Falling ruble doesn't hit Putin – at least, not yet

The shelves at the Perekrostok supermarket near Proletarskaya Metro in central Moscow are piled high with fresh produce. The meat department looks well-stocked, and the usual wide array of dairy products beckons.

But some of the brand names are unfamiliar to regular shoppers here, and a lot of their favored imported goods are nowhere to be found. An even bigger problem? The price tags, which are escalating – dramatically.

"I'm a person of regular habits, so I can tell you exactly that a grocery bill that came to 3,000 rubles six months ago now costs me closer to 4,500," says Mikhail Sevastyanov, a pensioner. "Like a lot of people, I'm just clenching my teeth and waiting for whatever is coming next."

Marina Volkova, a part-time worker on a tight income, says she can do without the imported French cheese she used to like – it's gone anyway, banned amid Russia's escalating sanctions war with the West over Ukraine. But even the prices for locally produced food are soaring. "You have a list of things to buy, and only so much money. It's getting harder and harder to make it work," she says.

Russians have been hammered by economic crises over the past two decades, and perhaps that's why they seem pretty stoic amid the current storm, which has seen the ruble lose 50 percent of its value against the dollar this year – 10 percent in the past week alone – driving up inflation, interest rates and, of course, prices for everyday necessities. 

But unlike the hyperinflation and crashes of the 1990s, or even the severe downturn of 2009 – when the West inadvertently inflicted far more economic damage on Russia than sanctions have done – this crisis involves politics.

One factor driving the ruble's plunge are the Western sanctions leveled against Russian banks and state companies over Ukraine. Those have led to a harsh credit squeeze and growing capital flight. Over the summer, the Kremlin struck back with counter-sanctions, banning a whole range of Western foodstuffs.

The customers in Perekrostok seem aware that their problems are to some extent rooted in President Vladimir Putin's spat with the West, but it's not clear that many of them are prepared to blame him – at least, not yet.

Shopper Irina Stoyanova said she was making do by finding cheaper fruits and vegetables in the nearby farmers' market, and doesn't expect things to get much worse: "Yesterday I heard our president on TV, reassuring people that things are under control. Look around you, there's no panic. Russians are used to surviving these things," she says.

Indeed, a survey in August by the Levada Center, Russia's only independent pollster, found that 78 percent of Russians supported the Kremlin's counter-sanctions against the West, while 13 percent thought they were wrong. A similar poll last month found that 73 percent still backed the policy, while 15 percent were opposed.

"Russians know the economic problems are a consequence of sanctions, but they seem to mostly accept what the Russian media tells them and place the blame on the West," says Alexei Grazhdankin, deputy director of the Levada Center. "The Russian leadership's responses are mostly judged to be correct." 

Economists say there is no immediate link between the falling ruble and rising prices, and that it may take some time for last week's 10 percent devaluation of the currency to work its way through the economy. Meanwhile, for those who have dollars, shopping in Russia has suddenly become a bonanza. A major news agency noticed this week that tourists to Russia are snapping up bargains in Moscow shops on high-end consumer goods, such as iPhones, which have gone in dollar terms from being the most expensive in Europe to the cheapest in a matter of days.

Ironically, another winner is the Russian government itself, which receives over half of its income in dollars through taxes on oil and gas exports. Russian Finance Minister Anton Siluanov said last month that even though the fall in oil prices is cutting state revenues, every one-ruble drop in the exchange with the dollar rate increases the government's income by up to 200 billion rubles, which it can use to pay pensions, public employee salaries, and other costs.

But that's not a trick that can be repeated more than once, say experts.

"There are more losers than winners in this currency devaluation. We are already seeing a big fall in consumer spending, as people retrench and cut their family costs," says Alexei Devyatov, an economist with UralSib Capital, a Moscow-based investment firm. "Unless the ruble recovers, which seems unlikely, we are probably going to see inflation go into double digits early next year. That's going to be bad news for the economy, and for most Russians."

One unexpected winner is the grocery shopper, Mr. Sevastyanov. He says he learned his lesson from Russia's previous crises, and since early this year he's been spending all his spare cash to buy dollars, which he keeps in a safe place.

"I've already made a tidy little profit," he says.