By Margarita Lyutova. Abridged translation by Sam Breazeale, Meduza, 8/10/22

In late July, a team of researchers from Yale published a report titled “Business Retreats and Sanctions Are Crippling the Russian Economy.” Since Russia launched its full-scale invasion of Ukraine, the same team has maintained a list of international companies that have ceased operations in Russia in response to the war. The project is led by management and corporate responsibility expert Jeffrey Sonnenfeld, a professor at the Yale School of Management and the founder of Yale’s Chief Executive Leadership Institute. The report has been cited widely in recent weeks, but Sonnenfeld is neither an economist nor a Russia specialist, and experts have raised doubts about some of the report’s claims. Economic journalist Margarita Lyutova explains why the researchers’ conclusions might be worth taking with a grain of salt.

Apples to oranges

In early March, soon after the start of Russia’s full-scale war against Ukraine, international corporations start withdrawing from Russia en masse. Some cited ethical reasons, while others pointed to new logistical difficulties resulting from Russia’s sudden economic isolation. On March 6, Yale Professor Jeffrey Sonnenfeld and a team of researchers that included his students published a list of 200 companies that had already announced they would either cease or limit their operations in Russia.

A second list, published alongside the first, contained 30 companies that had “remained in Russia with significant exposure.” But the authors’ analysis raised questions. A graph that was meant to compare the companies’ varying levels of involvement in the Russian economy used different data points for different companies: in some cases, it showed the number of branches or franchisees a company still had in Russia, while in others, it showed the total percentage of the company’s revenue that could be attributed to its operations in Russia. Still other companies were marked with notes saying their level of involvement in the Russian economy had “not [been] disclosed,” despite the fact that several of those companies publish public reports online that could have been used to assess their presence in Russia. The authors also didn’t explain why they had chosen these specific companies out of all of the international companies that remained in Russia.

On March 7, two companies on the “remained in Russia” list — EY (Ernst & Young) and Procter & Gamble — announced they were pulling out of the Russian market. Shortly after, Sonnenfeld began telling journalists that his list had been responsible for many companies’ departure from Russia, though he didn’t give specific examples. On March 11, the Washington Post published an article in which Sonnenfeld said that “over two dozen” companies had requested to be added to the list in a single day.

On July 22, Sonnenfeld and his coauthors published a report on the consequences of sanctions and the exodus of companies from Russia on the academic paper repository SSRN (formerly the Social Science Research Network). In the weeks since it was published, the report has had a huge impact: according to SSRN, it’s been downloaded over 66,000 times. A number of media outlets, including the Financial Times, CNBC, and Deutsche Welle, have cited it.

But even a cursory glance at the report raises some questions about its reliability. SSRN is intended to be a platform for academic articles, but the Yale report falls short of academic standards. For one thing, it’s missing a list of references, an appendix with data used by the authors, and a methods section, which would allow other researchers to assess its validity.

The claims made in the report are far-reaching. Its authors assert that “Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products and talent,” and that “there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia.” Claims that economic sanctions are ineffective, they say, are unfounded.

The paper is based on both the authors’ own list of companies that withdrew from Russia and an analysis of statistics regarding the Russian economy. The authors estimate that “as a result of the business retreat, Russia has lost companies representing ~40 percent of its GDP,” but don’t explain what time period they used to calculate this figure or whether they took into account the businesses that sold their assets to Russian companies.

Additionally, the current version of the list includes only 311 companies that have left Russia completely; another 500, the authors say, have left temporarily and retained the ability to return. Nonetheless, they refer to the economic damage done by the withdrawal of “over 1,000” companies.

The report contains other contradictions that don’t take an economics degree to spot. At one point, for example, the authors write that Putin’s reckless wartime economic policy decisions have “sent his government budget into deficit for the first time in years.” Later in the report, though, they include a table that shows that Russia had a deficit in both 2020 and in 2017.

