PUTIN DENIES LINK BETWEEN GEORGIA AND FINANCIAL TURMOIL IN RUSSIA

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Vladimir Putin yesterday admitted that foreign capital inflows could fall by up to 45 per cent this year, but rejected suggestions that turmoil in Russia's financial markets was caused by the conflict in Georgia.

The Russian premier said the country was simply suffering from the same credit crisis affecting the rest of the world, but he acknowledged that foreign inflows might fall this year from $80bn in 2007 to $45bn or $50bn.

Mr Putin blamed Russia's outflow of capital on “speculative” moves by western institutions withdrawing funds because of the “mortgage crisis” in the US and Europe

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But, speaking to western journalists in the holiday resort of Sochi, he denied there was a liquidity crisis and rejected the view that the turmoil had “anything to do” with the Georgian conflict.

The stock market has fallen almost 50 per cent since May and fell a further 2.7 per cent yesterday. Alexei Kudrin, finance minister, said yesterday that Russia was now considering using money from its $32bn national wealth fund and from pension reserves to support financial markets.

Mr Putin played down the scale of the domestic liquidity problems, saying that when the state treasury had offered extra funds to commercial banks, the banks had taken up far less money than they could have done. In aggressive comments towards the United States, he said Washington had huge deficits whereas Russia had “a double surplus” on its budget and trade accounts.

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Commenting on the Georgian crisis, he said Moscow was ready for political and economic co- operation with the west but not if it was going to be “pushed around” by the US.