Go Dollar!

15 January, 1999 The Moscow Times

City Not Europe’s Costliest Anymore

By Oksana Yablokova

If the wages and savings of ordinary Muscovites have been eaten by
inflation since the ruble collapsed in August, a new international
cost-of-living survey released Friday shows that life has only gotten
cheaper for foreigners and Russians who get paid in dollars.

Only a year ago, Moscow was rated the most expensive city in Europe
for expatriates and the third most expensive in the world. Now it has
fallen to 88th place. Russia’s second city, St. Petersburg, is way down
in 115th place out of the 123 cities surveyed around the world and has
the dubious honor of having the lowest cost of living of all Europe’s
major cities. Last year it ranked 32nd.

The Worldwide Cost of Living Survey, conducted In December by the
London-based research group the Economist lntelligence Unit, showed that
Japanese cities Tokyo and Osaka remain the most expensive in the world,
while Hong Kong has moved into third.

The survey was conducted by comparing prices for products and
services. The average prices were then compared to the average for New
York, which was used as the base city with an index 100. Moscow’s index
in comparison was 69. Tokyo, the most costly place on the globe, rated
138. Zurich, which leapfrogged Oslo to become Europe’s most expensive
location, measured 121.

A decline in housing prices appeared to be a major factor behind
Moscow’s lower cost of living. For example, an average two-room
apartment with Western renovation and located in the center costs $800
to $1,000 a month, while before the ruble devaluation the price was from
$1,300 and $1,500, realtors said. Viktoria Dovgach of Delight Real
Estate Company said, in general, apartment rents have dropped 30 percent
since the financial crisis hit and many expatriates began packing their
bags for home. Most landlords have been willing to reduce rents in order
to keep their tenants.

‘I managed to negotiate my apartment rent down to 40 percent of
what it was before the crisis – that’s a huge difference,’ said
Gill Costello, an American from Boston who lives in Moscow.

While a lot of imported products doubled and tripled their price in
rubles after August, some Russian-made products became considerably
cheaper. A bottle of St. Petersburg-made Baltika beer, which cost 6
rubles (about $l) before the crisis, now sell at 8 rubles (35 cents).
The price of a liter of milk, which was about 60 cents, dropped down to
25 cents after the devaluation. Despite a small increase in gasoline
prices, the rates for cab rides within Moscow remained the same if
counted in rubles, and because one-third the price in dollar terms.

Many stores and restaurants frequented by expatriates, however, have
returned to pricing in dollars, so these shoppers and diners are
breaking even, provided of course that they are paid in dollars.

The expatriate life would have become even more attractive if the
salaries of many foreigners and dollar-earning Russians had not been cut
after the ruble collapse. Albin Gieliez, an American from Chicago, who
works as promotions manager at BBDO advertising agency, said the
standard of living for expats has not increased as much as the figures
might suggest because many people, including himself, have had to accept
a salary cut. ‘The phone bills are great now, the rent has fallen
significantly, but a lot of products just stayed the same,’ he said
in a telephone interview.

Nastya Furtasova, marketing coordinator of the Moscow office of Akin,
Gump, Strauss, Hauer & Feld, a U.S. law firm, said her expenses have
decreased. ‘As the prices for basic food products and services have
not grown as much as the dollar, many things, including international
phone calls, laundry and utility payments, became cheaper for me,’
she said. ‘I used to spend $500 a month in living expenses before
the crisis, now 1 can make it with just $200,’ she said.

Zurich, in fourth place in the world rankings, was followed by Oslo,
Paris, Libreville, the capital of Gabon, Geneva, and London. Copenhagen
and Vienna were tied for 10th place. Athens and Lisbon are the cheapest
cities in the European Union. New York, the most expensive U.S. city,
continues to climb in the ratings, from 19th last year to 14th. This is
typical of the trend among U.S. cities because of the strong dollar.
Atlanta remains the cheapest U.S. city, in 68th place.

Moscow is tied with Wellington, New Zealand, for 88th place, just
above Bucharest.At the very bottom of the list is the Libyan capital,
Tripoli.

