The West's economic sanctions have been dismissed as ineffective by Russia, but it's not just the winter that's chilly for the country's inhabitants. This week, two heavy messages arrived, first new inflation figures showing an inflationary surge, 8.9 percent in November, up from 8.5 percent in October.
The inflation rate is believed by many external economists to be significantly higher, despite the Russian interest rate being at a record high of 21 percent.
The news agency AFP describes how state-controlled media have started reporting on the price shock, including the skyrocketing price of butter, which has led to butter being stolen from food stores.
A Problem
Another major problem is the labor market, with hundreds of thousands of inhabitants sent to the war front or having chosen to flee the country. According to economist Jevgenij Nadorsjin, there is currently a shortage of one million working-age people, which has driven up wages and forced companies to put the brakes on investments. For example, the state-owned railway company has announced that it will have to cut its investments by 40 percent next year.
The situation has become so dire that even Vladimir Putin has chosen to comment on it. In his annual Q&A session this week, Putin called the inflation development "alarming". German Gref, CEO of Russia's largest bank Sberbank, is even more drastic:
The economy cannot survive, he said earlier.
Sergej Tjemezov, described as a close friend of Putin and CEO of the military conglomerate Rostec, has in turn described the country's interest rate as "madness", and there is now a fear that bankruptcies will skyrocket in 2025.
Taking Effect
From the West, it is clear that the sanctions are now taking effect, one of those highlighting this fact is Finance Minister Elisabeth Svantesson (The Moderate Party) who has emphasized in her international meetings:
Number one is that the sanctions are actually working and one should not believe Russia's narrative. Number two is to continue working with these sanctions, which is something the entire government is doing, she says.
