Siberian Summer of Sanctions 2022
Thanks to Fred Weir for the inspiration.
The summer of sanctions in Siberia has come to an end and their impact is a mix of muted and opportunity generating. Passing the six month mark for the SMO, the people and corporations who needed or wanted to leave, left. Coping strategies for the people and corporations who stay continue to evolve and in the case of corporations, leaving sometimes looks a lot like staying. The shared moments are surprise that the sanctions bark is bigger than their bite and everyone recognizes that we live in a new world.
There are only two complaints of note. The first is the loss of IKEA. For several months they hung in, doors closed and paying full salaries for employees on the assumption they would re-open in May. Then the announcement that they were done. This was another nail in the coffin of hope for a quick end to the SMO, everyone knows the sanctions are here to stay.
Evidence of some Western corporations coping strategies for leaving while staying in the lucrative Russian market appear every day. Reebok sent out an announcement last week, “We want to quickly announce that while the Reebok retail and online store have suspended their work, the company FLO OBUV RU LLC has received the right to sell goods under the Reebok brand in Russia.”
An American friend with 20+ years of business experience in Russia described the new incarnation of McDonalds as “placeholding” because the new name, “Vkusno i tochka” (Delicious Period), is not “brandable”. This is supported by the underwhelming signage on the drive-through. The “Try MacCombo” is now just “Combo” together with “Snacks” and “Deserts” with photos of basically the same products.
Coke is supposedly out but it is still available. One rumor was they would continue to produce but would not be investing in Russia any more. That would be bad news for the seemingly endless list of new competitors vying to fill the niche. Three of them were recently available: Bochkari Cola, Uni Cola, and Jumbo Cola. All, with labels drafting on Coke’s trademark white on red script. The fourth, got more creative adding an eye-catching monkey in a cap to illustrate the white on red name, “Funky Monkey Cola”.
The second complaint is the additional costs and time required for travel to the West. Three friends found different routes to achieve a one stop Novosibirsk-Chicago through Antalya, Dubai, and Istanbul. However most end up with two stops traveling first to Moscow and then on through Istanbul. Despite the considerable challenges associated with travel, no one I heard complain followed it with, “Putin has to go”.
On the plus side of restricted Western travel is the opportunity it provides to develop domestic tourism. This process began with COVID, but sanctions kicked it into high gear inflicting a considerable impact in the Republic of Altai. This summer, the renovated airport welcomed 3 flights a day from Moscow (7 on Fridays and Sundays. 2 million people visited the Altai in 2021 and 4 million are expected to come in 2022.
The development by Sberbank of a year-round ski resort in the village of Manzherok (full disclosure, I live there), is providing an anchor and a magnet for this development.
The first chairlift opened in 2010 and in 2020 the Bank announced it would invest an additional 4 Billion rubles ($65,000,000) by 2024. A 5-star hotel is set to open for New Year’s as planned before the SMO. Rumor was the primary sanctions issue could be the need to find a replacement for the interior decor ordered from Italy.
According to Stanislav Kuznetsov, Deputy Chairman of the Sberbank Board, “We want to demonstrate the powerful tourism potential of the Russian regions. We see that as soon as the infrastructure appears that provides the necessary level of comfort and transport accessibility, the visits to domestic resorts increases dramatically. And this is an increase in the revenue side of regional budgets, and new jobs, and in general the money that remains inside the country and works to develop its economy.”
This massive corporate investment is happening together with an enormous growth in family owned businesses and SMEs. In addition to the traditional selling of souvenirs and fresh vegetables and fruits from their gardens, people are investing by building cabins or small hotels on their property. An IT couple from Moscow came as COVID digital nomads, liked the Village, bought a small hotel, and are currently renovating another tourist property. A world class massage therapist and her husband personally built a spa complex next to their home complete with sauna (including a river rock shower), massage room, and rental space. Another young couple opened a coffee takeout in a rental space on the main drag. All these businesses are booming.
The start of what used to be referred to as “green tourism” pre-dates the appearance of the ski resort but the season was short, half of June and July. Nadiya, one of the first to build a tourist cabin in the early 2000s, said she now has bookings through the winter. She was disappointed when “Booking.com” pulled out as a result of the SMO because she liked the clients it attracted but she is fully booked without it.
