Rising oil prices should be good for Russia. Prices have more than doubled in the past year to around $25 per barrel, adding around $4 billion to Russian export revenues. The rising trade surplus is a major contributor to a gross domestic product, which in 1999 should rise by 1 or 2 percent, the best performance since the collapse of the Soviet Union.
Where is the money going? That’s easy: It goes offshore. Jamestown’s daily Monitor reported a month ago that Central Bank figures implied capital flight of $10.9 billion in the second quarter alone. Last week the Finance Ministry’s Economic Expert Group reported that capital flight in the third quarter appeared to reach $8.6 billion. For the year, capital flight may well exceed $30 billion.
Russia’s gross domestic product is around 4,000 billion rubles, or $155 billion at market exchange rates, so capital flight is around 19 percent of GDP. In the United States, 19 percent of GDP would be around $1.7 trillion.
Capital flight means less money available domestically for investment or for government expenditures, including prosecution of the war in Chechnya. That war, now in its third month, is costing between $135 million and $150 million a month, according to Russian estimates. That would be $1.7 billion a year, or around 1.1 percent of GDP, about a third of the entire defense budget for 1999.
These numbers pose some questions for members of the Board of Directors of the International Monetary Fund, which is poised to decide whether to release the second $640 million tranche of the $4.5 billion loan agreed to last July. The basic questions are simple: why should Western institutions and Western taxpayers put money into Russia, when Russians will not do so? And why should the West help fund the war in Chechnya?