Russia's Capital Flight Problem Is Worse Than You Think

Putin, MevedevRussian prime minister Vladimir Putin and Russian President Dmitry Medvedev after their meeting in the Gorki presidential residence

Photo: AP

Russia’s capital flight problem was shown to be worse than previously thought last week when the Central Bank showed the 2011 total had reached $49.3 billion.Now, Igor Yurgens, Chairman of the Management Board at the Institute for Contemporary Development (ICD), has confirmed that he feels the figure for 2011 will be $60 billion in capital outflow, rather than the $30 billion predicted.

Yurgens, speaking in an interview with Valdai Club, points towards Russia’s instability as a reason investors choose to take money out of the country, in particular the lack of a predictable tax burden, quality human capital and skilled labour.

It appears that, as Julia Ioffe wrote in Foreign Policy a couple of weeks ago, this capital flight and lack of investment may be the real problem in Russia at the moment. The money from natural resources within Russia will only go so far — and members of the elite are starting to notice.

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