Reverse Salami Tactic: How Ukraine Is Cutting into Russia Piece by Piece

A week ago, Russia’s equivalent of Amazon, Wildberries, was virtually unknown to anybody who was not familiar with the inner workings of either Russian business or everyday life. Just like a week earlier most people did not know much about the naval traffic in the Sea of Azov. And before that not many even well-informed commentators and readers knew just how many large oil refineries operated in European Russia.

Since then, courtesy of meticulous Ukrainian planning, a large portion of oil refineries in Russia are undergoing repairs, the Sea of Azov is mostly devoid of vessels, and the internet is following the developments on the Wildberries bingo cards.

None of these measures can stop the war in one fell swoop. What they do, however, is deliver the ‘death from a thousand cuts’.

Just like the attacks on the oil refineries and shipping in the Sea of Azov have both obvious and invisible benefits, targeting warehouses has its immediate rewards and concealed returns that are not random and form part of a strategic plan. What are they?

What is Wildberries?

Wildberries is Russia’s largest online marketplace, controlling roughly 45% of the country’s e-commerce. Hundreds of thousands of sellers trade through it. When Western brands pulled out of Russia after 2022, Wildberries became the main channel for parallel imports — goods sourced through Turkey, the UAE, and Central Asia that kept sanctioned products available on the Russian market. Everything from iPhones to designer clothing, to bulletproof vests and drone components. It accounts for about a fifth of all retail sales in Russia, and its logistics run through a network of enormous centralised fulfilment centres. They are the ones now burning.

Russia’s online retail market is dominated by three platforms: Wildberries, Ozon, and Yandex Market. Together, Wildberries and Ozon alone control 77% of the country’s e-commerce. This setup was not accidental. Smaller operators were squeezed out through legal changes and unviable commercial terms targeting independent online trading. The resulting market belongs to a select elite and controls the vast majority of goods, sellers, and logistics via a very small number of very large centres. Like the majority of business in Russia, the Kremlin consolidated its control over it, in the process creating a perfect target for Ukraine.

So far, one week of strikes has destroyed roughly $2-3 billion in goods and infrastructure. The goods losses fall primarily on the sellers; the rebuild costs on the company. But to grasp the scale: Wildberries made $2.2 billion in profit last year. The entire RWB group is valued at $12.6 billion. One week of strikes has generated losses comparable to a full year’s profit.

Why Wildberries?

The official justification is straightforward. According to Zelenskyy, the fulfilment centres were supplying the Russian military with drone components, navigation equipment, and sanctioned electronics. A search of the Wildberries website returns over 78,000 items marketed as military supplies, some labelled “tested in the SVO”, Russia’s official term for the war in Ukraine.

The immediate economic damage is equally obvious. Over 10% of Wildberries’ logistics capacity has been destroyed. For a company that handles a fifth of all retail sales in Russia, that is a significant blow. But what is more — it limits the funds that will make their way into the Russian budget.

However, the blow this deals to Russia as a party to the war is far more extensive.

The Damage Dealt Through Wildberries

This is where it gets interesting. According to reports, anywhere from half a million to eight hundred thousand sellers have been affected so far. And if the current pattern continues, we may only be halfway through the Ukrainian campaign against the retail sector in Russia.

These people have business loans to repay, mortgages to cover, employees to pay. Many of them will have to declare bankruptcy. According to industry estimates, only 5-7% of Wildberries sellers carry insurance — in a country where private property can be seized and redistributed at will, insuring it is essentially a pointless luxury. The decision on compensation to sellers is still being debated. Wildberries changed their T&C shortly before the attacks, renouncing any responsibility in case of drone strikes, and sellers indicated their consent by continuing to trade on the platform. While Wildberries has walked back on this and started paying out some compensation (although the sums are laughable so far), it does not have enough money to cover this kind of loss.

That will affect the banking sector, some of which is already on the verge of requesting a government bailout which is unlikely to come. According to Igor Lipsits, former head of the macroeconomics department at the Higher School of Economics, the link between market and economy in Russia has broken down so completely that in some cases the interest rates on deposits banks are offering exceed the interest rates on loans — a sign that banks are desperately trying to prevent depositors from withdrawing their money. Reduced cash flow under these circumstances comes at the worst time possible. In a functioning economy, losses like these would hurt but they would not cascade. In Russia’s current environment, they do.

What is more, even people whose wares have not been affected look likely to be hit — Wildberries is not allowing traders to withdraw their goods from the undamaged warehouses. As a result, traders who still have goods to sell might have to wait patiently until they no longer have anything to sell.

The Human Factor

The situation also presents a challenge to an entire layer of society.

Unlike ordinary folk, these are people who have the wherewithal to create their own business as well as provide employment for others. Some of them are high earners and skilled researchers in their chosen fields. They are not easily fooled into believing the claptrap the Russian government routinely spouts. But they are not interested in politics, and until now they have not been affected by them. Now they are. Their economic interests no longer align with the war. They do not have any power over it, but they join the ever-growing number of people who want the war to end. Yes, for now most of these people want the war to end with Ukraine finally defeated, but eventually they will want the war to just end. Remember — a thousand cuts. This is but one.

These people are also a source of income and livelihood to thousands of others they employ. When many of them are faced with cutbacks and closures, they will bring with them a wave of redundancies. This comes on top of an already difficult employment situation in Russia. Although it might sound counterintuitive, Russia has a catastrophic demographic situation and related workforce shortages, and at the same time high unemployment due to a collapsing economy. Many businesses are unable to pay wages due to cash flow problems, lack of access to investment due to sky-high interest rates and overall deterioration of the business climate. This will add to growing unemployment which according to Lipsits amounts to roughly 7% when both hidden and open unemployment are taken into account.

Will it Stop with Wildberries?

A short while ago Ukraine’s president Zelenskyy announced the 40-day campaign intended to force Russia to come to the negotiating table. The targeting of fulfilment centres falls well within that scope, as did the clearing of the Sea of Azov from the majority of Russian sea transport and the disabling of oil refineries before that.

At the same time, it is fairly obvious that Ukraine will need to continue with the ‘persuasion’ campaign beyond the 40-day limit. Nothing that the Kremlin has said or done indicates that it intends to call it a day.

We can also expect that once Russia has spent some time and funds on repairing the oil refineries, Ukraine will gladly revisit them. As it will visit the rebuilt fulfilment centres. In fact, this might become a regular service update. The more industries are affected this way, the more targets Ukraine has to choose from and the more pressure there is on the Kremlin to keep things from falling apart.

While we do not know what Ukraine’s next line of targets will be, we can be almost certain that come autumn, Russian energy infrastructure will be high on the list. Moscow alone with its ring of power stations on the outskirts of the capital is a choice morsel.

One might argue that Russia can start targeting Ukrainian industry in retaliation, except that Russia has been doing exactly that for over four years. Not hitting back has not been productive for Ukraine. And while responding in kind is unlikely to bring a direct and immediate result, it is but one more cut. And this time Ukraine is holding the knife.