Russian Consumers, Firms Feeling Impact of Sanctions as Ruble Keeps Diving

Ordinary Russians are increasingly starting to feel the bite of Western-led sanctions, media reports from inside the country have indicated.

The ruble fell once again today and, at the time of writing, is worth around USD 0.0090, or 26% less than on the day of the invasion of Ukraine (February 24). 

Kommersant reported that the number of people visiting restaurants in Moscow had plummeted since the start of what Russia has called “military operations in Ukraine.” In the period February 24 to March 1, footfall in restaurants dropped by up to 50%, with revenues for many chains dropping 20%-70%. One restaurant chain owner opined that “for Russians, going to a restaurant in the current situation feels inappropriate.”

Beauty salons have also seen a massive decline in trade, although “the flow of customers to fast-food restaurants” has increased, with Burger King Russia telling the media outlet that it had “recorded double-digit growth in revenue and traffic in the last week compared to the same period in 2021.”

Footfall at shopping malls is also on the up, with many apparently desperate to spend their ruble savings on electronic goods and other items that could retain their value in the event of an economic crash.

Wine and spirits prices are on the march, the same media outlet reported separately, with some producers that make use of imported distillates reportedly raising prices by as much as 30%.

Meanwhile, president Vladimir Putin has signed decrees aimed at fighting the economic fire, including measures that allow banks to limit and block the withdrawals of cash and other assets to overseas accounts.

Novaya Gazeta wrote that the decrees stop Russian residents “from transferring foreign currency under loan agreements, crediting foreign currency to their accounts outside the Russian Federation, as well as making money transfers without opening a bank account using electronic means of payment provided by foreign payment service providers.”

Furthermore, Russian exporters will be obliged to sell 80% of their foreign exchange earnings.

Also, as reported, the Central Bank, meanwhile, has ramped up the key interest rate from 9.5% to a whopping 20%.

This latter decision is likely to hit Russian businesses particularly hard, industry players told Novaya Gazeta.

Igor Sagiryan, the founder of the construction giant RKS Development, opined:

“We do not work for oligarchs, but with people who take a ruble mortgage or save up for housing. Where will those people get their money from? It won’t get any better. The situation will not be resolved. Regardless of your political views, the situation will be catastrophic for everyone.”

An unnamed Aeroflot official claimed that flight bans on the national carrier would provide a “nightmare” for fleet maintenance professionals, with the carrier effectively grounded.

And Leonid Novoselsky, the President of the consumer firm Gradient, lamented: 

“We have been in operation since 1991. We have experienced a lot of things in that time, but there has never been such a logistical and financial blockade as this to deal with. What do we do? We will have to produce our own components. There will be [a return to] subsistence farming.”

Others, however, took a different view, claiming that there would be “winners and losers” as sanctions and counter-sanctions were put into place.

Also, the Central Bank has suspended morning and evening trading on currency markets of the Moscow Exchange until March 5, with trading still suspended on the stock market.

The Russian banking and IT giant Sberbank has taken a heavy battering from sanctions already – the firm has had to wind up its European operations and close its European subsidiaries.

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