Russia's economy is paralyzed, and Putin's war machine survives on cannibalizing state-owned firms, Yale researchers say

• 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 Vladimir Putin is one 2023's big winners.

Russia's economy is paralyzed, and its war machine survives on cannibalizing state-owned firms, according to two Yale researchers.

In an op-ed in Foreign Policy on Friday, Jeffrey Sonnenfeld and Steven Tian sought to push back on recent commentary that cast 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 that followed have inflicted huge costs on the nation's economy, they argued.

"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, noting that transferring "worthless" expropriated assets from Western firms to Putin's cronies doesn't make Russia wealthier.

They also listed several other signs that Russia's economy has been reeling.

Since Russia's invasion of Ukraine in early 2022, at least 1 million Russians have fled to other 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 own data.

In addition, Russia has lost access to Western technology and expertise that its companies relied on, while foreign direct investment has nearly completely 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 any new bonds 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 ahead. On Monday, Russian central bank governor Elvira Nabiullina said she is expecting more sanctions in the future.

While Russia has weathered the economic storms of the last two years, Nabiullina warned against thinking the country is "ten feet tall," according to a TASS state news agency translation. She added the pressure from sanctions may intensify, and the country must prepare for it.