President Vladimir Putin says that Russia’s war economy is well balanced to supply both guns and butter, but the price of butter itself is now soaring as surging inflation distorts parts of the economy.
“The Armageddon with butter is escalating; we wouldn’t be surprised if butter repeats last year's situation with eggs,” economists on Russia's popular MMI Telegram channel warned, referring to an earlier spike in egg prices which alarmed consumers.
The steep price rise has prompted a spate of butter thefts at some supermarkets, according to Russian media, and some retailers have started putting individual blocks of butter inside plastic containers to deter shoplifting.Russian Telegram channels report that two men robbed a supermarket in Moscow of 25 packs of butter.
— Anton Gerashchenko (@Gerashchenko_en) October 29, 2024
An employee tried to stop them, but then one of the men pulled out a knife.
Police have already detained two suspects, they are 29 and 25 years old. A criminal case was opened.… https://t.co/5AhGLgmh9l pic.twitter.com/U97ux4rfWQ
The authorities, who have gone to great lengths to try to ensure the war in Ukraine does not affect people’s daily lives, are watching closely. Dmitry Patrushev, a deputy prime minister in charge of agriculture, said on Oct. 23 that the government would monitor butter prices. He met major dairy producers and retailers and said imports were being stepped up.Russians have sunk so low they’re now stealing butter from stores because they can’t afford it. Stores lock it up in plastic boxes to keep it safe.
— Victoria (@victoriaslog) October 28, 2024
Meanwhile, like obedient slaves, they have no problem with their government pouring billions into killing civilians in Ukraine. pic.twitter.com/hHZwUTj4zz
Milk prices have soared too as have wages, interest rates, fuel and transport – all price inputs for butter. Butter imports from Belarus are not sufficient so Russia is expecting a big shipment from Turkey, and even from Iran and India, Russian media reported.
Defense spending on the rise
The Russian economy has so far outperformed expectations: shortly after Putin sent troops into Ukraine in 2022, Western economists predicted its imminent collapse.
Instead, despite the most onerous Western sanctions ever imposed on a major country, it grew faster than the United States and almost all major European countries.
Prices, though, are now rising - as are interest rates, which the central bank hiked 200 basis points to 21% on October 25, their highest since Putin’s first term in 2003. The central bank is forecasting inflation of 8.0-8.5% this year.
As it fights a major land war against Western-backed Ukraine, Russia is spending more on defense than at any time since the Cold War - and that is pushing up prices even if the International Monetary Fund forecasts growth of 3.6% this year.
Jim O’Neill, the former Goldman Sachs chief economist who coined the ‘BRICs’ term in 2001, has questioned how sustainable the situation is if things continue.
“It’s all because of enormous Russian defense spending,” O’Neill told Reuters of the overall macro picture. “So I think the medium-term outlook to long-term outlook is quite bleak.”
