Posted on 06/26/2022 1:31:16 AM PDT by UMCRevMom@aol.com
The newest car model unveiled by Russia's biggest auto manufacturer earlier this month is generating buzz, but not necessarily for the right reasons. The buzz about AvtoVAZ's Lada Granta Classic -- priced to sell at 678,300 rubles ($12,500) -- is about what it doesn't have: No airbags. No antilock brakes. No electronic stability system. No pretensioners to make the seat belts work properly. No GPS. An engine that complies with emissions standards from 26 years ago.
THE REASON FOR ALL THIS?
Western sanctions, imposed to punish Russia for its invasion of Ukraine, that have disrupted imports and roiled supply chains where crucial foreign parts and goods came from.
Not just the butt of Russian jokes, the new Lada is the latest in a growing number of examples showing the staggering transformation that Russia's economy is grappling with, on a scale not seen in at least a generation.
Smartphones aren't working properly. Food packaging has to be printed without labels. Clothing factories can't find buttons to sew on shirts.
The Kremlin is betting that fiscal and industrial policies will help the economy withstand the shocks and substitute missing imports with homegrown Russian versions.
President Vladimir Putin alluded to this wager last week during what used to be Russia's marquee annual investors' event, though he asserted that his government has already had considerable success in softening the blow.
"The economic blitzkrieg launched against Russia has failed," Putin told an audience at the St. Petersburg International Economic Forum that was substantially smaller than previous years.
Russian policy makers are hoping that appeals to nationalism have girded the populace for hardship and that consumers will be willing to tighten their belts without losing patience with the war, about to enter its fifth month following the February invasion.
But some pragmatic voices have spoken up publicly, warning that those who are hoping that Russia will replicate some of the success it had after a first set of Western sanctions was imposed as punishment for the 2014 seizure of Ukraine's Crimean Peninsula are unrealistic.
"Replacing everything is senseless, economically impractical, and simply impossible," said Sergei Chemezov, a longtime confidant of Putin and now head of the state-owned defense conglomerate Rostec.
"Not a single developed country in the world does this. Isolation, including technological isolation, and attempting to do everything on your own is a road to nowhere," he wrote in a June 15 opinion column.
Chemezov also dinged Russian policy makers, saying that more should have been done to diversify and deepen the country's economy.
"Russia was expecting something like this and to a large extent had time to prepare," he wrote. "Of course, there can be no illusions here. We did not manage to do everything -- there was too little time, because the same path took decades for Western countries."
Longtime Russia analysts said the economy is not on the verge of outright collapse, like what happened after the 1991 Soviet breakup.
"But we're talking about a return to the Brezhnev era, where modernization stops and it's this stasis-type of situation with lifestyles [and] people have few choices," said Chris Weafer, founder of the consultancy group Macro-Advisory, referring to the period under Soviet leader Leonid Brezhnev in the 1970s when the Soviet economy stagnated.
"The economy's now going into a twilight zone," he said.
GUNS AND BUTTER
After Russia occupied Crimea in 2014, Western nations sought to punish Moscow by imposing a raft of sanctions, targeting key companies and also influential individuals in and close to the government.
In response, Putin imposed bans on Western foods like apples, dairy, and more, and the government sought to reengineer the economy wholesale, to make it less dependent on imports. He also continued backing fiscal policies that turned the country's sovereign wealth fund into one of the world's largest.
For things like some food items, it arguably worked. Artisanal cheese makers, for example, not only managed to replace imports of Italian Parmesan, but drew powerful praise from some food critics.
For things like military and defense technology, not much changed. Russia's military industrial complex, heir to Soviet-era planning, continued to produce planes and tanks, many of which are being deployed -- and destroyed -- in the Ukraine war. Russian defense plants lost access to some of Ukraine's military manufacturers, but it wasn't a sea-change loss.
For many other sectors of the economy, not much changed either: Imports continued as before, along with trade and integration with the global economy.
That included computer chips, for which Russia has no domestic manufacturing capacity. And it included the IT and high-tech sectors, which rely heavily on the coding, programmers, and software prowess of the West to stay current.
The Russian government ordered state agencies to stop using foreign software -- Microsoft Office, for example -- in 2015, the year after the seizure of Crimea. Four years later, 90 percent of the software use by state firms was still foreign-sourced.
"They can make basic food items, and they can send rockets to space, but they really haven't created the middle industries -- for making cars, for example. That middle bit of the economy is still missing," Weafer said.
Following the February 24 invasion, Western nations bludgeoned the Russian economy with a set of unprecedented sanctions.
