Despite the reassuring narrative from The West that Russia faces "costs" and is increasingly "isolated" due to sanctions for its actions in Ukraine, the most recent data suggests reality is quite different. First, capital outflows slowed dramatically in Q3 (from $23.7 billion in Q2 to $13 billion in Q3) with September seeing capital inflows for the first time since Sept 2013. Second, Russia's current account surplus was significantly stronger than expected ($11.4 billion vs $8.8 billion expected) driven by increased trade. Third, and perhaps most crucially, Russia paid down a massive $52.8 billion in foreign debt as Putin "de-dollarizes" at near record pace, reducing external debt to the lowest since 2012.

As Goldman explains, Trade and income improved notably...

The current account balance for Q3 came in at a surplus of US$11.4bn, above consensus expectations of US$8.8bn and up sharply from a small deficit of US$0.7bn in Q3 2013. On our estimates, on a seasonally-adjusted basis, this now puts the current account at 3.8% of GDP, up from a low point of 1% in Q2 2013 and 1.6% for the full-year 2013. The improvement in the current account came from both the trade balance, where imports have contracted (due to slowing domestic demand and the weaker Ruble), and from the income balance. In our view, the latter could be due to either cyclical or structural factors, which are difficult for us to pinpoint, but risks to our current account balance forecasts nonetheless remain to the upside.

Meanwhile,

Net private capital outflows stood at US$13bn for the quarter, up slightly from US$10bn in Q3 2013 and similar to the pattern seen in Q2. *RUSSIA 3Q CAPITAL OUTFLOWS SLOW TO $13B VS $23.7B OUTFLOW IN 2Q *RUSSIA HAD $11.6B NET CAPITAL INFLOW IN JUNE: CENTRAL BANK June was first monthly net inflow since Sept. 2013, according to central bank statement.





And finally - "de-dollarization" accelerates as Russia pays down its foreign debt at the fastest pace since Lehman...

Source: CBR

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"Isolated" Indeed!