Putin undeterred by $32 billion in capital flight, continues assault on dollar’s role

Fearing the collapse of the Russian financial system and burdensome Western sanctions in the aftermath of the Ukraine crisis, investors and businesses moved more than $32.6 billion in assets outside of Russia, primarily to offshore accounts, in the first quarter of 2015, according to reports.

Capital flight has several negative effects on the Russian economy, including the loss of tax revenue and the reduction in funding available for investment.

Lack of investment funding also delays attempts to modernize the economy. The Center for Macroeconomic Analysis and short-term forecasts assesses that investment activity is down 20 percent since 2013. Continue reading

China’s Tacit Approval of Moscow’s Ukraine Policy

Since Moscow initiated military operations in Ukraine in February 2014, China has seemingly adopted an ambiguous stance as Russia’s annexation of Crimea and destabilization of southeastern Ukraine evoked international condemnation. During the past year, Beijing and Moscow strengthened their strategic partnership by deepening economic ties and enhancing bilateral military cooperation. China’s comparative silence on the Ukraine crisis has given way to unusually blunt remarks from a Chinese diplomat in Brussels who recently expressed tacit support for Moscow (UNIAN, February 27). Such remarks and the continued dynamic growth of Sino-Russian relations contradict efforts by the United States and the European Union to diplomatically and economically isolate Russia. Moreover, they leave open the question as to whether Beijing and Moscow are forming a de facto military alliance. Continue reading

EU commissioner calls for Ukraine accession promise

MUNICH – The EU commissioner who, over the past five years, tried and failed to get Ukraine to sign up to pro-EU reforms has said only the promise of accession can change former Soviet states.

“If we are serious about helping this part of Europe to transform, the association agreement is only the first step. The next one should be the light at the end of the tunnel. You can’t transform this part of Europe without using this most powerful instrument [enlargement],” former Czech diplomat Stefan Fuele told a congress of European and US security chiefs in Munich on Saturday (2 February).

Romanian President Traian Basescu backed him up. Continue reading