Food For Thought: Rising Prices Vex Kremlin Election-Year Politics

Since last year, Irina Likhtenshtein, a 73-year-old retired translator and editor in the central Russian city of Kazan, has steadily watch her grocery bills climb.

Potatoes? They’re up 40 percent, though she doesn’t eat them much. Carrots are up 30 percent. Fish used to be around 10 rubles ($0.15) a kilogram, now it’s 15. Quail is her go-to meat, but that’s now 530 rubles ($7) for a half-kilogram, up from 490 rubles last year.

Her state pension is around 17,000 rubles (US$230) a month.

“It was never enough; now it’s even less,” she said in a phone interview from the two-room apartment where she lives alone with her cat, Ryzhy. “Of course, people are worried, you end up retiring, and you don’t have any additional income. Prices keep going up and up.”

These days, it may not be endemic corruption or Aleksei Navalny’s protests or even the continuing COVID-19 pandemic that’s worrying the Kremlin most. It may be the marked rise in food prices.

According to data from the state statistics agency, Rosstat, cited by the government newspaper Rossiiskaya Gazeta, prices for basic food items have jumped across the board: potatoes, tomatoes, apples, margarine, chicken, cheeses. Since January 2020, food prices have risen 8.2 percent; vegetables 17.5 percent; fruits 13.5 percent.

And that’s despite government orders late last year imposing price caps on certain goods. Those caps are now scheduled to be lifted as of March 31, meaning prices could jump even higher.

“I don’t really understand why the government is doing this, what it is doing, because it is not possible to prevent prices from going up,” Vladislav Inozemtsev, an economist and director of the Moscow-based Center for Research on Post-Industrial Societies, told RFE/RL. “Prices will rise. This is a fact that is under no doubt.”

Inflation Is Global?

The causes of the increases in food prices appear to be various. A recent report by the UN Food and Agriculture Organization points to an uptick in global commodity prices broadly. Russia’s agriculture industry has thrived over the past two decades, as foreign investment has poured in, improving crop yields and fueling technological advances.

Among other things, that has helped make Russia the world’s largest wheat exporter.

A woman pushes a shopping cart as she visits a food store in Moscow. (file photo)

During Putin’s first two presidential terms, in 2000-08, the relative prosperity that has helped lift many Russians to the middle class has been largely fueled by high global prices. But the economy faces broader structural and societal problems, including corruption, weak rule-of-law standards, and transportation infrastructure.

Western economic sanctions imposed in 2014 after Russia annexed Ukraine’s Crimea Peninsula also dented economic growth.

Since that time, average incomes have stagnated, and declined in real terms for the past eight years; incomes are now 10 percent below 2013 levels. Last year, according to Rosstat, real incomes fell by 3.5 percent.

Government statistics show that another 1 million Russians slipped below the poverty line last year, bringing the total figure to nearly 20 million. A poll by the independent survey organization Levada Center in November found that among lower-income Russians, only a third have any savings whatsoever.

Navalny Vs. Income

Russians’ growing malaise was partially reflected in the wide national turnout for protests in January in support of Navalny, whose splashy anti-corruption campaigns have tapped into that discontent.

The protests were sparked by Navalny’s arrest upon return to Russia in January, after recuperating in Germany for nearly five months from a nerve-agent poisoning that has been blamed on Russian intelligence agents.

But sociologists who surveyed some of the protesters found that a substantial number were not necessarily out in support of Navalny, but because they were unhappy with the country’s economic situation.

The Kremlin, for its part, has tried to tamp down concern that Russia’s food price problems were unique — even as it tried to tamp down the rise in prices.

In early December, Putin announced price caps, with government directives aimed at sugar and sunflower oil producers, along with large retail chains. Under the agreements, which were set to run until April 1, producers and sellers agree to lower their prices and keep them stable.

Other measures included low-interest loans for sugar producers to purchase sugar beets, and subsidies for flour producers to purchase wheat.

‘Systemic Risks’

In late January, the Audit Chamber, the government’s official fiscal watchdog, warned that existing policies, including the price caps, posed potentially major risks for the country’s food supplies, not to mention inflation.

The chamber, which is headed by a respected former finance minister, Aleskei Kudrin, warned that food manufacturers or even farmers might balk at the lower levels, keeping supplies in storage, or selling them to other markets, which could lead to shortages on supermarket shelves.

“Such a step carries systemic risks,” the January 25 report said.

Russian President Vladimir Putin

On February 4, just days after two consecutive weekends of nationwide protests, Putin appeared on state TV with Economics Minister Maksim Reshetnikov to discuss food prices.

“The situation on the world food market, unfortunately, is getting worse,” Putin said.

Adding further headaches for the Kremlin was a Bloomberg report published about three weeks later, on February 28, that argued Russia’s rising food prices made it vulnerable to political unrest.

That grabbed the attention of the Economic Development Ministry, which put out a statement on the same day — a Sunday, a day when most Russian government agencies are quiet — pushing back against those conclusions.

“Such analytics are speculative in nature,” the ministry said. “The government is focused generally on economic instruments to reduce the impact of rising world prices on domestic prices, as well as on targeted measures to support producers in the regions.”

The sharp rise in food prices has added to many Russians’ other economic woes, such as stagnating wages, increased unemployment, and rising inflation. (file photo)

And on March 1, the public polling agency Nielsen published a survey that found nearly 70 percent of Russians were being forced to more closely watch household expenses, mainly due to the COVID-19 pandemic, and more than half of Russians said they were worse off.

In a briefing with reporters that same day, Kremlin spokesman Dmitry Peskov said officials disagreed with the reports’ conclusions about the country’s economic troubles.

“We have different data. We consider the conclusions that the authors…reached to be incorrect,” Peskov was quoted as saying.

“The fact that many felt a change in their income for the worse, that their [income] went down, is obvious. This happened all over the world. But we don’t agree with the fact that this is supposedly a more acute problem in Russia than in other countries,” he said.

‘No Reason To Hope It Will End Soon’

Vladimir Tikhomirov, chief economist at BCS Global Markets in Moscow, told RFE/RL that the removal of price caps on April 1 could fuel further price hikes. But he said that could be offset by a drop in inflation, which he said the Central Bank and the government are both counting on as the Russian and global economies recover from the pandemic lockdowns.

That could also prompt an appreciation in the ruble, which would help mitigate price surges, he said.

The economic malaise is also reflected in the consistently high demand for the mobile soup kitchens and homeless shelters operated by Nochlezhka, one of Russia’s oldest and best-known charitable organizations.

A homeless man on the streets of Moscow. (file photo)

Grigory Sverdlin, who has headed the organization for 11 years, said they serve hot meals daily to around 150 people — many of them homeless- — in both St. Petersburg and Moscow. He said they are also more frequently providing legal aid to people who’ve ended up homeless due to skyrocketing real estate prices or a corrupt bureaucracy.

In an interview with RFE/RL, he drew a comparison with 2014, when Russia suffered a sharp slowdown due to falling oil prices and Western sanctions.

“In my opinion, the economic crisis then was serious compared with the one we’re going through now,” he said. “But now there’s a sense that this crisis is not only more serious but deeper and heavier than before.”

“I’m no economist…but regardless of whether they lift the price caps, I’m sure that inflation and price increases will continue,” Sverdlin said. “Of course on a global scale, but in particular in Russia, because this country is in a rather serious economic situation, and there’s no reason to hope it will end anytime soon.”

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