June 26, 2022

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What happened on the 108th day of the war in Ukraine

What happened on the 108th day of the war in Ukraine

Yevgeny Shumilkin returns to work on Sunday. To prepare, he pulled the familiar “M” from his McDonald’s T-shirt and covered the “M” on a McDonald’s jacket with the Russian flag patch.

“They will be the same cakes,” promised Mr. Shumilkin, who maintains equipment in a Moscow restaurant. “Just with a different name.”

McDonald’s restaurants in Russia reopen this weekend, but without the golden arches. After the American fast food giant Withdrew this spring In protest against President Vladimir Putin’s invasion of Ukraine, the Siberian oil tycoon bought 840 Russian stores. Because nearly all of the ingredients come from within the country, restaurants can continue to serve much of the same food, he said.

This gambit may succeed – in demonstrating the surprising resilience of Russia’s economy in the face of one of the harshest barrages of sanctions the West has ever imposed. After three and a half months of war, it became clear that the sanctions – and Western companies torrent Leaving Russia voluntarily failed to completely dismantle the economy or provoke a popular backlash against Mr. Putin.

Russia has spent most of Mr. Putin’s 22 years in power as it integrates into the global economy. It turns out that the disintegration of large and highly intertwined business relationships is not easy.

The effects of sanctions will surely be deep and wide-ranging, and their consequences will only begin to become apparent. Economists and businessmen say living standards in Russia are already deteriorating, and the situation is likely to get worse as import stocks fall and more companies announce layoffs.

Some of Russia’s do-it-yourself efforts may not live up to Western standards. When the first post-sanctions Lada Granta prototype — a Russian sedan built by Renault before the French automaker pulled out this spring — rolled off the assembly line at a plant near the Volga on Wednesday, it lacked airbags and modern pollution controls. or anti-lock brakes.

attributed to him…Maxim Schebenkov/EPA, via Shutterstock

But the economic downturn is not as severe as some experts had predicted after the February 24 invasion. Inflation remains high, around 17 percent year-on-year, but has fallen from a 20-year peak in April. A closely watched measure of factory activity, the S&P Global Buying Managers’ Index, show up Russian manufacturing expanded in May for the first time since the war began.

Behind the positive news are a host of factors working in Putin’s favour. Chief among them: high energy prices, which allow the Kremlin to continue financing the war while increasing pensions and wages to please ordinary Russians. The country’s oil revenues above 50 percent this year.

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In addition to, Skillful work by the central bank He prevented panic in the financial markets after the invasion and helped the ruble recover from its initial collapse. Store shelves, for the most part, remain full, thanks to abundant stocks and alternative import routes being created across countries like Turkey and Kazakhstan – and the fact that Russian consumers are buying less.

Even the new Lada Granta is no more confused than observers expected: despite the lack of foreign components, it will still be equipped with power steering and power windows.

“Everything is not as bad as expected,” says a Russian auto site announce.

The survival of the Russian economy strengthens Mr. Putin’s position by reinforcing his narrative that Russia will stand tall in the face of the West’s determination to destroy it. He met young entrepreneurs Thursday at a town hall-style event, his latest effort to show that even as he waged war, he was eager to keep the economy functioning and get foreign trade moving. He insisted that even if the West did not deal with Russia, the rest of the world would.

attributed to him…Mikhail Metzl’s photo

“We will not have a closed economy,” Putin told a woman asking about the effects of sanctions. “If someone tries to limit us in something, they limit themselves.”

As for luxury goods, iPhones are still widely available, but they are more expensive, transported to Russia from the Middle East and Central Asia. The poor have been affected by the price hike, but they will benefit from the 10 percent increase in pensions and the minimum wage announced by Putin last month.

Those most affected by the economic turmoil are the urban middle class. Foreign goods and services are now hard to come by, Western employers are withdrawing and travel abroad has become difficult and expensive.

But Natalia F. Works for the state or for state-owned enterprises.

“Sanctions will not stop the war,” Zubarevic said in a telephone interview. The Russian public will tolerate it and adapt because it understands that there is no way to influence the state.

