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. Last Updated: 07/27/2016

Putin Says Bring Back the Billions

Looking to find additional resources to boost economic growth, President Vladimir Putin on Wednesday urged Russians to repatriate the billions of dollars they shifted abroad over the past decade.

But unlike Putin's previous economic reforms in taxes and land, the newest drive may leave him empty-handed, analysts warned.

Putin hinted Wednesday that businessmen and private individuals who wait much longer to admit that they have cash abroad could find it frozen amid international efforts to fight terrorism. Should this happen, the money would only be unblocked after a drawn-out battle in the courts, he said in an address to a congress of the Russian Chamber of Commerce.

Putin acknowledged that the government must continue trying to create an attractive investment climate where repatriated funds could be put to work.

"The government must not grab anyone by the sleeve and demand an immediate explanation of where his money came from, especially since in the past it failed to create normal investment conditions in the economy," Putin said, according to Interfax.

The presidential press service stressed that there were no plans to create a special agency to oversee the repatriation of capital.

Nobody knows for sure how much money has fled the country over the past decade. Experts put the amount at anywhere from $50 billion to $400 billion.

Analysts gave their nod of approval to Putin's call but cautioned that the devil was in the details.

"Financial liquidity generates growth. You could have more of it if you could patch the [capital flight] hole," said James Fenkner, chief strategist at Troika Dialog.

Putin in recent months has been prodding the Cabinet to further stimulate economic growth. The World Bank, which puts capital flight at $20 billion to $22 billion per year, estimates domestic capital investment would jump by 18 percent in dollar terms if capital flight were halved.

Details of how Russians could bring home money were unclear Wednesday.

Alexei Volin, the Cabinet's deputy chief of staff, suggested Tuesday that Russians with up to $100,000 abroad be allowed to legalize it by paying a 13 percent tax on the amount. They would then be allowed to keep up to 75 percent abroad, he told Interfax.

He said the government estimates that $300 billion is tucked away abroad, and it hopes to recover at least $100 billion.

Fenkner poured cold water over the proposal, saying individuals who had ferreted most of the cash abroad had sent amounts much larger than $100,000 and they would not be eager to pay a 13 percent tax.

Furthermore, few wealthy Russians are ready to park even a small amount of their fortunes in a Russian bank, he said.

First deputy Central Bank chairman Oleg Vyugin said that even if the funds were repatriated, trying to invest them into the economy would prove to be unjustifiably difficult.

"The problem is not only in amnestied money, but in the fact that it is hard for capital to work in Russia," he said by telephone. "Thus, by amnestying the capital, we might not increase inflows."

Vyugin said Russia's current problem is not a lack of money but a lack of good projects.

"[This] is related to how difficult it is to develop a good project due to its dependency not only on macroeconomic factors, which are fairly stable, but hard-to-predict environmental influences such as legal decisions and subsequent interaction with the army of bureaucrats," he said.

He pointed to Kazakhstan as an example of how difficult it is to repatriate cash even when an amnesty is offered.

"Less than $1.5 billion was returned there," he said.

Mikhail Zadornov, deputy head of the State Duma's budget committee, said the laws were not ready for an amnesty.

"Serious changes must be made in the Tax Code to perform this task, but this can only be done after tax reform is completed," Zadornov told Interfax.

Also, an amnesty could come at a high political cost, he said.

"Even a first step to implement the idea could displease a significant portion of the population, which is not needed on the eve of [2004] presidential elections," he said.

Staff Writer Torrey Clark contributed to this report.