AFP, Moscow :Russia is facing a prolonged period of low growth due to a failure to implement reform, is suffering from disturbing capital flight and the ruble is coming under sustained market pressure.So is it really the best time for President Vladimir Putin to launch an audacious bid to incorporate the Ukrainian region of Crimea into Russia within a matter of weeks?Economists say that the swoop on Crimea carries huge economic risks for Putin, who faces retaliation from the West, increased pressure on the already- embattled ruble and yet more haemorrhaging of foreign capital from jittery investors.The Russian strongman, who has not ruled out standing for re- election in 2018, has clearly put the political gain of grabbing Crimea before the short- term health of the Russian economy in the hope the damage will not be lasting.But economists say such logic may be flawed and Russia’s economic performance going forward will in any case make a mockery of its status as a member of the BRICS group of top emerging markets along with Brazil, India, China and South Africa.”The crisis in Ukraine has increased the risks to Russia’s already weakening economy presented by currency depreciation and capital flight,” analysts at ratings agency Fitch said.”Capital flight could accelerate, particularly if the threat of economic and financial sanctions increased.”Russia’s growth was a measly 1.3 percent in 2013, with its economy suffering from a longstanding failure to implement reforms needed to wean it off an addiction to oil and gas income.According to the economy ministry, private sector capital outflows have already reached $17 billion so far this year alone.These factors and general nerves over emerging markets have put the ruble under sustained pressure.But on Monday it suffered an all out assault, falling to record lows in value against the dollar and euro after Putin won approval from parliament for a de- facto invasion of Ukraine.In that single day, the central bank spent over $11 billion propping up its currency, some five times more than any other intervention by the Russian central bank in its history.”Capital flight, uncertainty and the higher interest rates needed to support the ruble will take their toll on Russia,” said economists at Berenberg Bank in London, cutting their growth forecast for Russia to zero in 2014.”Like the Soviet Union in the 1980s, Russia cannot afford a cold war,” they said.It said while other top emerging markets were taking measures to reform, “Russia is in effect ejecting itself from the BRICS.”Taken aback by the swiftness of Putin’s reaction to Ukraine’s turmoil, the West is planning retaliation but the Kremlin chief may be calculating that the bark is worse than the bite.
