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McDonald’s Is Reinvented in Russia as the Economy Stumbles On

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Yevgeny Shumilkin will be back at work on Sunday. In preparation, he removed the familiar “M” from the McDonald’s shirt and covered the “M” on the McDonald’s jacket with a patch of the Russian flag.

“It will be the same bread,” promised Schmilkin, who maintains the equipment at a restaurant in Moscow. “With a different name.”

The McDonald’s restaurant will reopen in Russia this weekend, but there is no golden arch. Siberian oil mogul bought 840 Russian stores after American fast-food giants withdrew this spring to protest President Vladimir Putin’s invasion of Ukraine. He said the restaurant can continue to serve many of the same foods, as almost all ingredients come from within the country.

Gambit may work — highlighting the amazing resilience of the Russian economy in the face of one of the most intense barrages of sanctions ever issued by the West. Three and a half months after the war, sanctions and a torrent of Western companies voluntarily leaving Russia could not completely dismantle the economy or cause public opposition to Mr Putin. became.

Russia spent much of Putin’s 22 years focusing on integration into the global economy. It’s not easy to unravel the ties of a very large and interwoven business.

Indeed, the effects of sanctions are deep and widespread, and the results are still in their infancy. The situation could be exacerbated, according to economists and businessmen, as Russia’s standard of living is already declining, imports are low and more companies are announcing layoffs.

Some Russian do-it-yourself efforts do not meet Western standards. When the first post-sanction model of the Russian sedan Rada Granta, co-produced by Renault before the French carmaker withdrew this spring, rolled off the assembly line at a factory near Volga on Wednesday, it was an airbag, Hyundai. Lacked pollution protection or anti-lock brakes.

However, the economic downturn is not as rapid as some experts expected after the February 24 invasion. Inflation is still high, around 17% on an annual basis, but has fallen from its peak in April 20. The S & P Global Purchasing Manager Index, an indicator of factory activity that is closely monitored, Indicated Russia’s manufacturing industry expanded in May for the first time since the beginning of the war.

Behind the positive news is a combination of factors that make Putin profitable. The most important of these is the high energy prices. This allows the Kremlin to continue to fund the war while raising pensions and wages to appease ordinary Russians.National oil income Is up 50 percent this year.

In addition, clever work by the central bank prevented financial market panic after the invasion and helped the ruble recover from the first crash. In most cases, store shelves are in stock, thanks to sufficient inventory and alternative import routes established in countries such as Turkey and Kazakhstan. There is the fact that Russian consumers buy less.

Even the new Lada Granta isn’t as clunky as the observer predicted. Despite the lack of foreign objects, it comes with power steering and power windows.

“Everything isn’t as bad as you’d expect,” said the Russian car website. declaration..

The survival of the Russian economy is strengthening Mr Putin’s hand by strengthening his story of Russia becoming taller in the face of the Western determination that Russia will destroy it. He met a young entrepreneur at a town hall-style event on Thursday. He is his latest effort to show that he is enthusiastic about keeping the economy functioning and keeping foreign trade moving during the war. Even if the West does not trade with Russia, he insisted, the rest of the world would.

“We are not going to achieve a closed economy,” Putin told a woman asking about the implications of sanctions. “When someone tries to limit us to something, they are limiting themselves.”

For the rich, luxury goods and iPhones are still widely available, but more expensive and are being shipped from the Middle East and Central Asia to Russia. Poor people are affected by rising prices, but will benefit from Putin’s announcement last month of a 10 percent increase in pensions and a minimum wage.

The city’s middle class was most affected by the economic turmoil. Obtaining foreign goods and services is now difficult, Western employers have withdrawn, traveling abroad has become difficult and exorbitantly expensive.

However, Natalia V. Zvalevich, a social and political geography expert at Moscow State University, estimates that many middle-class Russians have no choice but to adapt to lower living standards. .. Work for a state or state-owned enterprise.

“Sanctions are not going to stop the war,” Zubarevich said in a telephone interview. “Russian people understand that there is no way to influence the nation and will endure and adapt.”