But growth comes with headaches. Several of these new business people have shifted to a minimum stay model since changing sheets every day was a nightmare. Everyone suffers because prices for all goods (locally produced and chain stores) are oriented to the vacationer, there are traffic jams even on the one lane roads in the Village, and if you don’t shop by 11am on a Friday you will be standing in a long line.
Manzherok is located in the northern, most accessible part of the Republic 20 minutes from the airport, so development here is not surprising. The speed and breadth of what is happening in the south heading to the Mongol border is more notable.
This is not happiness for some long time Altai visitors. One man, who has been exploring the wildest parts of the region since the 1980s, said he didn’t even want to go to Mars (a multicolored geological wonder) because of the crowds hiking up the colored hills. These crowds have traveled a dirt, rock infested, car killing 7 kms to get there. On a recent hike to the Sofiyskiy Glacier, we encountered a group of middle-aged Scandinavian walking stick hikers who turned around when they saw how rocky the terrain was.
In the middle of what used to be nowhere, a young woman from Moscow opened an outdoor pop-up Café that would look right at home in Woodstock NY. Business is good so she plans to stay open into October when it is still possible to sit comfortably on the puffy chairs and stare at the still snow covered mountains. An Altai family has turned Babyshka’s small plot of land into a tourist compound. Simple but comfortable with an outdoor toilet they are making available to other tourists for 25 r. The male relatives did all the construction and the mother and daughter are running the operation.
Valera, an Altai driver explained that during the Soviet Union the land on the way the Glacier was one of the largest state farms in the country. Now, the only animals you see are camels that sometimes block the road. In the Village Beltir, what wasn’t destroyed by the “transition” was done in by the 7.3 earthquake in 2003. No one was killed but the population that was 1500 is now hovering around 77.
Valera has less business this year but the problem could be competition. The center of Chagan Uzun Village was filled with drivers and a wide range of exotic vehicles to travel to whatever destination you chose. When the tourist season ends, he will fly North and make money since this part of the Republic is not yet outfitted for year round.
Of course, the plan for the Republic was to continue to develop the foreign adventurer market segment. Traveling through Altai to Mongolia was the standard route for round the world bikers. New Zealanders visited us during the World Cup, two American women, a biathlon Olympian and a cold water swimmer, have also stopped by. Other Americans came even when it meant a 7 hour drive from Novosibirsk or a 2AM car ride to the airport in Barnaul. I have not hosted or encountered any foreigners this summer.
Meanwhile Russian families are making their happiest memories outside my window on the banks of the Katun River, reveling at the astonishing blue and green Geyser Lake in Aktash, and, experiencing the terror of driving down the Katy-Yaryk Pass. Everything looks normal but the situation with Ukraine is always there, lurking in the background.
The matron at the family tourist compound explained where the men were, her husband is making money in the North. She followed this with a pause and lowered her head before saying she had two sons serving in the Ukraine. Others, have elderly relatives in the Donbas who refuse to leave their homes. Most often it comes up when people talk about summers passed that were spent visiting family in the Ukraine. For some, the relationships are surviving, for others not. Even if unspoken, first and foremost in everyone’s thoughts is of the tragedy and loss. For many there is also fear and confusion at the pervasiveness of Western hatred towards Russians and how it is expressed beyond the sanctions.
Anyone who says they know how this will all play out is a fool. My best guess for the Russians is based on some wisdom I got from a woman on a train. January 31st, 1992, five weeks into the brave new world called a democratic-capitalist Russia, I was traveling from Moscow to Novosibirsk. My coupe mate was Baba Marsha, 60 and toothless, her oldest son just stole the cow that was her only valuable possession. Her advice, “If you want to understand Russians, you need to understand two words: terpelivwi (patient) and peredjit (living through it)”.
These sanctions, like all the disruptions that have happened over the last 30 years (in addition to what the 20th Century rained down on this country), will be patiently lived through by most. That may turn out to be a good thing…or at least not the worst thing.
