Russian outflows to continue with or without sanctions

Subject

Capital outflows from Russia.

Significance

Russia has been a net exporter of capital since 1991, and annual private capital inflows have exceeded outflows only twice, in 2006 and 2007. Attention often focuses on the use of tax havens, money laundering and acquisitions of expensive properties in European capitals, but this is far from the whole story concerning movement of assets abroad on a temporary or permanent basis.

Impacts

• The exodus of Russian money from Cyprus will benefit other jurisdictions.
• The ongoing domestic capital amnesty is unlikely to lead to significant repatriation of funds.
• Russia's new domestic 'offshore' will be most attractive to companies at risk from new sanctions.
• Mispricing exports and imports will apply more to services than to goods, which are easier to track.