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With fast-weakening rouble and fears for future, Russians rush to shop -Breaking


© Reuters. FILEPHOTO: This image was taken on February 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters] – A line of customers gathered outside IKEA near Moscow in the bright sun this week. As Russian families raced to get their quickly-depreciating dollars at the Swedish retailer, they witnessed similar scenes across Russia.

Russians fear a uncertain future with spiraling inflation and economic hardship, as well as a tightening of import goods.

After unprecedented Western sanctions were placed to punish Russia’s invasion of Ukraine, the rouble lost three percent of its value. This action froze a large portion of the $640 billion central bank reserve and banned several banks form the SWIFT global payment system, resulting in the rouble falling into freefall.

(Graphic: Russia’s currency reserves have surged more that 75% since 2015,

Russia was characterized by calm cities, showing little signs of the economic crisis. Except for the lines of people looking to stock up on products – mostly high-end items and hardware – before shelves empty or prices climb further.

“I urgently purchased the items I had planned to buy in April. Viktoriya Voshina, a shopper in Rostov told Reuters about her friend from Voronezh. She lives 217km (135 miles) north of Moscow.

Voloshina stated that she was searching for tables and shelves for her office and shopping also on behalf of a friend in another city. She added, “My heart breaks.”

Dmitry, another Moscow resident lamented the rapid rise in prices.

He said that the watch he wanted to purchase now would cost around 100,000 rubles, as opposed to 40,000 a week earlier. However, he declined to reveal his surname.

However, the week’s spending surge may end.

There is not panic but mortgage holders will be squeezed if interest rates rise to 20% and rouble savings are wiped out.

According to Oxford Economics, tightening of financial conditions is a sign that there’s more credit available in the economy. This has led to a drastic increase in unemployment and a decrease in domestic demand.

An analyst with Eurasia Group Zach Witlin points out that sanctions have already hit consumers through price increases and disruptions in digital payments.

Consumers aren’t directly targeted but “fear” and “caution are exaggerating their impact,” said he. He also added that the “snowball effect” created by foreign brands like IKEA taking place.

(Graphic: Russian financial conditions have tightened,


According to the Federal Customs Service, nearly half of Russia’s imports totalling $293 billion last year were made up of car, machine, and parts.

The government’s stringent import reductions over the past years have meant that imports for 2021 remained at 7% below levels in 2013. This is before any sanctions that were placed on Russia after its 2014 annexation and annexation Crimea.

(Graphic: Russian imports and exports,

China is also a key partner in boosting trade relations with Russia. China has been the sole country to increase exports to Russia since 2014.

(Graphic: China’s trade with Russia,

However, further falls are likely as the Russian rouble plummets. Insurers refuse coverage to Russian businesses and shippers abandon Russian ports.

While only a few Russian companies are targeted by sanctions “all of them will feel the chilling effect,” said Matt Townsend, sanctions partner at law firm Allen & Overy. This is why sanctions can be a powerful tool to isolate countries.

JPMorgan (NYSE) predicts that an immediate economic shock could cause a 35% decline in GDP for the second quarter of 2020 and a 7 percent drop for 2022. However, it said that Russia’s future growth prospects will be limited by the country’s growing economic and political isolation.

This could happen if there are restrictions on the “acquisition of technology necessary to support Russia’s most valuable industries,” RBC Global Asset Management warns.

Biden is currently preparing regulations to limit Moscow’s ability import phones, auto parts, and aircraft parts.

Multinationals include tech companies Apple (NASDAQ) and Microsoft, as well as consumer goods manufacturers Nike (NYSE: Diageo LON:) have cut all ties with Russia. This means that shoppers won’t have access to many of the products they are familiar with for over 30 years.

While Chinese companies have been able to capture some market share, they could also fall under secondary sanctions because many of their products, such as smartphones, use U.S. technology.

Many Russians don’t want to leave. Lidia Rostov, who is a freelance worker, said money transfer limitations made it more difficult for her to receive international payments.

“Sanctions have really hit me hard. The prices are up by around 20 %… It’s not a secret that it’s difficult to buy certain medicines. “Things will worsen,” she stated.

“Today, my family and me are leaving Russia.”