Volunteers help to close loopholes in sanctions against the Kremlin, in particular regarding electronics for the army: Denys Dovgopolyy

Since the beginning of the Russian war in Ukraine, the international community has imposed powerful sanctions against Russia, which the West calls historically unprecedented. More than 13,000 different sanctions have been imposed against Russia, according to the Carnegie Institution, which is more than the number of sanctions against Iran, Cuba and North Korea combined.

The private sector also joined the government measures. According to Yale University, more than 1,100 international companies have completely stopped working in Russia, which has hurt its economy.

Ukrainian activists are trying to convince companies still operating in Russia to close their businesses in the country in order to weaken the Kremlin’s ability to finance the war. Denys Dovgopolyy, an activist of the economic resistance of the Russian Federation, entrepreneur, founder of the Unicorn Nest project, head of iForum’s “Startups” department, told about the current stage of this campaign on the air of the Voice of America Briefing.

The interview has been edited for clarity and flow.

Yulia Yarmolenko, Voice of America: When we talk about the situation with the Russian ruble, which at the beginning of the month crossed the psychologically important mark of 100 rubles per dollar, do you think that, in particular, your actions together with the volunteers in a certain way accelerated the weakening of the Russian economy?

Denys Dovgopolyy, an activist of the economic resistance of the Russian Federation: I must say that the actions of the volunteers have changed a little over the past year and a half. The economic front is more stationary. This is primarily due to the fact that those companies that could exit quickly did. And those that remain are almost insensitive to most of the actions that economic volunteers can take.

Basically, it was public shaming. Those companies that remained have already received their share of negativity and have developed some immunity. Probably tens of thousands of economic volunteers worked. Now there are several hundred left, but their actions are more effective. That is, now we have started working with factors that can have an institutional influence. First of all, we were heard in Washington and in Europe that secondary sanctions should be imposed, because the Russians are quite effective in circumventing the current sanctions.

It cannot be said that it is massive, their export-import fell quite significantly, but in several positions, for example, electronics for the military, they found a very large number of loopholes.

First, our main front is now working to help our partners implement secondary sanctions.

Secondly, we started working with large legal companies and not only, which have already filed well-founded complaints about the fact that the companies remained (in Russia).

We have institutional means of influence, for example, over the past year, the National Bank has greatly strengthened the team that works from the point of view of sanctions. For its part, the NAKC, as you know, continues to work very effectively at this level. And not only them, our partners, countries that support Ukraine, such as Poland, the Baltic countries began to work with their partners in Western Europe, which, let’s say, are not very effective in opposing Russia and implementing sanctions. This has a pretty cool effect – even small loopholes that currently exist overlap.

Yu.Ya.: At the beginning of the large-scale Russian invasion, you worked to put pressure on companies. What arguments did you use then and what arguments sound now? Are there companies that are immune from public condemnation and that remain in Russia now?

D.D.: Almost all (companies) that remained are immune, after the waves of shame that we threw at them on the Internet and not only, even on the streets of Europe, when people came out against such companies.

They are no longer sensitive to public pressure, but they are very sensitive to regulators. We are currently working to ensure that auditors pay more attention to the risks that companies have when working in Mordor. This is very painful for them now, because it affects the share price, the ability to raise money.

And, for example, Prigozhin’s mutiny really helped us, because now we say: “Guys, you are putting the lives of your employees in Russia at risk, because they can be physically killed there, accidentally or deliberately.” This has an impact because they care about their reputation as an employer.

The question for these companies is whether, staying in Russia, having financial, legal, ethical risks and risks even for the lives of their employees, will they receive in the medium-term horizon profits that compensate for this? If earlier the answer was: we hope that all competitors will leave and we will have a profit, now the added economic risks do not allow them to answer this question very confidently.

Yu.Ya.: Are there companies that say they are leaving the Russian market, but these companies remain?

