Russian Hardship on Display at Delis as Sausages Shrink

There are many ways to measure the deepening financial crisis spreading across Russia. The ruble is sinking more than any other currency in the world, foreign reserves have plunged to a four-year low and the economy is teetering toward recession.

Galina Mityaeva measures it in centimeters.

The half stick of braunschweiger sausage that the 69-year-old retiree used to buy for her husband each week is now just too expensive. Cut it a little shorter, she instructs the deli counter clerks at the supermarket she shops at outside of Moscow -- a quarter stick will have to suffice.

“Every time I go to the store, food is more expensive,” Mityaeva said as she strolled through the grocery aisles on a recent afternoon. “People are angry right now. In the store lines, you can hear people complaining: ‘What can I afford to buy with 1,000 rubles?’”

Seven months after President Vladimir Putin initiated his foray into Ukraine, triggering international sanctions against Russia and the capital flight that has fueled the ruble’s plunge, consumers across Moscow are feeling the squeeze. Annual inflation soared to a three-year high of 8 percent last month, led by a 17 percent surge in prices on meat and poultry, 28 percent on tobacco and 13 percent on international airfare and travel-related services.

Meeting Place

Natalya Lomteva scoffs at the idea of taking a trip abroad, which she calls “impossible to afford.” A 20-year-old college student, she’s more focused on scrimping together the money to fund her pack-a-day smoking habit and finding restaurants that she can still afford. With temperatures dropping as winter approaches, an inexpensive place to gather with friends indoors takes on added value, she said.

“During the summer, we could at least hang out at parks,” Lomteva said while nursing a cup of tea at a coffee house that she called a “cheap option” in the northwest Moscow district of Shchukino. She said that one of her favorite haunts, Beverly Hills Diner, has become too expensive after rising food costs pushed up prices on a menu dominated by hamburgers and other American-style fare.

The surge in food prices accelerated after Putin placed a ban in August on some imports from the U.S. and Europe in retaliation for the economic sanctions against Russia. The 17 percent annual rate of inflation on meat, for example, is up from 11 percent in July and follows a 3 percent decline in prices at the end of 2013. Overall food inflation has almost doubled to 11 percent from about 6 percent last year.

Putin's Popularity

So far none of this has dented Putin’s popularity, which soared following his incursion into Ukraine. His approval rating rose to 86 percent in September from 65 percent in January, according to pollster Levada Center, which surveyed 1,600 people across Russia over four days.

Putin’s policy makers have been trying to contain the surge in inflation, raising the benchmark interest rate to 8 percent and re-initiating dollar sales in the foreign-exchange market to shore up the ruble. It has plunged 17.9 percent to 40.04 rubles per dollar this year, driving up the cost of imports.

Some products are disappearing altogether.

A Sberbank-commissioned poll released earlier this week found that 17 percent of those Russians surveyed said items have begun vanishing from store shelves.

Marina Khomenko, a 56-year-old teacher, said it’s become harder to find the Nivea cosmetics products she uses or C&A clothes she favors. Some prices have tripled, by her estimates.

Bread, Milk

“Clothes can’t cost this much,” Khomenko said.

Back at the supermarket outside of Moscow, Mityaeva, the retiree, reels off a laundry list of prices that she’s seen jump recently: bread, milk, cottage cheese, sour cream and chicken wings, among others. And then she remembers how much she’s now paying for medicine -- 4,000 rubles ($100) a month to treat cardiac arrhythmia -- and it sets her off again. That’s equal to more than one-third her monthly pension of 11,000 rubles.

“I can live without caviar but I need my medicines,” Mityaeva said. “Life is becoming more complicated.”

Before it's here, it's on the Bloomberg Terminal.