RUSSIA HAD capital outflows of $7 billion (€4.76 billion) at the outset of the conflict with Georgia over the separatist region of South Ossetia, finance minister Alexei Kudrin said yesterday.

The conflict, which erupted on August 7th when Russian troops repelled a Georgian attack on pro-Russian South Ossetia, spooked investors and sent Russian stocks tumbling to their lowest levels in nearly two years.

"Outflows of currency from Russia were $6 billion on Friday and $1 billion on Monday ," Mr Kudrin told reporters.

Russian stocks rebounded on August 11th after President Dmitry Medvedev signalled the conflict was nearing an end. Russia signed a ceasefire declaration on Saturday, a day after Georgia. Mr Medvedev said yesterday that his his forces would begin their withdrawal today from the conflict zone in South Ossetia.

Mr Kudrin said political risks were likely to further damage prospects for total capital inflows to Russia for the whole of 2008.

+He said the total would probably be less than the $30-40 billion forecast by the central bank for the year.

"I think the inflows will be a bit less than the official central bank forecast because of continued turbulence on global financial markets and some political risks which have appeared in recent days and have influenced foreigners' views on capital input or withdrawal."

Russia saw a record $82 billion in capital inflows in 2007.

Mr Kudrin unveiled a draft fiscal strategy to 2023, proposing to raise social security taxes from 2010 and reform the $162 billion oil wealth funds to back up the pension system.

Under the proposal, Russia's oil revenues will be redistributed between the liquid Reserve Fund designed to support the budget in case the oil price falls and the National Wealth Fund (NWF), earmarked for riskier investment. - ( Reuters)