Vestnik Kavkaza discussed the challenges that the Russian economy is facing, such as the outflow of capital and the fall in oil prices, with the Director of the HSE Banking Institute Vasily Solodkov and Head of the Funds Center of the HSE Nikolay Berzon.
Vasily Solodkov spoke about the current situation in the energy market, the components of prices, the level at which they remain at the moment and about what can be expected in the future.
" How will the oil industry develop? As for predicting oil prices, all the economists agree that it is physically impossible. We can try to predict how the energy industry will develop, as, one way or another, it will depend on energy prices. Now there are two factors that lead to lower prices and to growth. First, the reduction factor is the shale revolution, extracting bituminous oil in Canada. On the other hand , the demand for oil from China , from India , from Brazil, that is, those developing countries that have high rates of economic growth, is growing. We now see that the trends, on the one hand, are struggling, and this, in general, has led to the fact that now energy prices firm up. What are the prospects? From my point of view, the medium-term prospect is likely to be the decline in energy prices, just because of those factors which contribute to the increase of the supply and which I have mentioned. As for the prospects in the long run, it is hard to say something, because there is quite large research related to alternative energy sources. Now it is clear that they have something to offer, but they cannot entirely replace traditional energy that is based on oil and gas. In the future we'll see how it will develop. Plus, there is still nuclear energy, which in many countries still dominates, for example, in such countries as France. On the other hand, nuclear power has a number of unsolvable problems from the point of view of the development of modern technologies, in particular, nuclear energy production waste storage," he said.
Berzon pointed out two main reasons for the outflow of funds from Russia: the poor investment climate and corruption. The outflow of capital from Russia has not reduced. For the first six months of 2013, net capital outflow from Russia, according to the Central Bank, amounted to $38.3 billion.
In July, according to the calculations of the Ministry of Economic Development, another $6-7 billion will leave the country. The Bank of Russia forecasts a level of outflow of $67 billion for 2013. The Ministry of Economic Development expects capital outflow from Russia in 2013 to be within the range of $70-75 billion."In my opinion, there are two main reasons, they are well known. There is a lot of talk about it. This is the poor investment climate, and the second one is corruption. If you decipher what lies behind these terms... There are legal capital outflows when a Russian company, having not found attractive investment opportunities in Russia, legitimately invests its own money and earned means in investment projects abroad. If all the investment problems if Russia were solved, if everything were marvellous, and then there was extra money, then let us export our capital abroad, it would all be perfect. But in fact there are a lot of unresolved issues in Russia. Investment is needed, but investments unfortunately go over there. And a Russian businessman, business is always looking for more profitable and less risky conditions... If these factors are more attractive overseas, the capital goes there. This is legitimate capital outflow, it is a specificity of doing business, and nothing can be done about it. So, first, it is necessary of course that Russian businessmen invest in Russia, but for this to happen it is necessary that it is beneficial for them, that it is appealing. It is necessary that when an investment project is implemented, the rules do not change, taxes are not raised, interest rates are not raised. That there is no need pay bribes and “cut deals”. This is a bad investment climate. This is the first reason. And the second reason is the corruption component. And this corruption component in the total outflow of capital, according to expert estimates counts for about 50-60%. We should fight this. But we should fight not in order to prevent this outflow, but to deal with real corruption. When a capital outflow occurs it includes corrupt officials and corrupt executives of corporations that illegally have earned capital and in order to legalize it in some way they move the capital abroad through a network of phony companies. This is the second reason. Here are the two reasons for this. Corruption must be fought not with words, but in real life with action. Then, perhaps, the capital outflow will be reduced," he said.