D.D.:

No, almost not left, because if you said we were leaving and stayed, your risks become even greater. Because if you are a public company, if you deceive your shareholders, then the management of the company is criminally liable for these crimes. This is very serious. But it doesn’t really affect small companies that say we left and didn’t. Now there is another problem that in companies even in Europe, but this is not a very large scale, but in Georgia, Armenia, Kazakhstan, Turkmenistan, Turkey, a large number of companies are being created that help to circumvent sanctions from the point of view of export-import. This is now our main goal, with which the volunteer front is trying to work. And this is quite effective, because they deliberately help to circumvent sanctions and this is a criminal case against people in Europe, in the United States. These are arguments for the Treasury Department of the United States to negotiate with these countries so that they make it so that companies from their jurisdiction do not help the Russians to circumvent sanctions.

Yu.Ya.:

You said that right now you see some movement from the point of view of the United States or certain other Western countries to close loopholes to circumvent sanctions?

D.D.:

So. By the way, there are tools against those loopholes, but they are very long-term. For example, we find a company (which violates sanctions), prepare documents that will allow us to open a criminal case, for example, in Germany. Yes, it will take months. We have cases that cannot be moved for 8-9 months. But now it is starting to be solved systematically. When sanctioning bodies begin to pay attention to this, it begins to work more effectively.

Yu.Ya.: Over the past year and a half, how many companies have left Russia in total? The exit of which companies had the greatest impact on the economy of Russia?

D.D.: We do not keep records of companies, because there are a lot of such companies. We decided that if we are going to waste time on this, then we will not have time to work directly from the companies. I don’t want to say the names of the companies now, but we have companies that have gone out on their own; which we pushed out; which were pushed out by the Russians themselves. Because now these companies operating in Russia are a very attractive target for raiding operations. Some deputies, senators and even businessmen are working on this and they are pushing companies out in order to keep their own enterprises. And it turned out that in some industries the Russians themselves did more than all economic fronts.

Companies that have nationalized enterprises in Russia suffer and have immunity against cooperation with the occupiers. I believe that this immunity will last for decades, regardless of how our war ends. I do not doubt our victory, we are winning back our territory, but will we destroy Russia? A large number of companies will be immune from cooperation with this geography. I believe that this is also a great merit not only of the economic front, it cannot be said that it is only us, because volunteers are working on this, the administration of the president, our special services, the National Bank, the Cabinet of Ministers, the NAKC, the Ministry of Foreign Affairs are working on this, which is helping us a lot our country, and our partners, and individual ministries, and volunteer groups are not only Ukrainian, because in Switzerland, in Scandinavia, in Poland there are national groups of economic resistance that are working on this.

So, we are working together not only to do it now, but to make it so that after the end of the war, the Russians have no chance for economic revival and (the ability to) continue to finance their military machine. And this is a guarantee that after the end of the war they will need several decades to rebuild the economy.

Yu.Ya.: Do you think that the news of the last few days about the weakness of the Russian currency could indicate that both the sanctions and the actions to weaken the Russian economy, which are taking place in a number of directions, are now starting to work?

D.D.: They started working a long time ago, at first, from the first day, from the first hours, probably. But the economy, especially the corporate economy, the big economy is very inert. And the consequences that we have now are the consequences of our and not only our actions, of all our partners, starting from the first months. I hope that what is happening now will become a disaster for the Russian economy in a few months.

Yu.Ya.: Denis, you are an entrepreneur, you work with Silicon Valley, over the past year and a half, do you feel that there has been a certain reluctance to hire Russian specialists?

D.D.: That’s what we started with, what we did in the first probably three months. Technology business is a business that deals with risks. And it is normal for us when 99.7% of companies go bankrupt.

The industry has realized that sanctions, political and ethical risks have been added to the typical risks. And it was the easiest thing to do. So even now, high-tech companies in Silicon Valley, Europe and America are downsizing.

We observe that ethnic Russians are being laid off significantly more than the percentage of company employees who work there. That is, Russians are fired first and hired last. And this is a fact. This fact – hi-tech companies do not want to admit, because it is the basis for being accused of a certain discrimination. But these are reasonable risks that work: and you are sure that the person who works for you is not an undercover employee of the FSB, he will steal data from you and that Russia will use: and this is a risk assessment and it works.