In the spring of 2020, when the COVID-19 pandemic swept across the globe, the impact was felt by numerous industries,
including airlines, hotels, cruise operators, and restaurants.
Businesses that relied heavily on in-person interaction with customers were hit the hardest, with some facing bankruptcy.
The damage inflicted on the global economy was unparalleled since WW2.
Yet, there were businesses whose success was catapulted by the global lockdowns.
One such industry was the manufacturing of personal protective equipment, including medical masks, gloves, and hand sanitizers.
At times, the cost of a single medical mask soared to as much as $5 or $10, and in Russia,
there were days when they were sold for $15 each.
In some cases, a pump bottle of hand sanitizer was priced higher than a bottle of fine whiskey, and yet,
people still waited in long lines to purchase them.
It's evident that as the pandemic was at its worst, these companies were able to hit their annual financial targets
in just a few days, in the span of three months of panic, they made more money
than they had anticipated earning over the next 10 years.
These were the one-hit wonders. They won big, got a sudden windfall of cash, and then the market quickly bounced back.
But there were also strategic victories. The COVID pandemic gave a powerful boost to the entire online industry.
Distance learning, remote work, delivery services, and communication tools skyrocketed.
All businesses that enabled people to lead a normal life while stuck at home —
study, work, eat, have fun, and socialize — enjoyed incredible growth and development.
Even prior to the pandemic, the dynamic for those services was already most favorable,
but within just the six months of lockdowns, they covered a distance that would have otherwise taken them a decade.
For instance, Zoom had only 10 million users in December 2019, but by April 2020, that number had surged to 200 million.
Even the most terrible crisis has its beneficiaries.
Moreover, in the most extreme situations, some people who would otherwise end up in jail
or homeless succeed and climb to the top of the social hierarchy.
Russia’s war against Ukraine is no exception. Many people benefit from it. In many respects.
Today, we will talk about who — and how — benefits from the war and therefore has a vested interest in an ongoing conflict.
THE ELITES
It's evident what the top tiers of the Russian bureaucracy have lost over the year.
They have squandered 20 years and the amounts of money worth entire national economies
trying to become part of the Western elite.
What's the rationale behind purchasing a house in London?
These aging structures were built well before the advent of modern notions of comfort
and luxury and carry substantial maintenance expenses.
Are they truly on par with a personal Versailles that one could erect near Moscow?
No, the true value of owning a London home lies not in its lavishness,
but rather in the prestige of having a lord for a next-door neighbor, the opportunity to dine with a duke,
and the privilege of joining the same country club as an earl who traces his lineage back to William the Conqueror.
You're no longer just a St. Petersburg chav from the wrong side of the tracks.
You’re no longer someone who once waited in a mile-long line to snap up a pair of ill-fitting European-brand sneakers
and dreamed of having a can of sardines for dinner.
Now you have the opportunity to play polo alongside a real-life prince.
Buying residential property, opening bank accounts, making charitable donations, sponsoring sports franchises,
setting up awards, offering grants, supporting arts, legalizing residency,
and obtaining citizenship for yourself and your family — these actions aren't just about ensuring security,
safeguarding your wealth, and establishing contingency plans.
They also grant access to a different life. It's an opportunity to experience a different persona, to shed your old identity.
You're no longer just a hick from the sticks who struck gold by being on the same youth team as a future dictator.
You're now a virtually hereditary aristocrat, meeting Nobel Prize winners
and the Chancellor of Austria back-to-back on a single day. You’re part of the in-crowd.
For Russian faux aristocrats today, the problem lies neither in the nominal value of their lost assets nor in the quality
of their consumption.
Lost villas on Lake Como can always be replaced with equally, if not more, luxurious ones, say, in Dubai.
Seized funds are just money, after all, no biggie. Those who've been sanctioned aren’t exactly running out of funds.
Their lunch menus go beyond instant ramen and expired MREs.
But the tickets to a different life they once punched have expired.
They’re no longer a part of the global elite. They’re back to their natural and fitting positions.
They're no longer lords, knights, or peers, but rather corrupt officials and oligarchs in a dictatorial regime.
They depend on it and are inseparable from it.
They're now all tainted: any association with them or their wealth imperils one's reputation and freedom.
And how did the regime compensate them for such significant losses?
In a nutshell, compensation boils down to a simple principle: party like there's no tomorrow!
The West may be forever closed to you, but domestically, the world’s your oyster.
Even at the surface level, as claimed by the regime, all mechanisms for transparency and control are being dismantled,
and any hurdles to personal enrichment have been removed.
You no longer need to conceal anything behind a web of offshore accounts, evade inquiries from journalists
and activists, or feel any shame.
Your finances, family, assets, purchases, contracts, and agency reports are now completely off-limits.