Those pesky local factors

According to Alexander Isakov, the head of ​​Bloomberg’s economics team, Sonnenfeld and his colleagues also failed to take into account some important factors that are specific to Russia. For example, citing data from Rosstat, the authors write that even official statistics from the first quarter of 2022 indicate a major downturn in a number of sectors of the Russian economy when compared to those from 2021: they calculate a 62 percent decline in the construction sector, a 55 percent decline in the agriculture sector, and a 25 percent decline in the manufacturing sector.

The authors note that the data doesn’t take into account seasonal factors, but according to Isakov, seasonality can’t be discounted: indicators from each year’s first quarter are always significantly lower than those of the preceding year’s last quarter. This is due to a combination of the holiday season (which includes fewer workdays), Russia’s climate (which affects construction), and the fact that there’s no harvest in the winter. When all of this is taken into account, Russia actually showed a small GDP increase of 0.5 percent in the year’s first quarter, then a decline in the second quarter.

Isakov was clear that his goal was not to disparage Sonnenfeld and his colleagues; he was simply pointing out their errors in an effort to get closer to the truth. “Understanding conditions on the ground in [Russia] is more important than ever,” he concluded, “and [the] report is a commendable effort to do just that.”

Don’t worry, @CBSNews, I saved it for you. https://t.co/XIUkXjqMSw pic.twitter.com/wbe0fdngJH

— Viva Frei (@thevivafrei) August 8, 2022

Flooding a country with advanced weapons can have grave consequences, even when done with the best of intentions. This CBS Reports documentary goes inside Ukraine to get a firsthand look at how military aid gets from the border to frontline soldiers, and explores the difficulties of getting the aid to the fighters who need it. – August 4, 2022

CBS News removed this documentary from its website a few days after first posting it. It can still be viewed in full at this site. – Natylie

Link here.

By Prof. Oliver Boyd-Barrett, Substack, 8/14/22

Yes, it would be simpler and less messy all around if we just transferred the money directly from our bank accounts to Raytheon, Lockheed and the rest of them.

From New Atlas, today Brian Berletic:

Even according to a pro-Ukrainian map, there is no evidence of much change on the round, no evidence of any kind of Ukrainian counteroffensive in the south while in the east the Russians continue to make incremental advances (as we have seen consistently in reports from Mercouris).

A Pentagon briefing of August 8 talks of another draw-down package, the 18th, this one worth $1 billion. This is the value of equipment they take out of army stocks, send to Ukraine, and then immediately replace – providing huge windfall profits for arms manufacturers.

This 18th package includes additional ammunition for the HIMARS, but they don’t say how many of these there still are, nor how much ammunition they are sending (suggesting it isn’t very much). They are not sending any more HIMARS launchers, so the total currently provided remains 16. About half of those have been destroyed by Russia. They are sending 75,000 artillery rounds including, probably, for the M777s: this is just two days’ worth at the rate that Russia fires. Munitions for air defense systems are sometimes sent ahead of launchers so just sending stuff doesn’t mean it is usable when it arrives. The US is not sending the best possible but only the ones they can easily (repair/replace – meaning not clear0. These include 1000 javelin missiles, A24 missiles, medical treatment vehicles and other medical supplies.

There is little to no evidence these systems are stopping Russia.

An interesting Fort Benning paper, cited by Berletic, talks about highly trained professional US soldiers having trouble with some of these advanced weapons like the Javelin. Apart from failures to hit intended targets, the data showed that of 27 engagements observed only 19% were effective – even without considering the amount of damage they inflicted. Effectiveness is generally low, sometimes because even trained soldiers miscalculate: e.g. some of these missiles need to travel a certain distance before they become active, so as to protect the positions of those who are detonating. Therefore (even trained) soldiers often don’t understand the specifics of the weapons. The problems with untrained soldiers, who don’t know how to operate them, even how to turn them on in some cases, and who sometimes dependent on the manufacturer instructions they are reading on the internet for the first time. In the US, troops need practice, and they have to practice out in the field. This is something that it utterly impossible for Ukraine to organize. If the effectiveness rate is 19% in the case of well-trained US soldiers, then clearly the rate is going to be much worse for Ukraine. And sometimes different weapons are needed for different ranges suggesting the need for diversity of provision and flexibility of skill in using them.

