THE BELL WEEKLY: How three years of war have affected Russia's mood

Hello! This week we look how Russians’ financial situations have been hit by the invasion. We also dig into why the war means Russia is losing the AI race and look at Russia’s misplaced optimism over the possible return of foreign brands.

How Russians assess their life after three years of war

Three years of fighting in Ukraine have seriously affected the lives of Russian residents, sociologists say. Day-to-day life got worse for more than half the population, and more than a third found their financial circumstances have deteriorated.

• 54% of Russians said that the war had a negative effect on their day-to-day lives. This is strongly linked to declining support for the war, according to a study by the “Khroniki” project, timed to mark the third anniversary of the war (as seen by The Bell). Only 9% regarded the war as having a positive influence on daily life, while 32% said it had no impact.
• The survey of 1,600 respondents, conducted at the start of February, recorded a significant increase in the number of Russians whose financial circumstances were suffering because of the war. Back in Sep. 2024 it was 27%, by February it was up to 36%. Some 19% percent of respondents reported an improvement in their financial situations, compared with 16% in the fall. The discrepancy between those who complained that their finances were suffering and those who reported the war having a negative impact on day-to-day life suggests that it is not only material factors that play an important role, the researchers noted.
• “Respondents who experienced reduced financial circumstances are more likely to be long-term supporters of peace. And those who reported the war’s negative impact on everyday life are even more likely to be in favor of peace,” the study said.
• In addition, 40% of those surveyed said they were working more — and only 6% less — than 3-4 years ago. Political scientist and researcher on the Khroniki project Vsevolod Benderson said this showed many people have the feeling they “began to do more work, but did not see their lives improve.

Why the world should care

The war in Ukraine has profoundly changed Russian society. This latest data does not back up the propaganda claims of a society united. On the contrary, research points to a deteriorating quality of life, increased anxiety and declining material comfort for a significant proportion of Russians. That’s a sharp contrast with the official narrative about how the invasion made society stronger and more united.

Phantom hope for the return of foreign brands

The first US-Russian talks since the invasion of Ukraine were greeted in Russia not by talk of the end of the war, but by the country’s potential return to the global economic order. Russian officials and propagandists began to interpret the possibility of normal relations between Moscow and Washington as a chance for the swift return of Western brands that left in the wake of the invasion. 

• The sudden exodus of many foreign brands from Russia after the invasion of Ukraine came as a real shock to tens of millions of Russians. The foreign companies that arrived in the 1990s and 2000s played a huge role in shaping Russia’s consumer market, which was almost non-existent in the aftermath of the USSR. For example, in the early 90s, many people in Russia were still boiling white linens and half the country’s children had tooth decay. The niche for household cleaning products was filled by P&G. And McDonald’s, on the scene since the late Soviet era, became the key reference for fast food. Mars, Snickers and Twix chocolate bars were nationwide symbols of the era.
• Since 2022 dozens of consumer brands, banks, automakers and IT companies have left Russia. Russians also lost access to Visa and Mastercard services, including when they travel abroad — one of the most painful blows. So it’s hardly surprising that rumors of an apparent swift return for Western brands spread fast. In particular, they were fuelled by Kirill Dmitriyev, head of the Russian Direct Investment Fund and a participant in the talks with the Americans, who said that US companies might soon be back in Russia.
• Propaganda was quick to write about the imminent return of departed brands. Pro-Kremlin Telegram channels actively reported (1,2) on the possible reopening of stores operated by departed clothing brands like Zara, Bershka, Pull&Bear, Stradivarius and Uniqlo. Many media sources quoted the “forecast” of pro-government political analyst and PR man Vadim Siprov about companies like PepsiCo, Coca-Cola, Apple and McDonald's coming back to Russia — all apparently due to the normalization of US-Russian relations. Anatoly Aksakov, head of State Duma’s committee on the financial market, said that soon Russians would again be able to use Visa and Mastercard freely, because they had “lost a big market” and wanted to return. In reality, in 2021 Russia contributed just 4% of the payment systems’ profits.
• Not one company that left the Russian market has spoken about a return. Renault boss Luca de Meo was the only boss to speak publicly about the idea, and then only vaguely, saying there was a chance of the company returning, but it wasn’t great. Other companies, those still in Russia, went the other way — saying they hoped a peace deal would make it easier for them to finally quit Russia. The head of Italy’s Unicredit (along with Austria’s Raiffeisen this is one of two major banks that have so far remained in Russia) said that a settlement would help Unicredit depart quicker. In such a case, the bank has a better chance of achieving the market price for its Russian assets.
• Even though 18% of foreign companies that sold up and left Russia secured options to buy back their stocks or shares and return after sanctions might ease, this does not mean that a return is inevitable, Russian experts say. The ongoing sanctions regime creates many obstacles for the work of foreign companies. In addition, after the exodus of foreign brands the Russian market restructured and many Russian companies took over vacant niches which they will not wish to give up. For example, Russian manufacturers of soft drinks have already spoken against the possible return of Coca-Cola or Pepsi.

