Podcast “Learned something again”: How the Russian economy is imploding

Dmitry Medvedev, the former president of Russia, is convinced that his country will find an answer to the heavy sanctions. A former oligarch, on the other hand, explains that paper is already more valuable than the ruble. A Russian historian is already warning of a new revolution.

The Western sanctions will have no effect, said former Russian President Dmitry Medvedev in an interview with the Russian news agency RIA last week. They wouldn’t cause resentment either, he says. On the contrary, he announces full-bodied. The sanctions would even strengthen Russian society. Several videosuploaded to social networks paint a different, but always similar picture.

Officially, Russia is not running out of staple foods after Western companies withdraw from the country. Nevertheless, since the attack on Ukraine, Russians seem to have had to fight over food such as sugar again and again. Employees appear to be filming themselves in various supermarkets rolling a small load into an aisle. It only takes a moment for chaos to break out: people run to the sugar, try to grab as many packs as possible, snatch them from each other’s hands, push and yell at each other.

“insult to the paper”

It is difficult to judge whether these sugar fights are part of everyday life in Russia or whether they are just rare isolated cases. In any case, before the attack on Ukraine, there were no such videos. And these scenes are just a hint that Western sanctions are hitting the country so hard that the Russian economy is imploding.

The former oligarch and today’s opponent of Putin is the loudest disruptor Mikhail Khodorkovsky the image of unimpressed Russia. He has the economic situation Last weekend on Twitter illustrated with a practical example: “In the store, a pack of DIN A4 paper with 500 sheets costs 2000 rubles,” Khodorkovsky wrote. “So a piece of paper is not only worth four times as much as a ruble, but also more than a share of the Russian bank Sberbank on the London Stock Exchange. That is, to claim that Putin turned rubles and Russian shares into paper is one Insult to the paper.”

Not only the USA, the EU, Canada, Japan and other allied states are participating in the sanctions, but even historically neutral nations such as Switzerland. Among other things, the Confederates no longer export their world-famous luxury watches, which are often found on the wrist of President Putin, to Russia. Apparently an affront that drew an immediate response: Like them “New Zurich newspaper on Sunday” reported, the Russian secret service combed through the Moscow offices of the Swiss watch manufacturer Audemars Piguet and confiscated luxury watches worth several million francs. A theft that the Swiss economy will cope with – unlike the Russian industry, the European and American technology sanctions.

Avtovas, for example, the largest Russian automaker, had to shut down production at two factories in early March and send thousands of workers on forced leave. The company, which is responsible for cult brands such as Lada, among other things, stopped production in “Wall Street Journal” with the global chip shortage and explains that the break will only last two days.

In fact, however, the tapes of the newspaper stood still two weeks later quiet. Because Awtowas belongs to the French car manufacturer Renault and is dependent on components from other European countries. “If deliveries are stopped, production must also be stopped,” said a former board member of the carmaker, explaining the Russian group’s dilemma.

Airline bosses quit

Russian aviation doesn’t seem to be faring much better. Last weekend, low-cost airline Pobeda announced that it would have to ground 16 planes and reduce its fleet from 41 to 25 planes. “They hope that their spare parts will last until the end of the year,” translated the journalist Kevin Rothrock from the Russian exile medium Medusa a letter from the airline.

In this case, too, the cause is the western sanctions. Since the Russian attack on Ukraine, Russian planes have been barred from airspaces such as Europe and America. In addition, the two largest aircraft manufacturers in the world, Airbus and Boeing, are no longer allowed to sell Russian airlines. Technical or personal support for maintenance work or the delivery of spare parts is also prohibited. Actually, Russia also has to return leased aircraft to the actual owners in Europe or the USA, but has so far refused to do so. Several hundred machines are therefore considered stolen.

Nevertheless, a hopeless situation, as the deputy head of the largest Russian airline Aeroflot has obviously recognized: In mid-March, Andrei Panov gave up his position on the board and left the country. “Away from Russia, away from Aeroflot. The old life is over,” he wrote on Facebook at the time. Apparently only the head of Podeba, the low-cost airline with a shrinking fleet, was faster: Andrey Kalmykov is said to have resigned at the beginning of March.

IT specialists are resigning in droves

The two aviation managers are far from the only Russians currently leaving the country. Managers, stars or simple but well-educated citizens seek refuge abroad. The Russian Electronic Communications Association (RAEC) estimates that since the beginning of the war already 50,000 to 70,000 IT specialists have left the country. Another 100,000 could follow by the end of April, the head of the association warned last week at an appointment with members of the Russian parliament.

The staff is also running away from the finance department. According to the economic portal, the Central Bank of Russia should Bloomberg So many employees quit at the same time in such a short period of time that HR couldn’t keep up with locking their accounts. Even the head of the central bank, Elvira Nabiullina, wanted to give up after the Russian invasion of Ukraine, but may not: It has to repair the economic damage that Putin caused with his war.

Beginning of a downward spiral?

However, there are issues that central bank governor Nabiullina will not have an answer to. For example, the sanctions in the telecommunications industry mean that important components of European companies such as Nokia and Ericsson are missing, reports the Russian news platform RBC. That’s why the Russian Ministry of Digital Affairs recently instructed the country’s telecom providers to stop offering contracts with unlimited data packages. Otherwise the mobile network could be overloaded, it said.

The Russian historian Andrei Zubov suspects cuts that could be the beginning of a gigantic downward spiral. “If the war lasts longer and claims many lives, and if there is hunger, which I cannot rule out as a result of the sanctions, then the resentment can lead to an uprising,” he explained in an interview with ntv. “Just as it was experienced in 1905 and 1917,” he recalled two Russian revolutions.

Whether it will come to that, nobody knows. Four days after the war began, the Russian presidential office admitted that the sanctions were leaving their mark. But recently ex-president Medvedev was combative. He is convinced that the Russian government will find “adequate solutions” for the aviation, automotive and IT industries, he explained in an interview with RIA. “But it will be difficult,” he admitted. “We can’t rely on anyone, we have to solve these problems alone.”