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Misery and luxury

Fiona Clark, Moscow
February 10, 2016

When the going gets tough, the rich in Russia go shopping, but as the economy worsens there will soon be more up for sale than just luxury goods. Fiona Clark reports from Moscow.


We all know Russians have dark and tortured souls - just look at their literature - but another scale of unhappiness called the 'misery index' relates levels of inflation and unemployment to the amount of social and economic pain those indicators inflict. At the moment, according to Bloomberg, Russia is the fourth most miserable country in the world, surpassed only by Turkey (3), Argentina (2) and in the unfortunate position of first place, Egypt.

The index shows Russia has the second-highest inflation rate at 13 percent, one point behind Argentina, and an unemployment rate of 6 percent. Government statistics say real wages have dropped by about 9 percent.

And grumbles are growing. Protesters in the southern city of Rostov-on-Don took to the streets last weekend using humor to get their point across. In a parody of the support shown to those killed at Charlie Hebdo they carried signs saying "Je suis Ruble." Others read "Indecent behavior by the ruble: How low you have fallen!" and "Get up, it's time to catch up with Africa." Perhaps the most poignant read "The ruble hasn't fallen, only slipped. On a piece of salo" - a type of cheap salty cured pork fat which might now almost be considered a delicacy as buying power diminishes.

The independent opinion pollster the Levada Center says people's patience is running out. Speaking at its annual conference which was devoted to economic issues, research professor Natalia Tikhonova predicted it would only be about another 12 months before these types of small and humorous protests are replaced by mass protests.

Tikhonova said 28 percent of the population was working in extra part-time jobs to support themselves. Luxury goods and holidays abroad were fast becoming a thing of the past for many of the middle class, but in the villages and regional areas the situation was even worse. There, she said, people were suffering from mass dismissals from factory lay-offs and if they had a job, they weren't being paid. Workers were being exploited by employers, and the share of unemployed had doubled over the last year.

A tale of two economies

But the misery, it seems, isn't evenly spread. Back in Moscow and St. Petersburg the rich are shopping their cashmere socks off. Anecdotally, representatives of luxury brands have said sales - since the sanctions started - have boomed, and now Bloomberg reports that even though overall sales may have dropped by 10 percent in Russia, 2015 was a great year for luxury brands. Hermes, it says, has doubled its floor space in the luxury department store, GUM, while Prada said it has significant sales growth and Rolls Royce sales in Russia were the strongest in all of Europe. Market analysts say the rich are traveling abroad less and are spending their money at home instead.

And soon they may have even more to buy. In a bid to slow the economy's slide into oblivion along with the oil-price dependent ruble, the government is planning on selling off a stake in its oil and diamond companies as well as some parts of the banking sector. With its budget set on an oil price of $50 a barrel, and oil currently trading about $20 below that, the sale of part of these assets could net the government a healthy few billion dollars.

a company sign
Russian-held state assets may have to be sold offImage: picture-alliance/dpa

Rosneft and Bashneft (oil producers) and the diamond producer Alrosa are among the most likely candidates for privatization this year, according to the economic development minister, Alexei Ulyukayev. President Vladimir Putin says Russia will maintain a controlling stake in the companies and that he doesn't want them sold at fire-sale prices. Analysts have questioned whether the sale will actually go ahead, but economic expediency may rule the day - and that's when Russia's rich will really go to town.

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