Business as usual, as we knew it in Russia, is unlikely to make a comeback for years to come. Currently, the war in Ukraine continues to develop actively, and although negotiations between the two parties are ongoing, their positions are disparate, despite claims to the contrary.

For 30 years, since the collapse of the Soviet Union, Western companies and investors have been drawn to Russia and other former Soviet republics such as Ukraine and Belarus, seeking lucrative opportunities. On February 24, geopolitical risk skyrocketed following Russia’s full-scale invasion of neighbouring Ukraine, while an unprecedented range of sanctions imposed on Moscow altered cost-benefit calculations for companies to operate in the Russian market for years, if not decades, into the future. Everything from freezing the assets of Russia’s Central Bank, to severe export limitations, to Western companies’ “voluntary” pullbacks from the local market have thrown the country’s economy in turmoil.

Putin and his team had anticipated a Western response, knowing that their counterparts in the US and Europe would impose sanctions in case of a Russian attack on Ukraine. Preparation for a possible disconnection from SWIFT began in 2014, after the US threatened to disconnect Russia from this inter-banking messaging system following the annexation of Crimea. Nonetheless, it is unlikely that the Kremlin had anticipated that sanctions would be as far reaching as to freeze Russia’s Central Bank assets held in the West, for a total of 300 billion USD. Considering that Russia has approximately 680 billion in foreign reserves, this action severely hampered the Central Bank’s ability to sustain the value of the ruble in the forex markets, while also reducing the finances available to sustain the war effort.

Furthermore, the withdrawal of hundreds of privately-held enterprises driven by profits in the Russian market (with the transfer of significant portions of their employees to countries in the Caucasus, Central Asia, and Central Europe) and the subsequent rapid deterioration in standards of living for millions of Russians came as a surprise. As the New York Times has noted, in the West, “society’s expectations for companies have changed since [the times when] Coca-Cola sold drinks in Nazi Germany and Heineken brewed beer in Rwanda during the genocide there.” The Russian leadership failed to realise this.

The evolution of risks for businesses in the post-Soviet space is hard to predict in the mid to long term, due to an array of independent variables involved. However, this is precisely what we intend to do in this article that we invite you to download for reading.