Oil prices have more than doubled in the past year, boosting export earnings and lifting Russia to a trade surplus of $31 billion over the twelve months ending in September. But external accounts are not responding. The official rate for the ruble is now around 27 to the dollar, down over 30 percent in the past year. (And likely to fall further. The ruble’s fall has not matched the rise in consumer prices, which are now about 50 percent above year-ago levels.) Liquid foreign-exchange reserves are down to around $7 billion. The state-owned Vneshekonombank missed a $963 million payment of service on $32 billion in Soviet-era debt held by Western banks. Why are the country’s external accounts still in such bad shape?

The main reason is capital flight. The oil-price windfall stays overseas in dollars, despite a barrelful of laws and regulations requiring prompt repatriation and conversion of export revenues. The Russian-European Center for Economic Policy reported last week that capital flight (including export earnings that stay abroad) reached $1.5 billion per month in the second quarter. While Westerners fuss mightily about holding up a $640 million IMF loan, Russians spirit that much and more out of the country every two weeks.

Even money that stays in Russia goes into hiding. There is an estimated $40-$50 billion in cash U.S. currency in Russia. This money is not in the banking system. Neither is it readily available for lending or investment. Russians agree: It’s a lousy rate of interest and there’s no free toaster, but the smart place to save is the First National Mattress.

Parliamentary elections take place on Sunday, December 19. Interest is low. The economy is less than half the size it was in 1991, when the Soviet Union collapsed. Living standards have fallen for most of the population, and inequality of wealth and income has probably increased. Life expectancy has fallen. Political life is marked by scandal, hypocrisy, and impunity. Political figures, President Boris Yeltsin most of all, are generally held in contempt. It is enough to give democracy a bad name, and it has done so.

Russia’s woeful state did not prevent its addled president, like Lear in Act III, from threatening the world. In China, where he went against his physicians’ advice, he told reporters that “Bill Clinton permitted himself yesterday to pressure Russia. He evidently forgot–for a second, for a minute, for a half-minute–what Russia is and that Russia has a complete arsenal of nuclear weapons and decided to flex his muscles.” He warned the U.S. president against trying to dictate how the rest of the world should live. “It is we (Russia and China) who will dictate.”