Russia Sanctions, "Mobilization", and Capital Flight
Total imports have largely recovered thanks to surging exports from China and Turkey. Also: figuring out where the current account surplus has been going and the impact of the draft on capital flight.
I recently had a chance to chat with Hugh “I would recommend you panic” Hendry about global imbalances, the state of the world economy after the pandemic, the history of depressions, the legacy of the financial crisis, and more. Check it out!
If you are new to my coverage of the Russian sanctions, I recommend you read my previous note on the subject to catch up.
The U.S. dollar value of exports to Russia from a broad representative sample of the major manufacturing nations1 in September was just 24% below the pre-invasion monthly average—and up by 56% compared to the March-May average. The rebound is almost entirely attribtutable to surges in exports from China and Turkey.
Exports of machinery, electronics, and other items with potential military applications have recovered by less, but are nevertheless on the rise thanks to surging deliveries from China and, more recently, Turkey.
This is regrettable, but it is occurring at a time when Russia’s battlefield losses continue to mount, Russia’s domestic economy continues to weaken, and export earnings are falling. Moreover, while the “partial mobilization” of hundreds of thousands of Russian men into the army seems to have done little for the military situation, the disruption to business activity and the consequent emigration of hundreds of thousands of well-educated Russians will cause further lasting damage to to the Russian economy. A decent chunk of the massive gap between Russian export earnings and import spending is likely financing capital flight from draft-dodgers.