Millionaires are leaving Russia in droves after the country invaded Ukraine and the West imposed sanctions.
Almost three times as many Russian millionaires are expected to leave the country this year than in 2019, the year before the pandemic, according to a report by Henley & Partners, a company that helps wealthy clients move abroad.
As Western sanctions make life harder for its elite, Russia is predicted to suffer a net loss of around 15,000 high net-worth individuals (HNWIs) — defined as people with more than $1 million in assets — in 2022, compared to 5,500 in 2019, according to the report. That equates to about 15% of Russia’s millionaire population, it said.
Andrew Amoils, head of research at analytics company New World Wealth, which contributed data to the report, said that Russia was “hemorrhaging millionaires.”
“Wealth migration figures are a very important gauge of the health of an economy,” he told CNN Business.
“It can also be a sign of bad things to come as HNWIs are often the first people to leave… if one looks at any major country collapse in history, it is normally preceded by a migration of wealthy people away from that country,” he added.
Kremlin spokesperson Dmitry Peskov dismissed the report in a call with reporters on Tuesday, saying the Russian government had not “noticed [a] trend” of millionaires exiting the country.
Migration rates among Russia’s rich and powerful fell sharply in 2020 and 2021 as Covid-19 shut down international travel and closed borders.
But the trend of wealthy people leaving the country seen in the decade leading up the pandemic has resumed, and is now accelerating following Russia’s invasion of Ukraine in February. Russia’s economy is expected to shrink by about 8.5% this year, according to the International Monetary Fund.
The West has imposed round after round of punishing sanctions on Moscow, including expelling some Russian banks from SWIFT, the global payments network, and freezing about half of the country’s international reserves. Scores of Western companies, including luxury retailers, have stopped doing business in the country.
This year’s exodus of millionaires is expected to be more than nine times that of 2021, Henley & Partners’ data shows.
“Well before the imposition of sanctions… there was a tsunami of capital leaving the country, largely prompted by the increasingly capricious governing style of President Vladimir Putin and his demands of loyalty made on middle-class and wealthy Russians,” Misha Glenny, an author and journalist, wrote in an analysis for Henley & Partners.
This year, most emigrating Russians are expected to move to countries in southern Europe where many already have second homes. But the United Arab Emirates is rapidly becoming increasingly attractive for the country’s wealthy, in part, because of its zero-tax rate.
The UAE is predicted to overtake the United States and United Kingdom as the top destination for millionaires on the move this year. Henley & Partners predicts the country will welcome 4,000 HNWIs by the end of the year, compared with about 1,000 each year prior to the pandemic.
Amoils said elites were drawn to the UAE as an “international business hub with a high-income economy” which has a “reputation for being the safe oasis in the Middle East and Africa region.”
The global population of HNWIs grew by nearly 8% last year, according to research by Capgemini, a technology consultancy, which uses the same $1 million threshold as Henley & Partners.