Chris Weifer, a macroeconomic consultant with a long-standing focus on Russia, released a memo last week telling clients that “some of the previous assumptions were wrong.” Inflation and the shrinking economy turned out to be less serious than expected, the memo said. His company, Macro-AdvisoryEurasiaStrategic Consulting, has revised its forecasts to predict a recession that will continue into the next year, while reducing the decline in gross domestic product this year to 5.8% instead of 7%.

“The future of Russia’s economy is” slower, weaker, lower income, but basic goods and services are still available, “Weifer said in a telephone interview. For example, a major juice company. warning A customer who quickly turns all the boxes white due to a shortage of imported paint.

“The economy is now in a near stagnation period where collapse can be avoided,” he said. “It’s a more basic level of economic existence, and Russia can keep it going for quite some time.”

On Friday, the central bank of Russia cut its main interest rate to 9.5% as inflation stabilized. This is the pre-invasion level. On February 28, banks raised it to 20% to avoid the financial crisis. The ruble is currently trading at its highest price in four years after its value plummeted in the days following the invasion.

One of the reasons for the ruble’s unexpected strength is the surge in global energy demand from the pandemic. The Treasury expects the Russian government to plummet by more than $ 6 billion in June alone as energy prices exceeded expectations. Said last week.

At the same time, Russian consumers are reducing spending, further supporting the ruble and giving Russian companies time to set up new import routes.

However, Russian officials acknowledge that the most difficult times for the economy may still come. “The effects of the sanctions weren’t as serious as we initially feared,” said Central Bank Governor Elvira Nabiullina on Friday, but “it’s too early to say that the effects of the sanctions are fully manifested.”

For example, it remains unclear how Russian companies can obtain microchips used in a variety of products. In a meeting between Putin and an entrepreneur, one developer said, “I’m very worried about our microelectronics.”

Putin said: Real intention. “

The ties that tied Russia’s economy to the west are now unleashed, dating back decades, sometimes more than a century ago. Aeroflot, a state-owned airline, has acquired a number of new Boeing and Airbus jets, establishing itself as a convenient transit airline for people traveling between Europe and Asia. In the Urals, the factory worked with German manufacturer Siemens to build a modern train to replace the rusty Soviet stock.

Aeroflot has been banned from using European airspace and is currently focusing on domestic flights and is working to switch to Russian planes. This process takes years. Siemens, which built telegraph lines throughout the Russian Empire in the 1850s and helped bring Russia into the industrial era, announced last month that it would withdraw from Russia.

“Sanctions choke the economy, but it doesn’t happen all at once,” said Ivan Fedyakov, who runs Infoline, a Russian market consultant who advises companies on how to survive under current restrictions. “We only feel 10 to 15 percent of those effects.”

But at least when it comes to food, Russia is more ready. When McDonald’s opened in the Soviet Union in 1990, Americans had to bring everything. Soviet potatoes were too small to make french fries, so they had to get their russet potato seeds. Soviet apples didn’t work for pies, so the company imported them from Bulgaria.

However, by the time McDonald’s withdrew this year, Russian stores had obtained almost all ingredients from Russian suppliers. So when I was McDonald’s Employed 62,000 workers in RussiaAnnounced in March that it would be closed due to “unnecessary human suffering in Ukraine”. Aleksandr Govor, one of the Siberian franchisees, was able to continue to operate 25 restaurants. Last month he bought McDonald’s entire Russian business for a private amount.

Sunday — Russian Day, a patriotic holiday — he has 15 stores, including the former flagship McDonald’s in Moscow’s Pushkin Square, where thousands of Soviets lined up famous for Western flavors in 1990. To resume. A new logo, said to represent hamburgers and french fries, has been announced, but the chain will operate under a new brand that hasn’t been released yet.

According to the menu, Hash Brown is called by the Russian name Leaked On Russian tabloids. Also, since the secret source is proprietary, Big Mac will not be provided.

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