Yevgeny Shumilkin will return to work on Sunday. To prepare, he pulled the familiar “M” out of his McDonald’s shirt and covered the “M” on his McDonald’s jacket with a Russian flag sticker.
“It will be the same cakes,” said Mr. Shumilkin, who maintains equipment at a restaurant in Moscow. “Just under a different name.”
McDonald’s restaurants will reopen in Russia this weekend, but no Golden Arches. After the American fast food giant drawn this spring In protest against President Vladimir Putin’s invasion of Ukraine, a Siberian oil magnate bought 840 stores in Russia. Because most of the ingredients come from within the country, he said, restaurants can continue to serve many of the same dishes.
The game could work – underscoring the surprising resilience of the Russian economy in the face of one of the fiercest sanctions ever imposed by the West. Three and a half months after the war, apparently sanctions – and torrents of western companies voluntarily leave Russia – has failed to completely wreck the economy or provoke a popular backlash against Mr.
Russia has spent much of Putin’s 22 years in power integrating into the world economy. Untangling such vast and intertwined business relationships turns out to be no easy feat.
To be sure, the effects of sanctions will be far-reaching and far-reaching, with the consequences just beginning to show. According to economists and businessmen, living standards in Russia are falling and the situation could get worse as inventories of imports are low and more and more companies are announcing layoffs.
Some of Russia’s do-it-yourself efforts may not be up to Western standards. When the first model after the sanctions of Lada Granta – a Russian sedan co-produced by Renault before the French carmaker’s debut this spring – rolled off the assembly line at a plant near the Volga on Wednesday, it lacks airbags, modern pollution control systems. or anti-lock brakes.
But the economic slowdown hasn’t been as severe as some experts had predicted after the February 24 invasion. Inflation remains high, around 17% annually, but it has dropped from a 20-year peak in April. A closely watched measure of factory activity, the S&P Global Purchasing Managers’ Index, shows that Russian production expanded in May for the first time since the war began.
Behind the positive news is a combination of factors in Putin’s favor. Chief among them: high energy prices, which allowed the Kremlin to continue funding the war while increasing pensions and wages to appease ordinary Russians. The country’s oil revenue rising 50 percent this year.
Add Doa, the skillful work of the Central Bank prevented panic in financial markets after the invasion and helped the ruble recover from its initial crash. The majority of store shelves are still stocked, thanks to ample inventories and alternative import routes established through countries like Turkey and Kazakhstan – and the fact that Russian consumers are buying less. .
Even the new Lada Granta is less noisy than many observers expected: Despite the lack of foreign parts, it will still come with power steering and power windows.
“Things are not as bad as expected”, a Russian car website declare.
The survival of the Russian economy is in Mr. Putin’s hands by reinforcing his claim that Russia will stand up to the West’s determination to destroy it. He met young entrepreneurs on Thursday at a town hall-style event, his latest attempt to show that even if he goes to war, he wants to keep the economy going. economic operations and foreign trade activities. He asserted, even if the West does not do business with Russia, the rest of the world will.
“We will not have a closed economy,” Putin told a woman who asked about the impact of sanctions. “If someone tries to limit us to something, they are limiting themselves.”
For the rich, luxury goods and iPhones are still widely available, but more expensive, being brought into Russia from the Middle East and Central Asia. The poor have been affected by rising prices, but they will benefit from the pension increase and the minimum wage Mr. Putin announced last month of 10%.
Those most affected by economic upheaval are the urban middle class. Foreign goods and services are harder to buy now, Western employers are pulling abroad, and traveling abroad is becoming increasingly difficult and expensive.
But Natalya V. Zubarevich, an expert in social and political geography at Moscow State University, notes that many middle-class Russians have no choice but to adapt to a lower standard of living: At least half of Russia’s middle class, she estimates, works for the state or for state-owned enterprises.
