Capital outflow from Russia: Why do investors leave?

Foreign investors withdrew a maximum amount of money in 3.5 years from Russia. Foreign investment in the Russian economy has been declining for the fourth consecutive month. During this period, as much as $1.6 billion has been withdrawn from Russia. Analysts attribute the outcome  of investors to declining oil prices and negative situation on the world stage - in particular, concerning relations between Russia and the United States.

The Kommersant newspaper wrote with reference to the Emerging Portfolio Fund Research that India and Brazil took the lead in attracting investments among BRICS countries. The countries have received $2.6 and $1 billion respectively during four months.

However, according to earlier reports, direct foreign investment in the Russian economy increased  by 62% in 2016 to $19 billion. At the same time, they declined in the world in general by 13 percent to $1.52 trillion.

By the end of June, foreign investors had acquired about 85 percent of Russia's Eurobonds. Americans showed the largest interest in them. Russian businessmen acquired the remaining 15 percent of those securities. The Finance Ministry pointed out the growing demand for 30-year Eurobonds: foreign investors bought 95 percent of those securities.

According to the Central Bank of the Russian Federation, the capital outflow from Russia in 2017 is to make up 37 billion dollars. According to experts of the Bank of Russia, the outflow will decrease during the following years to 14 billion in 2018 and to 8 billion in 2019.

Pravda.Ru turned to experts to find out their opinion on the situation with the outflow of capital from Russia.

Mikhail Khazin, president of the Economic Research Foundation, economist, publicist:

"This is mere statistics, official data that is. The Russian government is responsible for the inflow of investment, and for this reason it does not like to demonstrate an outflow. Nonetheless, as for the result, it is quite natural. Because the goal of the global financial elite is to ensure support for the liquidity of the world dollar system at the expense of Russia's resources. This goal was set in 2014. Chairwoman of the Russian Central Bank, Nabiullina, started solving the problem by devaluing the Russian ruble. She arranged the outflow of about $200 billion. She then engaged in carry-trade transactions, for which the ruble rate was upraised, which also contributed to the outflow of capital. I think that she may receive an award from the West as an outstanding chairperson of the Central Bank."

Anatoly Aksakov, chairman of the State Duma Committee for the Financial Market:

"First off, $1.6  billion is not the amount that one should be concerned about. There are tens of billions of dollars flowing in and out of Russia. We have seen the ruble rate declining against the fall in oil prices and this is a key influence factor. The amount in question is speculative money that comes when the ruble strengthens and leaves when the ruble weakens. People make money on the strengthening of the ruble. Indeed, when the ruble weakens against the backdrop of fluctuating oil prices, speculators start withdrawing their funds not to lose on exchange rate differences.

The so-called arrival of money through the strengthening of the ruble, carry-trade, is also speculative. When the ruble strengthens, a reverse process will take place. There is nothing to worry about much. This is a speculative capital movement that does not characterise the situation in the country at all.


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Author`s name Dmitry Sudakov