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Chris Weaver, a macroeconomic consultant who has long focused on Russia, posted a note to his clients last week, saying that “some of our previous assumptions were wrong.” The note said that inflation and deflation turned out to be less severe than expected. His company, Macro-Advisory Eurasia Strategy Consulting, revised its forecast to show a smaller decline in GDP this year — 5.8 percent instead of 7 percent — while also forecasting a recession lasting into next year.

In a phone interview, Mr. Weaver described the future of Russia’s economy as “more bleaker, more stressful”, with lower incomes, but still essential goods and services. A major juice company, for example, warned customers that their boxes will be white soon due to the lack of imported ink.

attributed to him…Natalia Kolesnikova/AFP – Getty Images

“The economy is now moving into a near-recession phase where it can avoid a meltdown,” he said. “It’s a more basic level of economic presence, which Russia can continue for some time.”

On Friday, with inflation stabilizing, the Russian Central Bank lowered its key interest rate to 9.5 percent – the level before the invasion. On February 28, the bank raised the rate to 20 percent in an effort to avert a financial crisis. After the ruble depreciated in the days following the invasion, it is now trading at its highest level in four years.

One of the reasons for the unexpected strength of the ruble is the high global demand for energy as a result of the epidemic. In June alone, the Russian government expects windfall gains of more than $6 billion due to higher-than-expected energy prices, Ministry of Finance He said last week.

At the same time, Russian consumers were spending less – which increased the support of the ruble and gave Russian companies time to create new import routes.

Russian officials acknowledge, however, that the most difficult times for the economy may still be to come. Elvira Nabiullina, the head of the central bank, said on Friday that although “the impact of the sanctions has not been as severe as we initially feared,” it is “too early to say that the full impact of the sanctions has manifested itself.”

For example, it is still not clear how Russian companies will be able to obtain microchips used in a variety of goods. At Mr Putin’s meeting with the entrepreneurs, one of the developers said he was “very concerned about our microelectronics”.

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“Me too,” said Mr. Putin.

attributed to him…Maxim Shemetov/Reuters

The ties that bind the Russian economy to the West, which are now fading, go back decades – sometimes more than a century. Aeroflot, the national carrier, has acquired dozens of new Boeing and Airbus jets and positioned itself as a comfortable transit airline for travelers between Europe and Asia. In the Urals, a factory worked with Siemens, the German manufacturing giant, to produce modern trains to replace the Soviet rust.

Aeroflot, which is banned from using European airspace, is focusing on domestic routes and working on switching to Russian planes – a process that will take years. Siemens, which built telegraph lines across the Russian Empire in the 1850s and helped usher the country into the industrial age, announced last month that it was pulling out of Russia.

“Sanctions are stifling the economy, and it doesn’t happen all at once,” said Ivan Fedyakov, who runs Infoline, a Russian market consultancy that advises companies on how to survive under current restrictions. “We only felt 10 to 15 percent of its effect.”

But when it comes to food, at least, Russia is more prepared. When McDonald’s opened in the Soviet Union in 1990, Americans had to bring everything. Soviet potatoes were too small to make french fries, so they had to get their own russet potato seeds; Soviet apples did not fit into the pie, so the company imported them from Bulgaria.

attributed to him…via Reuters

But by the time McDonald’s pulled out this year, its Russian stores were getting nearly all of their ingredients from Russian suppliers. So when McDonald’s, which employs 62,000 workers in Russia, announced in March that it would suspend operations because it could not “ignore the needless human suffering unfolding in Ukraine,” and one Siberian franchisor, Alexander Goffour, managed to keep his 25 restaurants open. Last month, he bought the entire Russian business of McDonald’s for an undisclosed amount.

On Sunday – Russia Day, a national holiday – 15 stores will reopen, including the former flagship McDonald’s on Pushkin Square in Moscow, the place where, in 1990, Thousands of Soviets became famous for lining up For a taste of the West. The chain will operate under a new brand that has yet to be revealed, although the new logo was revealed, it was said to represent a hamburger and french fries.

The hash will be marked with a Russian name, according to the menu leaked to a Russian tabloid. And since the secret sauce is proprietary, there will be no Big Mac on offer.