Russia's Ruble Collapse Sparks Shopping Frenzy
With their currency in crisis, Russians would rather store value in goods.
MOSCOW— -- On his way home from work tonight, with the near-collapse of Russia’s currency on his mind, Maxim Legonkikh made something of an impulse buy.
He pulled into the Porsche dealership and bought himself a brand new sports car. In cash.
“It’s an incredible deal,” he explained. “I’m only here because I need to find a safe place for my money.”
At one point on Tuesday, the Russian ruble dropped over 22 percent before recovering slightly. That a day after falling over 10 percent on Monday. Price inflation has yet to catch up, meaning there are huge opportunities for Russians lucky enough to have the cash.
“Cheapest price in all of Europe,” the Porsche salesman said, as he processed the paperwork.
Yet unlike most people who just purchased a brand new car, Legonkikh isn’t thrilled about it.
“I don’t need this car,” he said with a shrug. He already owns two Porsches and a Land Rover. But, he figured the prices will soon go up and the ruble will probably go down. “We are headed for a crisis,” he said.
Buying a luxury car while Russia teeters on the brink of economic ruin may sound counter-intuitive, but his experience mirrors that of many other Russians who found themselves at the stores on Tuesday night. With the prospect of their rubles becoming worthless if it continues to drop, they’d rather get a deal on something now before their savings are lost.
Electronics stores were packed late into the evening as shoppers scooped up iPhones and iPads at prices over $100 lower than what they cost in the United States. Apple’s Russian website halted online sales “due to extreme fluctuations in the value of the ruble… while we review pricing.”
Unlike Russians in the late 1990s who lined up to pull their money out of banks as economic collapse loomed, today the streets of Moscow were notably calm as the markets destroyed the ruble. There were no signs of panic and few, if any, lines at ATMs, banks and exchange booths. Most Russians have yet to feel the pain of this week’s currency collapse. That will come later when prices inevitably rise.
Instead, many went on shopping sprees.
Igor and Katya were turned away after the Porsche Cayenne SUV they wanted to buy for their son was out of stock. They settled for a brand new Audi S5 instead. The price, they said, was the equivalent of $27,500. In the United States, MSRP for that car starts at $52,500, according to Edmunds.com.
“We came here because we have a problem. We have a lot of rubles which are losing value every second and we were too late to buy dollars at good price. We came here because prices on cars will increase tomorrow,” Katya said.
The big purchase, however, does not mean they aren’t worried about the future.
“We go on vacations every winter. But this year we are not going,” she added. “We do not know what will happen, everything is unstable and we are afraid.”
Asked who is to blame for Russia’s economic crisis, Legonkikh, the reluctant new Porsche owner, said it is President Vladimir Putin’s fault.
“Who else? Our father,” he said with a sarcastic eye roll. “It’s because of Crimea.”
Western countries imposed sanctions on Russia after it annexed Crimea earlier this year, which, combined with plummeting oil prices, has led to a steady drop in the ruble’s value. For now, Legonkikh may be in the minority as Putin’s popularity remains high and state-run television continues to parrot Kremlin claims that Russia’s economic woes are the result of Western meddling.
Not everyone in Russia is lucky to have savings to spend. Alexey, a karate instructor, said he has no plans to go shopping. Instead, he is canceling his ski vacation in Europe as the hotel prices are now too expensive.