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…