Russia earns less from oil and spends more on war
The Russian ruble's wobble in value has exposed a crack in President Vladimir Putin's fortress economy, a vulnerability quickly plastered over by the Kremlin's economic team in a move that allowed the currency to regain its footing, at least for now.
Yet the patch — an emergency interest rate increase — cannot hide the dilemma at the heart of the Russian economy: how to fund the military while not undermining the national currency and overheating the economy with corrosive and politically embarrassing inflation.
Life in Moscow presents a facade of normality despite sweeping sanctions tied to the war in Ukraine and the departure of hundreds of name-brand Western companies.
Outdoor seating at restaurants and bars on the popular Bolshaya Nikitskaya street were packed on a recent evening with well-dressed residents enjoying balmy August weather. Malls haven't changed at first glance, but where Zara and H&M once stood, shoppers find new clothing brands Maag and Vilet.
Key economic gauges are also in normal ranges. Unemployment is low, economic growth is better than many had expected and inflation is moderate by Russian standards — at 4 percent in July.
Imports to Russia are rebounding as goods come through nearby countries such as Kazakhstan and Armenia, avoiding sanctions.
Government spending on the military and social programs is spreading cash to people and companies, who are using some of it on imported products.
Labor shortages, stemming from people leaving the country, also are supporting salaries.
Some blows to the economy are obvious, particularly the auto industry after Western manufacturers abandoned their Russian businesses.
But Chinese vehicle imports are gaining ground.
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