As Russians prepare to celebrate the New Year or the week of public holidays that follows, they might notice this year's festive bill at the supermarket come out to significantly more than last year's – especially for fans of sandwiches with butter and red caviar, a New Year's dinner staple in the country.
In October of last year, Russian President Vladimir Putin denied that Russia was “spending too much money on guns and forgetting about butter,” prices of which have seen some of the biggest increases of all produce, growing by over 33 percent since the start of 2024.
Caviar, while far from being a staple food at almost 6,000 rubles (about $60) per kilo in December 2023, has shot up by over 50 percent this year to nearly 9,000 rubles per kilo. Potato prices, the basis of some of Russians' favorite New Year's dishes, like olivier salad and dressed herring, have increased the most – a kilo costs nearly twice as much as it did a year ago. Average prices for other basic goods, such as apples, herring, milk, oranges, and olive oil, have all increased by at least 15 percent in 2024, while olive oil, beetroot, and cabbage are up around 30 percent and red onions cost over 40 percent more than a year ago, according to official data.
Inflation has exceeded estimates by Russia's Central Bank, which predicted in October that it would remain between 8 percent and 8.5 percent for the year. According to the Russian government statistical office, Rosstat, as of December 9, consumer prices were 8.76 percent higher than they were at the beginning of 2024. The Ministry of Economic Development estimated inflation since the beginning of 2024 to have reached 9.2 percent on December 9 – more than twice as high as the Central Bank's target rate of 4 percent, which was set in November 2014 and has remained unchanged since then.
The price hikes have led the government to enter talks with retailers on implementing price reductions ahead of the New Year holidays, while Russian media have reported that cases of butter theft from stores have increased -- with police offering one woman allegedly caught stealing 29 blocks to avoid prosecution by volunteering for military service, a practice Putin legalized earlier this year as Russia seeks to recruit more people for the war in Ukraine.
Inflation has largely been fueled by massive government spending on the invasion of Ukraine, which has increased average salaries and, in turn, spending. Aiming to avoid another forced mobilization of men for the war after the last one in September 2022, the Ministry of Defense and regional governments have offered increasingly large cash incentives to those willing to sign up to fight in Ukraine, with Moscow's government currently promising a minimum of 5.2 million rubles, or about $50,000, for the first year of military service, including a 2.3 million-ruble (~$22,100) sign-up bonus. The average yearly salary in Russia as of September is about five times lower, at 84,324 rubles per month or 1,011,888 per year.
And the military isn't the only employer increasing wages. Russia's factories pumping out tanks and other equipment for the invasion have had to increase salaries and offer overtime to make up for a lack of workers. The shortage of cadres has led to the government considering allowing conscripts to work at factories instead of serving in the army.
These wage increases may have been enough to offset the price increases for much of the population, with official statistics showing that salaries adjusted for inflation have continued to grow. The average salary was almost 19 percent higher in September 2024 than September 2023, compared to an average yearly increase of 9.1 percent between 2010 and 2021.
Still, alarm bells are ringing at Russia's Central Bank, which in October raised the key interest rate to a record high of 21 percent in a bid to control inflation. The wartime boost to Russia's economy, which saw GDP grow 3.6 percent in 2023, may be coming to an end, with the Central Bank predicting between 0.5 percent and 1.5 percent growth in 2025.
