Economic penalties imposed on Russia are beginning to show

Hey there, time traveller!
This article was published 27/02/2022 (935 days ago), so information in it may no longer be current.

ST. PETERSBURG, RUSSIA — Desperate for a coffee and a bite to eat early on Monday morning, I pulled over at the roadside fuel station with the bright blue neon lights.

I feel slightly guilty admitting now that the name in lights was Gazprom Neft, one in a chain of gas station convenience stores partially owned by the Russian government. It’s not under sanctions for Russia’s invasion of Ukraine, but still …

I ordered a cappuccino and a chocolate croissant and looked around. Mars bars — my favourite — Coke bottles and Pringles chips. A seemingly endless variety of products. The best the world has to sell to Russia and to Russians, something multinational companies have been doing with gusto for 30 years.

How long will it be before those bulging shelves fall bare?

Some in the west still conjure up Soviet shortages when they think of Russia. Indeed, there is even a restaurant chain — Sovietsky Vremena — that cashes in on the kitsch, serving up joyless lukewarm pelmeni and borscht — originally a Ukrainian dish — in drab surroundings.

But the modern reality — especially in Russia’s big cities — is altogether different.

At least it was, until Russian troops rolled over the Ukrainian border last Thursday in an unprovoked military attack. It has been condemned by everyone from the International Judo Federation, which dumped Russian President Vladimir Putin as its honorary president and ambassador, to the normally neutral Switzerland, which has agreed to enforce European sanctions and freeze Russian assets.

On Monday morning, five days after the world had tuned up and begun singing in chorus, the weight of the economic penalties being imposed upon Russia began to be felt.

In 2018, when Russia hosted the World Cup, one Canadian dollar was worth 50 rubles. At its peak on this frazzled day of economic infamy, a loonie bought you 85 rubles.

Apply that to one of the snazziest luxury cars in the streets of Moscow these days, the Mercedes Maybach, which currently retails for a base price of $229,900 Canadian.

In July 2018, when France hoisted the World Cup trophy in victory, the Maybach would have cost the equivalent of 11-million rubles (roughly $128,000).

When Putin announced to the world last Thursday he had invaded Ukraine, the Maybach was going for 14.7-million rubles.

On Monday, it would have taken nearly 20-million rubles to fulfil the driving dream of every wannabe Russian oligarch.

This weekend, British Foreign Secretary Liz Truss described the world effort to impose sanctions against Moscow as “cutting the Russian economy off at the knees.”

What will a Maybach cost tomorrow? In a week? In a year? Or a Mazda, for that matter?

From the videos and photos, it appeared Monday that anyone with so much as a kopek to their name was trying to withdraw their savings in any currency but for the ruble.

On top of that, Russia’s Central Bank more than doubled the interest rate to 20 per cent from 9.5 per cent Monday, shortly before it shut the country’s stock exchange for trading.

The Russian billionaires, who have maintained a pact of silence throughout Putin’s long reign at the head of their country, are starting to get nervous. Frustrated, angry they are calling for the strong intervention of a government while the Kremlin rails about “drug addicts and neo-Nazis” in Kyiv.

To some, Putin has never looked more wild and unstable.

“If this is a real crisis, then we need real crisis managers, not science fiction writers with presentations,” Oleg Deripaska, a Russian energy and aluminum baron, wrote on his Telegram channel Monday. “We need to change economic policy. We need to end all this state capitalism.”

We also need peace, Deripaska said, in a lighter version of the protest calls that are building across the country related to the Russian attack on Ukraine.

“Peace is very important,” he posted a day before the market madness. “Negotiations must start as soon as possible.”

They started Monday, a Russian delegation meeting the Ukrainians at a spot on the border with Belarus. They came out of the talks spouting the same positions they held going in.

Under siege, Ukraine wants a ceasefire and a Russian withdrawal from its country. Facing the prospect of isolation more sweeping than the frostiest days of the Cold War, Putin’s negotiators insist its security demands be met: that NATO retreat from its borders, that the illegally annexed territory of Crimea be recognized as Russian land, that Ukraine be “demilitarized and de-Nazified.”

In short, the same demands Russia was negotiating with the U.S., NATO and Ukraine right before Putin’s troops invaded less than a week ago. Whatever was said at the meeting, it was enough for them to agree to meet again.

Not enough, though, for the fighting, the shelling, the dying to stop — nor the other repercussions that have started to chip away at lives and livelihoods, at links to the world outside of the gates being erected at Russia’s borders.

Allan Woods is a Moscow-based reporter for the Star. Follow him on Twitter: @WoodsAllan