“Everything has collapsed”: mobilization shakes up small businesses

In his brand new co-working space in Chelyabinsk, a city in central Russia, entrepreneur Maxim Novikov counts the empty seats.

The space is usually full of designers, programmers and young Russians working on their start-ups.

But since President Vladimir Putin last month announced a mobilization of hundreds of thousands of young Russian men, the 33-year-old has lost much of his clientele.

“A lot of people have stopped coming,” he told AFP by phone.

Instead, they fill the exhausted ranks of the Russian army or they are among the tens of thousands of others who have fled south to neighboring Kazakhstan.

The Kremlin’s mobilization has brought uncertainty and chaos to businesses already hard hit by sanctions and still recovering from the fallout of the pandemic. Over the past three weeks, just over half of Novikov’s 77 co-working spaces were occupied.

He has “no idea” if people who have fled or been conscripted will continue to pay the subscription fee, which costs between $70 and $130.

And now Novikov is worried about his loans.

“Turnover has already fallen by more than 40% this year,” said Novikov, an architecture graduate. “I wanted to buy a third space but for the moment it is not possible to take the risk.”

But he is far from the only business owner in Russia who is increasingly worried about the lack of manpower.

“It means projects are on hold and private companies will be afraid to invest,” said Natalia Zubarevich, an economist at Moscow State University.

The Russian economy has already been hit this year by unprecedented Western sanctions in response to Putin’s decision to send troops to Ukraine on February 24.

But Zubarevich said the mobilization was an “additional aggravating factor”.

She added that she was not surprised that young men from the provinces are joining the army, lured by monthly payments that are sometimes almost as high as their annual salaries.

Meanwhile, in the glitzy center of Moscow, Yelena Irisova, 45, is distraught to see her company, which produces luxury leather bags, shut down production.

It employs a dozen people in petty trade, but two of its craftsmen have left the business in recent weeks – one fearing mobilization, the other to help her daughter whose husband had been sent to the front.

“After September 21, everything fell apart,” Irisova said. “Our sales have tripled from 10 to three orders a day.”

She says her savings will keep her going “a month or two, but no more”.

No Russian company seems spared. Katerina Iberika, 39, owner of a pastry shop specializing in birthday cakes in Moscow, is also threatened with ruin.

Its five employees are women benefiting from exemptions from mobilization. But it’s low public morale that’s jeopardizing his business.

“Order cancellations for major events started two days before the mobilization,” Iberika told AFP.

Now she receives almost no orders, except for “very small”, and plans to leave Russia.

Increasingly isolated – and hit by sanctions and mobilization – an anxious Russian society is watching its spending closely.

“People are looking to put their money aside,” said Sofya Donets, chief Russia economist at Renaissance Capital. “They’re not going to overspend.”

Some industries have been hit harder than others by a sudden shortage of men.

Employers have sounded the alarm in recent days, asking the government for exemptions from mobilization, especially for small and medium-sized businesses.

Russia’s Economic Development Ministry told AFP it had drawn up a list of measures for these “problematic issues” and facilitated grants and microcredits.

“A mobilized entrepreneur may suspend the execution of the obligations” to repay the loans, the ministry said.

Donets, however, expects “more state intervention and aid” to calm the effects of the mobilization, especially as Russian coffers continue to fill thanks to its energy exports.

Russia news

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