No, Putin Is Not One of the Year’s ‘Winners’

This is perhaps the most dire moment for Ukraine since Russia’s invasion in February 2022, with the military situation on the battlefield seemingly stalemated, Western political support wavering under the weight of political dysfunction, and war in the Middle East diverting resources and attention.

Nevertheless, many reflexive cynics in the Western press are going too far in crediting Ukraine’s adversary, Russian President Vladimir Putin, with one Wall Street Journal columnist even declaring Putin one of the “winners of the year.” We cannot fall into the trap of thinking that all is good for Putin, and we cannot jettison effective measures to pressure him. Just this week, the New York Times even suggested that the exit of more than 1,000 multinational companies from Russia has backfired by enriching Putin and his cronies.

All the evidence suggests there are, in fact, ample costs of the business exodus. Economic data clearly shows that the Russian economy has paid a huge price for the loss of those businesses. Putin continues to conceal the required disclosure of Russia’s national income statistics—obviously because they are nothing to brag out.

Transferring nearly worthless assets does not make Russia or Putin cronies wealthier. While Putin expropriated some assets of Asian and Western companies, most firms simply abandoned them, eagerly writing down billions of dollars in assets. They were rewarded for doing so as their market capitalization soared upon the news of their exits. Russia is not only suing foreign companies for leaving, as ExxonMobil’s and BP’s departures ended the technology needed for exploration, but Russian oil giant Rosneft even sued Reuters for reporting on it. The massive supply disruptions shuttering Russian factories across sectors were described in on-the-ground reporting by the Journal, which resulted in the arrest and now nine-month imprisonment of the heroic journalist who documented the truth.

Consider the following economic statistics we have verified.

Talent flight. In the first months after the invasion, an estimated 500,000 individuals fled Russia, many of whom were exactly the highly educated, technically skilled workers Russia cannot afford to lose. In the year-plus since, that number has ballooned to at least 1 million individuals. By some counts, Russia lost 10 percent of its entire technology workforce from this unprecedented talent flight.

Capital flight. Per the Russian Central Bank’s own reports, a record $253 billion in private capital was pulled out of Russia between February 2022 and June 2023, which was more than four times the amount of prior capital outflows. By some measures, Russia lost 33 percent of the total number of millionaires living in Russia when those individuals fled.

Loss of Western technology and knowhow. This occurred across key industries such as technology and energy exploration. For example, Rosneft alone has had to spend nearly $10 billion more on capital expenditure over the last year by its own disclosure, which amounts to roughly $10 of additional expenses for every barrel of oil exported, on top of difficulties continuing its Arctic oil drilling projects, which were almost solely dependent on Western tech and expertise.

Near-complete halt in foreign direct investment into Russia. Foreign direct investment (FDI) into Russia has come to a near-complete stop by several measures. There has been only one month of positive inflows in the 22 months since the invasion, compared with approximately $100 billion in FDI annually before the war.

Loss of the ruble as a freely convertible and exchangeable currency. With global multinationals fleeing in such droves, there was little to stop Putin from implementing unprecedented, strict capital controls on the ruble post-invasion, such as banning citizens from sending money to bank accounts abroad; suspending cash withdrawals from dollar banking accounts beyond $10,000; forcing exporters to exchange 80 percent of their earnings for rubles; suspending direct dollar conversions for individuals with ruble banking accounts; suspending lending in dollars; and suspending dollar sales across Russian banks. No wonder ruble trading volumes are down 90 percent, making Russian assets valued in rubles virtually worthless and unexchangeable in global markets.

Loss of access to capital markets. Western capital markets remain the deepest, most liquid, and cheapest source of capital to fund business and risk-taking. Since the start of the invasion, no Russian company has been able to issue any new stock or any new bonds in any Western financial market—meaning they can only tap the coffers of domestic funding sources such as Putin’s state-owned banks for loans at usurious rates (and still increasing, with the benchmark interest rate at 16 percent). And with multinational companies having fled, Russian business ventures have no alternative sources of funding and no global investors to tap.

Massive destruction of wealth and plummeting asset valuations. Thanks in part to the mass exodus of global multinational businesses, asset valuations have plummeted across the board in Russia, with even the total enterprise value of some state-owned enterprise down 75 percent compared with prewar levels, according to our research, on top of 50 percent haircuts in the valuation of many private sector assets, as cited in the Times.

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These are just some of the costs imposed on Putin by the withdrawal of 1,000-plus global businesses; it does not consider the deleterious impact on the Russian economy of economic sanctions, such as the highly effective oil price cap devised by the U.S. Treasury Department. More than two-thirds of Russia’s exports were energy, and that is now sliced in half. Russia, which never supplied any finished goods—industrial or consumer—to the global economy, is paralyzed. 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.

Based on our ample economic data, the verdict is clear: The unprecedented, historic exodus of 1,000-plus global companies has helped cripple Putin’s war machine. At such a dire moment for Ukraine, it would be a mistake to be too Pollyannaish—just as it would be a mistake to be too cynical.