The money goes to corrupt officials and contractors, the Russian 1%. Apart from some normal stuff they spend it on luxury goods – iphones, bentleys, jets, yachts, depending on the level. Showing off your status like that is exceedingly popular in Russia.
At the same time, Russia produces very few such goods and thus much of this money simply flows out of the country. Besides, rich people spend a much lower percent of their income than the average Ivan does, so they park their savings offshore – in foreign bank accounts, real estate, etc. The reason they do it is because anything they have in Russia can be taken away in a matter of hours if they ever find themselves on the wrong side of the power field.
So yes, as you see corruption leads to capital outflow which is a real problem in Russia. In fact, we had some new laws passed to address that, not sure about the extent or effectiveness.
You're right though, Russia is beginning to see resource exhaustion – easily accessible forests, oil fields, etc. are gradually drying up. That's why we're ramping up arctic research for example. So while oil money won't last forever, we could have used it to kick-start our economy and infrastructure. There are so many talented engineers in Russia.
At the same time, Russia produces very few such goods and thus much of this money simply flows out of the country. Besides, rich people spend a much lower percent of their income than the average Ivan does, so they park their savings offshore – in foreign bank accounts, real estate, etc. The reason they do it is because anything they have in Russia can be taken away in a matter of hours if they ever find themselves on the wrong side of the power field.
So yes, as you see corruption leads to capital outflow which is a real problem in Russia. In fact, we had some new laws passed to address that, not sure about the extent or effectiveness.
You're right though, Russia is beginning to see resource exhaustion – easily accessible forests, oil fields, etc. are gradually drying up. That's why we're ramping up arctic research for example. So while oil money won't last forever, we could have used it to kick-start our economy and infrastructure. There are so many talented engineers in Russia.