LONDON – After sanctions halted production at the Kaliningrad assembly plant, Russian carmaker Avtotor announced a lottery for free 10-acre plots of land – and the chance to buy seed potatoes – so employees can grow their own food on the westernmost edge of the Russian empire during a “difficult economic situation” .
In Moscow, shoppers complain that a kilo of bananas has gone up to 100 rubles from 60, while in Irkutsk, an industrial city in Siberia, the price of tampons at a store has doubled to $7 .
Bank shortened receipts to address paperwork shortages. Clothing manufacturer says they are out of buttons.
“Russia’s economic outlook is particularly bleak,” Bank of Finland said in an analysis this month. “By waging a brutal war against Ukraine, Russia has chosen to become poorer and less economically influential.”
Even Central Bank of Russia predicted a staggering 18 to 23 percent inflation this year and a 10 percent drop in total output.
It is not easy to figure out the impact of war and sanctions on the Russian economy at a time when even using the words “war” and “invasion” is illegal. President Vladimir V. Putin affirmed that the economy is overcoming the measures imposed by the United States, Europe and other countries.
The financial moves made by Moscow helped cushion the initial economic damage. At the start of the conflict, the central bank doubled interest rates to 19% to stabilize the currency, and was recently able to lower rate to 14 percent. The rubles being traded at its highest level in more than two years.
And although Russia has had to sell its oil at a discount, the dizzying rise in global prices is causing oil revenues to soar to $180 billion this year despite the production cuts, according to Rystad Energy. The supply of natural gas will add $80 billion to Moscow’s coffers.
In any case, Mr. Putin shows little sign that foreign pressure will prompt him to scale back military strikes against Ukraine.
However, Avtotor’s lottery ticket and what it says about the traumas facing the Russian people, along with shortages and rising prices, are signs that economic hardship is wearing off. have stalked a number of Russian businesses and workers since the war began nearly three months ago.
Analysts say a rift with many of the world’s biggest trading partners and technology powers will cause deep and lasting damage to the Russian economy.
“Really tough times for the Russian economy are still ahead,” said Laura Solanko, senior adviser at the Bank of Finland’s Institute for Emerging Economies.
Solanko said that the amount of supplies and spare parts that are keeping businesses from shutting down will be exhausted in the next few months. At the same time, the lack of sophisticated technology and investment from abroad will hinder Russia’s production capacity in the future.
The Bank of Russia has acknowledged that consumer demand and lending are declining, and that “enterprises are facing significant difficulties in production and logistics”.
Ivan Khokhlov, co-founder of 12Storeez, a clothing brand that has grown from a showroom in his apartment in Yekaterinburg to a large company with 1,000 employees and 46 stores, is facing this problem.
“With each new wave of sanctions, it becomes more difficult to produce our products on time,” Khokhlov said. The company’s bank accounts in Europe remained frozen because of sanctions shortly after the invasion, while logistical disruptions forced him to raise prices.
“We face delays, disruptions and price increases,” he said. “When our logistics with Europe was destroyed, we became more dependent on China, which also has its own difficulties.”
Hundreds of foreign companies have severed their business in or withdrawn from Russia altogether, according to an accountant from the Yale School of Management. And the exodus of companies continues this week with McDonald’s. The company said after three decades it planned to sell its business, which includes 850 restaurants and franchises and employs 62,000 people in Russia.
Recently, Artem Komolyatov, a 31-year-old technology worker in Moscow, said: “I came across the first McDonald’s that opened in Russia in the 90s in Russia. “It’s completely empty now. Lonely. The sign is still hanging. But inside it’s all blocked. It’s already dead.”
Nearby, he said, two police officers wearing bulletproof vests and automatic rifles stood guard, ready to confront any protesters.
In the Leningradsky train station, at one of the few franchises still open on Mondays, customers line up for over an hour to enjoy the last of McDonald’s burgers and fries.
French car manufacturer Renault also announced an agreement with the Russian government to exit the country on Monday, although it includes the option to buy back its shares within six years. And the Finnish paper company, Stora Ensosaid it is divesting itself from three corrugated iron packing plants in Russia.
Deeper damage to the structure of the Russian economy is likely to increase in the coming years even in the area of monetization. energy sector.
Europe’s vow to eventually turn its back on Russian oil and gas will force Moscow to seek further customers, particularly in China and India. But the pivot to Asia, said Daria Melnik, senior analyst at Rystad Energy, “will take time and massive investments in infrastructure that in the medium term will drive output and revenue of Russia fell sharply”.
Without enough storage, Russia may have to cut its overall oil and gas production. However, wells are not like faucets, which are easy to turn on and off. Cap one, and it will most likely never be used again.
“Some of Russia’s spare capacity will be destroyed,” Melnik said.
Anton Siluanov, Russian Finance Minister, says that sanctions can cause many 17 percent off on oil production this year.
The larger slides are evident in other areas. Passenger car manufacturing fell 72% in March from the previous year.
In the industrial sector, which includes chemicals, oil, gas and manufacturing, the average four-week import volume is down 88% from early February, before the invasion, according to FourKites, a supply chain tracker response. The volume of imports related to consumption fell by 76%, making it difficult for Russians to purchase tampons and mobile phones, and for hospitals to obtain replacement parts and supplies for dialysis machine and ventilator.
In a survey of healthcare professionals in April, 60% of respondents said they had experienced a shortage. Among imported products, the items most lacking include gloves, catheters and disposable suture materials.
For consumers, price increases for basic goods have been noticed to the extent that Twitter account There have been mocking posts on social media, in which Russians lament the price hikes on everything from Palmolive shampoo to nectarines. It’s called But What Happened? and has nearly 44,000 followers.
A 26-year-old Moscow resident, who asked not to use her name for fear of reprisal, said the cost of imported fruit, like the bananas she puts in her oatmeal every morning, has skyrocketed.
“It’s a product I buy every time I go to the store, so I recognize it immediately,” she says. She says her total grocery bill has increased by about a third.
In Irkutsk, the price of a box of tampons has doubled from $3.50 within weeks of the war’s start, said a 23-year-old designer who earns $450 a month and asks her not named. “For the same amount of money, I could buy a good grocery cart or a new t-shirt,” she said, comparing pre-war prices.
Outside the country, Russia’s economic prospects are also shrinking. Earlier this month, Fennovoima, a Finnish company that operates nuclear power plants, suddenly announced that it has terminated a contract to build a plant north of the city of Hanhikivi with Rosatom, Russia’s State Nuclear Energy Corporation, which lists Putin as its founder.
“We are extremely disappointed,” Rosatom, which owns a third of the project through a Finnish subsidiary, said in a statement. declare: “We are completely unable to explain the reasoning behind this decision.”
Ivan Nechepurenko contribution report.
