$19billoon in investment funds taken out of Russia since the invasion

[Breakage]

This is tremendous news.


Russia: Kremlin wins war but faces new battle as investors scramble for exit | World news | The Guardian
Russia: Kremlin wins war but faces new battle as investors scramble for exit
Guardian ^ | September 6, 2008 | Luke Harding

$19bn taken out of country since invasion of Georgia began on August 8

For Russia's leadership, it seemed everything had gone right. In three weeks, the country had invaded Georgia, crushed its military and defied international opinion by recognising the breakaway republics of South Ossetia and Abkhazia. Western threats came to nothing. Russia's attack on Georgia went unpunished.

But victory has been undermined by an alarming flight of capital. Analysts estimate that, since the war began on August 8, $19bn (£10.7bn) has been withdrawn from the country.

The Kremlin is also facing other economic problems. They include a rapid drop in the oil price, which has fallen almost 30% from peaks close to $150 a barrel, and a 9.7% increase in inflation since the start of the year.

Analysts believe the war could become a catalyst for a more profound slowdown following at least seven years of unprecedented economic growth.

So far the Kremlin has managed to unite Russians in support for the invasion of Georgia. But as the economy cools, the euphoria is wearing off.

"The war in Georgia has been the major driver of the whole thing. Officially capital flight has been $19bn. We estimate it could be $20bn-$25bn," said Vladimir Osakovsky, a Moscow-based analyst at UniCredit.

"For most of this year we were viewed as a safe haven. Capital was flowing into Russian markets and into Russian funds. We have lost this safe-haven sense."