To a greater extent than is widely thought, Russia’s economy is being hammered by international sanctions and an exodus of so-called global companies, according to a new preprint study from the Yale School of Management. Among the key findings of the study is that the withdrawal of more than a thousand companies from Russia has eroded upward of 40 percent of the country’s GDP, reversing three decades’ worth of foreign investment. 

Yet that study may be politically freighted: A new report from the Washington-based International Monetary Fund says Russia’s economy is faring better than expected as it benefits from high energy prices.

There is no doubt that Russia’s invasion of Ukraine five months ago has sucker-punched the sprawling country’s economy, with Western sanctions and capital flight being major reasons, but “Russia’s economy is estimated to have contracted during the second quarter by less than previously projected, with crude oil and non-energy exports holding up better than expected,” according to the IMF’s latest World Economic Outlook. Agence France-Presse reported that the IMF has even upgraded Russia’s GDP estimate for 2022 “by a remarkable 2.5 percentage points, although its economy is still expected to contract by six percent.”

The IMF report went even further, suggesting that Russian “domestic demand is also showing some resilience thanks to containment of the effect of the sanctions.” Contrast that to one of the findings of the Yale study, which found that “despite some lingering leakiness, Russian imports have largely collapsed, and the country faces stark challenges securing crucial inputs, parts, and technology from hesitant trade partners, leading to widespread supply shortages within its domestic economy.” 

That is true, but what is one to make of the seemingly conflicting narratives? On closer inspection, they are not necessarily at odds. “Russian domestic financial markets, as an indicator of both present conditions and future outlook, are the worst performing markets in the entire world this year despite strict capital controls,” according to the Yale analysis. Yet was the Russian stock market ever so potent in the first place? Consider that the New York Stock Exchange has roots dating to 1792. The Moscow Exchange was founded in 2011.

Another of the Yale study’s findings bears scrutiny. Despite President Putin’s “delusions of self-sufficiency and import substitution, Russian domestic production has come to a complete standstill with no capacity to replace lost businesses, products and talent,” it says, adding that “the hollowing out of Russia’s domestic innovation and production base has led to soaring prices and consumer angst.” American fast food chain McDonald’s is one of the global companies that very publicly pulled out of the Russian market in the wake of the war on Ukraine, but Moscow replaced it with a Russified version, called “Tasty and that’s it.” Tastiness is a subjective thing, but there are no reports of bread lines in Moscow. 

In March, Russian auto maker Avtovaz had to stop rolling out its Lada cars because sanctions made some necessary parts hard to come by. As of last month, though, NBC reported that production of one of the more popular Lada models had resumed — just without air bags or anti-lock braking systems. That would clearly be an inferior automobile by Western standards, but for many Russians such a flawed option probably still beats walking to work in a snowstorm.

Examples like those tend to undercut the Yale study’s assertion 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.” Russia was already on the path to autarky prior to the invasion of Ukraine; the ability of wealthy Russians to shop for Louis Vuitton handbags or sip a Starbucks latte in downtown Moscow never meant that one could mistake it for Midtown Manhattan. Russia is forging its own path — it is simply not one that most Americans would equate with free markets and prosperity. 

Russia is also courting closer commercial ties with countries such as China and India, as well as smaller regional players like Turkey and Egypt. It does so even as it continues to shoot itself in the foot, almost literally, by “sending army recruits to fight in Ukraine after just days of training,” as the Moscow Times reported. 

The colossal expense of the war on Ukraine and the concomitant drain on the nation’s manpower will by most accounts keep the Russian economy sliding down the drain — the pace at which it does remains to be seen. This precarious state of fiscal affairs, though, is something to which most Russians are sadly long accustomed.