A new data has shown that the cost of living in Russia is surging following the international trade sanctions over the country’s invasion on Ukraine.
Official figures showed that the price of some household staples, such as sugar, have jumped by as much as 14% over the past week.
Inflation is set to keep rising in Russia where the Rouble has fallen sharply since the Russia-Ukraine war began. The value of the currency has dropped about 22% this year (2022), and this has pushed up the cost of importing goods.
The inflation data came as the Russian Stock Market resumed trading on Thursday, March 24, 2022, after a month-long break, with the majority of shares rising in a volatile trading session. The benchmark, Moex Index, is up by around 5.6% at midday in Moscow.
Analysts intimated that the government’s plan to buy billions of Dollars’ worth of Russian shares is supporting the market, which dived last month (February) after Russia’s invasion on its neighbour. In addition, bans on trade with foreigners and on short-selling remain in place.
Rising cost of living
On Wednesday, March 23, 2022, Russia’s Economic Ministry disclosed that the annual inflation jumped 14.5%, which made it become the highest rate since late 2015.
According to the Federal State Statistics Service (FSS), the cost of sugar rose by as much as 37.1% in certain regions of the country and increased by an average of 14%. Sugar, which is commonly used to preserve food or make liquor, is the biggest gainer in the week, the government agency, FSS revealed.
The price of onions is the second biggest riser over the week, up with 13.7% nationwide and 40.4% in some areas. Meanwhile, nappies were 4.4% more expensive. Prices for black tea rose 4% and toilet paper increased by 3%.
Stephen Innes, the Managing Partner at SPI Asset Management, averred prices are higher because of the weaker Rouble.
“The biggest culprit is imported inflation. Anything Russia imports is exponentially (pricier) due to the weaker Rouble.”
Stephen Innes, the Managing Partner at SPI Asset Management
A bite of the Sanctions
The UK, the US and the European Union have cut off a number of Russian Banks from financial markets in the West. They have also prohibited dealings with Russia’s Central Bank, State-owned Investment Funds and the Finance Ministry.
The Bank of Russia more than doubled its interest rate to 20%, in an attempt to stop its currency from sliding further. A large number of Western businesses also pulled out of Russia because of its war with Ukraine. Others, such as the Swiss food giant, Nestle, have withdrawn major brands such as KitKat and Nesquik.
Videos on social media showed shoppers scrambling to buy sugar and buckwheat at supermarkets in Moscow. Deputy Prime Minister, Viktoria Abramchenko, however, told Russians that the country is “fully self-sufficient when it comes to sugar and buckwheat”.
“There is no need to panic buy these goods. There is enough for everybody.”
Deputy Prime Minister, Viktoria Abramchenko
Russia has hit back at international sanctions and has threatened to seize the assets of businesses that have stopped operating in the country. It sanctioned US President, Joe Biden, and 12 other US officials last week.
On Wednesday, March 23, 2022, Russian President, Vladimir Putin, announced that the country would start selling natural gas to “unfriendly” countries in Roubles. Analysts say the planned decision is a move aimed at supporting the currency.
The EU on the other hand relies on Russia for 40% of its gas. However, prior to the breathing sanctions, many existing contracts were agreed upon in Euros and it is unclear if Russia can change them.
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