Capital flight from Russia has spiked dramatically since President Vladimir Putin first sent troops into Crimea and may reach $70bn (£42bn) over the first quarter of the year, prompting fears that the country may soon have to impose capital controls to stem the loss.
Andrei Klepach, the deputy economy minister, admitted in Moscow that the outflows are likely to reach $65-70bn, far higher than originally expected and a clear sign that investors are extremely nervous of escalating sanctions.
“It is shocking,” said Bartosz Pawlowski from BNP Paribas. “Markets have been extremely complacent, fooling themselves that Russia is invulnerable because it has almost half a trillion in foreign reserves. But reserves can become almost irrelevant in this sort of crisis.”
Lars Christensen from Danske Bank said the authorities may resort to some form of financial coercion to lock down funds in Russia. “Capital controls are a serious risk, and should not be discounted. Whatever now happens, there has been permanent damage to the Russian economy because investors are not going to forget this lightly.”