Russia is facing growing capital outflows that have already topped $21bn this year, as business people hedge their bets against potential shake-ups ahead of presidential elections in 2012 while the economic outlook dims.

As the other Bric nations of Brazil, India and China are trying to stem the tide of cash inflows, Russia is experiencing a cash exodus and weakening currency.

Sergei Ignatyev, Russia’s central banker, said on Tuesday that capital outflows had reached $21bn in the first 10 months of the year, blaming the exodus on “non-financial organisations”, which he said had been moving deposits to foreign banks and buying property abroad.

Last week the central bank raised its forecast capital outflows to $22bn for the year, up from its October estimate of $12bn. Monthly capital outflows have risen from $3bn in July and August to about $3bn a week, according to Goldman Sachs.

The high outflows helped to push the country’s hard currency reserves down by $3.5bn last week. Goldman Sachs estimated net private capital outflows at $3.4bn last week, up from $2.7bn in the first week of November.

Surging imports are also denting the $66bn current-account surplus that oil prices helped Russia build up in the first 10 months of the year.

Natalya Orlova, chief economist at Alfa Bank, said the monthly current account surplus could dwindle from $11bn a month to $1bn-$2bn in the fourth quarter of this year. She said that this was further fuelling aversion to the rouble and accelerating outflows.

A consensus was growing among economists that by next year the current account surplus could disappear, said Alexey Moiseev, an economist at VTB Capital.

“Holders of capital are finding that the risk-return ratio is no longer acceptable,” Mr Moiseev said. “All the risks associated with investing in Russia remain, but with the economy growing at only 3 per cent a year, the return on capital is pretty small.”

Mr Moiseev added that not only were increasing numbers of Russians taking funds to safer havens in traditional markets, they were also investing in Ukraine, for example, where the risks of doing business were high but the returns still higher.

He said: “A lot of Russian banking capital has headed there and a lot of smaller businessmen are buying land and food producers there in deals worth about $10m-$20m.”

One trigger for last month’s acceleration in outflows might have been the ousting of Yury Luzhkov, the long-serving mayor of Moscow, after a bitter struggle with Dmitry Medvedev, the Russian president, analysts suggested.

Mr Luzhkov’s removal was a signal that infighting among the political and business elites surrounding the president and Vladimir Putin, the prime minister, could escalate, and officials and business groups worried they could get caught in the crossfire.

“This is part of Russia’s Byzantine reality which does not attract investors,” said Yevgeny Gavrilenkov, chief economist at Troika Dialog, the Moscow investment bank.

Nikolai Petrov, political analyst at the Moscow Carnegie Centre, said: “The Luzhkov ouster was a demonstration that nothing is guaranteed, that no one is safe and therefore you need to diversify your risks. The elite right now has a very short-term horizon. They are all thinking in terms of 2012.”

Mr Gavrilenkov, however, said outflows had started to build in late summer when the government decided to raise spending again over the next three years, pushing the break-even price of the budget to an oil price of more than $100 a barrel.

The increase, which mainly addressed pensions rises, clouded the outlook for inflation, which had been at record post-Soviet lows.

Inflation was then further fuelled by the disastrous summer drought, which sent food prices spiralling. Full year consumer price inflation is now expected to be 8 per cent, while central bank refinancing rates are at 7.75 per cent, lowering the attractiveness of keeping roubles on deposit.

The government’s focus on using state spending to stimulate consumption instead of investing in the economy has led to a surge in imports, which have climbed 30 per cent in the first nine months of this year compared with the same period a year before. But economic growth was still stunted, said Ms Orlova, of Alfa Bank.

While much of the capital outflow may also be due to increased repayment of foreign debts in the fourth quarter, Ms Orlova said the higher spending on pension rises was fuelling uncertainty on how Russia would fund its pension deficit.

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