For Russians, the collapse of the Soviet Union ushered in the world of consumer capitalism, and over the past three decades the middle class has become increasingly accustomed to consumer goods and services. ‘West.
US and European sanctions against Russia, following its invasion of Ukraine, will hamper the ability of the Russian oligarchs to conduct business as usual. Higher prices, caused by a collapsing ruble and the prospect of inflation, will hurt the poor; even before the invasion, the West’s earlier sanctions against Russia, over its annexation of Crimea, had already high poverty levels in the country.
The middle class, however, is feeling a slow and sure squeeze: a gradual separation from the Western brands and products they rely on. “The older generation tells me that they lived through the 1990s and know how to handle these situations,” said Anna, a researcher for a design firm in St. Petersburg, who just asked to be mentioned by first name. “But we, the younger generation, are in shock.”
Russian sanctions lead to bank runs
Sanctions against Russian banks – especially Sberbank, which pays 60% of Russians’ salaries – are triggering panic over deposit security. Anna said her mother spent half an hour in a queue at an ATM, and even that was relatively brief. “I was in a supermarket where there was an ATM, and the queue for it spread all over the supermarket,” Anna said. His own bank card, issued by the still unlicensed Tinkoff bank, still works.
But systems connected to sanctioned banks, like Apple Pay, Visa and MasterCard, have been suspended, making it more difficult to pay for online services. Other online services, such as Spotify and Airbnb, have also gone out of business.
The list of manufacturers who have suspended sales or exports to Russia is long and growing: Nike, Boeing, Dell, Harley-Davidson, Honda, Swatch, H&M, Volkswagen, Apple, Disney, etc. Between that, the crashing ruble and the shutdown of several shipping servicesRussians also stock up on products before their price gets out of reach or they simply disappear from the shelves.
Anna’s mother bought supplies of her heart disease medication, imported from Germany. Others buy luxury goods, appliances and electronics – perhaps as a hedge, the economic historian Adam Tooze wrote, in case they could be resold if the ruble collapses further. “My friends all buy iPhone chargers,” Anna said. Official Russian smartphone and laptop resellers are running out of their products or saying they can’t sell them, said Alex Suvalko, who stopped by to inquire about an iPhone at several stores in Moscow last week.
On Wednesday March 2, Suvalko, a researcher in cultural studies at a Moscow university, went to an IKEA to buy a refrigerator and other supplies for his new apartment, only to find that it had been cleaned by shoppers. “I had to go to an IKEA in Nizhny Novgorod, about 450 km away, to buy these things,” Suvalko said on Wednesday (March 2). He was lucky; the next day, IKEA announced that it was closing its stores and factories in Russia.
Sanctions hurt Russian small businesses and investors
When the sanctions hit big Russian companies, their market value plummeted. Alex Grand, a talent management consultant for several Moscow companies, said Quartz that about 30% of the value of the banking and oil stocks in his portfolio have evaporated. He had anticipated this, however, he said. In preparation, he had invested in foreign currencies, which appreciated as the ruble fell.
The uncertainty of the financial future frightens companies that depend on imports. A mid-level employee at a wine importer in St. Petersburg says they received overseas shipments daily before the war.
“On average wine prices have already gone up by 30-60%,” he said, asking to be quoted anonymously because he is not authorized to speak to reporters. “With some wines, 100%.” Retailers who had already bought bottles on credit from the importer before last week at the prevailing dollar-ruble exchange rate now need to figure out how much to mark up the bottles in accordance with the new exchange rate, he said.
And if they can, people want to leave, Anna said. “I have colleagues who want to move to Georgia or Armenia,” she said. “Because otherwise we’re sitting here waiting for the internet to be shut down, for the borders to be closed, and then we’ll become like North Korea. The world sees us as its enemy, but our own state also sees us as its enemy. Everything is broken and we don’t know what the future holds.
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