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. Last Updated: 07/27/2016

Post-Crisis Russia Is Cheaper For Some




This week and next The Moscow Times will be revisiting the events of Aug. 17, 1998. Tomorrow: Did an exchange rate fetish of 6 rubles to $1 keep Russia weak?


"Man, this place is cheap!"


A comment heard so often in the first years after the collapse of the Soviet Union made a triumphant return to Russia after last August's financial meltdown. But only for those lucky few who have salaries measured in dollars.


For those who can still think in dollars, Moscow's slide from the most expensive city in Europe and the third in the world to a modest 83rd place in the world brought an improvement in their quality of life.


Average Moscow rents dropped from 30 percent to 50 percent, offering renters the opportunity either to save a lot of money, or move to a more luxurious apartment.


Alexei Kistenyov of Penny Lane real estate agency said a two-room apartment in the city center now goes for $500 and a choice place for $1,000.


Other phenomenal savings are gypsy cabs. Prices simply have remained the same since last year. It is still fairly easy to get a ride within the city center for 20 rubles to 30 rubles, with only one difference - before last Aug. 17 that would have been $3 to $5 and now it's about $1.


Even the official taxi companies have not increased their rates.


For those who prefer to do the


driving themselves, Russian made cars became an affordable purchase, at $3,000 to $6,000 for a brand-new vehicle.


Another perk provided by the crisis was that things like plane tickets and mobile phones got much cheaper in dollar terms. Driven by a drastic shrinkage in the number of people still able to afford such things, airlines and telecommunications companies considerably reduced prices and offered various bargains to attract customers.


Mobile phones became more accessible. Moscow Cellular Communications introduced a family package: Clients who purchase two mobile phones receive up to 300 minutes a month of free communication time between the two numbers. Other telecom providers also have come up with attractive offers.


Traveling also became much less painful. Paying something around $300 for round-trip flights to Europe has become almost expected, while before the crisis such a deal would have been considered a major stroke of luck.


Prices on domestic flights went down, too. For instance, a round-trip ticket to Lake Baikal cost $220 this summer, as opposed to an astounding $600 at the same time last year.


Peter Westin, an economist with the Russian European Center for Economic Policies, said the largest increase in purchasing power has been for domestically produced goods and services.


"Look at Baltika. It was sold at about a dollar before the crisis and now it is less than 50 cents," Westin said.


However, the picture of cheerful expatriates and a small number of well-paid Russians running around town with more money in their pockets is only a small bright spot against a dark background of millions of Russians growing continually poorer.


Inflation from August 1998 to the end of July 1999 was 118 percent, Westin said. With little or no increase in their nominal incomes, for Russia's 38 million pensioners and millions of state employees the high inflation rate has meant a dramatic drop in purchasing power.


Westin said the recovery from the stark split between dollar and ruble earners is likely to last for another year or year and a half.


Because of the presidential elections due next year, Russia is unlikely to get direct investments before then. "All foreign companies are likely to wait for the election results," Westin said.


As the result of the drop in some prices as well as an increase in cheaper local products on the Russian market, the minimum subsistence level actually fell in dollar terms from $73 in July 1998 to $38 in June 1999.


However, life becoming cheaper in dollar terms even for average Russians across the country has not made it any easier in real terms. The cold statistics show that while in July 1998, 22.3 percent of the population lived at or below the minimum subsistence level, in June of this year, the number of the officially poor stood at 35 percent.


This, though, was an improvement over January's record of 38.2 percent.


The average pension last July was 403 rubles ($67 at the July 1998 exchange rate). By June of this year, the average pension only increased by some 46 rubles to 448 rubles - $18, or less than a third in dollar terms.


People of working age suffered too. Some state-sector employees have received minimal raises, but many have not.


"My husband used to be paid about $400 if one were to convert it, but now it is only $100," said Tatyana, the wife of a Foreign Ministry employee, who asked that her surname not be published.


Even for the self-employed the times have been tough.


Vladimir Orlov, 42, worked as a long-distance truck driver for 20 years. But the crisis simply drove him out ofbusiness.


"I used to be able to make between $1,500 and $2,000, but now it's easier for me to make both ends meet by working as a gypsy cab driver," Orlov said.


"I even used to deliver rocket parts to Baikonur," the cosmodrome in Kazakhstan, he said, looking pitifully at his aging Lada.


Orlov said ruble prices for cross-country cargo transportation have remained practically the same. While nice for those paying for the trucking, the drop in dollar terms was the main reason why Orlov quit the business.


"I can only say that I was lucky not to have bought my own truck before the crisis. Some of my friends who did still owe serious money with no prospect of earning enough to pay the debts," Orlov said.