Page 15 - bne_newspaper_September_28_2018

Eastern Europe
September 28, 2018 www.intellinews.com I Page 15
Russian capital flight figures to make your eyes water
Ben Aris in Berlin
Looking over Russia’s capital flight data, you could be driven to tears. Since 1994, when the Central Bank of Russia (CBR) started publishing capital flight data, a total of $581bn has left Russia as private sector outflows.
But what really makes the eyes water is that in the last decade and half there were only two years, 2006 and 2007, when there was a net inflow of capital. Those years were the height of Russia’s boom when Russian businessmen finally became optimistic about the future of the country: the $131bn that came home in those two years was only slightly less than the total of all the money that had left in the preceding decade, $156bn.
If the US crash had not started a global panic, if Russia had had a few more years of this level of in- flows, then it is likely the changes would have gath- ered enough momentum to transform the country and bring it up to par with the developed world.
But the US did crash. Russia didn't have very long in the sun. In 2008 a massive $133bn left – the same amount as all the money that had arrived in
the previous golden years – and not only did the op- timism evaporate, but one can imagine that those Russian investors foolhardy enough to bring their cash home have been scarred for life. In the fol- lowing years between 2009 and the second quarter of this year, a total of $539bn has left the country, which includes an eye watering spike that was even bigger than the 2008 crash: $152bn fled in 2014 fol- lowing Russia’s annexation of the Crimea that year. Capital flight has petered off in the last two years, but some $20bn is still leaving every year.
The challenge that President Vladimir Putin faces now is to recreate the atmosphere of optimism that prevailed from 2006-2007 so that his own businessmen want to bring their money home from its offshore havens and invest in Russia. The Kremlin is now trying the stick and car-
rot approach with Putin’s deoffshorisation laws vs things like a tax amnesty for returning flight capital. He has not convinced anyone yet. Russia doesn't look stable enough. US sanctions are not going away. And the economy is effectively stagnating. As I have argued elsewhere, Russia is suffering from a crisis of confidence.
Since 1994, when the Central Bank of Russia (CBR) started publishing capital flight data, a total of $581bn has left Russia as private sector outflows.