A landmark week for London Business School – and clear-eyed analysis on Russia

It has been a remarkable week for London Business School. A £25m gift from a distinguished alumnus, one of the most significant in the School’s history, was accompanied by the School unveiling its Corporate 100 community, a pioneering alliance bringing together some of the world’s leading companies, including Rolls-Royce, Nestlé, Deutsche Bank and VEON. The initiative will provide a unique forum for global corporations to learn not only from LBS faculty but also from one another, drawing on the School’s expertise to navigate an increasingly complex global landscape.

Amid these celebrations, Dean and Professor of Economics Sergei Guriev also joined Bloomberg Daybreak’s Tom MacKenzie to share his perspective on another subject of pressing importance: the health of the Russian economy as the war in Ukraine grinds on.

Guriev’s assessment was sober. After two years of war-fuelled growth, Russia’s economy is now “on the verge of recession.” The 4 per cent annual growth rates of 2023 and 2024 have given way to stagnation, with output expected to expand by just 1 per cent this year. The first quarter was negative, the second barely positive. Fiscal resources are under pressure, with VAT lifted from 20 per cent to 22 per cent and taxes on small businesses rising sharply. Russia’s sovereign wealth fund, once substantial, is now depleted to around 2 per cent of GDP.

Despite this squeeze, Guriev cautioned against complacency. Russia’s state-controlled banking system, which accounts for 80 per cent of assets, can still be marshalled to absorb government debt, ensuring the war effort continues. Oil revenues remain a lifeline, though Washington’s evolving policy toward India and other buyers could unsettle Moscow’s export strategy.

Looking ahead, Guriev described Russia as a “two-speed economy”: a military sector still growing, albeit more slowly, and a civilian sector mired in stagnation, squeezed by high wages, high inflation, and interest rates that remain stuck at 17 per cent. Demographic strains, millions killed, wounded or emigrated, add further drag.

Geopolitically, Guriev argued, Vladimir Putin is probing NATO’s resolve, testing whether Europe and the United States will remain united. At the same time, Russia has become increasingly dependent on Beijing. “It is a junior partner, some would already say vassal,” Guriev observed, noting that China is now Russia’s indispensable supplier of technology and trade.

For London Business School, this dual moment, celebrating landmark institutional achievements while providing rigorous analysis of global crises, speaks to its unique role. At a time of fragmentation and uncertainty, LBS is both shaping the future of business and helping leaders understand the shifting dynamics of the global economy.

The interview can be viewed here: https://lnkd.in/e5Q33jc9 and https://www.youtube.com/watch?v=klUP1aJhIDA (interview begins at 15.15)