Russia’s techies flee country they fear is ‘flying into an abyss’

Brain drain threatens Russia’s economic future

Russian tech executive Ilya Krasilshchik hurriedly packed up three suitcases and boarded a flight to Dubai this week with no plan and no idea what would come next. All he wanted was to leave a country "flying into an abyss", he said.

Krasilshchik is one of tens of thousands of Russians who have fled the country in recent days, seeking to escape the spiralling effects of President Vladimir Putin’s invasion of Ukraine, from western sanctions imposed in response to the war to the Kremlin’s crackdown on dissent.

“The country that we lived in has been destroyed. What future is there for a country where chekisty have seized power?” he told the Financial Times, referring to the Soviet word for security services. “I believe such a country has no future. All it can do is survive.”

The wave of emigration, if permanent, will prove a significant long-term drag on an economy already hit by EU and US sanctions that have crippled its stock market and currency and cut it off from western financing, officials and analysts have warned.

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With almost all European airspace closed to Russian aircraft, flights to Tel Aviv, Istanbul, Yerevan, Baku and Tbilisi have been sold out for days, while other travellers have packed on to buses to the Baltic states.

Konstantin Siniushin, a Latvia-based Russian tech investor and co-managing partner of The Untitled Ventures fund, found that demand to leave was so high - and exit routes so oversubscribed - that he chartered a plane to take people out.

“The first week [after the war began], people were in shock. The second week, people started getting out fast and it was a madhouse,” said Siniushin.

He filled the 160 or so seats on the March 3rd charter flight from Moscow to the Armenian capital Yerevan within 24 hours. Most passengers were IT professionals or businesspeople with an international focus.

“The people leaving were those who understood that for them, all this represents a ban on their profession, because they receive income from conducting business internationally,” Siniushin said.

Influx to Georgia

Georgia's economy minister said on Monday that as many as 25,000 Russians had arrived in the country in the past few days, according to local media outlet Sova. Vahe Hakobyan, chair of the Armenian parliament's economic affairs committee, said this week that about 6,000 Russian and Ukrainian citizens were arriving in the country every day.

Even before the invasion and international sanctions, Russia’s economy faced two big problems, according to analysts: a need to develop new industries to reduce reliance on exports of hydrocarbons and other natural resources, and a falling working-age population. The loss of tens of thousands of educated and skilled people will make the situation worse, say economists.

"The exodus is a self-imposed sanction by Russian authorities. Many flee what they see as an iron curtain closing upon them," said Elina Ribakova, deputy chief economist at the Institute of International Finance.

“The long-term impact is a lack of hope for any progress or productivity growth,” she said. “Sanctions will impose severe limitations on Russia’s ability to import technology, while self-imposed brain drains will drain Russia of human capital.”

JPMorgan last week forecast that Russia’s economy would contract 35 per cent in the second quarter, 7 per cent this year and 12 per cent overall before it recovers, as the western sanctions announced this month take effect.

If the thousands of young Russians who have already fled choose not to return, the economic blow will be long lasting, economists warn.

"There can be no doubt that he is losing the allegiance of the most productive part of his people," said Daniel Gros, distinguished fellow at the Centre for European Policy Studies. "This is an added medium- to long-term unforeseen [for the Russian economy]."

Visa policy

Even before the current crisis, the EU was seeking to prompt a Russian brain drain to deprive Putin of talent, observers say. One option for potential sanctions against Moscow previously drawn up by Brussels, but superseded by the Ukraine invasion, included a loosened visa policy for young, educated Russians wanting to study or work in the bloc, according to people involved in the discussions.

The speed of the Russian exodus was exacerbated last week as rumours spread that Putin intended to impose martial law, close the country’s borders and draft men of fighting age into the army. Kremlin denials failed to stem the flow.

Emigration self-help groups have sprung up on online forums, with advice on how to leave. Heading to Estonia by bus this week, one Russian woman told the FT the vehicle was packed and that tickets on many others making the day-long journey from St Petersburg were sold out.

The majority of passengers were young men, she added. Russian border guards checked passports three times, asking many people if they were going to Ukraine. Other travellers have reported forced checks of their mobile phones and laptops.

“We can’t complain because we were in the best possible situation, comparatively, in the sense that it was possible for us to just get up and go in the space of a day, abandoning our former lives,” said Krasilshchik.

It was a privileged position, he said, “firstly, because we had the opportunity to leave at all, and secondly, because no bombs are falling on what we are leaving behind”. – Copyright The Financial Times Limited 2022