Russia’s economy is paralyzed, and President Vladimir Putin’s war machine is surviving only by cannibalizing state-owned companies, two Yale University economists say, Business Insider reports.

In an article published by the Financial Times, Jeffrey Sonnenfeld and Stephen Tian directly contradict an article published last week in The Washington Post, which named Vladimir Putin as one of the “winners of 2023” in the context of the failure of Ukraine’s summer offensive. , the blocking of Western aid to Kyiv by both the United States and the European Union, and the better-than-expected resilience of the Russian economy in the face of sanctions.

However, two Yale University economists note that the sanctions imposed by the West and its partners against Russia, combined with the mass exodus of Western companies from the country under Putin, are causing huge damage to the Russian economy.

“We can’t fall into the trap of thinking that things are going well for Putin and that we can’t put effective pressure on him,” Sonnenfeld and Tian said, adding that Moscow’s nationalization or asset confiscation of foreign companies does not make Russia richer.

In fact, including the head of the Russian Central Bank, the technocrat Elvira Nabiullina, recently warned that the Russian economy is in danger of overheating because it will end up consuming almost all the resources at its disposal for military action. .

“Imagine the economy as a car. If we try to go faster than the technical characteristics of the car allow, sooner or later the engine will overheat and we will not be able to drive a long distance. It is possible to conduct quickly, but for a short period of time,” she said at a press conference where she announced that the Central Bank of Moscow had decided to raise the country’s base interest rate to 16% again.

The Russian economy faces many problems

Sonnenfeld and Tian mention in an article published by the FT other challenges facing the Russian economy, such as the million people who have fled the country since the start of the invasion of Ukraine, many of them working with university degrees in key sectors of the economy. for example, the technology sector.

This has led to a labor crisis in Russia, which economists at Yale University estimate at 5 million workers, as significant numbers of men have been mobilized to fight in Ukraine or sent to the defense industry to produce weapons.

Officially, Russia presents this situation as a win, and the government led by Prime Minister Mykhailo Mishustin emphasizes the low level of unemployment, which has reached a record low level in Russia. But problems with production in civilian sectors of the economy led to a renewed increase in inflation, as the head of the Central Bank of Moscow also spoke about.

Referring to the data made public by it, Yale University economists also note that only from February 2022 to June 2023, private capital in the amount of $253 billion left Russia, and new foreign investments almost completely disappeared.

In addition, Russia has lost access to Western technology and experience, things that cannot be immediately replaced.

Yale economists point out that Russia is not an economic superpower

Sonnenfeld and Tian note that all these problems are exacerbated by strict capital controls, which the Russian government reinstated in October on Putin’s orders to stem the ruble’s collapse.

The measure resulted in Russian ruble-denominated assets losing almost all of their value on international markets, and Western sanctions prevented Russian companies from issuing new shares or bonds in Western markets.

“Russia, which has never supplied any finished products – industrial or consumer – to the world economy, is a cripple,” Sonnenfeld and Tian note.

“This is far from an economic superpower, almost all the raw materials they supply can be replaced from another side. The war machine is fueled only by the cannibalization of some companies that are now owned by the state,” say two economists from Yale University.

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