Russian businesses feel the pinch after Putin's draft order

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

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

But since President Vladimir Putin announced a "partial mobilisation" of 300,000 men on September 21, the 33-year-old has lost much of his clientele.

"Many have stopped coming," he told AFP by phone.

Instead, they are filling the depleted ranks of Russia's army or they are among the tens of thousands of others who have fled south for neighbouring Kazakhstan.

Projects on hold

The Kremlin's mobilisation has brought uncertainty and chaos to businesses already hard-hit by sanctions and still recovering from the fallout of the pandemic.

In the past three weeks, a little more than half of the 77 spots in Novikov's co-working place were occupied.

He said he has "no idea" if the people who fled or were drafted will keep paying subscription fees, which cost between $70 and $130.

And now Novikov is worried about his loans.

"Turnover has already dropped 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."

Novikov is far from the only business owner in Russia who is growing more nervous over the workforce vacuum.

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

Russia's economy has already been battered this year by unprecedented Western sanctions in response to Putin's decision to send troops to Ukraine on February 24.

But Zubarevich said the mobilisation was an "additional aggravating factor".

She added she was not surprised young men from the provinces were joining the army, attracted by monthly payouts that are sometimes almost as much as their annual salaries.

'Fallen soldiers'

But the risks cannot be overlooked.

Five men drafted to fight in Ukraine have died since joining the army, authorities said Thursday (October 13), without disclosing the location of the deaths.

The "fallen soldiers" came from the poor, industrial Chelyabinsk region in Western Siberia, according to the press service of the regional government.

On Wednesday, Russian lawmaker Maxim Ivanov, who is overseeing the mobilisation in the region, said that a mobilised man from Chelyabinsk region had died of a drug "overdose" while he was at a training centre.

On October 3, Ivanov said three mobilised soldiers had died at a military base in Sverdlovsk region, central Russia.

One died from a heart attack, another committed suicide and the third died of alcohol-related liver cirrhosis after he was sent home, according to Ivanov.

The Kremlin has acknowledged "errors" were made during the mobilisation, following reports of people who were not eligible, including students and elderly or infirm people, receiving summons.

Last week, Russia's Defence Minister Sergei Shoigu said that over 200,000 people had been conscripted into the Russian army in two weeks to fight in Ukraine, where Russia's forces are suffering major setbacks from a recent Ukrainian counter-offensive.

'Everything collapsed'

In increased isolation -- and hit by sanctions and mobilisation -- an anxious Russian society is watching its spending closely.

"People are looking to put their money aside," said Sofya Donets, chief economist for Russia at Renaissance Capital.

"They're not going to overspend."

Meanwhile, in glitzy central Moscow, 45-year-old Yelena Irisova is distraught at seeing her company, which produces luxury leather bags, stop production.

She employs around 10 people in the small business.

But two of her craftsmen left the company in recent weeks -- one fearing mobilisation, another to help her daughter whose husband had been sent to the front.

"After September 21, everything collapsed," Irisova said. "Our sales fell threefold -- from 10 to three orders a day."

She says her savings will keep her going "a month or two, but not more".

No Russian business seems unscathed.

Katerina Iberika, 39, who owns a pastry shop specialising in birthday cakes in Moscow, is also facing ruin.

Her five employees are women with exemptions from mobilisation. But it's the low morale among the public that's endangering her business.

"Cancellations of orders for big events started two days before mobilisation," Iberika told AFP.

Now she gets nearly no orders at all, except for "very small" ones.

She too is considering leaving Russia.