Since last summer, Russia has suffered from accelerated capital flight of $2.9 billion a month, a figure dramatically higher than earlier estimates, according to a Finance Ministry assessment made public today.
The study by the ministry's economic experts suggests that rising oil prices have led exporters to ship more of their profits abroad. The rush of capital out of the country, the study says, explains why Russia's foreign currency reserves have declined even though exports are booming and imports remain weak.
Capital flight is one of Russia's most debilitating economic woes, a leakage of wealth that is desperately needed to rebuild industry and support the troubled effort to transform the country into a market economy. For more than a decade, spurred by political instability, high taxes, lawlessness and hyperinflation, billions of dollars have been fleeing Russia to offshore havens and bank accounts.
The issue was thrown back into the spotlight in recent months when it was disclosed that U.S. authorities were probing the flow of billions of dollars from Russia through the Bank of New York.
Much of the capital flight from Russia is hard to track because it takes place through front companies, phony trade invoices and fake export-import transactions, and there have been wildly differing estimates in recent years of how much is involved. The money can include profits from criminal activity, but often represents profits skimmed from industry or cash being concealed from Russia's punishingly high tax rates.
For years, government officials have paid lip service to stopping capital flight but been unable or unwilling to do anything about it.
Only this week, a top Central Bank official said capital flight had declined to $530 million to $550 million a month.
But the Finance Ministry study, by analyst Oksana Dynnikova, painted a different picture. At a time of "almost zero foreign investment," she said, the outflow "weakens the national currency, hampers the building up of foreign reserves and siphons off investment resources of the country." She estimated that capital flight from Russia was running about $1 billion a month last spring but zoomed to $2.9 billion a month in the period from July to September.
Many analysts say that in today's global economy the best way to stop capital flight is to create the conditions that attract investment and capital, and that Russia has done just the opposite, allowing a lawless, oligarchic economy to run wild. Russia has rules against the export of capital but they have never been seriously enforced, and the Central Bank's credibility was undermined when it was disclosed earlier this year that it, too, had been sending the country's precious foreign currency reserves to a small offshore firm.
In recent years, capital flight has intensified alongside perceived risks from upcoming elections and economic turmoil. The Finance Ministry study says a large chunk of wealth exited Russia last year at the time of the ruble devaluation and default on domestic debt. Now, the money may be fleeing before parliamentary elections in December and another period of uncertainty.