Russians are used to crises – but after almost ten months of war, the situation is desperate. Many have lost their jobs, businesses are broke, everything is becoming more expensive. And then there’s the fear of further drafts. But Putin is probably relying on a characteristic of his compatriots.
This year, many Russians who are otherwise willing to spend, especially around the New Year celebrations, have lost the shopping fun. The metropolis of Moscow, for example, shines with opulent decorations and the Jolka, the Christmas tree, on every larger square – as if to prove that energy is the least of the problems of the resource superpower. But the glamor can hardly hide the many problems created by the war against Ukraine: many shops are closed. The shopping centers are sometimes deserted. Restaurants lament a lack of New Year celebrations.
Boutiques by Dior, Chanel and Swarovski are empty in Moscow’s Yevropejski shopping center at Kiev Train Station. Thousands of Western companies have ditched their representative offices in Russia because of Moscow’s war against Ukraine, which has seen EU and US sanctions make doing business difficult or impossible. Numerous shopping centers are on the verge of bankruptcy, says economics professor Kirill Kulakov. The closures during the pandemic alone put many in trouble. “The problems have now worsened after the start of the special military operation in Ukraine and because of the population’s declining purchasing power,” he said in a radio interview. And Kulakov expects the situation to get worse.
Many Russians have lost their jobs due to the withdrawal of Western companies and investors. But even for those who have work, money is tight due to inflation of around 15 percent, because groceries and other everyday goods are becoming more and more expensive. In foreign reports, Russian state media repeatedly show demonstrators and other dissatisfied people from Germany full of malice who complain about energy prices, cold apartments and other hardships. This should show the Russians that things are better at home, where many apartments are overheated.
But anyone who commutes between Russia and Germany quickly realizes that the mood in Moscow and other cities is gloomy despite the blaze of lights. The standard of living falls. Nobody knows how long the war will last. There is great fear that Kremlin chief Vladimir Putin could call up even more reservists for the war. Even if Putin smiles away at the problems when he appears on television, people’s uncertainty is palpable.
Many figures reflect this. Sellers of furniture, household appliances and electronics are complaining about sales slumps of 30 percent or more. The situation is similar for building materials, shoes and clothing as well as cosmetics. True, despite the departure of Apple in Moscow, getting the latest iPhone is not a problem. But not least because of the state-controlled ruble exchange rate, people have to dig deep into their pockets.
So-called parallel imports have increased significantly. Goods are imported into Russia by third parties bypassing the manufacturer – circumventing sanctions. Turkey and Kazakhstan, which do not support the West’s sanctions, are important partners for Russia here. High-tech items for industry and armaments are also in demand in Russia. Here not only the sanctions and especially the ban on chip deliveries, but also a worldwide shortage of these components are a hindrance.
The crisis is particularly noticeable in the Russian car market. According to industry information, new car sales fell by a good 60 percent from January to November. Of the once 60 brands of cars sold in Russia, 14 remain: 3 Russian – Lada, UAZ and GAZ – and 11 Chinese. The restart of the Soviet brand Moskvich, hailed by Moscow bureaucrats, is a copy of the Chinese small car JAC JS4.
While the selection is modest, the prices are handsome. A video is circulating on social networks in which a buyer is upset that the Chinese SUV model Chery Exceed is being sold in a Moscow motor show for the equivalent of almost 90,000 euros. “You can buy a Mercedes GLE for that in the USA.” Here he gets a Chinese car that costs a third in the country of origin, the man scolds.
Like the car industry, the real estate industry is also complaining about sales problems. There is an oversupply because people have no money to buy a house. According to statistics, construction companies can currently sell every third apartment in a new building. The situation threatens to worsen in the coming year as the government-backed mortgages that have been supporting the market so far will expire. Then several construction companies are threatened with bankruptcy.
So far, Putin and his government have offered few solutions to the problems. Rather, the Kremlin relies on the crisis-tested frugality of many Russians. When Putin was once asked whether it wasn’t a bad thing that there was hardly any color on yoghurt pots, for example, he replied whether attractive packaging was more important than Russia’s sovereignty. He meant that despite all the disadvantages and sanctions, Russia would continue undeterred with its own foreign policy and with it the war in Ukraine.
