A Blog by Jonathan Low

 

Mar 23, 2022

"Back In the USSR:" Russian Shoppers Suffer Long Lines Again As Sanctions Bite

Back to the future, as sanctions, a collapsing ruble and shortages of essential foods and goods reawaken memories of the bad old days. 

The looming question is whether the long-suffering populace, which had become accustomed in recent years to a middle class lifestyle, will endure privation. JL 

Andrew Roth reports in The Guardian, image Newsweek:

A run on Russian staples have revived fears that the Kremlin’s invasion in Ukraine will lead back to the shortages or endless queues of the Soviet Union. Shortages are a first taste of what is going to be a hard year for Russia, marked by a massive economic contraction, high inflation and cutoff from the globalised economy. As Russia’s economy contracts, inflation is expected to skyrocket as high as 20% this year. “I think we are going back to a USSR. I’m not seeing it as a temporary shock unless there is a change in government.”

The lines for sugar in Saratov were hard not to compare to the Soviet era, part of a recent run on Russian staples that have revived fears that the Kremlin’s invasion in Ukraine will lead to a virtual slide back to the shortages or endless queues of the Soviet Union.

Bags of sugar and buckwheat began disappearing from local markets in early March, just a week after Russia launched its invasion of Ukraine. And when the local mayor’s office announced that it would hold special markets for people to buy the staples last week, hundreds showed up.

“People are sharing tips about where to get sugar. This is crazy,” said Viktor Nazarov, who said that his grandmother had tasked him with visiting the special market last weekend to stock up. “It’s sad and it’s funny. It feels like a month ago was fine and now we’re talking about the 1990s again, buying products because … we’re afraid they’ll disappear.”

After an hour and a half waiting at the city’s main square, he was limited to buying one bag of five kilograms, he said.

Other videos shared on social media have shown fights for sugar in markets in other cities in Russia, all while officials have maintained that the shortage is part of an artificial crisis.

“What is happening with sugar today is aimed at creating a panic mood in society,” said the governor of Russia’s Omsk region, which is facing similar shortages, on Tuesday.

 

The sudden shortages are a first taste of what is going to be a hard year for Russia, marked by a massive economic contraction, high inflation and an unprecedented cutoff from the world for a globalised economy.

“I think we are steadily going back to a USSR,” said Elina Ribakova, deputy chief economist for the Institute of International Finance, indicating that the Russian government would likely continue to close off from the world economy. “I’m not seeing it as a temporary shock and then we’re going to go back to the liberal democracy and reintegration into the world, unless there is a change in government.”

As Russian troops pressed forward in Ukraine, stores in some big cities have reported shortages of essential products such as tampons. Prices on imported goods, such as Tide detergent, clothing, or toothpastes, have also skyrocketed as the rouble tumbled in value.

For the rise in price on basic goods, the government has blamed panic buying and speculators, saying it has more than enough supply to satisfy demand.

“As in 2020, I want to reassure our citizens now: we fully provide ourselves with sugar and buckwheat. There is no need to panic and buy up these goods – there are enough of them for everyone,” said Viktoria Abramchenko, a Russian deputy prime minister, in a public address.

More worryingly, medicines such as insulin have begun disappearing from pharmacy shelves. Some polls have indicated that Russian doctors are facing shortages of more than 80 medicines at pharmacies, including insulin and a popular children’s anti-inflammation medicine. Once again Russian officials blamed panic buyers, noting that most western pharmaceutical companies have said that they will not limit shipments of essential medicines to Russia.

But as Russia’s economy contracts, inflation is expected to skyrocket as high as 20% this year, said Ribakova. For ordinary Russians, she said, that would mean “poverty. Poverty and desperation.”

“People were so busy with just surviving,” she said. “Getting basic drugs, basic foods, surviving on minimal pensions … people are coming very skinny to this crisis. They don’t have savings, they were barely surviving before, and now they’ll be spending days in queues and lacking access to basic healthcare and drugs.”

Natalia Zubarevich, an expert on the economy of Russia’s regions, noted that the main reason for the recent shortages was not just the damage from sanctions but also the failure of supply chains and hesitancy to make big purchases while the value of the rouble remains so volatile.

“I understand that the instincts of the Soviet-Russian people don’t change,” she said during a recent radio show, noting how sugar was a traditional item to purchase during unsure economic times. “But I’d think like this: If you have a beloved pet, think about where the pet food is made and from what … I was berating myself because I bought too little [medical pet food]. This isn’t sugar. I should have bought more.”

Thousands of employees have been affected as large foreign companies including Ikea and McDonald’s have temporarily exited the market. Meanwhile, local factories and other employers have also begun halting production. Earlier this month, AvtoVAZ, one of the country’s largest automakers, had been forced to halt production of certain lines of vehicles.

And Moscow’s Sheremetyevo, the country’s largest airport, said on Monday that it would have to furlough a fifth of its staff and halt further hiring as passenger traffic slows due to sanctions.

In the longer term, entire sectors of the Russian economy could be at risk, as the lack of access to western component parts could affect everything from air travel to production of consumer goods.

“Economic growth is sacrificed for the sake of this wartime economy,” said Maria Shagina of the Finnish Institute of International Affairs and the Geneva International Sanctions Network.

The additional risks and volatility of operating in Russia now mean that many companies will decide not to reenter the market, she said.

And the recent exodus of the youngest and the brightest of the country makes it unclear who will step in to prepare alternatives.

“It is possible that a couple of years down the road that there will be Russian alternatives for products from Microsoft to tampons but it will take time to produce,” said Ribakova. “And the question is who will produce that.”

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