Translated material
Non-combat losses
Experts discussed the impact of the war in South Ossetia on the Russian economy
The military conflict in South Ossetia will have negative consequences for the Russian economy. In particular, Russia will almost certainly not become a member of the World Trade Organization in the foreseeable future, and the influx of Western investment into the country may be significantly reduced. Representatives of the Russian expert community came to this conclusion at a round table at the RIA Novosti agency.Analysts noted that last Friday stock markets reacted sharply to reports from foreign agencies “about the invasion of Russian troops into Georgian territory.” “Market participants were aggressively withdrawing money from the ruble,” emphasized Evgeniy Nadorshin, an economist at Trust Bank. “The reaction was strong, considering that for Russia this conflict is local in nature.”
Chairman of the Board of the Russian Association of Political Sciences Vladimir Petrovsky suggested that the nature of the military operation is of little concern to Western partners: “The investor will not go into details of the conflict resolution. It is important that the image of a player trying to play not by the rules is being formed around Russia.” The head of the research department at IG Kapital, Scott Semet, agreed with this: “One can argue about whether the risks are actually increasing, but it is enough that foreign investors consider the risks to have increased.”
At the same time, as Evgeny Nadorshin noted, other events at the end of July and beginning of August also played a negative role: corporate conflicts, scandals with the TNK-BP and Mechel companies also hit Russia’s reputation as a “safe haven” for investors. “All together, this is a good anniversary of August 1998,” Mr. Nadorshin joked and added that Trust has already lowered its forecast for net inflow of foreign capital this year from $40 billion to $30 billion.
In addition, according to experts, after the fighting in South Ossetia, Russia is unlikely to become a member of the WTO. “Perhaps the way there is already closed to us,” suggested Mr. Nadorshin. Vladimir Petrovsky responded by noting that “the protracted process of Russia’s accession to the WTO is used as a method of political pressure, and this always has an indirect relation to the economy.” However, this seemingly gloomy forecast did not upset analysts much. “Russia, without entering the WTO, can look at Asia,” Mr. Nadorshin is sure. “If we want a growth rate of 10% per year, then Asia is growing at that rate, and Europe could go into recession within a quarter.” However, the expert made a reservation that “alliances with China and Korea will not make it easier for us to diversify the economy,” since in terms of high technologies Russia is already inferior to these countries.
But the analyst is inclined to view Georgia’s exit from the CIS “as a positive factor”: “It’s high time to reform the Commonwealth. Events in South Ossetia must prompt some kind of reconsideration of this organization, otherwise the moment will be lost. It is important to reformat the CIS space based on the consent of the participating countries and try to make it as equal as possible.” “We need to not only mend the broken cup of the USSR, but at least make life easier for ordinary people,” added Vladimir Petrovsky, who recalled the plan of Kazakh President Nursultan Nazarbayev to create a visa-free space within the Commonwealth. Scott Semet, however, cooled these hopes, saying that “in the CIS in the near future, a unified economic policy, and especially a common currency, is unrealistic.” However, he immediately introduced a note of optimism into the discussion: “Everything is not so gloomy - Russia looks good in the long term.”
And finally, Mr. Semet promised his colleagues that “if the conflict does not resume, Russia’s ratings will not be lowered.”