Why the world should care

The authorities themselves don’t seem all that excited about the return of departed companies. Deputy PM Denis Manturov, who was previously responsible for trade and industry, said that in the case of auto-manufacturers, their return will not be as simple as their departure. As for foreign retailers, they would be obliged to open stores in Crimea and the occupied “new territories.” It’s unlikely anyone would agree to this, since it would open the way to direct sanctions, at least from Europe. 

There’s no doubt that the authorities would generally seek to frustrate the return of departed brands, even though the consumer market would clearly benefit from them coming back. At first glance, this seems absurd, but there would be nothing new in the Kremlin taking decisions that run counter to the interests of the general public, especially when it comes to foreign business. In 2014, Russia imposed a food embargo and banned imports from countries that imposed sanctions against it. While this stimulated import substitution, it also triggered a significant rise in food prices. 

How Russia is losing the AI race

Russia has its own self-driving technology, a search engine to rival Google, and voice assistants and smart speakers that are better conversationalists than Alexa or Siri. But it has no generative neural networks that can compete with the latest versions of ChatGPT or surprise everyone like China’s DeepSeek. How did this happen, and does it mean Russia has already lost the AI race?

• Russian companies began seriously exploring language models after ChatGPT’s success in late 2022. At that time, Russian developers realized that the future lay in text generation, rather than training language models for specific tasks, and in “transformers” – a special architecture that allows a language model to see the entire context at once and understand how words relate to each other. Before that, neural networks understood text word-by-word and could “forget” information if the text was long. 
• The emergence of ChatGPT kicked the Russian market into action and developers responded. Sber, Russia’s biggest bank, greatly increased investment into developing its chat bots, two market sources told The Bell. Their investment alone was serious money for the Russian market, one of the sources said, without specifying a figure. But the Russian market was not ready for this boom. The war in Ukraine made it much more difficult to acquire hardware and nobody bought expensive GPUs, advanced video cards for training neural networks that can cost$30,000–40,000 each, ahead of time. They are now even more expensive in Russia thanks to the extra logistics costs via parallel imports. Many Russian developers had to make do with their own hardware since it is not available to rent in Russia and Western players left the market.
• Another problem, which faced Yandex and Sber was staffing. Few people are capable of creating something revolutionary, and most of them are already working for OpenAI or other US-based rivals. “I know at least a few guys from Yandex who had important positions in the LLM development team have gone to work abroad, and some of them ended up at OpenAI,” said one of The Bell’s sources. “If you have the necessary skills, you can live very well in Russia. But it doesn’t compare with what you would get if you went and worked in the West in terms of money, or professional satisfaction. So it’s no surprise that we saw this outflow,” said another source.
• Censorship is another issue. Russian AI chat-bots cannot discuss “problematic” issues such as the war, LGBT rights or criticism of Vladimir Putin. For example, Sber has a special censorship model, but it is so strict that the GigaChat bot is simply unusable. 

Why the world should care

The Russian language model market is forever lagging behind, according to every developer or expert who spoke to The Bell. “We are already back about a generation and a half. And, given high interest rates, this will get worse: we need large capital investment, money is expensive and there’s no liquidity,” said Valery Babushkin, author of the book Machine Learning System Design.