Russia will cut vodka prices by 16 percent this February as President Vladimir Putin seeks to discourage the drinking of cheaper, bootlegged tipple as the country's economy collapses.
According to Bloomberg News
, the current retail minimum of 220 rubles ($4.10) per half-liter (17 oz.) of vodka imposed by the government to combat alcoholism was a 30 percent increase from the 2013 minimum. With the economy in a tailspin as of late, however, the government fears people are being driven to the black market, and will lower the minimum to 185 rubles ($3.24).
"This is clearly a populist measure as Russia is entering an economic crisis that may be several years long," said Vadim Drobiz, head of Ciffra, an alcoholic-beverage market researcher. "Russian vodka prices are already the world’s highest relative to people’s incomes, and real incomes are declining."
By some estimates, the high prices have led to up to a third of all vodka purchases being made on the black market.
As of Wednesday, inflation in the former Soviet state hovered near 10 percent. The value of the ruble has fallen by 40 percent. Western sanctions leveled against Russia for its invasion of Ukraine combined with falling global oil prices have racked the country with economic pains in recent months — culminating recently in a bank run this past December.
"People flocked to their banks to turn their rubles into dollars and, failing that, stampeded to stores to buy whatever foreign goods they could — luxury cars, Apple products and Ikea furniture — before their money lost any more value," The Washington Post wrote
of the mid-December run.
"Even jacking up interest rates from 10.5 to 17 percent, basically paying people to keep their money in rubles, wasn't enough to persuade them to do so."
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