Russia is eager to become a global counterbalance to the west both militarily and economically. However their provocative actions in the region, especially in the Ukraine has lead to capital net outflows, not seen since the beginning of the 2008 recession. Below is a graph illustrating the point. As you can see, capital flowing into Russia went into negative territory in Q2, falling far below competing nations like Turkey and Poland:
Most economists saw this coming from a mile away, mostly due to the sanctions placed on Russia by the United States and the European Union. However the precipitous drop in investments coming into an economy still very much trying to find its footing is sounding alarms throughout the Kremlin.
It’s hard to tell exactly how this will push Russian President Vladimir Putin’s hand in the various controversial actions he has taken, but one thing is for sure – the markets are beginning to make themselves heard.
Also not working in Russia’s favor is the downward spiral of the number of Eurobond issuances from Moscow. This will make it harder for bond issuers to borrow, drying up even more money.
Will this trend continue in Russia or will Putin and the ruling party in Moscow begin to rethink their reckless foreign games?