Updated September 3, 2008<

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   Russia's Prime Minister Vladimir Putin declared that in 2008,

the Russian government wouldn't increase the stake of the capital inflow to the economy, since "it poses the additional problems" with the inflation and

the volume of money supply.

Russia's Central Bank (CB) and the government can afford such strategy for a year or two, but no later than 2011, though, from the end of 2009 the level of the capital inflow will determine both the inflation and the ruble rate.

   "We will not have such capital inflow like in the previous year, but it is not related to the events in Georgia", Russia's PM Vladimir Putin declared in Tashkent on September, 2. "We don't require such high inflow, since it poses the additional problems both with the volume of money supply and the inflation growth". He used the CB' data as a reference and gave the forecast of the net capital inflow of $30-40 billion in 2008. In 2007 this index was $83,2 billion, in 2006 – $41,8 billion, and in 1Q 2008 – $12,3 billion. The preliminary calculations based on the CB' data on the volume of the international reserves show that since the beginning of 2008 up to August, 22, there could be the net capital outflow.

   Except for the influence assessment of the events in Georgia, Mr. Putin's logic coincides with the current argumentations of Russia's CB, the Ministry of Finance and the independent economists.

In 2006-2007, Russia's money offer was formed mainly due to the capital inflow, and the foreign investments' growth as a backside of GDP and the industrial production' s growth imply the acceleration of inflation and ruble strengthening. The latter leads to the import growth and to

the competition drop of the Russian producers. The CB' project, "The key directions of the CB' monetary policy" that was introduced to the State Duma on August, 28, is covering exactly this fact.

   However, according to the CB's document, the Russian government's negligence for the capital inflow ends soon.

As it was stated in the document, even in the mid-term prospect (2009-2011), the tendencies of the ruble rate "will be predetermined by the facilities movements within the framework of the foreign economic activity". Since the oil price is $90-95 per barrel, the current accounts' surplus of balance of payments will be replaced with its deficit in 2010, and at $66 per barrel – in 2009 already. "Under such terms, the primary role will have the cross-border capital movements that will determine the ruble rate change", as it is said in the CB's document.

   The Bank of Russia's assessment may be too optimistic: "the zeroing" of the current account (the balance amount of trades in commodities, services, investment profits and payments for labor) can take place even earlier.

Russia's CB takes to account the calculations of the import growth rates by 15-21% for 2009, and for 2010 – by 10-17% depending on a scenario. Within the last couple of years, the import growth rates ranged from 30 to 40%, and even higher sometimes. The calculations based on such import growth rates show that all scenarios, except for the most optimistic (oil – $115 per barrel in 2009), point to the "zeroing" of the current account in 2009, and in 2010 it can be even more negative (to $115-350 billion).

   So, in 2009, the regular strengthening of the ruble rate can be replaced with its weakening. Thus, the devaluation rates will be determined by the attraction level of Russia's economy for the foreign investors.

It seems as in the CB understand this – "The key directions" don't give any forecasts of the rate dynamics, unlike the previous years.