In Rostov-on-Don, a Russian port city of 1.1 million people just east of the Ukrainian border, signs of the fallout from the ruble’s collapse are everywhere.
There’s the 27-year-old entrepreneur whose storage facility is packed to the ceiling with imported Spanish tiles that his clients can’t afford anymore. There’s the accountant who had a front tooth pulled, only to realize she didn’t have enough money to pay for the imported implant needed to fill the gap. And there’s the interior designer who’s resigned herself to getting no year-end bonus after watching sales plunge at the European furniture store she works in.
While President Vladimir Putin boasts of how his government has been cautious about spending its foreign reserves to defend the ruble, the decision not to pursue a more active approach is adding to the inflation surge that’s throttling the Russian economy. In southern cities like Rostov-on-Don, where wages don’t match those in Moscow, the pain is more evident: electronics stores, apparel shops and restaurants are emptier, and billboards appealing to cash-strapped shoppers dot the downtown landscape.
“Nobody is buying,” Alyona Romanenko, the interior designer at House and Decor, said as she waited idly for customers to show up on a recent weekday. With the ruble tumbling 23 percent against the euro and 30 percent against the dollar this year, she said her boss has been raising prices constantly to keep pace. She estimates about half the clients she’d been advising on furniture purchases recently have postponed their orders. “My customers are in bad shape right now and so am I,” Romanenko said.
The ruble selloff that began early in the year with the Ukraine conflict -- and the international sanctions it would trigger -- has intensified as the price of oil, Russia’s biggest export, sank and the central bank took steps to allow the currency to trade more freely.
The exchange rate has dropped 13 percent in the past month to 46.7306 rubles per dollar, the worst tumble since 2009. After spending more than $70 billion of foreign reserves to slow the ruble’s decline in the first 10 months of the year, the central bank has only used $1 billion in November. No other major currency in the world has fallen more in 2014.
In an interview with state-run Tass news service last week in which he said the drop in oil could be “catastrophic” for Russia, Putin lauded how policy makers had been spending reserves “sparingly.”
The weaker currency gives his government more rubles for each dollar earned on oil exports, helping shore up the budget, but also adds to an inflation rate that’s already at a three-year high of 8 percent by driving up import prices. So far, Putin, 62, has maintained his popularity, earning an approval rating of 86 percent in a Levada Center survey of 1,600 people across Russia in September.
For Artyom Popov, the 27-year-old entrepreneur in Rostov-on-Don, the ruble devaluation has been a disaster.
Like his mother before him, Popov specializes in tracking down foreign products, ranging from fur coats to construction materials, and selling them to clients across the city.
Sales on his No. 1 product -- kitchen and bath tiles that he picks out himself in Spain -- are down 60 percent since July, Popov estimates. He’d been traveling to Spain every few months to purchase more tiles but said he has no plans to head back over anytime soon.
When clients see the price in euros, they say “it’s fine,” according to Popov. “Then I calculate that in rubles and I see it’s psychologically hard for them to pay 60 rubles for something that used to be 45,” Popov said as he maneuvered his black BMW X5 through traffic in Rostov-on-Don one afternoon this month. “They say it’s too expensive and leave.”
Sticker shock also applies to teeth repair.
After having her upper right canine tooth pulled, Ulyana Lyubyatina said she was told in early September that an implant made in Italy would cost 18,000 rubles, or about $480 at the time -- “a huge sum of money for me.”
Things only got worse from there.
A week later, the dentist’s office informed the 48-year-old accountant that it had run out of the implants and needed to reorder at a price of 24,000 rubles. Earlier this month, she said the price climbed again, to 25,000 rubles.
Unable to afford the import, yet loathe to buy a Russian-made implant that she says she wouldn’t trust, Lyubyatina is stuck with a temporary plastic tooth.
“I don’t know what to do,” she said, shouting over the traffic in downtown Rostov-on-Don as she stood in line at a bank ATM. “I hope the ruble chaos will eventually calm down. What is going on now is crazy.”