The illegal outflow of capital from Russia continues to accelerate, said Central Bank Deputy Chairperson Dmitry Skobelkin at a session of the State Duma Financial Market Committee.

One of the most popular ways to do this is to give a loan which will never be repaid to an offshore company. The Russian legal entity which has transferred the money then declares itself bankrupt, and the offshore recipient can transfer the funds to a third company, allowing it to disappear virtually without a trace.

The amount of such deals, of non-residents’ unrecovered debt to residents, has reached $35 billion, Skobelkin reported. One of every four dollars issued by Russian companies as loans to foreign companies has not been recovered, and the total continues to grow.

In the fourth quarter it grew by $2.9 billion. “As practice shows, this money is not taken out as a real economic activity as a loan, it is one of the channels for withdrawing shady income acquired through crime, fraud, and so on,” Interfax cites Skobelkin as saying.

At present, participants in such schemes are not being held accountable. A bill requiring that Russian legal entities issuing loans return the money to the country (mandatory repatriation) had its first reading in the State Duma in January 2016, but subsequently encountered opposition from the major Russian state corporations.

Complaints came from Rosnano and Rosneft, Deputy Finance Minister Alexei Moiseev noted: the former demanded that an exception be made for companies that receive funding from the budget and under guarantee, as well as their subsidiaries (with as little as a 20% share).

Rosneft in turn proposed that loans related to mining minerals should be exempt from mandatory repatriation, even if their non-return is related to the realization of geological risk. Rosneft was joined by Gazprom Neft, Lukoil and Zarubezhneft.
These complaints would need to be addressed in the second reading, Moiseev commented.

“A command has been given by the government not to delay this law,” Skobelkin told the committee. According to him, the decision was made by First Deputy Prime Minister Igor Shuvalov at a meeting on currency control.

In the first half of 2017, $11 billion flowed out of Russia into offshore accounts, putting Russia firmly in the world’s top five countries with respect to this indicator, according to calculations by RANEPA experts.

According to the United States’ National Bureau of Economic Research (NBER), the wealthiest Russians hold assets in offshore accounts amounting to 60% of Russia’s GDP. This is almost 60 trillion rubles, or more than $1 trillion at the current exchange rate.

According to this indicator, Russia is on the same level as the Persian Gulf oil monarchies and the countries of Latin America.

  capital outflow, Russia

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