Russian Economy Hit By Ukraine Turmoil

LAURA MILLS – APRIL 16, 2014, 7:51 AM EDT

MOSCOW (AP) — Russia's economy slowed sharply in the first three months of the year as uncertainty over the crisis in Ukraine spooked investors into pulling money out of the country, a government minister said Wednesday.

Economy Minister Alexei Ulyukayev told parliament that growth was only 0.8 percent in the first quarter — far short of the ministry's earlier prediction of 2.5 percent — because of "the acute international situation of the past two months," as well as "serious capital flight."

Russian markets have been rattled by tensions between Moscow and neighboring Ukraine, where Russia annexed the Black Sea region of Crimea last month. The main stock index in Moscow tanked 10 percent in March, wiping out billions in market capitalization. In the first three months of 2014, the ruble lost 9 percent against the dollar, making imports more expensive, and spooked investors pulled about $70 billion out of the country — more than in all of 2013.

Among investors' chief concerns are that the U.S. and European Union might escalate their sanctions against Russia to affect trade, particularly in the valuable energy market. Europe is Russia's largest trading partner. It buys more than three-quarters of Russia's crude oil and natural gas exports, which fund about half the government budget.

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