Alexandra Prokopenko poses at a marathon event back in Russia. He used to run in Moscow’s Meshchersky Park all the time: It was his favorite place in the city. But he doubted he would see her again, at least in the near future. Shortly after Russia’s invasion of Ukraine, he left his country, along with hundreds of thousands of his peers.
Alexandra Prokopenko
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Alexandra Prokopenko
Alexandra Prokopenko poses at a marathon event back in Russia. He used to run in Moscow’s Meshchersky Park all the time: It was his favorite place in the city. But he doubted he would see her again, at least in the near future. Shortly after Russia’s invasion of Ukraine, he left his country, along with hundreds of thousands of his peers.
Alexandra Prokopenko
Alexandra Prokopenko grew up in Moscow. He has always been fascinated by economics: money, business, how economies work.
A few years ago, he landed a dream job as an adviser to Russia’s central bank in Moscow.
Prokopenko loved Moscow. The city is vibrant and beautiful — full of restaurants, music and culture. But right now, his favorite place is Meshchersky Park, a giant urban forest, where Prokopenko runs.
“It was my favorite place. I always felt so good there,” he recalls.
But Prokopenko’s Meshchersky run is a thing of the past. He left Moscow, as well as his job at the central bank, shortly after Russia invaded Ukraine.
Prokopenko now works at the German Council on Foreign Relations. His focus is still the Russian economy — he publishes new analyzes and data every week.
He said he was glad to be there, but he wasn’t at home.
“I miss Moscow a lot,” he said. “I miss Moscow every day.”
Prokopenko was part of a massive wave of young Russians fleeing their country. Although hard numbers are hard to come by, hundreds of thousands are estimated which has left Russia since its invasion of Ukraine.
That contributed to a reduction in Russia’s labor force.
According to one estimate, more than 1.3 million Russians under the age of 35 left the Russian workforce last year alone, though that number may include other factors such as workers taking jobs not officially captured in the statistics.
Alexandra Prokopenko landed her dream job at Russia’s central bank in Moscow, a city she loves.
Alexandra Prokopenko
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Alexandra Prokopenko
Especially among those who fled the country were educated workers with in-demand skills such as engineering or computer programming. This massive loss of talent appears to be one of the biggest economic consequences of Russia’s invasion of Ukraine.
“I don’t think the Russian authorities will admit it, but we have seen a massive brain drain,” Prokopenko said.
A “full-blown demographic crisis”
Even before the invasion, Russia was experiencing a labor shortage: Businesses and factories complained that they could not find the workers they needed.
“Now it’s a full demographic crisis,” said Oleg Itskhoki, an economist at the University of California, Los Angeles.
Itskhoki says this poses a big problem for the Russian economy: Without workers, many companies and businesses will have to retreat or close entirely.
But the labor shortage is not the only problem facing the Russian economy.
In 2022, Russia’s economy is strong despite harsh sanctions, earning it the nickname “fortress Russia.” Much of this economic strength has come from oil prices. The invasion of Ukraine caused global panic that sent oil prices soaring.
Russia sells its oil to China and India, among others. And many of the sanctions against the sale of oil and natural gas in Europe did not begin until the end of last year.
2023: the “year of hard choices”
But 2023 will be a very different year for the Russian economy. The European sanctions started, so the oil revenues are very low and now the war is costing Russia hundreds of millions of dollars a day.
“2023 is the year of difficult choices for Russia,” Itskoki said.
He says right now Russia needs money, which means President Vladimir Putin will have to raise taxes (probably on businesses) or force people to buy war bonds – or both.
This could erode support for the war, which Putin desperately needs.
The Russian economy managed to grow in 2022, despite sanctions, earning the nickname “fortress Russia,” but 2023 turned out to be a very different year.
Dimitar Dilkoff/AFP via Getty Images
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Dimitar Dilkoff/AFP via Getty Images
The Russian economy managed to grow in 2022, despite sanctions, earning the nickname “fortress Russia,” but 2023 turned out to be a very different year.
Dimitar Dilkoff/AFP via Getty Images
“The Kremlin is clearly paying attention to the particularly unpopular population,” Itskhoki said. “They’re trying to navigate what’s less popular.”
Fortress Russia is starting to feel the heat.
Manufacturing Russia: back to the future
2023 has also begun to reveal some cracks around Russian production and manufacturing.
A large part of the resources and technology is given to the weapon. At the same time, the sanctions mean that Russia cannot import goods from many countries and manufacturers often cannot get products or parts.
“For example, air bag technology is not available in Russia,” Itskhoki said. “And so the cars built in Russia are built without air bags.”
Or anti-lock brakes.
Many of the trains, planes and other high-tech products made in Russia use technology from decades ago.
Russia can still import a lot from places like China, but that takes business away from Russian companies and also risks creating greater economic dependence on China, which Putin doesn’t like .
Russian citizen problem
However, Itskhoki and Prokopenko stress that the biggest issue facing the Russian economy isn’t products or sanctions: It’s people.
A generation of skilled workers now fighting at the front or fleeing the country.
Experienced workers like Prokopenko himself, who says he still dreams of continuing long runs in the forest of Meshchersky Park but isn’t convinced it will happen anytime soon.
“I want to go back, but I don’t think it will be safe for me,” he said. “People in Russia can be prisoners for nothing.”
Prokopenko said he is in touch with many fellow Russians who have left, most of them skilled young people like him. He said the consensus was that as long as Putin ran the country, there was no going back.
And that is a big problem for Russia not only now but also going forward.
After all, while sanctions and restrictions on manufacturing may affect the Russian economy for years to come, the loss of a generation of the best and brightest could harm the country’s economy for generations.
