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. Last Updated: 07/27/2016

Honey, They Shrunk The Dollar!

There was a time when $20 or a fistful of rubles went a long way in Moscow: A taxi would go anywhere for 50 cents, you could buy huge bunches of roses without thinking about the price and, for a few glorious days in the spring of 1991, two people could lunch in the Metropol Hotel's new Boyarsky Zal for less than $10.


No more. There is little external sign of it - no sleek glass-and-metal skyscrapers, no lushly decorated shop windows - but Moscow is turning into one of the most expensive cities in the world.


It is happening all over town. Every minute of the day, in shops, restaurants, hotels, clubs and on the streets, the buying power of dollars and rubles is dwindling.


Survey after survey places Moscow near the top of the expense league for foreign residents. The latest, in Newsweek, names the city as the fourth most costly in the world for dining out. You can eat out for less even in Hong Kong.


A new phenomenon, the stable ruble, has combined with skyrocketing prices to undermine the purchasing power of the dollar and dramatically alter economic realities here for foreigners and Russians earning hard currency.


One element is the fact that the dollar rate against the ruble has not kept pace with inflation. The ruble is holding steady at 1, 100-1, 200 rubles to the dollar - losing only 5 percent of its value against the U. S. currency in the last five months, despite a 20 percent average monthly rise in inflation.


But not just inflation is behind the trend. There is also the small but growing class of wealthy Russians who have money to burn and are eager to flame. Willing to pay any price for the forbidden fruit of the Communist years - from frozen lobsters and Japanese sushi to a Mercedes-Benz or a Cadillac - they are driving up prices across the board.


Unlike Russians in the ruble economy, who are suffering real economic hardship, foreigners have the ultimate option - they can go home.


For those who stay, life is becoming more expensive by the day. and that is spawning some new spending patterns.


Longtime Moscow residents used to laugh at foreigners who went to hard-currency stores to stock up on fruit and vegetables, when it was so much cheaper to buy fresh produce in the markets.


These days, it can be more expensive to buy lemons or salad at the Central Market than it is to purchase imported, heavily taxed fruit and vegetables brought from Spain via Holland to Russia.


Asking prices for a kilo of oranges hover between 4, 000 and 5, 000 rubles at the Central Market, compared to 95 cents plus tax at Stockmann; apples cost up to 4, 000 rubles a kilo - slightly more than an average $3 at a foreign supermarket.


Some items, such as bananas and kiwi fruits, are almost always a better buy in the hard-currency shops. Another advantage of the shops is that they have periodic sales. When was the last time the vendors at the Central Market had a week-long special?


Neither do kiosks always offer a cheap alternative. Liquor, especially brand name spirits (50, 000-60, 000 rubles for a bottle of brandy), is often as - or more - expensive than in dollar shops.


There are still bargains, like coffee and cigarettes (200 Silk Cut sell at about $16 at the Garden Ring Supermarket but can be found at Kievskaya district kiosks for 3, 600 rubles). and at a lesser-known market, such as Tishinsky near Belorussky Station, basic foods like potatoes, garlic, and onions are much cheaper than at a dollar shop - onions sell for about 400 rubles a kilo, compared to $2 at a hard-currency store.


Many foreigners have developed a selective approach on shopping expeditions. Kate Whyte, a British resident of Moscow who has lived here for over three years, now buys her potatoes and onions from her local vegetable shop, and other fruit and vegetables from the Irish House supermarket.


"It's better quality and not that much more expensive", she said.


Restaurants used to be divided into two categories; rubles, which meant very cheap, and hard-currency, which meant expensive. Now, the bill looks much the same whether you pay in dollars or rubles.


"I go to foreign restaurants these days", said Whyte. "Russian places are just not cheap any more. There's not much difference in the cost of a foreign restaurant, and the quality is better".