Russia Today, Jan. 18,
1998

A Revolution of Empty Stomachs

By Rod Pounsett

Kremlin spin doctors will no doubt attempt to capitalize on the news
that Moscow is no longer the most expensive city in Europe for
foreigners. And according to the Economist Intelligence Unit, Russia as
a whole has toppled from being third most expensive country in the world
to 88th. This may be construed as encouraging news for expatriates,
those trying to attract new business to Russia and the country’s tourist
industry. But it will not do much to alter harsh realities for the
estimated 73 million ordinary Russians, according to the Red Cross, now
living below the poverty line.

For instance, rents for Westernized Moscow apartments have fallen by
as much as 30 percent since the ruble crisis caused a mass exodus of the
foreign business community and formerly high dollar wage earning
Russians lost their jobs. An apartment offered at $1,500 a month at the
end of last summer can now be snapped up for $1,000 or less. Prices for
foreigners have fallen even further in St. Petersburg, which is now
115th in the world table.

But for Russian pensioners trying to exist on under $20 a month, or
those families that have not seen any sort of wage packet for almost a
year, these figures are meaningless.

In fact, it is hard to imagine how people manage to survive,
especially considering the rapidly increasing prices for essentials such
as basic food items. And with food imports cut to almost nil and the
severe winter shortages of domestic produce, the problems have been
exacerbated by unscrupulous exploitation of supply and demand.

Yes, a lot of Russians, especially in the rural areas, do have the
ability to grow some food for themselves — that is, if they can afford
seeds, fertilizers and transport costs to get to their small holdings.
And there is the prospect of reasonable amounts of humanitarian aid from
the West this winter, provided the system allows the produce to reach
the needy without corrupt officials and criminals hijacking it en route.
But the fact remains that a lot of Russians are having a hard time
making ends meet.

In relative terms, it is marginally easier for people living outside
the capital. General prices in the regions can be up to 30 percent lower
than in Moscow. But that only means very little goes a little bit
further.

To get things in perspective, it is worth looking at the cost of
items for an average shopping basket of supplies based on current Moscow
region prices. Remembering that a pensioner couple will have an income
of about $35 a month and a family of four on state support no more than
$100, out of which they also have to pay for utilities and other
household costs, not to mention nonstate provided medicines and some
school supplies if they have young children. University students do get
some minimal extra assistance, but not much.

This list takes into account the normal Russian diet. Price per pound
(unless otherwise stated)

• Potatoes $0.06
• Cabbage $0.08
• Onions $0.15
• Garlic $0.15
• Beet root $0.06
• Apples $0.25
• Bananas $0.28
• Grapes $0.48
• Flour $0.20
• Butter $0.18
• Cheese $0.57
• Meat $0.60-$1.20
• Sausage $0.50-$1.00
• Low-grade frozen fish $0.90
• 10 eggs $0.28 Bread (loaf) $0.17
• Milk (pint) $0.25
• Cooking oil (pint) $0.80
• Fruit juice (pint) $0.60
• Water (pint) $0.24
• Baby food (packets, two-week supply) $4.30
• Detergent (Western brands) $0.76
• Detergent (Russian brands) $0.38
• Toilet soap (bar) $0.10
• Toothpaste (250 grams – Western brands) $0.95
• Toothpaste (250 grams – Russian brands) $0.40

Prices calculated using a ruble exchange rate of about 21 to the
dollar.

A couple I know in Moscow with two young children, both of whom have
lost their jobs in the recent crisis, tell me they are having to survive
on $2 a day for food after all other costs have been taken into account.
They try to buy some meat or fish a couple of times a week for the
children, but sweets or ice cream are very rare treats.

It is hard for them to understand they are not living in a Third
World country. Despite the current economic crisis Russia has to be
considered a developed nation. But how, they ask themselves, can Russia
afford to spend billions of rubles developing things like the
state-of-the-art new MiG fighter jet rolled out in public for the first
time last week when their children are on near starvation rations?

Napoleon reminded us that armies march on their stomachs. The Russian
government might be warned that revolutions can begin with empty ones.