In such circumstances, the USA sending, say, 1000 javelin missiles is not a matter of helping Ukraine, it is an exercise in arms profiteering. $9.8 billion worth so far. As Ukraine loses the battle, they need different weapons. Now the laughable claim is that the Ukrainians are waiting upon a weapons delivery that will allow them to enact their counteroffensive in Kherson. Their soldiers are in trenches, nowhere to hide, their “advance” stalled, and the villages that they are supposed to have recaptured never named. Soldiers and advisors talking about the Kherson offensive are cited anonymously in western newspapers. There is simply no evidence that Ukraine has the ability for such an offensive. It admits losing 100 to 200 soldiers a day, while the Pentagon continues to waffle on about troop morale and more than “40 million Ukrainians” fighting for the existential survival of their country.

The Pentagon claims the Russians have suffered 80,000 casualties and that the Russian military has been doing badly. They are certaintly not suffering casualties at the rate of Ukraine. Since their main mode of battle is long range artillery it is not clear how they could be losing troops at the rate claimed by the Pentagon. The reality is that their losses are far lower (as other western claims have already indicated, perhaps as low as 5,000). The Russian military is not running out of anything, while Ukrainians are running out of everything. The Pentagon claims Russia has lost 3,000 to 4,000 armored vehicles, presumably as a result of Ukrainian missile systems. But since Ukrainians cannot possibly fire these systems effectively, as we have just discussed, then this number of losses of Russian vehicles is simply unbelievable. Simple propaganda. It totally contradicts the reality that Russia continues to advance, and Ukraine continues to lose.

The Pentagon narrative also ignores the efforts by Russia to restore to relative normality the areas they are taking over, often liberating them from the Azov-style battalions of the Ukrainian armed forces that were sent to suppress pro-Russian populations in places like Kherson and Kharkiv after the US-backed coup d’etat in 2014, sometimes torturing and killing those who resisted. Russians will of course suppress terrorists or saboteurs in the territories they have recovered for the people’s republics.

Berletic references various other Pentagon lies including the claim that Russia tried to capture Kiev in February (it was much more likely to have been a shock tactic and a diversion, successfully encouraging Ukraine to deploy its forces over a wider area instead of being concentrated in the Donbass). In the meantime, so much weaponry has been sent to Ukraine, that many of NATO armies are now lacking in their own weaponry as they await replacements. They are relatively unprotected, therefore. Quite an extraordinary outcome.

The Pentagon briefing references the Pelosi visit to Taiwan which was a complete violation of the One China Policy and international law. Pentagon presumptions of impunity are an expression of faith in US exceptionalism.

The Pentagon indulges its usual claims about the “wonder weapon”, the HIMARS (actually just an unarmored truck with launchers at the back, not difficult to locate and destroy). The precision-guided 200 pound warheads they carry, the Pentagon claims, are so impactful that they have slowed Russia down. So if is such a great weapon, why then has the US sent only 16 (not even a full battery, some of which, possibly 8, have already been destroyed by Russia, despite Pentagon denials to the contrary), and only about 100 missiles? (The Brits have sent one or two comparable systems, and Germany has promised a few which have not yet arrived).

These quantities are ridiculously insufficient in contrast to what is available to Russia. Russia has comparable and even better multiple rocket launch systems in the use of which their troops are better trained, in addition to having proper aviation support, cruise missiles, Iskanders etc.

If Ukraine is depending on HIMARS, it is bound to lose. The fact that the HIMARS are being sent at all is a result of the fact that Russia destroyed Ukraine’s heavy weapons systems earlier on in the conflict. Ukraine also had an air-force at the beginning of the conflict, but Russia destroyed it. Why isnt the USA providing it F16s? Well, it takes time to train pilots – one to two years. And if the USA starts sending F16s to Ukraine and Russia shoots them down, then we get photos of F16 smoldering on the ground, which might provide the right PR optics for Lockheed. A similar logic may be at work behind reluctance to send more HIMARS to Ukraine. Better for Lockheed to have other countries (like the Czech Republic) send their existing fighter planes and armory and then after these have been destroyed, Lockheed can begin replacing them, knowing it will take a year or so for fighter pilots to be properly trained.

