The Crimean crisis will exacerbate Russian capital flight from the west back to mother Russia, and one particular beautiful peninsula which stands to benefit the most if all goes well according to President Putin’s plan is Crimea. Since the escalation of crisis in Crimea last weekend, there has been a lot of speculation about possible sanctions being imposed against Russia by Western countries.
Imposing restrictions against Russia that are similar to those used in Iran would cause direct damage to the global economy, especially in the EU.
And so with that happening anyway, and the increasingly negative perception of Russia by foreign investors, exacerbated by the country’s assumed role in the Ukrainian crisis, this may threaten to choke off the flow of investment capital desperately needed to boost growth and diversification in the economy.
Restricting imports of consumer goods would certainly cause inconvenience in Russia but would be much more financially painful for suppliers, many of whom count Russia as their biggest customer.
Last year, Russia scored a spectacular success in attracting $94 billion worth of foreign direct investment according to a report compiled by the United Nations and released in mid-February.
That was a massive increase of 83 percent over the previous year and put Russia third in the table behind China, which attracted $127 billion, and the U.S.
But the success of Russia’s Direct Investment Fund, which attracted about $10 billion of fresh commitment in 2013, is also a vital factor, the fund is well-placed to repeat that success in the coming years.
Capital flight is a catch-all description that combines normal trade and capital flows with individuals’ money being exported out of the country, which is estimated to be about one-quarter of total capital flight.
As many of you are undoubtedly aware, Russians love the beautiful TAX FREE lifestyle that Dubai offers, and if perhaps Crimea was to offer the something a little similar, well your guess is as good as mine, Crimea could be, what Gibraltar is to the British.
Indeed I may sound a little premature but nonetheless I say, “Meet the Russians in Crimea the New Dubai”.
Let’s not forget that Russia has repeatedly expressed its dismay at Europe’s handling of the debt crisis in Cyprus which imposed heavy losses on uninsured depositors, many of them Russian, and with Crimea almost under total control, well your guess is as good as mine. Furthermore there are Chinese whispers among property developers that Kremlin will make Crimea the new TAX FREE play ground for Russia’s wealthy elite, after all it is in Putin’s interest to show the Western Ukrainians that they have picked a bankrupt inept European Union, rather than joining a dynamic custom union with Russia which has a strong focus on trading with India and China.
Many of you may think this is wishful thinking, however looking at the Olympic host city of Sochi I cannot help but wonder, what plans the Russians have in developing Crimea, but one thing is certain the Russians don’t do anything in half measures, it’s all or nothing.