A recent round of telephone calls to upscale ruble restaurants serving Russian food disclosed that finding a meal for less than the equivalent of $50 a head was next to impossible. This matches the bill at upscale hard-currency spots in town - places that increasingly cater to a rich Russian clientele.


Ordinary Russians simply never go to a restaurant, and most foreigners have either cut down on going out to eat or resigned themselves to paying sky-high prices for mediocre meals, with a 20 percent tax slapped on top.


Not just food is affected by the shrinking dollar. The cost of transport, linked to increasing gasoline prices, has risen noticeably, to the point where catching cabs is not much cheaper here than in foreign capitals.


The taxi mafia that works Sheremetyevo Airport now demands $30-$40 for a ride into central Moscow. A cab taking you from the White House to Washington's Dulles International Airport, which is farther from the city center than Sheremetyevo, will charge $35-$38.


Phone calls are getting a lot more expensive too. Costs vary depending on the time of day: Direct dialing between 8 P. M. and 8 A. M is the cheapest, at 300 rubles a minute to Europe and 600 to America, plus a 5 percept tax on all calls. These same rates apply on weekends and holidays.


But on a weekday, a leisurely conversation with your ex-college roommate in California clocks up at 1, 200 rubles a minute from 8 A. M. to 3 P. M. , and 6 P. M. to 8 P. M. Call between 3 P. M. and 6 P. M. , and the rate is higher, at 1, 500 rubles a minute.


For Europe, the rate zones are different. From 8 A. M. to 10 A. M. and 3 P. M. to 8 P. M. calls cost 600 rubles a minute, and during peak time, which is from 10 A. M. to 3 P. M. , the rate is 750 rubles a minute.


Then there is the rent. Native Muscovites pay a relative pittance for their state apartments, but for foreigners living in Moscow, the prices levied on centrally located flats rival if not surpass rents in the West.


An informal survey of Moscow real estate agents revealed that a three-room flat in the center goes from $1, 000 a month for a basic apartment to as much as $3, 500 for a flat decorated to Western standards.


This makes renting a flat in Moscow as expensive, if not more so, than renting an apartment in midtown Manhattan. Choose to live in Brooklyn, and a good three-room flat wilt probably cost $800 a month.


And few of the conveniences you could expect for paying to live in a certain New York neighborhood are available in Moscow - there are still no 24-hour delis on the fashionable Malaya Bronnaya, for example.


Natalya Belova of the Domovoy real estate agency said that rental prices on the most desirable flats are stable at present, at over $2, 000 for a central three-room, but said she can foresee an increase.


"As more and more foreigners arrive, looking for good flats, they will probably rise", she said.


Ironically, for some local hard-currency businesses, decreasing dollar-power has been a boon of sorts. It seems paradoxical, but it stands to reason. Russian wages, which are adjusted for inflation, are increasing in dollar terms. This makes imported goods increasingly accessible to people paid in rubles.


At the same time, Russian prices are edging closer to world levels, meaning that there is less difference for shoppers whether they buy in rubles or dollars.


Colm Fitzsimon, the manager of the Garden Ring Supermarket, said that he has noticed "a major increase in business over the last six months".


He believes that the store's substantial sales growth "has a lot to do with the artificially low ruble rate".


Then there is the increasing number of Russians who have come into big money - at times, staggering, incalculable wealth.


These high rollers (like the man we encountered in Stockmann's buying $20 worth of kumquats, although he did not know what they were) impact on prices everywhere, especially those for luxury items. Shops like one new clothing store at the Radisson charge $700 for a sweater because they can sell three a week at that price - and all to Russians.


Conspicuous consumption is in.


"Russians want to be seen spending money", said the 36-year-old founder of a Moscow bank, who preferred to remain anonymous. "The more expensive a bar is, the better. A Russian businessman knows this. That's why he sells fake Italian suits and fake Levi's for absurd prices".


Will the trend continue? Most likely it will. "Russians", as the banker said, "have lived for so little for so long".