Forget all your problems.
You no longer need to maintain a million shell companies registered to all your schoolmates just
to pretend you're competing in public tenders.
You no longer need to fear the prosecutor's office, which used to investigate the complaints from internet snitches.
You can just dump everything directly to your son's company and buy broccolis for 40 bucks apiece —
no serf will ever poke into your wallet or sneak into your palace anymore.
Now all of Russia is one big offshore, one big blind trust just for you. It’s official!
The country is now divided into the nobility and their voiceless serfs, and as long as you're on the king's side,
there's no regulation that applies to you.
Moreover, the government will make sure your secrets are safe.
But it’s not just about secrecy.
For there to be something to put in the blind trust called the Russian Federation,
we (says the regime) announce the grand season of plundering public money.
The opportunities for theft are now endless.
Import substitution, military procurement, industrial development, the rebuild of annexed provinces,
setting up parallel imports, creating patriotic art, and developing school curricula with mandatory brainwashing classes in mind.
No matter what you do, we'll always have a highly classified project for you where nobody asks how you spend the money.
The war is like the Sochi Winter Olympics, except on a national scale. Take as much gold as you can carry.
You can safely forget the words like law enforcement, the FSB, or the Investigative Committee.
These guys have other things to attend to now. They’re looking for national traitors, stealing a hella lot of money in the process.
They can’t be bothered with your dealings anymore.
True, Europe no longer hides and protects your stolen money.
Let's keep rolling!
Social hierarchy is like a natural selection’s ugly sister.
The same set of qualities, talents, skills, needs, and ambitions can lead to different results in different political regimes.
The 1917 revolution and the ensuing civil war in Russia would be a good example.
Who were the most successful, daring, brave, and effective leaders among the Red commanders?
People like Grigori Kotovsky, hardened and remorseless criminals,
who in peacetime led gangs of robbers and whose lifetimes switched between custody and correctional facilities.
But suddenly, the country began to form an army. It was made up of anyone and everyone, mostly half-starved and illiterate riff-raff.
And in these circumstances, the very qualities that had made you a gang leader
and landed you in many a prison cell could elevate you to the top and make you a part of the military elite.
In moments like this, you don't need decorated fourth-generation military officers with summa cum laude
from every academy under the sun with a command of five languages and expert knowledge of military strategy.
The ability to read maps and fortification skills won't help you maintain discipline in a crowd
of ragtag misfits and criminals that somebody’s dubbed an army.
In an army like that, you need to be the biggest scumbag of them all, and your soldiers should fear you more than the enemy
and even the good Lord above.
If the army is akin to a gang, then the general should be akin to a criminal kingpin.
If you're the type of person who first shoots and saves questions for later,
If you don't care about your own life or anyone else's, you can thrive in a war-torn Somalia.
But, say, in France, you'd end up behind bars.
Conversely, a talented musician could make millions in France, while in Somalia, they'd starve to death.
This war has elevated hordes of people whose best shot at a career would be one of a Walmart cashier.
And even landing that job would require some luck.
We've got a whole new breed of "war correspondents" now.
They didn't have any notable track record in the media, and weren't big-time bloggers before the war.
Their grasp of the Russian language is often questionable at best.
And yet, within just a few short months, they've been catapulted into positions of influence.
They address huge audiences, charge top dollar for ad space, and help set the national agenda.
They're feted in the Kremlin. Their Telegram posts are printed out and presented to Putin himself.
They're put on all kinds of state committees and councils.
Their loyalty has become a commodity for the most powerful government agencies.
They are now important people, and it's crucial who they back in the power struggle.
In just one year, we've gained a new media elite, whose main competitive edge is their exceptional thirst for blood.
The same is true of those who voluntarily went to war, whether in the units of the Ministry of Defense or in various PMCs.
In the early days of the war, Mediazona published biographies of these volunteers: drivers and security guards,
alcoholics and criminals who were recently happy to earn a monthly salary of $300 or just scrape by doing odd jobs.
Now they’re suddenly earning $3,000 to $4,500, and their net worth is higher than that of a small-town mayor.
But crucially, they're no longer social outcasts, aimlessly wandering between a sawmill and a car wash.
Now they're warriors and creme de la creme.
Who were the first to volunteer? It's not hard to guess: they were mostly people who had nothing to lose but their massive debt.
They had no careers, no social status, no close-knit families, and no prospects in civilian life to speak of.
They jumped at the opportunity to grab the weapons and head off to a foreign land with the same gusto
that they would have used to do drug mule gigs, rob a local store, or pilfer golden earrings from elderly women.
People who fail to see that actions have consequences are the favorite clientele of all street cops.
Crimes committed by such people are an easy solve, as they leave a trail of evidence behind.
