West’s sanctions, ruble’s drop, oil’s plunge hit Russians hard
MOSCOW — Russia’s economy has been battered this year by uncertainty over the conflict in Ukraine, the falling price of oil, Western sanctions and retaliatory Russian import bans.
Now, poor and middle-class Russians are increasingly challenging government insistence that a 40 percent drop in the value of the ruble — now worth a record low of 54 to the dollar — will affect mainly the rich.
Approval ratings have so far remained high for President Vladimir Putin, who has staked his reputation on Russia’s reemergence as an economic powerhouse after the turbulent 1990s. But Putin faces growing anger from middle-class families and even poorer Russians as their quality of life declines.
Mikhail Antonov, 27, a manager at a children’s goods store, had saved up this year to drive with friends from Moscow to Germany and spend a week visiting Christmas markets and the countryside. But the 30,000 rubles he has saved up have gone from being worth 670 euros, or about $830, at the start of the year to less than 450 euros, or $560, causing him to cancel the trip.
“This would have been my first trip abroad and my girlfriend and I had saved up,” he said. “Now because of the situation in Europe and Ukraine, everything has gotten more expensive and our savings have been reduced to nothing.”
According to Vladimir Kantorovich, vice president of Russia’s Tour Operator Association, travel abroad for the winter holidays is down 30 percent, and trips to Europe have fallen about 50 percent. On Wednesday, Russia’s flagship airline, Aeroflot, raised its ruble-denominated prices by 15 percent.
Olga Kupriyanova, 35, a law professor at Moscow State University, says her family of four feels the pinch particularly when it comes to putting food on the table. Inflation is estimated to reach 10 percent by early next year, and food is rising fastest. According to the Federal Statistics Service, chicken costs 27 percent more than it did last year, pork 25 percent, and the beloved staple of buckwheat 48 percent. Russians on average spend about 30 percent of their income on food, compared with 6.7 percent in the United States.
Russia’s economic woes stem from a trifecta of problems. First, oil and gas exports, which finance half of Russia’s budget, have been hit by the plummet in world markets: The global price of crude oil has fallen some 25 percent since the summer. Renaissance Capital analyst Oleg Kouzmin said if prices stay there, Russia could see its economy shrink by 3 percent next year.
Second, Russia’s banks, which were slapped with sanctions this summer as a response to Moscow’s role in Ukraine, have to pay off $90 billion in external debt before the end of 2015, which is becoming harder by the day as the ruble loses value. The central bank had tried to support the ruble but after spending $29 billion in October alone it gave up and floated the currency last month.
Finally, Russia banned Western meat, dairy, vegetables and fruit this summer in response to the sanctions, helping drive the steep spike in prices.
Last week, Russia’s economic development ministry revised its economic forecast for 2015, predicting a drop of 0.8 percent instead of 1.2 percent growth. Finance Minister Anton Siluanov has said the sanctions are costing Russia $40 billion a year, and falling oil prices another $90 billion-$100 billion.
Politicians and state-run television have pushed a narrative that only the rich will be affected by the depreciation of the ruble. But slowing growth and rising inflation have affected average Russians such as Kupriyanova and Antonov, who both earn less than the average Moscow salary of 50,000 rubles a month, now worth about $925.
“Politicians are trying to make the best of the situation, but this attacks low-income households more than middleand high-income households,” said Konstantin Sonin, an economist at Moscow’s Higher School of Economics. “They spend more on consumption and food, and they are the most vulnerable.”