In a recent op-ed in Foreign Policy, Yale professors Jeffrey Sonnenfeld and Steven Tian argue against the notion that Russian President Vladimir Putin is one of the winners of 2023. They contend that Russia's economy is actually paralyzed and surviving by cannibalizing state-owned firms.
Sonnenfeld and Tian highlight the significant costs that Western sanctions and the exodus of multinational companies from Russia have imposed on the nation's economy. They caution against falling into the trap of thinking that all is well for Putin and emphasize the importance of maintaining effective measures to pressure him.
The professors point to various indicators of Russia's struggling economy. Since the invasion of Ukraine in 2022, over 1 million Russians, including top tech talent, have fled the country, exacerbating a labor shortage of nearly 5 million workers. Additionally, $253 billion in private capital has left Russia between February 2022 and June 2023, according to the Russian central bank's data. The loss of access to Western technology and expertise, as well as the near absence of foreign direct investment, further hinder Russia's economic prospects.
Sonnenfeld and Tian also highlight the effects of strict capital controls, rendering Russian assets valued in rubles virtually worthless in global markets. Furthermore, sanctions have prevented Russian companies from issuing new stocks or bonds in Western markets.
The professors assert that Russia's economic power is limited, as it does not supply any finished goods to the global economy and can easily substitute its raw materials from elsewhere. They argue that the country's war machine relies solely on the cannibalization of state-controlled enterprises.
Even the Kremlin anticipates more economic challenges ahead, with Russian central bank governor Elvira Nabiullina warning of future sanctions. While Russia has weathered economic storms in the past, Nabiullina cautions against overconfidence and emphasizes the need for preparedness.
Overall, Sonnenfeld and Tian's analysis presents a sobering view of Russia's economy, challenging the notion that Putin is a winner in 2023. They provide evidence of the economic paralysis and reliance on state-owned firms, urging against complacency and emphasizing the significance of ongoing pressure on Putin's regime.