They can casually steal a phone from a neighbor's child, pawn it two blocks away,
and buy a case of vodka from a nearby corner store.
These same qualities, the thought process of a three-year-old, lead to the fact that these people really go to war
for $3,000 a month.
Because they don't need any motivation other than a quick buck coupled with an opportunity
to go on a robbing and killing spree with no legal paybacks.
These people — those of them who still live — have a vested interest in making sure the war never ends.
They absolutely don’t want to go back to the life where they had to unload semitruck trailers for $200 a month,
where everyone treated them like dirt, and their wife would chase them out of the house.
They don't want to go back to the life where they're not soldiers serving their homeland,
but just drunken neighborhood punks, where robbery and violence aren't encouraged, but punished.
Many of us had a great life before February 24, 2022: a successful career, a comfortable home, habitual routines,
and plans, after it, things changed.
We were forced to choose between comfort and freedom.
We had to butter up the Turkish bureaucracy to obtain residency permits,
leave our spacious Moscow condos for tiny studio apartments in Tbilisi, adapt to a foreign lifestyle, search for new jobs,
freak out, and spend a fortune to legalize our families, colleagues, and pets.
None of this was ever planned by the hundreds of thousands of people who were forced to leave the country.
Meanwhile, living in constant fear of mobilization, martial law, or mass repression was definitely
not part of the plans of those who stayed.
But there is a huge number of people who’ve been enjoying the best stage of their lives since February 24.
Yeah, they’re in the trenches, but in that trench, they’re treated with respect by their fellow soldiers,
and they instill terror in local residents.
They’d never otherwise be paid such huge amounts of money or awarded medals.
They don't want to go back to a life where they're cursed at by grumpy old ladies on park benches,
where their own children are ashamed of them, and where they hide from debt collectors and bailiffs.
In the pre-February 24 world, they had nothing to hope for, and their qualities just weren't suited for that peaceful pre-war life.
BUSINESSES
Businesses are the least obvious beneficiaries of the war because there’s no such thing as an average business.
In the grand scheme of things, it doesn’t look good at all.
The playbook has changed dramatically in Russia due to the sanctions,
isolation, disrupted supply chains, currency limitations, and more.
However, the new economic reality is not the primary nor the secondary challenge.
Entrepreneurs are naturally adaptable and can continue to operate no matter
the rules even when running a business itself becomes a crime.
But the rules must be clear at least. Stability in regulations is crucial for both long-term and short-term planning.
If you buy a crate of women's tights, you need to be certain that they won't suddenly become illegal before you can sell them.
Predictability is essential for effective planning.
In today's Russia, making plans even a month ahead or investing money in hopes of future profits is half optimism,
half foolishness.
Each day carries unpredictable risks.
Tomorrow morning, Putin may declare a second wave of mobilization and buses with military license plates will arrive
at your factory gate, reeling in all your employees.
The next day, it may come to light that President Tokayev loves Ukraine more and doesn't recognize our victories,
and a customs wall will rise up along the border with Kazakhstan.
In a week, the State Duma may pass a law declaring women's tights incompatible with traditional spiritual and moral values.
In six months, it may turn out that container transport is now monopolized by Putin’s friends, and without their personal seal,
your goods will be bulldozed.
And a little later, it will be announced that your tights are needed by soldiers freezing in trenches,
and the government price for them is now 20 rubles per metric ton.
The scariest thing isn't just that anything can happen in Russia these days. It's that sooner or later, something inevitably will.
You might be sitting down for a business lunch one day, only to find out that your business has vanished into thin air.
So yes, usually, you lose. Russia has indeed turned into a black hole unsuitable for any investment.
But some do win, and win so big that the war becomes central to their businesses.
Take a construction complex.
It's not just there, we can actually see how much the construction lobby is currently influencing politics.
Even the phrase "reconstruction of Mariupol" sounds absolutely insane.
Throughout the recorded human history, it was always necessary to end the war first, at least pause it.
To wait for the active shooting to stop on both sides, to make sure that what had been seized could indeed be claimed.
And only then could you reconstruct and resettle what had been captured.
During a war, you evacuate people and provide temporary housing,
but you don't start large-scale construction in an active warzone.
Yet, that's exactly what our construction industry did in Mariupol, building houses with such urgency
that you'd think a nuclear war was coming the next day, and they wanted to enjoy their stolen money first.
Captured territories become gold mines, and I'm surprised they haven't started building houses on top of trenches yet.
It's clear where all this enthusiasm comes from. It's also clear why, for decades, the issue of hundreds of thousands
of dilapidated buildings in Russia has gone unresolved, but a new residential block in an occupied zone
can sprout up in just a week.
It's because this is the Chechnya reconstruction redux, just like the one from the late 1990s
and early 2000s during the Russian military campaign in the republic.
