Tuesday, July 22, 2014

Putinism Thrives on Dirty Money

Western leaders ignored Putin's bad behavior as long as Russian money flowed in. Flight 17 changes all that.

By Oliver Bullough, WSJ
Updated July 21, 2014 7:52 p.m. ET

This year's most important Russian financial indicator will be how much money flees abroad. Central-bank data released on July 9 put capital flight so far this year at $75 billion, almost 4% of gross domestic product, and rising by the day. And that was before last Thursday's murderous downing of Malaysia Airlines Flight 17 over eastern Ukraine.

Westerners marvel at Vladimir Putin's high domestic approval ratings, above 80% in Gallup's most recent poll, which comes after this year's invasion of neighboring Ukraine and annexation of Crimea. But those with the wherewithal to let their money do the talking say different. More money has fled Russia in the first half of 2014 than in the whole of 2013. If Mr. Putin were really doing a good job, capital flight would not be an issue.

Popularity and capital flight are rarely considered together, but they hold the key to Putinism: He gives ordinary Russians stability and television (heavy with propaganda), while their rulers get the right to strong-arm their way to riches and keep the money safely abroad. For the Romans, it was bread and circuses; for Mr. Putin, it is bread, circuses and offshore bank accounts.

Mr. Putin is often credited with rebuilding Russia, but that has been as much aided by $100-a-barrel oil as by anything he has done. Hundreds of billions of dollars have poured out of Russia since he took power in 2000, while corruption has spread to encompass every element of the economy.

(More here.)

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