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Economic Iron Curtains Fall on Russia as Companies Break Relationships: NPR


An elderly Russian woman ate a hamburger on the opening day of January 1990 at the first McDonald’s in the Soviet Union at the time.

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An elderly Russian woman ate a hamburger on the opening day of January 1990 at the first McDonald’s in the Soviet Union at the time.

Rudi Blaha / Associated Press

A crucial chapter in Russia’s recent history is nearing its end, as many of the world’s largest and most famous companies have abandoned Russia after Russia’s invasion of Ukraine.

It began partially at the end of last month when BP announced that it would end its multi-billion dollar relationship with Russian oil giant Rosneft.

However, what started as a trickle was an escape from the company. This week alone, companies from Coca-Cola to Goldman Sachs have announced that they will cut off their ties with Russia.

Perhaps there was no decision to leave the company that was more symbolic than McDonald’s made. This week we have decided to suspend operations in Russia. The company will temporarily close 850 restaurants nationwide.

Many Russian experts say that the escape does more than strengthen the country’s isolation of the decision to invade Ukraine. It marks a return to the era when Russia was part of the Soviet Union, at least for now, and the global economy.

“It’s a really shocking reversal,” says Daniel Treisman, a professor at UCLA who specializes in Russian politics and economics.

“The Iron Curtain is down again, or another kind of curtain is down. I think Russians are afraid to lose their connection to this world where they have lived for the past 30 years,” he said. say.


Russians are waiting in line outside McDonald’s fast food restaurant in Moscow in 1990.

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Russians are waiting in line outside McDonald’s fast food restaurant in Moscow in 1990.

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It all started with McDonald’s

Many Russians and outside observers have an indelible memory of January 1990 when the first McDonald’s restaurant served its first customer at Moscow’s Pushkin Square.

Russia was still part of the Soviet Union at the time and was one of the first glimpses of a country that began to open its economy.

Thousands of curious customers lined up on the first day of Big Mac and French fries, which was a sight at first, but the restaurant has become a kind of landmark.

In the months and years that followed, when the twilight of the Soviet Union gave way to the new dawn of Russia, almost all major multinationals followed in the footsteps of the fast-food chain.

General Motors builds cars in the country, which has also become an important market for motorcycle maker Harley-Davidson, where Apple sells iPhones, and in 2007 Starbucks opened its first store in Moscow.


The car produced by General Motors is on display at the groundbreaking ceremony of the GM plant in Shushary, a suburb of St. Petersburg, Russia, on June 13, 2006.

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The car produced by General Motors is on display at the groundbreaking ceremony of the GM plant in Shushary, a suburb of St. Petersburg, Russia, on June 13, 2006.

Misha Japarize / AP

Russia eventually became the 11th largest economy in the world.

According to Triesman, the withdrawal of these companies will have serious implications for Russia’s economy, in addition to the widespread sanctions imposed by the United States and its dozens of allies.

McDonald’s plans to continue paying 62,000 workers, but the unemployment rate is likely to skyrocket as other companies do not make the same promise. The unemployment rate in January before the war was 4.3% according to the Federal State Statistics Service. ..

Since the invasion, the value of the country’s currency has fallen by more than 40 percent against the US dollar; one ruble is now worth less than a cent.

The collapse of the currency will contribute to widespread inflation, which will lead to more difficulties.

Russia’s economy will be affected in other ways

Russia’s isolation also poses other major challenges to its economy.

Chris Miller, a historian at Tufts University’s Fletcher School, said, “It’s not just about shrinking economic statistics by a few percent and raising inflation by a few percent.” The Russian economy, built over almost a third century, has turned around in just a few weeks. “

Russia has become heavily dependent on imports.

In the third quarter of 2021 (the latest quarter when data is available), the country imported about $ 77 billion worth of goods, according to data from the central bank, the Bank of Russia.


In the file photo of March 22, 2000, people are lined up to enter the first IKEA store that opened just outside Moscow.

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In the file photo of March 22, 2000, people are lined up to enter the first IKEA store that opened just outside Moscow.

Maxim Marmar / Associated Press

The presence of foreign companies brings many new technologies and expertise, and Russian companies are tightly integrated with the global supply chain.

And, as in the Soviet era, domestic industry has not evolved enough to step up.

“Russia’s entire industrial economy will face dire difficulties as it seeks to find alternatives to Western products and often fails,” Miller said.

“Russia has gained access to foreign consumer goods and has gained a lot of technology and expertise from Western companies. Everything has turned around very quickly,” he adds.

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