Back then, houses were built in Chechnya that were immediately and successfully targeted
by attacks and razed to the ground again.
It was the main source of enrichment in those days, long before the oil boom.
If a constructed house has been demolished, the fraud schemes are buried under the rubble.
The same thing is happening today, except on a far greater scale: who knows what territories will have to be surrendered tomorrow,
so it's time to grab and throw as many gold-filled bugs as we can into the train before it departs.
Uncontrollable and unlimited construction contracts — this is the shining moment for the construction complex.
It's not even comparable to the Moscow renovation project.
These are just days and months to earn enough money for the rest of their lives.
The construction complex doesn't care if these buildings are built to last or who will end up owning them.
To them, it would be perfect if the war never ended, and Mariupol would change hands
at least once a year so that the cycle of plunder never stops.
Wartime military and civilian construction has always been a source of enrichment for contractors
on a macroeconomic scale, in any country.
But under current conditions, it's not even comparable to oil or gas. It's like pure cocaine being pumped through a major pipeline.
There are also buyers of assets from Western companies that have pulled out of the Russian market.
It's clear that factories, stores, or restaurants — any assets removed from the production chains of the parent company —
stop being what they used to be in peacetime.
Without the supply of Nissan, Ford, Toyota, or Mercedes parts, a large car factory in a large Russian city
is reduced to a hangar filled with industrial equipment.
Still, you get a whole hangar filled with expensive industrial equipment and highly skilled workers at a fraction
of its real value, perhaps even just for a dollar, what a steal!
There was a reason why Putin issued a special decree as soon as Western businesses began to leave Russia en masse.
According to the decree, the government determines who the withdrawing companies can sell their assets to.
Because when a sale is equivalent to expropriation, when assets are worth virtually nothing,
it becomes completely irrelevant how to use them.
Besides, one cannot allow the invisible hand of the market to distribute such a pie. It has to be handed out personally.
Yeah, this car factory with all its equipment worth tens or hundreds millions will never again actually produce cars.
But it can still make furniture, manufacture pots and pans, sharpen tank treads, or weld potbelly stoves for trenches.
It was acquired for free anyway, so who cares?
The ruins of assets once owned by Western companies will never reach the level of their previous owners.
Some of them will simply die out. But it's like those assets that found new owners after the collapse of the Soviet economy.
Some quickly turned into gloomy industrial ruins, some factories became warehouses,
while others adapted to new realities and made their owners billionaires.
And don’t forget the companies that now enjoy the lack of competition from the West and enjoy the market monopoly.
Russian booking services aren’t rooting for the return of booking.com.
And thousands of parallel import middlemen don’t want the official distribution channels back.
So when it comes to business, the situation is this: almost everyone loses. But those who win, win big.
To them, this war dragging on is a matter of big, very big money.
And the longer the war rages, the more opportunities for lobbying they get.
SOMETHING TO THINK OF
Before we wrap up, I’ll reiterate, just to be clear: this war is as beneficial to Russia as the COVID pandemic was.
It brings only suffering and ruin. It also robs us of our future.
All that the government does now is delay the collapse of the economy with petrodollars.
And the longer the war drags on, the harder it will be to delay it.
This crisis won't turn into growth, only decline. It may be fast or it may be slow, but it will get worse.
Last year, Russia survived on reserves and stockpiles, with an astonishing format of sanctions being introduced:
the imports were halted right away, while the exports were only restricted eight months later.
Such imbalance simply flooded the economy with currency.
The prospect of sanctions being imposed was so inflated,
it became a sponsor for Putin and his war, driving up prices for fossil fuels.
Now the free ride is grinding to a halt. New rounds of sanctions are gradually closing old loopholes and eliminating imbalances.
The decline of the Russian economy won’t be quick, but it will certainly be prolonged.
Talk of development is no longer on the table. It's all about survival now.
And yet, once again the war shows that any, even the most catastrophic situation, has its beneficiaries.
And the longer it drags on, the more resources and effort they are willing to invest to ensure that it persists.
To those who still own some resources, but are bleeding them because of the war instead of accumulating them,
it’s a reason to think.
Because if Putin and the war aren’t stopped soon, it will eventually become too late.
After some time, the people who can't survive without the war will become the political and financial elite.
And when this happens, no one will care what you, the peacetime establishment, think.
The war weakens you, but you remain silent. The war makes them stronger, and they act.
Before I wrap up, here's something else. I recently gave an interview to Yevgeny Kiselev, a 1990s TV star.
My first reaction to his offer was one of disbelief. But we eventually had a conversation on his channel.
It was fun. After all, it's an unusual feeling to be interviewed by someone you as a kid watched hosting TV shows.
We discussed some important issues. Check it out in case you haven't. Follow the link in the description.
See you tomorrow!