- The Washington Times - Tuesday, June 13, 2006

ST. PETERSBURG (AP) — President Vladimir Putin said yesterday that Russia attracted more capital investment in 2005 than left the country for the first time in years and proposed that the energy-rich nation serve as host to a 2015 world exposition.

Mr. Putin also said the government would maintain its monopoly over natural-gas exports through state-controlled OAO Gazprom, but promised to allow independent producers more access to export pipelines, Russian news agencies reported.

The comments, made to foreign businessmen attending the 10th annual St. Petersburg Economic Forum, come amid growing criticism by the European Union and others that Russia is seeking to gain complete control over certain energy sectors with the potential aim of using energy exports as a weapon.

Russia’s natural resources minister said yesterday that a new Russian energy law will restrict foreign access to the country’s massive energy reserves by an amount more than expected.

Summing up his government’s economic achievements, Mr. Putin said post-Soviet Russia had attracted $112 billion in cumulative foreign investment.

He said capital inflow had exceeded capital flight in 2005 for the first time in years — the Central Bank reported a $300 million net inflow — and that Russia’s gold and hard-currency reserves this year could exceed state and private foreign debt combined.

In 2004, when a politically charged tax investigation of the Yukos oil company was reaching its climax, capital flight jumped to $8 billion from $1.9 billion in 2003. In previous years Russia has reported capital flight as high as $25 billion.

But 2005 saw many investors overcome the fears over property rights that the Yukos case raised.

“By hosting the Expo, Russia could become a generator of new roads of global interaction,” Mr. Putin told the economic forum. “We are ready for the job.”

Major World Expos are typically arranged every fifth year and run for half a year. About 22 million people visited the Expo 2005 in Aichi, Japan, which ended its six-month run in September. The next World Expo will be held in Shanghai in 2010 and 70 million visitors are expected. Russia has never hosted the event.

Russia is the world’s second-largest exporter of crude after Saudi Arabia, and surging global oil prices have spurred its rapid economic growth during the past years. After relying heavily on loans from the International Monetary Fund and World Bank in the 1990s, Russia’s accounts are now flush with cash.

Mr. Putin said the four biggest problems in the economy were high inflation — currently running around 9 percent annually — monopolies, bureaucratic barriers and corruption. He said no barriers to foreign investment should be erected under the guise of national security concerns.

“Far from all of us, even countries with developed market economies, can offer transparent access to their economies for foreign investors,” Mr. Putin said. “We, too, are looking for a balanced approach to this difficult problem.”

In a sign of Russia’s economic confidence, Deputy Prime Minister Dmitry Medvedev told the forum that the ruble could become an international reserve currency.

“In keeping with the rising world demand for rubles, our currency can become one of the reserve currencies [of the world] and a currency for other centers of economic development,” he said.

Russia has said it will formally end all capital controls July 1, a move underlining its re-emergence as an economic power in the immediate run-up to the summit of the Group of Eight leading industrialized nations, which it will host in St. Petersburg in mid-July.

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