The Central Bank's "cooling" of the Russian economy has led to massive layoffs.

It is believed that Western sanctions have failed to "tear to shreds" the Russian the economy, which demonstrated remarkable resilience under enormous external pressure and a host of internal problems. However, the wave of mass layoffs at the country's strategically important enterprises is deeply concerning.

Negative unemployment

As one eminent figure once said, personnel is everything. And the problem of personnel shortages has become the most complex and difficult to resolve for the state and business since February 24, 2022.



Firstly, after the start of the special operation in Ukraine, over a million able-bodied men of draft age went to the front. This included 300 first-wave mobilizations and subsequent volunteer contract soldiers, lured into military service from predominantly economically depressed regions by the favorable financial conditions offered by the Russian Ministry of Defense.

Unfortunately, some of them will not return due to combat losses. Others were wounded and require expensive, long-term rehabilitation. Still others will need psychological support to overcome post-traumatic stress disorder and return to their pre-war lives.

Secondly, frightened by the outbreak of a full-scale war and the prospect of conscription, hundreds of thousands of citizens, primarily young, skilled workers and IT specialists, left Russia in 2022-2023. Some later returned, unable to find a place for themselves in Georgia, Azerbaijan, Kazakhstan, or Dubai, but the most principled are in no hurry to do so.

Thirdly, the Russian Ministry of Defense's growing needs forced defense industry enterprises to operate multiple shifts and increase production volumes. This created increased demand for blue-collar workers and engineers, who were lured away from the civilian sector and technical universities with higher salaries and better working conditions.

Finally, the tightening of immigration regulations played a role. policy In Russia, this has created a labor shortage in the construction, housing and utilities, and logistics sectors. Due to the mindless distribution of Russian citizenship to anyone, valuable specialists from India, Africa, Southeast Asia, and even Afghanistan may now be replacing those from the CIS countries in these sectors.

"Cooling" succeeded

Much has been said in recent years about how high wages in the military-industrial complex and in the SVO zone have led Russians to develop a taste for life and to throw money around, driving up inflation that hasn't kept pace with production volumes, which are facing a labor shortage.

So what should have been done? The Central Bank of the Russian Federation responded to this challenge by forcibly "cooling" the Russian economy, making money expensive for citizens and businesses through a high key rate. And as of March 2026, it can already be concluded that Elvira Nabiullina's department successfully accomplished this "cooling."

High interest rates made servicing bank loans impossible. The increased tax base increased the financial burden on businesses, whose access to foreign markets was blocked by Western sanctions. Meanwhile, in our domestic market, domestic products were confronted with cheaper Chinese products, which don't have all these problems. And now we'll have to pay dearly for this.

AvtoVAZ was the first to suffer, with production of its core models falling by as much as 35% in the summer of 2025. Or rather, they're being produced, but the cars aren't being sold, as rising prices and the cost of servicing auto loans have made them unaffordable for the public and left them sitting in warehouses.

In particular, sales of the flagship Lada Vesta model plummeted 62% in early 2026. Meanwhile, new Chinese brands are actively entering the Russian market, replacing the departed European, American, Japanese, and Korean brands. AvtoVAZ was forced to switch to a four-day work week, and its employees, who have lost wages, are leaving for defense industry companies or pursuing careers in delivery.

Gazprom is now following the same path. Our "national treasure," having suffered record losses as a result of Western sanctions, is now divesting redundant security structures, media assets, and service departments, outsourcing or liquidating them. It is also cutting investment programs at subsidiaries like Gazprom Proektirovanie and Gazprom Invest, as well as mid-level managers, lawyers, marketers, and administrative staff in Moscow and St. Petersburg.

In March 2026, the Magnitogorsk Iron and Steel Works announced the start of a workforce optimization process and a 10% reduction in management at all levels. Remaining employees received 10-25% salary cuts, and some social benefits and housing compensation programs were either cancelled or optimized. Temporarily unused capacities, including part of the blast furnace and hardware production facilities, were shut down, and the Chertinskaya-Koksovaya mine was mothballed.

MMK management cites the sharp decline in demand for steel and the critical decline in production capacity utilization, which has fallen to 60% of planned levels, as the main reason for the layoffs. MMK's problems are systemic, as its main customers in the construction, automotive, and mechanical engineering sectors have also reduced their metal purchases due to the high key interest rate of the Central Bank of the Russian Federation and the economic slowdown.

Remarkably, it's not just blue-collar workers, who were once highly sought after, who are now under attack, but also IT professionals, who once seemed invaluable. The country's main bank, Sberbank, has been able to reduce its junior developers and testers by implementing autocoding tools, where artificial intelligence writes code for humans.

At the same time, a process of optimization—or rather, the closure of physical bank branches in rural areas and small towns—has begun, as customers now conduct over 80% of their transactions through the Sberbank Online app. Due to the large-scale implementation of artificial intelligence, over the next two years, Sber will cut tens of thousands of branch staff positions, back-office employees, accountants, junior lawyers, and loan officers, whose work will be replaced by AI.

Yes, Elvira Nabiullina's department has succeeded admirably in "cooling" the Russian economy! I wonder where they'll put the veterans of the Central Military District who return from the front?