The most extreme predictions for how much the Russian economy will contract this year are around 12-15 percent. More modest estimates say it will be between 7-9 percent. But still, even Russian economists say it will be severe.
"The current recession is of a transformational, structural nature and will be bigger in scale and length in all scenarios" than the last one, Russian central bank researchers said in a report released in April, referring to the downturn caused by the COVID-19 pandemic.
In the aftermath, scores of Western companies either paused their operations in Russia or pulled out altogether.
That has exposed major holes in Russian domestic manufacturing capabilities and supply chain disruptions.
The paper industry, for example, was unable to meet demand for bleached paper supplies, and packaging manufacturers said they were unable to obtain inks used in printing packaging. The company that took over the McDonald's franchise in Russia reopened its flagship restaurant in Moscow, but hamburgers and french fry wrappers were blank.
"All of our wood is Russian, but bleaching chemicals were imported. Now, producers are switching to alternative suppliers, developing their own chemicals, but this also takes time. In the food industry, raw materials are domestic, and the usual foreign packaging urgently needs to be replaced," Elvira Nabiullina, the head of the central bank, told lawmakers on April 21.
"And all this takes time," she said.
Putin addressed the question of the domestic packaging industry during a panel discussion at the St. Petersburg forum, downplaying the issue when presented by the moderator with a juice box that was white because of a lack of ink.
"What's most important for us?" he asked. "To be independent, sovereign, and to ensure our future development now, for coming generations? Or to have packaging today?"
Buttons used in clothing were another example where foreign supply chains had been disrupted, Nabiullina pointed out.
Smartphones, too. Tech giant Apple has pulled out of Russia, meaning fans of the iPhone or similarly popular devices will be hard-pressed to download operating system updates or even buy apps through the Apple store.
Users of Samsung smartphones have also reported major problems, according to the newspaper Izvestia. You can't activate a new Samsung phone within Russia because you need a SIM card from a country for which the smartphone was released.
IMPORT SUBSTITUTION, PARALLEL IMPORTS
Other industries facing major disruptions include car manufacturing, which employs around 600,000 people nationwide, and is one of the country's biggest private employers.
Avtovaz, which until recently was controlled by France's Renault Group, has instituted sporadic work stoppages and furloughs in some locations.
The stripped-down Lada Granta that was announced earlier this month wasn't a brand-new design: Such a model had been in limited production since 2011. But the removal of standard safety equipment like airbags, as a result of Western sanctions, surprised many observers, and drew mockery online.
"If sanctions remain what they are, the gap between Russia's economy and the rest of the world will only get wider and wider," Weafer said. "The Russian people in the future will be driving a Lada, while people in the West will be sitting in driverless cars."
Volkswagen Group announced in March that it was suspending production at two Russian assembly plants. This week, the company offered buyout packages to employees at a Nizhny Novgorod plant, in an effort to cut labor costs -- the first known effort by any automobile manufacturer within Russia as a result of Western sanctions.
'BESIEGED FORTRESS'
Even some defense facilities have stumbled in their production, exposing holes in where military manufacturers source some of their parts. Two plants specializing in the manufacture and repair of tanks -- Uralvagonzavod and the Chelyabinsk Tractor Plant -- were forced to suspend work due to the lack of foreign components.
Some economists share Putin's optimism that Russian ingenuity, and alternative markets like China and India, which have declined to sign on to Western sanctions, will allow the economy to withstand the body blow.
Lawmakers and policy makers, meanwhile, have scrambled to try to erect a parallel framework and rebuild supply chains before shortages become permanent, or lead to wider shutdowns.
Major online marketplaces -- Yandex, Wildberries, Ozon -- have moved to build new supply chains for so-called parallel imports, essentially replacing retailers and shippers that have opted, or been forced, to withdraw from Russia.
On June 22, Russia's upper house of parliament passed legislation that aims to protect parallel importers from legal liability for violations of copyright or trademark infringement.
Still, some top business leaders, like German Gref, the CEO of banking giant Sberbank, warned that without a fundamental overhaul, Russia's economy will require a decade to return to its 2021 levels.
Even if a cease-fire or truce is reached in Ukraine, Russia would still face a "besieged fortress" phenomenon, economist Yevgeny Gontmakher predicted.
"In this scenario, too, the economy would become more primitive and focus only on supporting military production," he said in a May 31 research note.
"External conditions have changed for a long time indeed, if not forever," Nabiullina said at the St. Petersburg forum, not long after Putin's speech. "It's obvious to everyone that it won't be as it was before."
How did vehicles in America operate reliably for the first 100 years without all the extra stuff.
kinda strange you’re more concerned about russia’s economy while biden is destroying ours...
