Back in December, Russian President Vladimir Putin all but begged wealthy Russians to bring their overseas holdings back to Russia. His campaign went so far as to offer amnesty from prosecution for individuals whose wealth was gained illegally – something true of a significant segment of Russia’s richest citizens.
At the time, the plea was aimed at exploiting the patriotic feeling of wealthy Russians – it was time to bring Russian money back home to strengthen the economy. Apparently, though, appealing to the patriotism of oligarchs and members of organized criminal groups didn’t work, because on Thursday, Putin had to renew his request. This time, he appealed to naked self-interest.
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Speaking at a gathering of representatives of Russia’s largest businesses, Putin warned that unless wealthy Russians with overseas holdings repatriate their money now, they face the risk of having their funds frozen. He pointed out that the United States and its allies have been applying increasingly harsh financial sanctions on Russia as a result of its invasion of Ukraine’s Crimean peninsula last year and its continued military support of an armed rebellion in the eastern part of Ukraine.
To be fair, Putin has a point. The West has increasingly cracked down on the ability of many wealthy Russians to move money around the globe, and even on their ability to travel personally.
However, the call for repatriation of Russian wealth likely has little to do with Putin’s concern for the finances of his richest constituents and a whole lot to do with the fact that Russia has experienced massive capital flight in the past year. Some $150 billion in capital was transferred out of the Russian economy in 2014, as the ruble lost its value, interest rates soared, and international investors began treating the country as a de facto pariah state.
Until now, Russia’s wealthiest have decided that keeping their money abroad at the risk of it being frozen there was a more acceptable gamble than bringing it back home and having it locked into an economy that is likely to tumble into severe recession, if not outright depression, in the next year.
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Given the current state of affairs in Russia, it’s hard to see how that calculus could have changed, even for the most legally endangered of Russia’s wealthy.
It is actually hard to overstate how explicit Putin was late last year in urging criminals to repatriate their funds. At the time, he said, “I propose a full amnesty for capital returning to Russia. I stress -- full amnesty.”
“It means,” he continued, “that if a person legalizes his holdings and property in Russia, he will receive firm legal guarantees that he will not be summoned to various agencies, including law enforcement agencies that they will not ‘put the squeeze’ on him. That he will not be asked about the sources of his capital and methods of its acquisition. That he will not be prosecuted or face administrative liability, and that he will not be questioned by the tax service or law enforcement agencies.
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“We all understand that the sources of assets are different, that they were earned or acquired in various ways. However, I am confident that we should finally close, turn the ‘offshore page’ in the history of our economy and our country. It is very important and necessary to do this.”
On Thursday, according to the Associated Press, he added a caveat to his call for capital repatriation, saying that money returning to Russia would have to be transferred in compliance with international money laundering rules to avoid the movement of “capital earned in an illegal manner.”
That said, much of the money in question has already been laundered, so for many wealthy Russians with assets of dubious origin, worries about criminal prosecution aren’t a big concern. Worries about the future of the Russian economy, however, are. And for that reason, it’s not likely that Putin’s pleas will result in an influx of capital to his struggling economy.
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