Russia less risky after Georgia conflict: Kudrin

By Darya Korsunskaya and Gleb Bryanski

MOSCOW (Reuters) - Russia's political risks have diminished after the country sent troops to Georgia to support two breakaway regions because a further military escalation was now unlikely, Finance Minister Alexei Kudrin said on Tuesday.

Russia sent troops into Georgia last month in response to an attempt by Tbilisi to retake the breakaway region of South Ossetia by force. Moscow's move drew condemnation from the West and prompted many investors to sell Russian assets.

"From my point of view, the situation has now been resolved and political risks have disappeared. The situation is now clear," Kudrin said at an interview at the Reuters Russia Investment Summit.

Investors took $7 billion out of Russia immediately after the conflict broke out, sending Russian stocks and the rouble tumbling but Kudrin said foreign direct investment has not been affected.

"Investors can now relax and start acting," he said at the event, held at the Reuters office in Moscow. "If you want to make money in Russia, please, go ahead."

Kudrin said Russia remained committed to a course of further economic liberalization and to improving the climate for both foreign and domestic investors.

"Russia will uphold the key principles of economic liberalization. Russia says: We will not introduce any restrictions (on foreign investment) and will not change our policy. Will the West do the same thing?" Kudrin said.

Kudrin said a "civilized" resolution to a row around BP's (BP.L: Quote, Profile, Research, Stock Buzz) Russian venture TNK-BP and a pricing scandal around coal miner Mechel (MTL.N: Quote, Profile, Research, Stock Buzz) was a sign that Russia is trying to improve the investment climate.

"Investors are now waiting for decisions of their governments. I think the last EU summit has shown there will be no such decisions," he added, referring to the summit in France last week, which failed to impose sanctions on Russia.

Kudrin, 47, has been an architect of Russia's economic policy in recent years. With the help of record high oil prices, Kudrin turned around Russian finances and created a fund for windfall oil revenues.

Kudrin is also seen as one of the most Western-friendly Russian politicians. He rarely speaks on foreign policy issues but called on Russia to alter its hawkish foreign policy earlier this year.

He has also led the effort to integrate Russia into the world economy through its membership in the Group of Eight industrialized countries and pushed for Russia to become a member of the World Trade Organization.

Russia, under pressure from the West, agreed on Monday to completely withdraw its troops from parts of Georgia within a month, but there was no commitment to scale back its military presence in two Georgian separatist regions.

"Obviously, Georgia has lost these territories but I do not see any possibility for this conflict going further," Kudrin said, adding that the conflict between Georgia and the enclaves was old and has always posed some political risk.

"This solution is painful for Georgia, but Georgia will have to live it," Kudrin said. He said Russia bore no additional costs due to a large military operation in the Caucasus and had no plans to provide large scale financial aid to separatists.  Continued...