014 BUSINESS Surge in Russian capital outflows adds to woes MOSCOW: A surge in capital outflows and warnings it could intervene further ing incentives to invest in large opera- billion, was the highest since the fourth reduction compared with the previous from Russia underscores how interna- in Ukraine. tional activities by Russian companies,” quarter of 2008, while banks’ foreign official 2014 growth forecast of 2.5 per- tional tensions over Ukraine are adding “Of course it’s the conflict with she said. assets reached $35 billion, also close to cent, and are also below last year’s disap- to the woes of Russia’s already strug- Ukraine and the uncertainty about Recent surveys suggest that business levels last seen in the 2008 financial crisis. pointing growth rate of 1.3 percent. gling economy. Russia’s central bank has potential (military) operations in eastern confidence is now the lowest since 2008. “Of course we see substantial increases in The Economy Ministry estimated that published balance of payments data Ukraine that triggered such big out- Reacting to such trends, President currency purchases by Russian residents for the year capital outflows would reach that showed an estimated $63.7 billion flows,” said Alexei Devyatov, economist Vladimir Putin has called for the busi- as a reaction to ruble weakness - which $100 billion, implying that the bulk of in net capital outflow in the first three at Uralsib. ness climate to be improved “substan- was triggered by capital outflow. These this year’s outflows have already months of this year - as much as the $63 Alfa Bank economist Natalia Orlova tially” and “at an accelerated pace”, things are self-supporting in a sense,” said occurred. billion in outflows seen during the said the Ukraine crisis was only one fac- though previous such exhortations have Uralsib’s Devyatov. However, some other forecasters are whole of 2013. tor, as outflows were already strong delivered scant results. The surge in capital outflows was gloomier. The World Bank warns that the The bank first published a figure of even before the threat of Russian mili- among the factors leading the Economy total for the year could reach $150 billion. $50.6 billion on Tuesday, but later tary intervention in Ukraine. Flight to dollars Ministry to cut its official economic “Looking forward you may take two included an adjusted total to add $13.2 Domestic investment by Russian VTB Capital economist Vladimir growth for this year, joining a wave of views,” said VTB Capital’s Kolychev. “The billion in forex transactions between companies fell by 7 percent in January Kolychev said the outflow was being organizations that have slashed Russian first one is that the peak of dollarization is banks and the central bank, which ana- and by 3.5 percent in February, com- driven by companies and ordinary growth forecasts because of the Ukraine over, which means that the ruble should lysts say provides a clearer picture of pared with a year earlier, illustrating households, which have been rushing to crisis. Deputy Economy Minister Andrei stabilize in the next year.” “The opposite total capital flight. The surge coincides how rising capital outflows coincide convert their ruble savings into dollars. Klepach said on Tuesday the ministry view is that we are only in the middle of with slumping investment and a sharp with declining willingness to invest in “The most important factor behind this forecast growth at either 0.5 percent or this geopolitical mess (over Ukraine). deterioration in business confidence, as production in Russia. “Overall the net huge capital outflow was savings dollari- 1.1. percent in 2014 - with the higher fig- That means more pressure on the ruble forecasters slash economic growth fore- capital outflows reflect general concern sation,” he said. Households’ demand for ure conditional on fiscal stimulus steps. as locals continue to run away from local casts after Russia’s annexation of Crimea about financial stability, and also declin- foreign currency in the first quarter, $19.6 Both forecasts represent a sharp assets.” —Reuters Gazprom, China close to gas agreement: Russia Deal to boost Moscow’s bid to turn eastwards MOSCOW: Russia’s Gazprom and China may sign gas a year. “Regarding Gazprom’s gas contract, the cent earlier this month in what Ukraine said was a a landmark gas deal next month, a Russian official sides are close to agreement ... The only issue politically-motivated move to punish Kiev for pur- said yesterday, marking some progress in a long- remaining is ... the price,” he was quoted as saying suing closer ties to the European Union. stalled agreement that would boost Moscow’s by Itar-Tass news agency, adding that both sides Bypassing Ukraine by