“Sanctions will not end the war,” Ms. Zubarevich said in a phone interview. “The Russian public will tolerate that and adapt because they understand that they have no way to influence the state.”
Chris Weafer, a macroeconomic consultant long focused on Russia, published a note to his clients last week, saying that “some of our previous assumptions were wrong”. The note said inflation and the slowdown in the economy turned out to be less severe than expected. His firm, Eurasia Strategic Consulting, revised its forecast to show a smaller decline in gross domestic product this year – 5.8% instead of 7% – and forecast predict a recession extending into next year.
In a phone interview, Mr Weafer described Russia’s economic future as “dull, more debilitating”, with lower incomes, but still with basic goods and services. For example, a large juice company, warning customers that its boxes will soon be white because of the lack of imported paint.
“The economy is now moving into a near-stagnation phase where it could avoid a crash,” he said. “It’s a more fundamental level of economic existence, which Russia could continue for some time.”
On Friday, with inflation stabilizing, the Central Bank of Russia lowered its key interest rate to 9.5% – the pre-invasion level. On February 28, the bank increased it to 20% to try to deal with a financial crisis. The ruble, after plummeting in value in the days following the invasion, is now trading at a 4-year high.
One reason for the ruble’s unexpected strength is the sharp increase in global energy demand due to the pandemic. In June alone, the Russian government is expected to rake in more than $6 billion due to higher-than-expected energy prices, Finance Ministry speak last week.
Russo-Ukrainian War: Main developments
At the same time, Russian consumers have spent less – further elevating the ruble and giving Russian companies time to establish new import routes.
However, Russian officials concede that the most difficult times for the economy are likely to come. Elvira Nabiullina, the head of the central bank, said on Friday that although “the impact of the sanctions is not as severe as we initially feared”, it would be “too soon to say the effect” The full range of sanctions was evident.”
For example, it remains unclear how Russian companies were able to obtain microchips that are used in a wide range of goods. At Putin’s meeting with businessmen, one developer said he was “very interested in our microelectronics”.
Putin interrupted: “Me too. True.”
The ties that bind Russia’s economy to the West, which are now being untied, spanned decades – sometimes more than a century. Aeroflot, the national airline, has acquired many new jets from Boeing and Airbus and has positioned itself as a convenient transit airline for people traveling between Europe and Asia. In the Ural Mountains, a factory has partnered with Siemens, the German manufacturing giant, to produce modern trains to replace rusty Soviet vintage cars.
Banned from European airspace, Aeroflot is now focusing on domestic routes and working to switch over to Russian planes – a process that will take years. Siemens, which built telegraph lines across the Russian Empire in the 1850s and helped usher the country into the industrial era, announced its withdrawal from Russia last month.
“Sanctions choke the economy, which doesn’t happen immediately,” said Ivan Fedyakov, who runs Infoline, a Russian market consulting firm. “We only felt 10 to 15 percent of their effects.”
But when it comes to food, at least, Russia is more prepared. When McDonald’s opened in the Soviet Union in 1990, Americans had to bring everything in. Soviet potatoes were too small to make french fries, so they had to buy their own whole potato seeds; Soviet apples were not suitable for the pie, so the company imported them from Bulgaria.
But by the time McDonald’s withdrew this year, its Russian stores were already getting nearly all of their ingredients from Russian suppliers. So when McDonald’s, employed 62,000 workers in Russia. can keep its 25 restaurants open. Last month, he bought out McDonald’s entire business in Russia for an undisclosed amount.
On Sunday – Russia Day, a patriotic holiday – he will reopen 15 stores, including the former flagship of McDonald’s on Pushkin Square in Moscow, where, in 1990, thousands of Soviets lined up famously to enjoy the taste of the West. The chain will operate under a new brand that has yet to be revealed, although a new logo has been announced, which is said to represent a hamburger and fries.
Hash brown will have a Russian name, according to a menu leaked for a Russian tabloid. And, since the secret sauce is exclusive, no Big Mac will be offered.
