Tracking Russia's Financial Outflows, Again
The current account surplus has shrunk thanks to higher imports (bad) and lower oil and gas revenues (good). Data from Russian and other sources suggest that capital flight is still important.
Russia’s current account surplus ballooned following its invasion of Ukraine as spending on imports fell much faster than revenues earned from selling exports to the rest of the world. In 2022H1, Russian residents earned $74 billion more than they spent each quarter on average, compared to $41 billion/quarter in 2021H2 and $45 billion/quarter in 2022H2. This corresponded to large-scale financial outflows from Russia by Russian and foreign investors.
A few months ago, I dug into what was then the latest available data on where the money went. There was an apparent discrepancy between the Russian figures, which suggested that most (but not all) of the financial outflows of 2022 were attributable to capital flight and emigration, and data from other sources, which implied that Russian banks were accumulating claims on banks in the rest of the world, particularly Belgium (home of Euroclear) and China.
Since the start of this year, things have been different. As I explained in my previous note, spending on imports has normalized (bad) even as revenues earned from selling oil and gas have continued to drop thanks to the oil price cap (good). In 2023Q1-Q3, Russia’s current account surplus has averaged just $14 billion/quarter.
Yet the latest data suggest that the shrunken surplus corresponds to similar sets of financial flows as in 2022, just in much smaller volumes.
Unfortunately, the discrepancy between the Russian and non-Russian data persists, which creates interpretative challenges. (For more on those challenges, read my note from the summer, along with the footnotes.) With those caveats in mind, it looks as if capital flight is still the dominant explanation for what has happened since the estart of the war.