Russians See Costlier Food as No Crisis

http://www.nytimes.com/2014/12/30/world/europe/russians-see-costlier-food-as-no-crisis.html

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KHOTKOVO, Russia — In the early days of 1992, prices here exploded by an average of 350 percent as post-Communist Russia crash-landed into a free market economy. Six years later, in August 1998, prices again gyrated wildly after the Russian government devalued the ruble and defaulted on its debts.

In comparison, this year’s plunge in the value of the ruble seems positively tame, which may explain the relative stoicism among shoppers here as they shuffled along snow-covered paths, making the rounds of the shops and getting ready for the long holiday season.

That isn’t to say that inflation — now above 10 percent — is not on everyone’s mind. Several store managers said the same thing: Prices have been going up with each delivery. In a store in the nearby village of Akhtyrka, the sales clerk advised a couple of elderly shoppers to come back later, after she had updated the price list.

For consumers and retailers alike, Russia’s latest economic crisis has come in stages. The first impact was felt last summer, when Russia retaliated against the West for Ukraine-related sanctions by imposing a ban on food imports from the United States, the European Union and several other trading partners. The second blow came after the value of the ruble took a deep plunge in mid-December, before bouncing back somewhat. A third is expected as rising interest rates choke off credit.

Here in Khotkovo, a town of 23,000 people 60 kilometers, or about 35 miles, northeast of Moscow, tracking the impact of the self-imposed sanctions is like proving a negative. A variety of goods — from basmati rice to imported hard cheeses — have simply vanished, leaving consumers with fewer and less desirable choices.

A store on the main square that specializes in food from Belarus, Russia’s western neighbor and an ally of sorts, dodged the first bullet. Belarus never imposed sanctions, but now the drop in the value of the ruble is having an effect, said the store’s manager, who declined to give his name.

He estimated that prices had over all increased 10 percent to 15 percent in the last month, and like others, he didn’t dare venture a prediction for 2015.

After a decade of sustained economic growth, Russian consumers are more resilient than they were in 1992 or 1998, and as they shop for their traditional New Year’s Eve feasts, many are shrugging off the higher prices.

Housewives standing in line at a meat counter said they were prepared to make do with less. Marina, who declined to give her last name, said that beef prices — now at 600 rubles a kilo (roughly $5.40 a pound) — had probably gone up at least 25 percent but that this wouldn’t stop her from serving it for the traditional New Year’s Eve feast. “We’ll manage,” she said.

Several shopkeepers said they were running through old stocks, which would explain why such anomalies as Finnish dumplings or Italian coffee can still be found on the shelves. Others explain that importers have figured out ways around the ban, bringing European goods through Belarus, where they are relabeled and brought across the border to Russia. Countries like Brazil have also stepped up exports to Russia, although typically at higher prices.

Ever since the food ban was introduced last summer, the Russian government has used the opportunity to encourage local producers to fill the gap. That has already had some effect: By October, domestic meat production was up 12 percent, according to government statistics.

Until this crisis hit, Russian consumers said, they were not aware of their dependence on imported food. Now, as their currency loses value, putting Western goods out of reach, they welcome government-backed efforts to step up domestic production.

“We were living in some kind of dream world,” said a man who identified himself only as Alexei, who owns a food emporium on the edge of town. “They should have made this effort long ago, instead of living off oil and gas.”