Russia, August 30, 1998
Bez Dollarov
And you though you were fast at changing the price tag on a GAP shirt!
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Wow, Russians are swift! Yesterday when I went to buy
cookies at the kiosk by my house, the prices were going up as I stood
there! When I walked up to the kiosk, the cookies were 8 rubles, but by
the time I figured out which ones I wanted, they were 10 rubles. As an
experience traveler, if I didn't know better, I would think that they
were just doing the usual 'gouge the American' trick, but I do
know better. Prices are changing all over Moscow, and for everybody. The
economy here is unlike any other I have lived in, it is completely tied
to the United States Dollar. About 80% of all consumer products (food,
clothes, and toothpaste) are imported from Europe/USA, and all of it is
paid for in Dollars. All personal services (rent, trade services) are in
Dollars, and most Muscovites are paid in USD.
Combine that with a historically unstable currency, and you get a nation that has a schizophrenic economy. By Russian law, all official prices and payments are in rubles, but the ruble price is really the ruble equivalent of a Dollar price. Big contracts are usually written something like 'payment at the ruble equivalent of $5,000 on the date of sale,' and even small shop prices have such contracts (not as formal, of course) with their suppliers. Why does all this matter, you ask. Well, with the drop in the value of the ruble (rrl), from six rrl to the dollar, to nine or ten rrl to the dollar in one week, all the prices in Moscow have to change. That's why my cookies went up, and why the salads I eat for lunch went from eleven to twelve rubles. It is also why the restaurant I went to Friday night had stickers over the old prices and new prices in pencil. As I went shopping around town yesterday, I saw more effects of the ruble devaluation. First, expensive shops (nice clothes, electronics, and furniture) were closed. The shop owners, unsure of the ruble rate, do not know how to price their goods. If they could just have dollar prices and dollar sales, they would be open, but when the ruble drops by the hour, they do not want to loose on exchange rates in the time it takes to sign a contract. Second, the food shops are very low on inventory. People are spending all the rubles they were not able to convert into dollars, because today, pasta is twelve rubles and tomorrow it will be thirteen, so buy all you can today with the rubles you have. The shop owners, having to purchase goods in USD, have found themselves unable to keep up with demand, having watched their own purchasing power shrink. Second, there were long lines at any exchange booth that had dollars. Most exchange booths are out of USD, having sold them all last week. Now that the Russians are convinced that the ruble will just drop lower, they want to change as much rubles as they can, into dollars. The rubles they cannot exchange, they are spending. Black market currency traders, once scarce for all the legal exchange booths, are back to work the 15% difference between the by and sell prices. Last, but not least, stores, restaurants, and even kiosks are starting to accept payments in USD again. Before, if you had USD, you would have to go on the street and exchange it; the stores would not accept it. Now, I can pay for my dinner with a Ben Franklin, and get ruble change at decent exchange rate! One odd offshoot of the USD shortage are rent payments. Since almost all rent in Moscow is paid in USD cash, and there is none to be found, tenants and landlords are scrambling to find new ways to make the monthly transactions. My landlords, being the swift Russians that they are, asked me to send a wire transfer to their Swiss bank account. And I thought I was going to get out of paying rent for the month, damn! Toronto Sun September 7, 1998 Panic buying grips Moscow By Matthew Fisher MOSCOW -- The cranky woman in the brassiere shop in the tunnel leading to the Kitai Gorod Metro station has an impossible job. Small wonder she appeared agitated. Every few hours she had to put new price stickers on the 200 or so western-made bras and panties dangling in her shop window. A fortnight ago about six rubles bought an American dollar. Money changers now quote a price of 16 or 17 rubles to the dollar, but this is pure fantasy. There are almost no dollars to be had anywhere in Russia except on the black market, where a single Ben Franklin, as the American $100 bill is sometimes called here, fetches as much as 2,500 rubles. Plainly speaking, what this means is that the ruble has suddenly lost 75% of its value after several years of relative stability. With the Yeltsin government and the parliament deadlocked over who should be prime minister and how to begin trying to halt the collapse of Russia's feeble economy, nobody has yet dared guess how low the ruble will go. These are strange days in Moscow. Many shops are closed because their owners and managers can't figure out what the prices should be. Those that are open are constantly repricing their stock. As hyperinflation starts to set in, there are some bargains to be had for those with dollars to spend. The best deals are in Moscow's endless, bleak suburbs where there are few banks and currency exchange shops with message boards to inform clerks or customers of the very latest ruble rate. At the tiny market across the street from my flat on the southern edges of the capital a loaf of bread now costs the equivalent of 40c. Two weeks ago it cost 90c. A can of Italian baked beans is 25c. That's a third of what they were in late August. And my favourite banya, or bathhouse, costs exactly half yesterday what it did 19 days back. Flush with purple 500 ruble notes, which were losing their lustre by the minute, a friend of mine spent five hours hunting for a shoe store on Thursday that was actually willing to sell her shoes. She bought British and Spanish shoes for 500 rubles just as the store closed its doors for the day at noon. When it reopened the next morning the same two pairs of shoes had been marked up to 1,500 rubles each. On Tuesday I found St. Petersburg mineral water at what was then the equivalent of $1 a bottle. Two days later in another store the same bottle only cost the equivalent of 50c. So-called New Russians were inordinately proud of their new credit cards, but just as they were getting used to showing them off, signs went up that are a form of economic apartheid familiar from Soviet times. Only credit cards issued by foreign banks are now accepted. Fearing that imports of foreign consumer goods are doomed, Moscow's small middle class went on a wild spending spree last week emptying shops of brand name washing machines, refrigerators and television and liquor shops of wine and vodka. The trick in such crazy circumstances, as every babushka knows, is to hunt around, live within your means and never panic. These pragmatic old women, who keep most Russian families going, have been quietly taking rubles out of their mattresses and from under their floorboards to buy up large quantities of staples such as salt, sugar and pasta. Many babushkas are slicing loaves of bread and then drying them in their ovens so they can be eaten with tea and preserves during the long winter which looks like it is coming one or two months early this year. Better than anyone else, what these wrinkled veterans of Stalin's lunacy, the Nazis' siege of Moscow and decades of Soviet privations understand is that Russia will be very short of food in the coming months. It's not just the supply of western consumer goods which will soon dry up. Russian agriculture is in such a calamitous state that the country imports between 40% and 70% of its food. Severely spooked by huge losses, few western firms will be importing anything into Russia unless they are paid in advance. Given that Russia cannot now repay debts which run into the hundreds of billions of dollars, that may be impossible for years to come. Customs points already report a big drop in road and sea traffic. The rumour mill has it that Moscow may be forced to dig into its three-month strategic food reserve even before the first snow flies. Whatever the ruble is worth by then may not matter much. |
