Moscow Drops Notch in Cost Study

Top 15 ('04 Rank)
1. Tokyo(1)
2. Osaka(4)
3. London(2)
4. Moscow(3)
5. Seoul(7)
6. Geneva(6)
7. Zurich(9)
8. Copenhagen(8)
8. Hong Kong(5)
10. Oslo(15)
11. Milan(13)
12. Paris(17)
13. New York(12)
13. Dublin(14)
15. St. Petersburg(10)
Source: Mercer HR Consulting

A cup of coffee in Moscow is the most expensive in the world and you will be hard-pressed to find a music CD here for less than $23, according to a new study of the world's costliest cities to live in.

With 119 points, Moscow is the world's fourth-most and Europe's second-most expensive city for expatriates, according to the annual study by Geneva-based Mercer Human Resources Consulting, released Monday. Globally, only Tokyo, Osaka and London are more expensive than Russia's capital.

New York, No. 13 in the world, is used as the study's base city, with 100 points. Tokyo, which scored 134.7 points, is three times more expensive than Asuncion, Paraguay, the least expensive city in the Mercer study.

The survey measures differences in prices for 200 goods and services -- from apartment rentals to clothing and food -- in 144 cities around the globe. It is used by multinational corporations and government agencies to determine compensation for their expatriate employees.

Moscow was ranked Europe's No. 2 and the world's No. 3 last year.

St. Petersburg, the only other Russian city on the list, fell from No. 10 last year to No. 15, and is roughly as expensive as Dublin and Vienna, the study found.

While former communist bloc capitals are still much cheaper than either Moscow or St. Petersburg, their rankings rose sharply last year, as "they make strides to bring their economic infrastructure up to EU standards," said Marie-Laurence Sepede, research manager at Mercer.

For example, Warsaw jumped 49 places to No. 27, and Prague moved upward from No. 49 to No. 28.

"There is a great difference between prices for locals and for expatriates," Sepede said, explaining some of the study's findings that may seem alien to anyone familiar with daily life in Moscow.

According to the study, a cup of coffee in Moscow will set one back $5.42, as opposed to $3.45 in London, $2.91 in Paris or $4.06 in Warsaw. In reality, many Moscow coffee shops normally charge about half that price.

Similarly, a music CD can be bought in Moscow for $23.47, according to the study, a price one might pay only for an imported disc.

The study also did not take into account the extremely cheap transportation system, as the survey on which the report was based was done by "expatriates, who generally don't use public transportation," explained Anna Krotova, a senior analyst at Mercer.

Scott Antel, a partner at Ernst & Young and a Moscow resident since 1993, said that the study's findings might be true for those "living in a cocoon environment" but are less so for foreigners who "go native," taking public transportation and shopping at markets.

"[The study] is probably correct for those expatriates living in enclosed compounds, buying only imported products and dining at top restaurants, as many did in the early 1990s. But today there is local choice and some significant comparative savings on items such as transport, petrol, utilities, certain foods and building supplies," he said.