Billions of Rubles Secretly Leaving Russian Economy

Every year, billions of rubles leave the Russian economy, often through the UK. This massive outpouring is having a devastating impact on the value of the ruble and left many to wonder how so much currency is able to exit the country in such a fashion.

Estimates put the amounts flowing out of Russia and into the UK at approximately $1.5 billion every month. That equates to roughly $140 billion a year, and this appears to have been happening since at least 2006.

Every year, billions of rubles leave the Russian economy, often through the UK. This massive outpouring is having a devastating impact on the value of the ruble and left many to wonder how so much currency is able to exit the country in such a fashion.

Estimates put the amounts flowing out of Russia and into the UK at approximately $1.5 billion every month. That equates to roughly $140 billion a year, and this appears to have been happening since at least 2006.

Methods of getting the money out of the country vary from the fairly innocent, such as accounting errors and complicated transactions involving multiple currency exchanges, or more devious, such as smuggling, embezzlement, and other criminal activities. Whatever the means or reason, this quickly escaping cash flow has the ruble tumbling as regulators search for ways to plug the leak.

The ruble has lost over 40% of its value versus the dollar over the last year. A number of factors are influences including sanctions by the West, falling oil prices, and the escaping rubles. The damage has wiped billions off the wealth of some of Russia’s richest men while simultaneously leaving the average person on the streets finding it increasingly difficult to make the purchases they need on a daily basis.

This trend, coupled with Russia’s tendency to seize the assets of political dissidents, has led many of Russia’s wealthiest to invest outside of the country. This ensures not only the safety of the investment against Russian government intervention, but also that no harm will come from the rapidly diminishing ruble. This has led to yet more of Russia’s economic base flowing out of the country, albeit in more legal and traceable ways.

It appears that the UK may be a popular destination for Russians, which may be why so many rubles seem to flow through its banks. Many Russians have begun purchasing lavish properties in this country and applying for visas in record numbers. Of course, British property laws offering much more significant protections than in Russia or most of Eastern Europe appear to be the deciding factor.

The Russian Central Bank has not yet announced a plan to stymie the outflow of rubles, but most experts predict one may be forthcoming. Whether this takes the form of financial penalties or criminal sanctions remains open, but a combination of the two is most likely. Still, most believe such sanctions may have little or no ultimate effect on the situation until social and political changes that ensure a safer investment environment for Russians take effect. Unfortunately, the types of changes required are not likely to occur during the Putin administration, leading many to wonder whether any future changes may be too little, too late to save the ruble and the Russian economy from total free fall.