Panicked Russian consumers stock up on staples

This is an audio transcript of the FT News Briefing podcast episode: Panicked Russian consumers stock up on staples

Joanna S Kao
Good morning from the Financial Times. Today is Monday, March 21st, and this is your FT News Briefing.

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Russia’s attack on Ukraine is entering its 26th day. Fierce fighting continued in Mariupol yesterday and Moscow demanded that Ukraine surrender control of the besieged port city. Meanwhile, Russia’s economy is starting to feel the bite of western sanctions. We’ll hear from our correspondent about shortages and surging prices.

Polina Ivanova
You are seeing empty shelves when it comes to staple goods that people are sweeping off the shelves in order to stock up in case of further price rises.

Joanna S Kao
Plus, European regulators are finally set to agree on new rules for Big Tech. I’m Joanna Kao, in for Marc Filippino, and here’s the news you need to start your day.

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Germany yesterday said it signed a long-term deal with Qatar to source liquefied natural gas. Germany’s economy minister was in Doha as part of a tour of Gulf states. He said this deal would be a door opener for the country’s economy because it would reduce its reliance on imported Russian gas. More than half of Germany’s annual supply of LNG comes from Russia. His trip comes as EU leaders prepare to meet in Brussels later this week to discuss rising energy prices.

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Russian consumers are feeling the effect of western sanctions. Prices are rising, certain goods are disappearing from shelves and consumers are panic buying. The FT’s Polina Ivanova joins me to talk more about what’s going on there. Hi, Polina.

Polina Ivanova
Hi, hello.

Joanna S Kao
So how are sanctions being felt by ordinary Russians?

Polina Ivanova
It’s starting to have an effect. I think in particular, price rises are starting to be felt, especially on consumer goods, on automobiles, on things like refrigerators and that sort of thing, you know, big consumer goods starting to really shoot up in price. The government is trying to keep tabs on the prices of staple goods, but panic buying of those has spread like wildfire. So you see a lot of videos on social media of people in supermarkets, you know, almost fighting over bags of sugar. There is no actual deficit or shortage. So people’s response to this economically risky situations is to stock up on some of their key staple goods things like buckwheat, sunflower oil and sugar and flour.

Joanna S Kao
So you’re describing a lot of panic, but what goods are actually in short supply?

Polina Ivanova
So things like iPhones and items that people think could run out or could disappear off the market very soon because of this sort of western corporate exodus from Russia and also anything that requires imports. So I spoke to one coffee chain in a town in Siberia, a chain of five coffee shops that has decided to shut down. They rely on imported coffee beans, which shot up in value. They also rely on cardboard cups, which have gone up. I think in the first three days following the introduction of western sanctions shot up by something like 70 per cent. The chain also runs a bar that was supposed to be Mexican themed and provide tequila. But because of supply chain disruptions since the outbreak of war and western companies not being willing to work with the Russian market at the moment, the team is learning how to distil tequila.

Joanna S Kao
And what about the sanctions on banks and financial transactions, how is that affecting people?

Polina Ivanova
Yes. So Visa and Mastercard’s departure and Apple Pay and this kind of thing means that though credit card transactions within the country are still functioning on those systems international payments are not. And people who earn money from abroad, whether they, I don’t know, do online courses or runs businesses that require international payments, they’re unable at the moment to really process them. So there’s been a run on trying to secure cards that use a Chinese payment system called UnionPay, which some Russian banks have actually posted on social media about how they are short of plastic because they need to be producing all of these UnionPay cards all of a sudden.

Joanna S Kao
So Polina, how are people responding, are they angry about this?

Polina Ivanova
I think what has been striking for me is that people are focusing on making do and kind of working out loopholes rather than necessarily sort of reacting with anger towards the government or anger towards the situation. In general, you know, when Instagram was blocked, a lot of people moved to the Russian domestic platforms; with payment systems blocked, people are finding these UnionPay cards; when they run businesses that rely on imports, they’re trying to find domestic solutions. Everybody is trying to keep going and finding creative ways to do that.

Joanna S Kao
Polina Ivanova is the FT’s correspondent covering Russia and Ukraine.

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Governments around the world have struggled to rein in the power of digital empires like Google and Apple. This week, European regulators are set to finalise new rules for Big Tech. Rules they hope will be a model for other countries. Our EU correspondent Javier Espinoza joined me to talk more. Hi, Javier.

Javier Espinoza
Hello. Hi there.

Joanna S Kao
So we’ve spoken with you quite a bit as you’ve followed this over the past two years. And there are two parts to these rules, one’s for consumer privacy, and the other is to maintain market competition. And that’s the one I want to focus on, the Digital Markets Act. Can you remind us what that would do?

Javier Espinoza
So the premise is that only a handful of American companies have dominated, have cornered markets, and we don’t have any rules that allow for a sort of like enabling companies to emerge. So for example, I’ve spoken to Andy Yen, who is the founder of an email provider called ProtonMail, which is substantially much smaller than Google. And he was telling me, you know, we grow based on the goodwill of tech giants because at the moment we have an unregulated wild west.

Joanna S Kao
So big tech companies fought really hard against this. What happened, why couldn’t these powerful companies and their lobbyists fend off these rules?

Javier Espinoza
So Google and company, Apple, Amazon, all these companies have been extremely active over the last couple of years. One limitation that they have faced is that usually lobbying happens in the corridors of parliament and then coffee houses in Brussels and in the corridors of the European Commission. But the problem has been that they were not able to because of all the tough limitations on our lives in the last couple of years. So they had to rely on remote meetings, which has not been the same. So lawmakers and MEPs and EU officials that I talk to on a regular basis here tell me that they feel their lobbying has been ineffective, even though they have really invested millions of dollars into trying to influence their regulation.

Joanna S Kao
So how transformative is this and how will they be different from current antitrust efforts?

Javier Espinoza
It’s quite transformative because in the past, the burden of proof lied with regulators, so they had to prove Facebook or Apple were breaking EU law, that they were undermining competitors. But now the whole idea of this new regulation is that Google and Facebook and all these big tech companies have to actually show that they are being pro-competitive. So there’s been a reversal of the burden of proof in like you have to show that you’re not doing bad.

Joanna S Kao
That sounds like a pretty big turnaround, a big change for Big Tech. Is this a done deal?

Javier Espinoza
We expect if everything goes according to plan to have an agreement between the European Commission, the Parliament and the countries of the EU on Thursday. And then if that goes ahead, this should turn into law, become law by the beginning of next year. But even if there was a minor delay of a few weeks and we have something by Easter or just after, it’s done. So, for sure we can say that Big Tech has lost. But even though we’re going to have these rules, we have to like watch carefully how these tech companies implement this and how they might bring the EU to court because they may allege they are not gatekeepers or that they are not breaking the law, even though it’s set in these new rules. So, you know, we’ll have to see how it plays out.

Joanna S Kao
Javier Espinoza is the FT’s EU correspondent.

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Before we go, chipmakers are looking at a two-year shortage of critical equipment. The warning comes from ASML, the company makes lithography machines that etch circuits onto silicon wafers. It’s critical to the supply chain. ASML’s chief executive just said he won’t be able to ship enough machines to meet rising demand. Intel just last week announced plans to invest more than $100bn to expand manufacturing in Europe and the US, it wants to reduce reliance on Asia. Meanwhile, Korean companies and Taiwan’s TSMC are also investing hundreds of billions of dollars to make more chips.

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You can read more about all of these stories at FT.com. If you aren’t a subscriber yet, you can read our key Ukraine coverage for free. Just visit FT.com/freetoread. Again, that’s FT.com/freetoread. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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