Now that the U.S. and the NATO allies have taken from the Russian oligarchs their cash in foreign banks, their mansions, their boats and planes, and blocked the export of all private and corporate Russian capital abroad, Russia is freer to decide how to organize the capital investment of the economy. Freer, that’s to say, than Russia was when the Clinton Administration installed Boris Yeltsin and his cronies in the Kremlin at the end of 1991; destroyed the parliament in 1993, and rigged Yeltsin’s re-election in 1996.
Freer too than Russia has been under Vladimir Putin’s policy of deoffshoreization–that policy fell through a loophole in 2015. The price of their combined failures over thirty years has been more than one trillion dollars. That’s the sum of Russian capital outflow which started in 1992 and accelerated since 2000.
In the calculation of the International Monetary Fund (IMF), Russia has been the only example in the world of an economy in which domestic economic growth has failed to reverse capital outflow, and to attract capital to return. Privatization in Russia has also been unique because it has accelerated the rate of outflow of domestic funds, enlarging the gap between domestic outflow and foreign inflow. Predictably, this has led to the accumulation of a bigger Russian capital economy offshore than the domestic capital economy (except for housing); and a level of inequality of incomes which is today worse for Russians than it was during the last decade of tsarist rule ending in the world war and the revolution of 1917.
Not so predictably, under the conditions of the war of the U.S. and its allies to confiscate the offshore economy and destroy the domestic economy entirely, the Russian revolution of 2022 has commenced. It has begun with the passage through the State Duma last week of the new law to terminate all Russian share listings on foreign exchanges, and reorganize the Moscow stock exchange accordingly. Entitled “On Amendments to the Federal Law On Joint Stock Companies and Certain Legislative Acts of the Russian Federation”, and running for 22 pages, the revolution doesn’t start until Article 4 on page 14, buried under a series of articles revising the regulations for public company audits and accounts.
Also buried in the revolutionary new law is Section 9 of Article 6 on page 20. This provides the Russian government with the discretionary power to issue exceptions to the new law and allow foreign share listings, circulation and trade of securities for Russian companies which apply.
The Russian revolution of 2022 has a gaping loophole.
The third reading version of the new law which was voted by the State Duma last week can be read here. The bill had initially been presented to parliament last November when it was an uncontroversial, unnoticed measure dealing with auditors and accountants. It was then substantially revised in March to become the vehicle for a capitalist revolution.