- Putin has begun a “merciless cannibalization” of the Russian economy, two Yale scholars have said.
- The researchers pointed to the chaos unfolding in Russia as Putin attempts to cover the country’s growing budget deficit.
- Russia’s show of economic strength is a “window dressing”, the researchers said.
Vladimir Putin is ruining his country’s economy as the Russian president derails the financial order in his quest to conquer Ukraine, according to two Yale researchers.
In a recent editorial for TIME, Jeffrey Sonnenfeld and Steven Tian, two scholars from the Yale Chief Executive Leadership Institute, highlighted the economic chaos unfolding in Russia as the war in Ukraine drags on.
Although some estimates show that Russia is spending surprisingly little on its “special military operation”, official statistics show that the country has run up a budget deficit of around $40 billion so far this year, thanks to the increase military spending and falling revenues as Western sanctions bite. in key sectors of its economy.
“Far from the mainstream narrative of how Putin funds his invasion, Putin’s financial lifeline has his ruthless cannibalization of Russian economic productivity,” Sonnenfeld and Tian said. “He burned furniture in the living room to fuel his battles in Ukraine, but that is now starting to backfire on a deafening silence and a lack of public support.”
Putin, for his part, has tried to raise more money as the war effort continues, but has done so in a way that has largely ignored Russia’s fiscal responsibilities, the researchers said. This includes measures such as printing record volumes of Russian rubles ‘out of thin air’, forcing institutions to buy ‘almost worthless’ Russian debt assets, one-off heavy taxes on ‘essentially everything that moves’ and the withdrawal of billions from the Russian sovereign wealth fund. to balance the finances of the nation.
These measures have contributed to the flight of millionaires and ordinary workers, who have left the country in search of better opportunities, which has considerably damaged the country’s production and productivity. And although Putin made a show of Russia’s economic strength, his actions only bought Russia time, the researchers warned.
“This resilience is nothing more than a Potemkin facade, backed not by genuine economic productivity, but rather by shaking the whole country to direct pennies to war,” Sonnenfeld and Tian said. “Putin may continue to support his invasion of Ukraine in this way, but in doing so continues to rip off his own people. By avoiding outright economic collapse by mortgaging Russia’s future, he becomes increasingly more unloved by his people and is therefore increasingly weakened.
Sonnenfeld and Tian criticized the state of the Russian economy, despite Putin’s attempts to assure the public that Russia is doing very well. Unpublished statistics from the Kremlin are likely to show a weaker picture of the Russian economy than that given by the government, said Sonnenfeld and Tian, who have previously argued that Russia’s economic figures were simply “chosen in retail” and that its economy was actually imploding.
“Amid such undisguised plunder of the Russian economy, stripped it for toys of war, it is perhaps unsurprising that last weekend’s failed Prigozhin putsch revealed no love lost for Putin on a national level from the Russian population and elites,” the researchers said.