MOSCOW, May 27 (Reuters) - Russia, basking in a flood of cheap money, may prove to be a big beneficiary of the United States Federal Reserve's steady loosening of monetary policy.
As interest rates come down, top Russian companies are borrowing heavily in dollars as never before to feed ambitious growth plans.
Another side effect of lower U.S. interest rates -- a firming of the euro against the rouble -- also looks like it can give a boost to Russian manufacturers who had been struggling to stay competitive while the rouble steadily gained strength.
"The rouble was strengthening but that changed when the Federal Reserve loosened policy. The strength of the euro also delays the strengthening of the rouble," said Peter Boone, an economist at Brunswick Warburg in Moscow.
Lower U.S. borrowing costs have spurred Russian companies to take on more dollar debt. Corporate and sub-sovereign borrowing jumped to $3 billion in the first three months of the year, up from barely $500 million in the first quarter of last year.
"Russia will be the main beneficiary of cheap U.S. money. It is flooding in," said Boone.
"Russians are able to borrow abroad more cheaply and bring the money into Russia," he said, adding "there is no doubt this environment is great if they don't go overboard."
One factor speeding the flow of funds into Russia is a sea-change in investor perceptions of a country which less than five years ago suffered a debt default and a virtual collapse in business confidence.
Russia's stunning recovery has also coincided with a big outflow of funds from the United States as Wall Street falls from favour among many investors who are prepared to look elsewhere for higher returns.
EURO STRENGTH HELPS RUSSIAN MANUFACTURERS
The euro's 10 percent nominal appreciation against the rouble so far this year is also seen by analysts as providing a shot in the arm for Russia, especially the country's hard-pressed manufacturing exporters.
As the rouble firmed against the dollar in recent months, spurred by high crude prices which have helped Russia's oil-exporting economy power ahead, manufacturers have taken a battering.
Now a strong euro may give them some welcome relief.
"I tend to think it (the euro's appreciation) has a positive impact," said Vladimir Drebentsov, a senior economist at the World Bank's Moscow office.
"In Russia, because of its dependence on resource (oil and commodities) exports, the rouble was appreciating too fast for the rest of the economy to adjust," he added.
But Russian exporters needed to seize the opportunity that the euro's strengthening had given them to modernise plant and equipment and get into shape.
"The euro appreciation provides a breathing space. Hopefully Russian businessmen will use it. If this happens it will be beneficial. It seems it's a counterbalance to rouble appreciation," said Drebentsov.
A stronger euro could also boost Russia's appeal as a place to do business for companies from the euro area.
"A stronger euro relative to the rouble makes Russia a relatively more attractive investment location for euro-based investors," said Moscow's Alfa Bank in a research note.
There are costs too. Russia can expect to pay more to service those of its foreign debts which are denominated in euros.