“youâre more concerned about russiaâs economy while biden is destroying ours...”
Your conjecture is fallacy
How did the US operate 100 years ago.
Simple reliable design.
90% of the mandated crap from DC to the Car Manufacturers contribute very little to actual function.
Now it is about tracking everyone for big brother.
The cars are so complex that the dealerships cannot do a good job of repairing them when they break.
The styles change so fast and often that parts are a real issue in repairing them.
I’m no fan of anything in Russia, but I do love good simple design. And products that are designed to make life easier and better, instead of simply more complex.
I hate cheap ChiCom crap that is glitzy but does not function well. But China is where we shipped all our manufacturing to. If you look carefully today, see what that bought us?
I have a 66 Ford Mustang with about 120,000 miles on it. It was my first wife’s first car. A contractor saw it in the garage of a house I am remodeling and told me, “you do realize that that car as it is (all 4 tires flat from age) is worth $20,000 dollars. It originally cost about $3,000.
your excerpting my post to your advantage is conjecture...
Putin wants it to be like the USSR again!
It was either another Freeper or Reagan that told the story about how back in the day in the USSR you had to wait 10 years for a new car, and you had to pay the money up front.
So the guy goes in and lays down his money.
“Thank you comrade! We’ll see you in 10 years.”
“Yes comrade. Morning or afternoon?”
“What kind of a question is that!?”
.
.
.
.
“Well, the plumber is coming in the morning.”
Well they didn’t, at least not without regular maintenance. Everyone in winter cold weather always carried jumper cables. Getting cars and trucks with generator charging systems, points ignition, and carburetors was decidedly a dicey affair on subzero mornings unless the engine was kept in a high state of tune. Better heeled motorists usually got a Tune-Up twice a year. Everyone else messed around, “golden screwdrivers”, and often made them run worse. Whenever I worked on vintage iron much of what I did was simply repairing stuff or adjusting back to factory specs, that people’&$@cked up.
Modern cars often have no soul, but they have become very reliable and rarely need any attention. (God help you if they do, however)
No shirt buttons. That explains the shirtless Putin pictures.
While claiming the sanctions are having no effect, they sure do complain about the sanctions a lot.
Agreed! I had a few 6 volt vehicles and getting them to start in relatively mild temperatures was a bit nerve racking. I canât imagine trying to keep one going up north in the winter.
Still;
The buzz about AvtoVAZ's Lada Granta Classic -- priced to sell at 678,300 rubles ($12,500) -- is about what it doesn't have: No airbags. No antilock brakes. No electronic stability system. No pretensioners to make the seat belts work properly. No GPS. An engine that complies with emissions standards from 26 years ago.
We sure could use a $12,500 new car here in the US. Maybe make it an even $15k and improve a few things like the seat belts.
Decent looking little cars. At 36mpg, I wouldn't mind having one about now.
EPA and NHTSA compliance probably costs that much, per car.
The company that took over the McDonald’s franchise in Russia reopened its flagship restaurant in Moscow, but hamburgers and french fry wrappers were blank.
BLANK! Oh noes!
Seriously?
The secret old cars? Always pull the vacuum advance off the distributer before setting the dwell. That is the secret.
Senior Biden administration officials said gold is Moscowâs second largest export after energy, and that banning imports would make it more difficult for Russia to participate in global markets. The officials spoke on condition of anonymity to discuss details before the announcement.British Prime Minister Boris Johnson said the ban on Russian gold will âdirectly hit Russian oligarchs and strike at the heart of Putinâs war machine,â a reference to Russian President Vladimir Putin.
The Russian people in the future will be driving a Lada, while people in the West will be sitting in driverless cars.”
The people of Russia will retain competent skills the people of the west will become even less able.
Fixed it.
Exactly. Basic designs. I think India produces something similar.
It’s the shirt buttons that are baffling me. Those aren’t exactly high-tech, they require no fancy ores or computer chips, and they haven’t changed all that much in the last century. I know people who make them by hand, just for the fun of it.
Making them precisely enough they can be attached entirely by machine might be a little tricky, but not ridiculously tricky. There are even instructions online for making them from common materials like milk.
(No, seriously. Check it out: https://lizhaywood.com.au/making-buttons-from-milk-plastic/ )
There will always be some country willing to buy Russian (or anybody else) gold. Given the long running deficits and mismanagement the American government has enjoyed this is sort of like shooting yourself in the foot. They’ll just buy it on the down low. I’m not smart enough to understand it, but it may even increase the price. That’ll show ‘em!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.