As prices rise in Russia, the economy’s future looks “especially bleak.”

Prices rise in Russia

prices rise in Russia,After sanctions slowed down production at its assembly plant in Kaliningrad, the Russian automaker Avtotor announced a lottery for free 10-acre plots of land and the chance to buy seed potatoes so that employees could grow their food in the westernmost part of the Russian empire during “the difficult economic situation.”

In Moscow, people were upset that the price of a kilogram of bananas had gone up from 60 rubles to 100 rubles. In Irkutsk, a city in Siberia with many factories, the price of tampons had doubled to $7.

Due to a lack of paper, banks have cut the length of their receipts. The people who make clothes said they were almost out of buttons.

The Bank of Finland said in an analysis this month that the economic outlook for Russia is terrible. “By starting a bloody war with Ukraine, Russia has chosen to become much poorer and less important in the world economy.”

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Central Bank of Russia inflation prediction

Even the Central Bank of Russia has predicted that this year’s inflation will be between 18 and 23% and that the country’s total output will drop by as much as 10%.

At a time when the words “war” and “invasion” are illegal, it is hard to figure out how the war and sanctions affect the Russian economy. However, President Vladimir V. Putin has said that the measures put in place by the US, Europe, and others are not hurting the economy.

At first, Moscow’s financial moves helped lessen the damage to the economy. At the beginning of the conflict, the central bank doubled interest rates to 19% to keep the currency stable. Recently, they were able to lower rates to 14%. As a result, the price of the ruble is higher than it has been in more than two years.

prices rise in Russia

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Energy

Even though Russia has had to sell oil at a discount because prices are going up so fast worldwide, Rystad Energy says that oil taxes will go over $180 billion this year, even though production has been cut. In addition, the delivery of natural gas will add another $80 billion to Moscow’s bank account.

In any case, Mr Putin hasn’t shown much evidence that pressure from outside the country will make him slow down military attacks on Ukraine.

Still, Avtotor’s vegetable patch lottery and what it says about how vulnerable the Russian people are, along with shortages and price hikes, are signs of the economic distress that has hit some Russian businesses and workers since the war started almost three months ago.

Analysts say that Russia’s break with many of its biggest trading partners and technology leaders will hurt its economy in a deep and long-lasting way.

A senior adviser at the Bank of Finland Institute for Emerging Economies named Laura Solanki said, “The tough times for the Russian economy are still ahead of us.”

Ms Solanko said that businesses would no longer have enough supplies and spare parts to keep going in a few months. At the same time, Russia won’t be able to produce as much in the future because it doesn’t have enough advanced technology or money from outside the country.

The Russian Central Bank has already said that consumer demand and loans are going down and that “businesses are having a lot of trouble with production and logistics.”

Ivan Khokhlov, co-founded 12Storeez, a clothing brand that grew from a showroom in his apartment in Yekaterinburg to a big company with 1,000 employees and 46 stores, is dealing with the problem firsthand.

Logistics

Mr Khokhlov said, “Every time there is a new round of sanctions, it gets harder to make our product on time.” Shortly after the invasion, the company’s bank account in Europe was still blocked because of sanctions, and he had to raise prices because of problems with logistics.

“We have to deal with delays, problems, and price hikes,” he said. “As logistics with Europe get worse, we depend more on China, which also has problems.”

A record kept by the Yale School of Management shows that hundreds of foreign companies have already cut back on their business in Russia or left the country altogether. This week, McDonald’s was the latest business to leave. The company said it planned to sell its business after 30 years. The business has 850 restaurants and franchises and employs 62,000 people in Russia.

A 31-year-old tech worker in Moscow named Artem Komolyatov recently said, “I walked by the very first McDonald’s that opened in Russia in the 1990s.” “It’s totally empty now. Lonely. The sign is still in place. But it’s all blocked off on the inside. It has died completely.”

He said two police officers were standing guard nearby with bulletproof vests and automatic rifles, ready to stop any protesters.

At the Leningradsky train station, customers waited in line for more than an hour at one of the few McDonald’s franchises open on Monday.

On Monday, the French automaker Renault also said it had reached an agreement with the Russian government to leave the country. However, the agreement gives Renault the option to buy back its stake in the country within six years. And Stora Enso, a Finnish paper company, said it was selling three corrugated packaging plants in Russia.

Even the energy sector, which brings in a lot of money, is likely to cause more damage to the structure of the Russian economy in the coming years.

Europe’s promise to stop buying oil and gas from Russia in the future will force Moscow to look for customers elsewhere, especially in China and India. But Daria Melnik, a senior analyst at Rystad Energy, said that the shift to Asia “will take time and massive infrastructure investments that will cause Russia’s production and income to drop sharply in the middle term.”

Without enough storage space, Russia might have to cut the amount of oil and gas it makes overall. Wells can’t be turned on and off like faucets, though. Cap one, and it’s probably never going to be used again.

About the oil flow in Russia, Ms Melnik said, “Some spare capacity will be lost.”

Anton Siluanov, the Russian minister of finance, said that sanctions could cut oil production by 17% this year.

There are more significant drops in other areas. For example, passenger car production was 72% lower than the year before in March.

FourKites, a company that keeps track of supply chains, says that the average number of imports in the industrial sector, including chemicals, oil, gas, and manufacturing, is 88 per cent lower than in early February, before the invasion. In addition, consumer imports are down by 76%, making it hard for Russians to buy things like tampons and cellphones and for hospitals to get parts and supplies for dialysis machines and ventilators.

In April, 60 per cent of health care professionals who were asked about shortages said they had already seen them. Things like disposable gloves, catheters, and suture materials were the most common imported items missing.

Price increases on essential goods have been so noticeable to consumers that someone made a Twitter account to make fun of social media posts in which Russians complain about price increases on everything from Palmolive shampoo to nectarines. Its name is “But What Happened?” and it has almost 44,000 people who follow it.

A 26-year-old woman in Moscow asked that her name not be used because she was afraid of being punished. She said that the price of imported fruit, like the bananas she puts in her oatmeal every morning, had skyrocketed.

“It’s what I always buy at the store, so I noticed right away,” she said. She said that her grocery bill had gone up by about a third.

Within weeks of the war starts, the price of a box of tampons in Irkutsk went up from $3.50 to $6.00. This was said by a 23-year-old designer who makes $450 a month and asked not to be named. She compared prices before the war by saying, “For the same amount of money, I could buy a basket of good groceries or a new T-shirt.”

The economy of Russia is also getting worse outside of the country. This month, Fennovoima, a Finnish company that runs nuclear power plants, announced that it was ending its contract with Rosatom, the Russian State Nuclear Energy Corporation, to build a plant in the northern city of Hanhikivi. Putin is listed as the founder of Rosatom.

Rosatom, which owns a third of the project through a Finnish subsidiary, said, “We are extremely disappointed. We don’t understand why this decision was made.”

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