For average Russians, western sanctions over Ukraine war begin to bite

Soaring interest rates have pushed some to hold off on buying homes. Others are stocking up on imported medications and travel plans have been cancelled.

People are desperate to withdraw hard currency as the rouble plummets in value. Picture: AFP

Viktoriya and Yevgeny Vinnikov had carefully planned for a trip this month to Bulgaria, even travelling hundreds of kilometres to get a Covid-19 vaccine that would allow them to enter the European Union.

They were booked on the Hungarian low-cost carrier Wizz Air and had reservations at a cozy hotel in the capital, Sofia, and the ancient southern city of Plovdiv.

Then came the sanctions.

After Western countries, including European nations, shut their airspace, Russia hit back, banning flights by airlines from 36 countries, including Hungary. As a result, the Vinnikovs’ vacation was scrapped. The couple don’t know when they will be able to travel abroad again.

“We used to go abroad at least two times a year,” said Ms Vinnikov, a 56-year-old real estate agent, adding that the cancelled trip was a gift from her husband for International Women’s Day on March 8.

Since Moscow’s invasion of Ukraine last month, the US and Europe have unleashed a package of punishing sanctions against Russia’s economy, including restrictions on the Russian central bank and cutting other banks’ access to the dollar and other reserve currencies. Plans are also in the works to sever some Russian lenders from the Swift global-payments messaging system.

The impact has already begun to reverberate.

Long lines have formed at some banks as the rouble continues to plummet and Russians rush to withdraw hard currency. Movie theatres have been forced to cancel the showing of American films, after US studios Disney, Warner and Sony halted the release of films in Russia.

Netflix customers in Russia were unable to pay for their subscriptions with credit cards issued by some banks, including Sberbank, Russia’s largest bank and a target of US sanctions. The problem was soon resolved, according to Netflix.

Some Russians shelved plans to buy a new home after mortgage interest rates more than doubled to 20 per cent. Meanwhile, people have started to stock up on products such as foreign medications out of fear they might become scarce or run out in the coming weeks and months. Around 55 per cent of Russian medications are imported, according to 2021 data from the DSM Group, a Moscow-based marketing agency that specialises in pharmaceutical market research.

A sign reads ‘flight cancelled’ at the Aeroflot check-in counter in the Tom Bradley International Terminal at Los Angeles International Airport after President Joe Biden announced a ban on Russian aircraft in US airspace. Picture: AFP

Olga Sazonova, 60, a St Petersburg coach and psychologist who offers what she describes as “body mindfulness tours” to Europe and beyond, was slated to take a group of 12 people to the Maldives in April. That trip has now been shelved and she is waiting for a refund of her deposit from the hotel.

Realtor Tatyana Johnson said the increased mortgage rates had crippled the plans of several of her clients who had planned to take out a mortgage. At least two clients, who were about to buy second homes at a pre-sanctions interest rate of 11 per cent, abandoned their plans.

“Of course, it’s become unbearable,” she said.

Ms Johnson also had plans to fly to Serbia on February 26, two days after the first set of sanctions were imposed. But the flight bans scotched those plans. While her airfare was refunded, Ms Johnson lost the advance payment on her hotel.

“The sanctions were not justified” because they harm ordinary people, Ms Johnson said.

Kremlin spokesman Dmitry Peskov said on Wednesday that “the Russian economy has suffered a serious blow”, but he insisted ”we are still standing”.

The Kremlin has retaliated against sanctions, including imposing a ban on the issuance of loans by Russian residents to foreigners and ordering exporters to sell 80 per cent of their foreign currency gains from exports. The government has also said it would spend one trillion roubles, equivalent to around $13.7bn, to buy shares in Russian companies.

Nonetheless, “the current situation is very difficult”, said Stepan Goncharov, an analyst at Levada Centre, an independent Russian pollster. “It will lead to long-term consequences. It will have an effect not on only the middle class, but also the lower class, which is larger. They will also feel this change in their normal lives.”

Mr Goncharov said the sanctions could have far-reaching consequences because the low-income Russians who will bear the brunt of the sanctions comprise President Vladimir Putin’s core political base.

Russia’s tech-savvy youth, who are more globally connected and are largely opposed to the Kremlin’s military campaign would also feel the pinch, Mr Goncharov said, adding that the pain would spread through much of the population.

“(People) will blame European countries and the US,” Mr Goncharov said. “But of course, there will be a drop in the standard of living and for this responsibility will be put on the government, because they couldn’t make the economy self-efficient and defend ordinary people, and of course part of this blame will be put on the president as well.”

Thousands of Russians took to the streets last week to protest the war. Authorities used violence to disperse them and have detained almost 6900 for participating in unsanctioned demonstrations, according to OVD-Info, an activist group that monitors police detentions. Russian authorities have since quickly repressed other demonstrations.

A post on the Twitter account of jailed opposition leader Alexei Navalny urged Russians to come out in protest of attempts to quash opposition to the Kremlin’s aggression in Ukraine. “We must, gritting our teeth and overcoming fear, come out and demand an end to the war. Each arrested person must be replaced by two newcomers,” the tweet said.

The Wall Street Journal