The situation vis-a-vis Ukraine is very similar to that which pertained in the US occupation of Afghanistan – a constant process of buying of time, even as the Taliban reconquered the country, while everyone (the MICIMATT) makes a fortune (except for most Afghans, of course and most Americans) pretending to fight a real war.

On other issues, Berletic refers to western media reports of the recent explosion in Crimea, asserting that it was a Ukrainian attack, when even Kiev denies responsibility. Western media keep claiming that Russia is firing at itself (!!) at the Zaporizhizhia nuclear power plant, when it is clear that it must be Ukraine that is shelling the power plant that is held by Russia, a measure of Ukrainian desperation. As for claims that Ukraine has destroyed the road and rail bridges to Kherson, not only is the truth of this not fully established, but why would it matter given that Russia has other options. More importantly, how would the taking out of bridges help Ukraine launch an offensive to retake Kherson?! Western media narratives are becoming more disjointed, contradictory and desperate (on behalf of Ukraine and NATO).

Should Ukraine simply sign over sovereignty to Russia? Well, Ukraine already signed over sovereignty, but to the USA, in 2014. The current war serves Washington interests, not Ukrainian.

The Insider, 7/26/22, English translation via Google translate.

If accurate, this is a sad thing. This shouldn’t be happening in any country. whether it’s the U.S. (e.g. convict firefighters in California), Russia or anywhere else. – Natylie

The GUFSIN held an exhibition of products made by prisoners in Yekaterinburg. As stated in the department, production is actively developing in the [penal] colonies, which are ready to replace companies leaving the Russian market. The Regional Newspaper writes that correctional institutions signed contracts for the manufacture of furniture for 3.5 million rubles over the two days of the exhibition.

“The colonies may well take the place of IKEA. If we compare furniture, we have better quality and lower prices. We are not businessmen,” said Ivan Sharkov, head of the labor adaptation department for convicts of the Main Penitentiary Service of Russia in the Sverdlovsk Region.

The government of the Sverdlovsk region and the GUFSIN are planning to create a woodworking workshop in the Middle Urals for the production of sheets for the manufacture of furniture. In the Kamensk-Urals IK-47 at the end of April, as part of the import substitution program, the production of double-glazed windows was opened.

As Alexander Levchenko, head of the press service of the GUFSIN of Russia for the Sverdlovsk region, said, most of the furniture produced in the colonies is supplied to state customers.

“The authorities, the courts, the investigative committee, the bailiff service order a lot. Recently, IK-10 completed a large order for the Sverdlovsk Regional Prosecutor’s Office. We supply furniture for schools, kindergartens, rest houses, sanatoriums. Good dynamics in municipal orders – last year they earned more than half a billion rubles, including 114 million – on orders for the Sverdlovsk region, ”says Levchenko.

Previously, prisoners have repeatedly told human rights activists about the problem of the use of forced and low-paid (essentially free) labor of prisoners in colonies throughout the country. In fact, Russia still has a system of hard labor, the conditions of which can be equated with torture. Prisoners work in the sewing industry, assemble furniture, make icons and weapons.

The Insider wrote about how they work in a clothing factory in a women’s colony. One of the prisoners complained about working conditions in IK-2 in the Mordovian village of Yavas. She said that the administration had set a task: to sew 600 suits for Russian Railways workers in a week, that is, about 120 suits a day with the help of 160-170 prisoners.

In January, the founder of Gulagu.net, Vladimir Osechkin , published a conversation with a former prisoner of correctional colony No. 7 in the Omsk region, who told that convicts were forced to work in hazardous production in clandestine workshops, including making military weapons as gifts to high-ranking security officials from the FSB , TFR, FSIN and prosecutor’s office. He himself painted military weapons, made congratulatory inscriptions on them.

“The maximum salary is 300 rubles per month. But that’s only happened to me once or twice. The minimum is 30 rubles. They worked every day, Saturday and Sunday too. They did not work only in those moments when some kind of commission came, ”said the former prisoner.

According to the former convict, in the industrial zone IK-7, the convicts built a yacht for the supervising prosecutor from an old tugboat.