using different pipelines or efforts to turn eastwards away from Western planned to discuss contract details yesterday. “We reorienting trade to the East have become priori- sanctions. The gas supply deal is the Holy Grail for really hope that the contract will be signed in ties for the Kremlin, and could strengthen Moscow after at least 10 years of talks, and if May.” Beijing’s negotiating position on price. signed would mark a victory for President Russia ships around 16 percent of its total Gazprom has been in painstaking talks over Vladimir Putin who has warned the West that crude exports to Asia, while gas volumes are the last 10 years about shipping gas to China and attempts to isolate Russia over its annexation of small, limited to those of super-cooled gas. The has been unable to agree on pricing. Putin plans Crimea would backfire. gas deal would help Gazprom reduce its depend- to visit China in May. Britain’s Economic Secretary to the Treasury Sajid Javid speaking during a Arkady Dvorkovich, a deputy prime minister, ency on exports to Europe, which gets around a Putin will hold a meeting with his government news conference in London. Maria Miller, the minister who oversaw future was quoted as saying during a visit to China that third of its gas needs from Russia with the bulk of on energy cooperation with Ukraine yesterday. regulation of Britain’s newspapers, was replaced yesterday by Javid, consid- Gazprom and China were close to reaching agree- transit coming via Ukraine. Some local media have said he may suggest limit- ered a rising star of the Conservative Party, after she quit her cabinet post ment, paving the way for the construction of a Moscow is again at odds with Ukraine over gas ing gas supplies to Ukraine, with owes Gazprom following a row over expenses linked to a mortgage. —AFP pipeline to carry 38 billion cubic metres (bcm) of payments after Gazprom hiked prices by 80 per- $2.2 billion in gas payments. —Reuters BoE set to hold Sanctions trump patriotism record-low rates for Russian banks in Crimea LONDON: The Bank of England is forecast ing rates. The unemployment rate has held today to freeze interest rates at a record- steady at 7.2 percent, having fallen to a SIMFEROPOL: In the rush to serve Lack of interest seize Russian assets. Kraiinvestbank from Russia’s low 0.50 percent, amid caution over the near five-year low of 7.1 percent late last clients keen to open ruble Russian officials have lamented They could also make a tidy southern Krasnodar region, just strength of Britain’s economic recovery, year. accounts, staff at the first Russian the lack of interest among banks to profit. “Nature abhors a vacuum. over the Kerch strait from Crimea, analysts said. Britain’s 12-month inflation rate mean- bank to open its doors in Crimea operate in Crimea, which voted to Ukrainian banks are leaving and issues both MasterCard and Visa The central bank’s nine-strong Monetary while slowed to 1.7 percent in February, the have yet to find time to open the join Russia in a March 16 referen- Russian banks are coming. There is and has correspondent accounts Policy Committee (MPC) is also expected to lowest level for more than four years. “With boxes stacked in the entrance or dum the West called illegitimate. a lack of bank services on the in non-resident banks. Genbank maintain its quantitative easing (QE) stimu- inflation falling comfortably below 2.0 per- put up a proper sign. With a majority of ethnic Russians, peninsula, so despite what can and Kraiinvestbank were not lus at £375 billion ($628 billion, 455 billion cent, we expect the BoE to stay on hold Instead they are relying on a plas- Putin hailed the return of Crimea as hardly be called a healthy econo- immediately available for com- euros). Policymakers will hold a shortened today, in line with the consensus, which is tic banner with letters in red saying: a victory, shrugging off sanctions my, banks could still get a healthy ment. The three are not yet able to meeting, yesterday instead of over two likely to have a limited market effect,” noted “Russian National Commercial Bank: targeting close officials and Bank profit,” said Maksim Osadchiy, head fill the space left by Privatbank, days, to allow some members to attend the Barclays analysts. The BoE’s key lending rate Your Russian bank in Crimea!” Not Rossiya, a lender Washington says of the analytical department at which had the largest banking International Monetary Fund’s spring meet- has stood at 0.50 percent since March 2009, that RNCB needs to advertise its is the “personal bank” for his inner ings in Washington. The outcome will be when it also launched the radical QE policy CFB bank. services network in Crimea with announced at 1100 GMT today.