“History can be funny”: Muscovites get used to living without Dior and McDonald’s | Russia
JThe irony was not lost on some Muscovites queuing outside a McDonald’s on Tuesday night, just after the company announced it was temporarily closing its nearly 850 locations in Russia.
“My dad once told me that he stood in line when McDonald’s opened when he was young. And now I’ve ended up in line, but for a very different reason. The story may be fun,” said Dmitry Grigoryev.
When McDonald’s opened in Moscow’s Pushkin Square in 1990, a queue of several thousand people formed. Inside and outside the country, the arrival of the Golden Bows was seen as a sure sign of the end of the Cold War.
Russians’ embrace of Western fast food, pop culture and jeans has come to signify the country’s integration into the global capitalist system. Despite the rise of authoritarianism under Vladimir Putin over the past decade, international brands have remained keen to keep their doors open in Moscow and other major cities with large middle classes.
But Russia’s invasion of Ukraine on the morning of February 24 changed everything. Since then, there has been an unprecedented outflow from international companies, including Toyota, Heineken, Nike, Apple, Exxon, Ford, Zara, Netflix and Ikea.
“The corporate exodus is truly staggering,” said Maria Shagina, an international sanctions specialist at the Finnish Institute of International Affairs and the Geneva International Sanctions Network. “The rate at which this happens is unknown to modern history. Russia is completely decoupled from the global business, technology and banking communities.
Shagina said Western sanctions, such as the decoupling of some Russian banks from the Swift system and new export controls, would have complicated operations for Western companies.
But she said the majority of companies that had suspended operations had done so out of reputational concerns, given how deeply unpopular the war was in the West.
“Of course the Kremlin expected the West to impose sanctions, but I’m not sure they expected how toxic Russia would become. These companies aren’t just leaving because of the sanctions, but mainly because they think Russia can’t invest right now, that it’s not fair to do business there.
In a sign that Russian officials may not have expected such a dramatic exit of companies, a senior official in Russia’s ruling political party called for the nationalization of the operations of Western companies that had left the country.
“This is an extreme measure, but we will not tolerate stabbing in the back, and we will defend our people,” United Russia leader Andrey Turchak said in a statement posted on the party’s website. Turchak said such a move would help prevent job losses and maintain Russia’s ability to produce goods domestically.
It’s not just the mass market industry that has taken a hit. Images on social media posted on Monday showed empty halls in Moscow’s upscale shopping mall, Tsum, which is popular with Russia’s wealthy elite.
Virtually all major fashion brands, including Burberry, Hermès, Gucci, Chanel and Louis Vuitton, have temporarily halted operations. On Monday, Condé Nast announced that it was suspending its publishing activities.
“I think Russians are in shock as their world is falling apart at lightning speed,” said Katya Fedorova, who runs a widely read fashion and lifestyle blog on Telegram. “Many do not yet understand how the sanctions will affect them and their daily lives in the months to come.
“But the scariest part isn’t the exit of luxury brands. It’s mainstream brands like Mothercare leaving the country, with very few Russian substitutes available. It’s absolutely insane how the Russian government managed to destroy all the connections that have been built with the international retail industry for 30 years in just 10 days.
Analysts offered a grim forecast for Russia’s economic outlook. The Institute for International Finance last week predicted a 15% contraction in Russia’s GDP in 2022, double the drop from the global financial crisis. “We consider the risks to be on the downside. Russia will never be the same again. wrote IIR Chief Economist Robin Brooks.
For now, McDonald’s and Ikea say they will keep their staff on the payroll. But experts like Shagina believe the scale of the foreign exodus will likely lead to an immediate rise in unemployment, even before the impact of Western sanctions is felt. “We are only [in] the second week the sanctions need time to really bite,” Shagina said.
The Russian ruble has already fallen dramatically since the start of the war, losing half of its value against the dollar and the euro. The stock market has been closed since the invasion. Morgan Stanley said Monday that Russia could face a debt default as early as next month.
Shagina said she expected the sanctions to drive up inflation while crippling Russia’s purchasing power. A major recession coupled with the exodus of Western brands could dramatically change the daily lives of average Russians, Shagina said.
“Russia is going back to the 90s, and it wasn’t a particularly stable time for most,” she said.