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Friday, August 17, 2007

Annals of Russian Insanity: Biting the Hand that Feeds You

Showing just how truly crazy Russian foreign policy really is, the Moscow Times reveals that when Russia pathologically attacks Britain it's attacking it's biggest investor. Talk about biting the hand that feeds you! This is neo-Soviet self-destruction, pure and simple.

Britain has become the top foreign investor in Russia in the first half of 2007, statistical data showed Wednesday, despite political tensions over former FSB agent Alexander Litvinenko's murder in London. The data showed Britain invested over $15 billion in the first half of 2007, toppling Cyprus on the list of foreign investors. Britain's investment soared in the second quarter, when VTB Group held an initial public offering in London. It was not clear from the data whether the money came as direct or portfolio investment, but analysts suggested that in the absence of large business deals the increase was due to portfolio investments. "London is a large financial center and portfolio investment is less vulnerable to political jitters," said Yaroslav Lissovolik, analyst at Deutsche UFG. Cyprus-registered firms led foreign investment growth in the country in 2006, investing $9.8 billion, almost 23 percent of the total foreign investment. Many companies, which hold large assets in Russia, are registered in Cyprus. "Russia has now exhausted the potential of the capital repatriation," said Lissovolik, referring to the capital flight out of Russia in the 1990s and suggesting that authentic foreign capital will now phase it out. Russia saw a major reversal of capital movement trends after the country liberalized its currency regime and exposed its appreciating currency to investors. Net private capital inflows are expected to hit $70 billion this year.

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