Russians have seen the enemy, and it is theirs
Russia’s invasion of Ukraine is now one year old and has changed a great many things. It has reinvigorated NATO, worsened global food and energy insecurity, laid bare the geopolitical rifts of an increasingly multipolar world, and deeply altered Ukraine as a nation. It has also shifted Russians’ views of their own country’s economic, social and political priorities toward a siege mentality marked by a profound sense of grievance against the West. Investors should take note.
Most Russians think their country is on the right track
At first glance, Russia seems to have weathered the dual storms of international censure and sanctions surprisingly well. Thanks to a rally ’round the flag effect, public optimism soared following the February 2022 invasion and has remained high since. Despite a huge decline in Russia’s international standing, the average Russian is now more likely to say their country is headed in the right direction.
One Year Into the War, More Russians Say Their Country Is on the Right Track
Our finding mirrors independent Russia-based polling that shows double-digit increases in President Vladimir Putin’s approval rating (a topic Morning Consult does not survey on due to political sensitivities) after the invasion. At the same time, Russians’ views of “unfriendly” Western countries and their companies plummeted since last February, indicating that Russians are aware of Western censure yet still support the war.
Fewer Russians (albeit still a plurality) also expect bad times in the coming year relative to the period predating the invasion. In January 2022, over twice as many Russians were pessimistic about the coming year than were optimistic. Now, the gap is down to 13 percentage points. With the exception of a temporary downturn in sentiment during Russia’s “partial mobilization” conscription campaign late last year (highlighted in gray below), the change has been durable.
Fewer Russians, Though Still a Plurality, Expect Bad Times in the Coming Year
At first glance, this boost in optimism may seem surprising. Other data sources indicate that real incomes in Russia have likely fallen, and the International Monetary Fund estimates that its economy shrank by 3.4% in 2022. But policy and propaganda have cushioned the blow. On the one hand, Russia’s government and state-owned enterprises (SOEs) drew on record high energy receipts to soften the impact of sanctions, specifically by issuing state aid to banks to cushion investment levels, raising wages at some of the largest SOEs, and raising pensions and the minimum wage by 10%. The central bank also implemented harsh foreign exchange controls, which helped shore up the exchange rate. On the other hand, state media have used a nationalist, pseudo-historical narrative to present the invasion as a continuation of what Russians call the Great Patriotic War (World War II). Our data suggests this strategy has been largely effective in shoring up public support by lionizing Russians’ economic hardship and painting Ukrainian defenders as Nazis and terrorists.
Russians see conflict in the decade ahead
One year into the war, our data also shows declines in the shares of Russians saying that social agency and economic growth are important policy priorities in favor of greater military preparedness, though growth remains in pole position in absolute terms. Notably, this survey question asks about a 10-year time horizon, suggesting that many Russians are seemingly projecting themselves into an even more bellicose future.
Thinking of the Coming Decade, More Russians Now Prioritize Defense Over Social and Economic Issues
Economic nationalism has grown, posing risks for foreign investors and exporters
For foreign investors, the fact that economic growth is still paramount to Russian adults may appear encouraging. But their attitudes toward foreign goods and capital reveal a gloomier picture. Since the invasion, Russians have become less eager to welcome foreign-owned businesses, more likely to favor tariffs on foreign goods and more likely to say they go out of their way to buy domestic products. They are also less willing to punish violations of foreign companies’ intellectual property rights, as evidenced by legal changes permitting theft of such property from countries determined to be unfriendly toward Russia. In short, economic nationalism is the mood of the hour.
Economic Nationalism Has Grown in Russia Since the Invasion
Plowshares into swords: Expect further reallocation of resources from social issues to military spending
In the 12 months since the war began, Russians have also become more reluctant to express support for racial and gender diversity in corporate management and for environmental protection efforts writ large. They also express less concern about wage inequality, though the shift is smaller, indicating that some of the government’s efforts to shield consumers from the war’s economic fallout have been successful.
Russians Now See Social Issues Like Wage Inequality and Gender Parity as Less Important
Russians’ deprioritization of economic and social issues foreshadows a lack of public resistance to further reallocating state resources toward the war effort. 2023 will see Moscow hike defense spending by 43%, with a larger increase possible. While this spending may cushion Russia’s topline GDP number, it does not lay the groundwork for future growth and will crowd out spending that does: By some estimates, Russia’s 2023 budget foresees spending on health care falling by 9%, on education by 2%, and on infrastructure and industrial spending by 23.5% and 18.5%, respectively. The deprioritization of human development — by both the Russian government and the public — along with Russians’ willingness to eschew foreign investment and the know-how it provides, bode very ill for Russia’s long-term growth prospects.
Terrorism and conflict have supplanted environmental degradation as Russians’ top concerns
Compared with the 12-month window preceding the conflict, more Russians now perceive terrorism and conflict between countries and ethnic groups as their country’s top threats. Surprisingly, this shift does not reflect a significant increase in the shares who perceive each as a threat; rather, it derives from a large decrease in the salience of other threats like environmental pollution, global poverty and infectious diseases including COVID-19.
Cross-Country Conflict and Terrorism Are Russians’ Most Salient Threats Amid Declining Concern About Most Others
Similarly, the large decreases in the shares of Russians who view climate change and pollution as major threats will pose headwinds for Russia’s desperately needed green transition. At the same time, technology sanctions and a severe brain drain in other productive parts of the economy — most notably the IT sector — are strangling alternate sources of growth.
Only a perfect storm of military losses and economic collapse will cause a major public opinion reversal
Russia watchers may soon find out the true limits of Russia’s post-invasion rally ’round the flag effect. In the coming months, lower energy receipts and tightening sanctions will increasingly weigh on the Russian economy, while stopgap measures that shored up economic confidence in 2022 will struggle to contain the fallout this year.
Still, based on the views that Russians express about their country’s overall direction and their priorities for the future, economic frustration alone appears unlikely to translate into public displays of opposition to the war. Since the invasion began, mass mobilization was the only event to reveal cracks in solidarity with the war effort. If a continued stalemate in Ukraine compels the Kremlin to order another draft coinciding with economic malaise, popular support could finally collapse.
Western companies waiting on the sidelines may need to throw in the towel
According to recent research, only around 8.5% of Western-based companies — defined as companies headquartered in the European Union or G-7 countries like the United States — with equity investments in Russian subsidiaries when the war began have fully divested, opting instead to freeze their operations. And even some companies that did divest included buyback clauses in their terms of sale. These facts suggest that many Western companies are waiting on the sidelines for a chance to get back into the game. Given the prevailing public sentiment, their prospects of doing so look especially grim.
Public opinion can and does change. But the Kremlin’s anti-Western narrative has been durable, pervasive and effective, and it will be difficult to quickly change tack in the event of a true cease-fire. In the meantime, Russians will continue to view Western products and investments as suspect. If there are significant costs associated with waiting on the sidelines, companies doing so should consider throwing in the towel.