Oil wealth gone, Russians brace for hard times

McClatchy NewspapersDecember 31, 2008 

WORLD NEWS RUSSIA-ECONOMY 1 MCT

Russian women sell clothing outside of a subway station in Moscow, December 31, 2008. Several such street vendors said business has been getting worse. Many Russians worry that the country's economic troubles will worsen.

TOM LASSETER — Tom Lasseter / MCT

MOSCOW — The subway crowd brushed past Alla Semyonova, tromping through the now-gray slush of a December snowfall.

Semyonova held a black knit sweater for sale dangling from a wire hanger in her right hand (1,000 rubles, or about $33) and a blouse with gold flowers in her left hand (500 rubles).

The 67-year-old woman stood stoically in the cold, trying to raise a few dollars for the New Year. "I sold nothing yesterday, not one thing," Semyonova said. "It's very bad right now."

There are many oft-quoted indicators of Russia's suffering economy — the nation's international reserves have fallen by more than 25 percent since August; the major stock indices recently plummeted by 70 percent; and the ruble has been sliding — it's now selling at exchange houses for about 30 to the dollar, compared with 23.5 five months ago.

Beyond those figures and the analysis of financial experts, however, on the streets of Moscow — a city that has known much tumult during the past century — there is for many Russians a deep sense of fear, a feeling of being underneath a gathering, dark wave of hard economic times.

Only last spring, downtown Moscow was a place where Russia's nouveau riche walked out the door of boutiques with fists full of bags from Hermes, Cartier and Gucci. In a city with more billionaires than any other in the world, Bentleys and BMWs idled outside the shops with drivers waiting to put the bags in the trunk and zip to the next shop.

That was before the war with Georgia in August, which kicked off an exodus of foreign capital; the global financial crunch, which dried up lines of credit used by heavily leveraged Russian businessmen; and, finally, the crash of oil prices that had underwritten much of the boom.

Crude-oil futures ended the year at $43 a barrel — a long way down from their record-shattering price of $147 in July.

"The stability based on oil wealth proved an illusion," observed a guest columnist in Tuesday's edition of Vedomosti, a business journal. The writer, the head of an influential polling center, reported that 61 percent of those interviewed in September said things were going in the right direction in Russia, a figure that dropped to 43 percent in December.

Standing in the snow Tuesday, Semyonova caught the eye of a woman pausing and shouted that as her first customer of the day, she could have a good price. The woman looked away.

"I don't remember it being this bad since 1998," Semyonova said. That was the year the ruble collapsed, taking the Russian economy with it and leaving mobs of people to rush the stores to stockpile food.

It's not just the babushkas selling clothing who are worried.

Sergei Busko, a construction executive, said he hasn't yet been squeezed hard, but he knows that it's coming.

"This economic situation will affect everybody. We haven't felt it yet personally, but we're waiting," said Busko, who was holding a Giorgio Armani satchel as his wife stood by, ensconced in a lush, brown fur coat. "If people don't have money, everything will stop."

At the GUM shopping mall, its bright lights bouncing off the tomb of Vladimir Lenin across Red Square, the rich still mill about, but there's less spending now, said bored clerks sitting behind decorated windows. During this time last year, on the eve of Russia's New Year and orthodox Christmas holiday season, the place was packed with people buying thousands and thousands of dollars worth of couture clothing, and heavy, shiny rings and necklaces.

Elena, a manager at the Italian jewelry store Pomellato, said that "there has been a large drop in sales, it began in October."

"The customers are talking about the crisis all the time," said Elena, who didn't give her last name.

Olga, a saleswoman, chimed in: "It's not just our customers worrying about it, it's everyone."

The two women, both looking like fashion models in their finely tailored business suits and surrounded by diamond and pearl baubles, stood behind a counter with a bottle of champagne corked in its bucket, still waiting for customers at 3:30 in the afternoon.

Victoria Zelepukhina was outside the store, offering passersby samples of Viktor and Rolf perfume. Most of them waved her away, not in the mood to pay more than $120 for a small bottle of fragrance called Flowerbomb.

"Our sales started going down a few months ago, we had to start doing this, giving away samples," Zelepukhina said with a shrug. "Not many people are buying our perfume these days because it's expensive."

Sitting in her central Moscow office, a couple miles from Red Square, Ekaterina Lebedeva said her son works at a Range Rover dealership where several people already had been laid off. She worries that her boy could be next.

Lebedeva said, however, "As for my job, I don't think I will have any problems." In fact, she said, her business seems well positioned for the days ahead.

Ekaterina Lebedeva is the manager of a pawn shop.

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McClatchy Newspapers 2008

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