Image by Ivandemidov
One of the major problems with the Russian economy is the liquidity and solvency of its domestic banks. Western sanctions, and the collapse of the price of oil on international markets in 2014, created liquidity problems for Russian financial institutions. Much of the banks’ short term debt suddenly could not be refinanced in Western markets. Many of them have been necessarily rescued by the Bank of Russia, or risk systemic risk to the Russian economy.
In addition to external factors, the familiar stench of corruption has also endangered these financial entities, with estimates of over $100 billion being siphoned offshore illegally over the last ten years.
“No one here wants to return. Everyone feels great with the stolen millions. A kidnapped Russian bankers over the past ten years, according to my rough estimates, no less than $ 100 billion,” says Russian businessman and banking expert Aleksandr Lebedev, in an interview with Russian media outlet Republic.ru.
Lebedev states, there “are many Russian fraudsters, for whom, of course, it is more comfortable to keep money in Switzerland than to talk with the Russian state. It is foolish to hope that anyone thinks about returning money to Russia.”
In addition, capital flight from the Russian Federation is a continuing problem.
“Total capital outflow from Russia increased to $31.3 billion last year, a 160 percent increase from 2016, Russia’s Central Bank reported Wednesday. Foreign investors have been part of that capital flight, withdrawing nearly $1 billion from the Russian economy last year over fears of new U.S. sanctions scheduled for February,” reported The Moscow Times.
Former Russian finance minister, Alexei Kudrin, a man trusted by Russian President Vladimir Putin, has urged a reduction in military spending/offshore adventures, and a refocus on domestic social spending and infrastructure, saying the current situation is unsustainable unless economic growth is sparked to a higher level. The Kremlin seems to be following these recommendations.