As Putin organizes his re-election bid, Russia's resilient economy is a major selling point

MOSCOW (AP) — Russians are finding that the prices of some imported staples, such as fruit, coffee and olive oil, have risen dramatically. Most Global brands have disappeared — or reincarnated as Russian equivalents under a new Kremlin-friendly monarchy. There are a lot of Chinese cars roaming the streets. Those who want specific luxury cosmetics may be out of luck.

On the contrary, Not much has changed economically For most people in Russia, President Vladimir Putin, more than two years after sending troops into Ukraine.

So though Comprehensive penalties Which led to cutting off a large part of Russia's trade with Europe, the United States and their allies.

This sense of stability is one of Putin's main assets as he organizes his scheduled victory in the presidential elections March 15-17 presidential elections For a fifth term of six years.

Inflation is higher More than most people would like, more than 7% – higher than the central bank's target of 4%. But unemployment is low, and the economy is expected to grow by 2.6% this year, according to the International Monetary Fund, double previous expectations. This is much higher than 0.9%. Expected expansion of Europe.

“There are difficulties, of course – they are related to the general situation in the world,” said Andrei Fedotov, 55, who was walking along the central shopping street on Tverskaya Street a few blocks from the Kremlin. “We know that very well, but I think we will overcome them.”

Fedotov, who works in education, said the rise in prices “of course bothers me, like any consumer, I see them rising.” “It's tied to the times we're in, and those will pass.”

Brand manager Irina Novikova, 39, seemed optimistic despite the rise in prices in stores: “More local products have appeared, more agricultural products. Yes we all see that Some goods disappeared“.

“Prices have gone up – if I used to buy three items at a certain price, now I buy one,” she said, but added: “Go and look for Russian products, and stores that sell Russian goods.”

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“The industry may have suffered, and we know that there have been some setbacks in this regard, but again, we are adapting and redirecting our thinking, and we are starting to look to our Chinese friends,” Novikova said.

particle Russian spending on military equipment Huge payments to volunteer soldiers give a boost to the economy. Government-backed mortgages are subsidizing apartment buyers in a major blow to the booming construction sector, as evidenced by several mega projects High-rise developments are rising On the banks of the Moscow River.

Inflation is a concern, but it is also nothing new. Russia became more self-sufficient in its food production after 2014, when it seized the Ukrainian peninsula of Crimea and the resulting Western sanctions led the government to ban a wide range of food imports from Europe.

Planned government spending this year is almost double what it was in 2018. However, the deficit remains under control with taxes and taxes. Oil revenues continue to flow.

So-called parallel imports through third countries such as Georgia, Kazakhstan or Uzbekistan have allowed Russians with money to continue to buy Western products – from sports shoes to mobile phones and cars – from companies that no longer do business in Russia, usually at a premium. big.

The BMW SUV is still readily available, although it is twice as expensive in Germany. IKEA has closed its 17 Russian storesbut its furniture and home goods can be purchased online — for a price.

Apple left, but the 512GB iPhone 15 Pro Max sells for the equivalent of $1,950 in rubles on Wildberry's retail site in Russia, the same price the phone sells for in Germany.

This does not mean that there are no pressures on the economy. Companies are facing labor shortages after hundreds of thousands of men left the country after the crisis began Fighting in Ukraine To avoid mobilization, hundreds of thousands more signed military contracts.

Meanwhile, Russian oil exports have shifted from Europe to China and India due to a boycott by Ukraine's allies. To avoid penalties and Setting a ceiling on the price of oil shipmentsRussia has had to spend billions to buy a shadow fleet of aging tankers that do not use Western insurance companies that have to respect price caps. Russia too It lost the lucrative natural gas market in Europe After cutting off most pipeline supplies.

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The automobile industry was devastated after the withdrawal of its foreign owners, such as Renault, Volkswagen, and Mercedes. China has replaced the European Union as Russia's main trading partner Chinese vehicles quickly took over Half of the car market last year, according to Ward Information.

Many foreign companies also left or… They sold their business to local partners At knockdown prices. Other companies, including Danish brewer Carlsberg and French food company Danone, have seen their Russian businesses confiscated by the government.

“The economy plays a very important role in all of Putin’s elections,” said Janice Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs. “For most Russians, who have chosen to ignore the war, the economy is actually the bigger issue.”

economic stability “It is a signal that Putin can use vis-à-vis other elites that he is still able to mobilize the masses. And to achieve that, it has to be real and not just a manipulated number,” Kluge said.

“So it's still important that there's that real support, even though there's absolutely no opportunity for voters to change who's in office,” he said.

GDP, the economy's total production of goods and services, remains an “abstract number” for ordinary people, while GDP is the economy's total output of goods and services. Ruble exchange rate Tourism is less symbolic than it used to be because most people cannot travel and there are fewer imported goods to buy, Kluge said.

“What matters is inflation,” he added. “This is a case where the regime has already made some preparations.”

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The central bank is combating rising prices by raising interest rates to 16%. The government has supported the Russian currency by asking exporters to change Foreign profits from things like oil to rubles, resulting in lower prices for remaining imports.

A 6-month ban on gasoline exports from March 1 will help keep fuel prices low in Russia.

The government also offers mortgages for apartments at heavily subsidized interest rates – a move that increases people's sense of personal prosperity, but will ultimately end up costing the government a big bill.

The key factor is Russia's ability to maintain the missiles, Kluge said Exporting oil and natural gas to new customers in Asia. As long as oil prices hold up, Russia can maintain its high level of spending on military and social programs “indefinitely,” Kluge said.

Russia earned about $15.6 billion in oil export revenues in January, according to estimates from the Russian Oil Tracker of the Kiev School of Economics. That's about $500 million a day.

In the long term, the economic outlook is less certain. The lack of foreign investment will limit new technology and productivity. Government generosity may one day exceed the central bank's ability to manage inflation. How generous policies continue after the election is up to Putin.

The main threat to stability today is the sharp decline in oil prices, which are now trading at about $70 per barrel of Russian Urals blend. Thanks in part to sanctions and boycotts, this represents a discount from about $83 for international benchmark Brent crude.

But for now, the state's finances are more solid than many expected.

“I don't have good news” for people waiting for the Russian economy to collapse “tomorrow” due to sanctions, Alexandra Prokopenko, a former Russian Central Bank official, previously wrote on Twitter. “It's a big, flexible animal.”


McHugh reported from Frankfurt, Germany.

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