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Georgia conflict cost Russia $7 bln in outflows

Russia had capital outflows of $7 billion during the short conflict between it and Georgia over the separatist region of South Ossetia, Finance Minister Alexei Kudrin said on Sunday.

The conflict, which erupted on August 7 when Russian troops repelled a Georgian attack on pro-Russian South Ossetia, spooked investors and sent Russian stocks tumbling to their lowest levels in nearly two years. “Outflows of (foreign) currency from Russia were $6 billion on Friday (August 8) and $1 billion on Monday (August 11),” Kudrin told reporters. Russian stocks rebounded on August 11 after President Dmitry Medvedev signaled the conflict was nearing an end. Russia signed a ceasefire declaration on Saturday, a day after Georgia.

Kudrin said political risks were likely to further damage prospects for total capital inflows to Russia for the whole of 2008. He said the total would probably be less than the $30-40 billion forecast by the central bank for the year. “I think the inflows will be a bit less than the official central bank forecast because of continued turbulence on global financial markets and some political risks which have appeared in recent days and have influenced foreigners’ views on capital input or withdrawal,” Kudrin said.

Russia saw a record $82 billion in capital inflows in 2007. (Reuters)