Bankruptcies, inflation, fear of war: The mood in Russia is gloomy

Bankruptcy, inflation, fear of war
In Russia, the mood is bleak

The Russians are used to crises – but after almost ten months of war, the situation is desperate. Many people have lost their jobs, businesses have collapsed, and everything is becoming more expensive. And there is the fear of drafts. But Putin probably trusted the character of his comrades.

Many Russians who are willing to spend this year, especially around the New Year celebrations, have missed out on the shopping fun. The metropolis of Moscow, for example, shines with rich decorations and a zholka, the Christmas tree, in every major square—as if to demonstrate that energy is the least of the resource superpower’s problems. But glamor can’t hide the many problems created by the war against Ukraine: many shops are closed. Shopping centers are sometimes deserted. Restaurants lament the lack of New Year’s celebrations.

Dior, Chanel and Swarovski boutiques are empty in the Evrobezhsky shopping center at Moscow’s Kiev train station. Thousands of Western companies have abandoned their representative offices in Russia because of Moscow’s war on Ukraine, and EU and US sanctions have found it difficult or impossible to do business. Many shopping centers are on the verge of bankruptcy, says economics professor Kirill Gulakov. 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 the purchasing power of the population is declining,” he said in a radio interview. And Gulakov expects the situation to worsen.

Many Russians have lost their jobs due to the withdrawal of Western companies and investors. But even for working people, money is tight with inflation hovering around 15 percent, as the cost of groceries and other everyday items continues to rise. In foreign reports, Russian state media repeatedly show demonstrators and other dissidents from a hostile Germany complaining about energy prices, cold apartments and other hardships. This should show the Russians that things are better at home where many apartments are heated.

But anyone who travels between Russia and Germany quickly realizes that despite the lights on in Moscow and other cities, the mood is dark. Quality of life decreases. No one knows how long the war will last. There are growing fears that Kremlin leader Vladimir Putin may call even more security forces into battle. Although Putin laughs off the issues when he appears on television, the public’s uncertainty is palpable.

Sales decline of 30 percent and more

Many statistics reflect this. Furniture, home appliance and electronics retailers are reporting sales declines of 30 percent or more. The same is the case with construction materials, shoes and clothing and cosmetics. True, despite the departure of Apple in Moscow, getting the latest iPhone is not a problem. But because of the government-controlled ruble exchange rate, people have to dig deep into their pockets.

So-called co-imports have increased significantly. Goods are imported into Russia by third parties other than the manufacturer – barring sanctions. Turkey and Kazakhstan, which do not support the West’s economic sanctions, are important partners for Russia here. High-tech materials for industry and weapons are also in demand in Russia. Here not only economic sanctions and especially the ban on chip supply, but also the global shortage of these components is an obstacle.

The crisis is particularly noticeable in the Russian car market. According to industry data, new car sales fell 60 percent from January to November. Of the 60 brands of cars sold in Russia at one time, there are 14: 3 Russian – Lada, UAZ and GAZ – and 11 Chinese. A reboot of the Soviet brand Moskvich, hailed by Moscow authorities, is a copy of the Chinese small car JAC JS4.

Prices are rising fast

Although the selection is modest, the prices are pretty good. A video of an upset buyer of the Chinese SUV model Chery Exceed being sold at the Moscow Motor Show for the equivalent of almost 90,000 euros has gone viral on social media. “You can buy a Mercedes GLE in America for that.” Here he gets a Chinese car that costs a third of the country of origin, the man scolds.

Like the car industry, the real estate industry also complains about sales problems. The supply is high because people don’t have money to buy houses. According to statistics, construction companies can currently sell every third apartment in a new building. The situation is likely to worsen in the coming year as government-backed mortgages, which have so far supported the market, expire. Then many construction companies face the threat of bankruptcy.

So far, Putin and his government have offered few solutions to the problems. Instead, the Kremlin relies on the crisis-tested austerity of many Russians. When Putin was once asked whether it was a bad thing that yogurt pots had no color, he replied, for example, that attractive packaging was more important than Russia’s sovereignty. Despite all the disadvantages and sanctions, Russia will continue its own foreign policy and the war in Ukraine, he said.

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