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Facing Crisis, Russians Who Can Afford It Are Going Shopping

Falling Price of Oil Sends Russia Into Economic Crisis 2:00

MOSCOW — Facing an economic crisis, the Russians who can afford it are shopping.

The collapse of the ruble currency — which plummeted 17 percent against the dollar on Monday and Tuesday — didn't cause a run on the banks or huge lines at grocery stores and currency exchanges as has happened during similar crises.

Instead, the longest lines were outside electronics stores as Russians rushed to buy suddenly under-priced washing machines, televisions and computers, anything that wouldn't lose its value as fast as the ruble.

“We've had high demand since November, when we usually don't sell that much. Yesterday the line for the cash register was to the other end of the hall,” said Ravil Daizrakhmanov, an employee of the consumer electronics store M.video, gesturing across the huge showroom. “They were buying very expensive tech products.”

A government employee named Denis, who declined to give his last name, was purchasing a washing machine from Daizrakhmanov on Wednesday as Christmas music played overhead. After the ruble began falling this week, he said he “bought a lot of stuff I had been planning to buy three months from now,” including a new Playstation. Besides some rubles he was keeping to pay back loans, Denis said he was planning to spend all of his other money.

“It makes no sense to buy foreign currency because we don't know what the exchange rate will be tomorrow, and everything is getting more expensive,” he said.

The last time the ruble sank anywhere near as quickly was during the 1998 Russian financial crisis, when soaring inflation burned up Russians' savings overnight, food prices doubled and millions fell below the poverty line.

Although the ruble has lost almost half of its value against the dollar this year due to slumping oil prices and Western sanctions against Russia, the decline has been mostly gradual. The population also has a bigger cushion against the fall this time around since a decade of oil-driven economic growth has padded wallets, bolstering president Vladimir Putin's popularity.

The ruble strengthened slightly Wednesday after Russia's “Black Tuesday,” when it hit 80 to the U.S. currency before closing at 68 to the dollar. It had reached 59 to the dollar on Wednesday as oil prices rose late in the day.

The comeback came as Prime Minister Dmitry Medvedev warned top energy exporters not to stockpile their foreign currency earnings, the finance ministry announced it had begun selling off its foreign currency, and the Central Bank promised to support banks with Russia's still-extensive foreign currency reserves.

But a war of words between Russian officials, who normally go to great pains to keep a united front, undermined confidence in its policy. Notably, economic development minister Alexei Ulyukayev said the Central Bank should have raised interest rates sooner than the 6.5 percent hike in the early hours of Tuesday morning.

Although many Russians said they continued to support their government, people were obviously looking for ways to invest their rubles rather than hold onto an unstable currency. A car dealer in the city of Orenburg said on Russian television on Wednesday that business was booming as Russians came with cash-in-hand to “at least buy something” and Kazakhs came over the nearby border to take advantage of suddenly bargain-basement prices in rubles. Several Moscow car dealerships reportedly halted sales on Wednesday due to uncertainty over prices and because many models were already out of stock.

Others were simply looking for a good deal. Although Apple stopped online sales in Russia late Tuesday “due to extreme fluctuations in the value of the ruble,” several Moscow stores continued to sell at old prices. At three Moscow electronics chains, an iPhone 5s cost about $100 less than in the United States on Wednesday afternoon at the new exchange rate.

Alexander, a Moscow art professor who declined to give his last name, said the ruble fluctuations had brought him to M.video on Wednesday to look at laptops.

“I've been thinking about buying one for a long time, because everything will get more expensive starting January 1, it's all imported,” he said. “There's no sense in buying foreign currency, you needed to do that early. Now you need to buy something, some product.”

Asked who was to blame for Russia's economic woes, he answered, “Everyone but us.”

“The United States has a poor attitude toward us,” Alexander said. “Our government and our president do a lot of good things … Why did they adopt these sanctions against us?”

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— Alec Luhn