Russia could by hit by damaging food shortages and an economic collapse similar to that seen in the Soviet Union, experts have warned. Russia’s skyrocketing inflation kduring the Ukraine war and Kremlin plans to cap prices on food staple items have drawn comparisons to problems seen in the Soviet-era.
Food prices have soared in Russia, with figures from July showing bread prices jumped 15%-17% in annual terms, while inflation for the year was nearly 9.5%. The country has been grappling with a growing economic crisis as the Kremlin continues to pour billions of pounds to continue its war in Ukraine. Now, economists say that Russia’s rising food prices could undermine Vladimir Putin, while also warning that shortages could be on the horizon.
Russia is reportedly looking to regulate the prices of vegetables, poultry and dairy products from March next year.
Economists say while it is seen as a necessary step to reduce inflation, the effect could be similar to failure of the Soviet-era central planning.
Igor Lipsits, a Russian-born economist, told The Kyiv Independent that food shortages are likely.
He said: “Russia is now shifting toward a fully planned, command-style system, with all its usual flaws — constant food shortages, long queues, and everything else that comes with it.
“That’s what lies ahead for Russians, and it’s becoming quite clear.”
Under the proposals, between 80%-90% of food production would be sold at fixed prices or within Moscow-approved price ranges, according to Russian outlet Kommersant.
It is claimed some food producers are not impressed with the plans and are looking at ways to get around them.
Warning of potential issues, Mr Lipsits said: “There’s still a fundamental imbalance between the needs of Russia’s population and the capacity of its agriculture to meet them.
“Price regulation doesn’t fix this — it only pushes the crisis deeper into the system.
“If the government doesn’t provide subsidies, producers will go bankrupt, production will collapse, and the food crisis will escalate.”
Discussions over the draft law to regulate the prices are currently ongoing, according to reports.
Oleksandr Talavera, professor of financial economics at the University of Birmingham, said he can envisage shortages “even in the short term” and warned the price controls move could mirror Soviet-era economic problems.
He told The Kyiv Independent: “The moment the state says it will regulate prices, that product disappears. Just recall the Soviet Union — demand exceeded supply, and everything was controlled by the state.”
A poll in June by independent Russian pollster Levada Center found almost 60% of Russians saw rising prices as their biggest concern.
Maria Snegovaya, Senior Fellow at the Center for Strategic and International Studies think tank, said this is “highly sensitive” for Mr Putin and the Kremlin as it “undermines their ability to keep pretending that ‘everything is fine and nothing is happening’”.
Last month, reports in Russia warned of increasing food prices — notably pork which had apparently risen by 7% in June alone.