Paul Goble
Staunton, Jan. 2 – For more than a decade, Vladimir Putin has called for an end to the offshore-ization of the Russian economy, the practice whereby Russian owners of physical property in Russia register them abroad to evade taxes, but Moscow has done ensure that happens, Valentin Katasonov says.
As a result, capital flight has continued, the Moscow commentator points out; but that is not the worst aspect of this situation. Because most Russian assets abroad take this form and are registered in offshore jurisdictions, Western governments have significant leverage over the Russian economy (fondsk.ru/news/2023/01/02/prokljate-ofshorov-i-strannosti-sankcionnoj-vojny-58120.html).
In fact, there has been a conjunction of interests that have kept these arrangements alive despite sanctions, Katasonov says. On the one hand, wealthy Russians are pleased to be able to avoid Russian taxes and protect their wealth. And on the other, Western governments are only too happy to have Russians put themselves in a position where the West can influence them.
But the time has come to change these arrangements, the commentator continues. The Russian state budget is running a deficit, capital flight is continuing, and the West is showing itself ever more prepared to use all the levers it has against Russia. Ending offshore arrangements by Russian owners has to become a priority, he says.
Doing so would not be difficult “from a technical point of view.” Russian owners would have to re-register their assets in Russia; and if they failed to do so within a month, then their holdings would be nationalized and their wealth as recorded in assets now held in foreign offshore accounts would disappear.
The bigger question is political: can the Putin regime take a step that would alienate many of its wealthy supporters? That may have stayed its hand in the past, Katasonov suggests; but circumstances have changed; and now the Kremlin must act not only to balance the budget but to ensure Russian sovereignty.
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