Jobs in Russia begin to suffer due to sanctions
McDonald’s restaurant in Moscow has closed after being sold to a Russian businessman – Photo: AFP
During an emergency meeting on May 26, the Central Bank Russia cut its benchmark interest rate for the third time in a row, from 14% to 11%, in an attempt to boost the economy.
Central Bank Governor Elvira Nabiullina then warned that the coming months would be “difficult for both businesses and people” as the country’s economy was in recession.
According to the newspaper New York Timesthe economic damage to Russia, although difficult to quantify, has spread everywhere, from the country’s largest companies to its small shops and workers.
Basic items are gradually in short supply. Prices for consumer goods have skyrocketed, with inflation rising to 17.8% last month.
Revenue from the energy sector, although still high, is expected to decrease, as European customers begin to turn away from Russian oil.
According to AFP news agency, on May 27, the Russian truck manufacturer Kamaz announced to reduce the working hours of about 5,500 employees due to a shortage of parts due to Western sanctions.
At the beginning of April, most of the 40,000 workforce at Russia’s leading carmaker AvtoVAZ had to temporarily quit their jobs and receive two-thirds of the normal salary. The situation is expected to last until at least June 6.
AvtoVAZ is the manufacturer of the domestic car brand Lada and is owned by the French car manufacturer Renault. Like many other Western companies, Renault decided to withdraw from Russia by selling shares in AvtoVAZ to the Russian state.
“What is happening is a terrible experience,” said Ivan Fedyakov, who runs Infoline, a market research firm in Russia. “This has never happened in modern history when such a large and deeply integrated country was suddenly isolated from the global economy.”
“The Russian economic outlook is particularly bleak,” the Bank of Finland said in a report released earlier this month. “By starting a war against Ukraine, Russia has chosen to become poorer and less economically influential.”
Nearly 1,000 companies have left Russia, including Nike, Reebok, Starbucks and, most recently, McDonald’s.
Import routes of raw materials for products such as cars have been blocked by European countries. DHL, UPS and FedEx have been refusing to deliver in Russia for months now.
Tech companies like Adobe and Oracle have suspended operations and there are concerns that Russia could soon run out of data storage space.
Nino, a jewelry designer in Moscow, says the clay she uses has disappeared from the market because it is made in Germany and in the Donbass region of Ukraine. According to Nino, the price of clay has increased from 30% to 60%.
“My jewelry is made by a Russian company. They are also running short of materials,” Nino said. “Logistics are struggling. Either we don’t have what we need or it’s significantly more expensive.”
At the moment, the Russian economy still relies, at least temporarily, on oil and gas exports. The European Union has not been able to agree on an embargo on Russian oil, but Russia’s revenue is expected to gradually decrease over time as countries seek to reduce their dependence.
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