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Russia’s economy is paralyzed, and Putin’s war machine survives on cannibalizing state-owned firms, Yale researchers say
Jason Ma – December 27, 2023
- Russia’s economy is paralyzed, and its war machine survives by cannibalizing state-owned firms.
- That’s according to Yale professors pushing back on commentary that Putin is one 2023’s big winners.
- “We cannot fall into the trap of thinking that all is good for Putin,” they said.
Russia’s economy is paralyzed, and its war machine survives on cannibalizing state-owned firms, two Yale researchers said.
In an op-ed in Foreign Policy on Friday, Jeffrey Sonnenfeld and Steven Tian pushed back on recent commentary that cast Russian President Vladimir Putin as one of 2023’s big winners amid signs of economic resilience.
But Western sanctions and the mass exodus of multinational companies from Russia have inflicted huge costs on the nation’s economy, they said.
“We cannot fall into the trap of thinking that all is good for Putin, and we cannot jettison effective measures to pressure him,” Sonnenfeld and Tian wrote, adding that transferring “worthless” expropriated assets from Western firms to Putin’s cronies didn’t make Russia wealthier.
They also listed several other signs that Russia’s economy had been reeling.
Since Russia invaded Ukraine in early 2022, at least 1 million Russians have fled to other countries, including top tech talent. That’s contributed to a labor shortage that’s nearing 5 million workers and has stoked high inflation.
Meanwhile, $253 billion in private capital left Russia between February 2022 and June 2023, Sonnenfeld and Tian said, citing the Russian central bank’s data.
In addition, Russia has lost access to Western technology and expertise that its companies relied on, while foreign direct investment has nearly dried up.
Making matters worse are strict capital controls that have rendered Russian assets valued in rubles virtually worthless on global markets.
And sanctions that cut off Moscow from much of international finance have prevented Russian companies from issuing any new stock or bond in a Western market.
“Russia, which never supplied any finished goods — industrial or consumer — to the global economy, is paralyzed,” Sonnenfeld and Tian said. “It is not remotely an economic superpower, with virtually all of its raw materials easily substituted from elsewhere. The war machine is driven only by the cannibalization of now state-controlled enterprises.”
Even the Kremlin is bracing for more pain. On Monday, Russia’s central-bank governor, Elvira Nabiullina, said she’s expecting more sanctions.
While Russia has weathered the economic storms of the past two years, Nabiullina warned against thinking the country was “10 feet tall,” a translation from TASS, a state news agency, said. She added that the pressure from sanctions could intensify and the country must prepare for it.