From The Telegraph, July 7:
The Russian potato shortage that shows Putin’s economy is on the brinkSurging food prices and labour shortages are fuelling inflation and making Moscow vulnerable
When the last leader of the Soviet Union visited Chequers for lunch with prime minister Margaret Thatcher in 1984, one topic of discussion was potatoes.
Raisa Gorbachev, the wife of Soviet leader Mikhail, claimed Russia had 300 ways of cooking the humble spud, prompting Michael Jopling, Britain’s agriculture minister, to express disbelief.
She later posted a Russian cookbook to Jopling with the clarification: “In fact, there are 500, rather than 300, recipes to cook potatoes.”
For Vladimir Putin, Russians’ appetite for the vegetable has become problematic, however. Shortages have pushed up prices by 167pc over the past year, the biggest rise of any food.
“It turns out that we don’t have enough potatoes,” Putin admitted during a televised meeting in May, adding: “I spoke with [Belarusian leader] Alexander Grigoryevich Lukashenko. He said, ‘We’ve already sold everything to Russia.’”
Since the invasion of Ukraine in 2022 made Russia the world’s most sanctioned country, eagle-eyed economists have watched closely for signs of economic damage which have proved remarkably elusive.
But now surging food prices and labour shortages are keeping inflation high, driving big cracks in the economy.
“We’re basically already on the brink of falling into a recession,” economy minister Maxim Reshetnikov told a conference recently.
Could Russia’s well-oiled war machine be running out of steam?
The strain is definitely starting to show, says Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center.
“Slowing economic growth coupled with high inflation leaves Russia close to stagflation,” says Prokopenko, a former adviser at Russia’s central bank.
It means Putin is vulnerable. Further falls in oil prices or a tightening of sanctions can now inflict far greater harm than they did previously, Prokopenko warns. “None the less, we are not quite there yet,” she cautions.
Another economist at a European bank, who didn’t want to be named, said the waters were still muddied when it came to Russia’s economy.
“The momentum is much slower than it used to be. If we look at the deficit, it has been widening. That suggests that despite the fiscal support, which is most likely aimed at military-related areas, the Russian economy is clearly not as robust as it used to be,” they said.
In other words, Putin’s war economy is likely at capacity: “The potential to draw more people into the army and military production has been used. There is a limit to how many shifts people can work in factories, producing munitions and military uniforms.”
As a result, inflation was running high at 9.9pc in May, fuelled by billions of roubles ploughed into the war effort, worker shortages and other price pressures. To quell it, interest rates are at 20pc, even after a one percentage point cut in June....
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