Russian consumers flocked to stores Wednesday, frantically buying a range of big-ticket items as they looked to pre-empt price rises following the staggering fall in the value of the ruble over recent days.
As the government looked at ways of easing the selling pressure on the ruble, which has slid 15 per cent in just two days and raised fears of a bank run, many Russians were buying cars and home appliances — in some cases in record numbers — before prices for these imported goods shoot higher.
Swedish furniture giant IKEA, for one, has already put consumers on notice that its prices will rise Thursday, which resulted in weekend-like crowds on a Wednesday afternoon.
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Last month, technology company Apple hiked its prices 20 per cent last month in Russian stores to make up for the cratering ruble. On Wednesday, the company stopped sales on its Russian website altogether, and posted a statement saying it was "reviewing pricing."
'We are just a few days away from a full-blown run on the banks' - Vedomosti editorial
Shops selling a broad range of items are reporting record sales while some have had to suspend operations, unsure how far down the ruble will go. Apple, for one, has halted all online sales in Russia.
Alyona Korsuntseva, a woman in her 30s, says the current jitters surrounding the Russian economy reminded her of the 1998 Russian crisis when the ruble tumbled following the government's default on sovereign bonds.
"What's pressuring us is the fact that many people rushed to withdraw money from bank cards, accounts," she says. "We want to safeguard ourselves so that things wouldn't be as bad they were back then."
The ruble has suffered catastrophic losses this week as traders fretted over the impact of low oil prices on the Russian economy, as well as the impact of Western sanctions imposed over Russia's involvement in Ukraine's crisis.
It even lost ground on Tuesday after the surprise move by Russia's Central Bank to raise its benchmark interest rate to 17 percent from 10.5 percent. The hike was intended to make it more attractive for currency traders to hold onto their rubles.
After posting fresh losses early Wednesday, the ruble has been up and down all day before settling at 3 per cent higher at 65 rubles at 4 p.m. Moscow time.
One reason why the ruble has advanced is that Deputy Finance Minister Alexei Moiseyev was quoted by the Interfax news agency as saying that the government is going to sell foreign currency "as much as necessary and as long as necessary." That, the hope is, would relieve the pressure on the ruble, particularly against the dollar.
In light of the currency's slide, Prime Minister Dmitry Medvedev hosted a meeting with the heads of Russia's largest exporters and pledged to implement a "package of measures" to stop the decline of the ruble. He said the details of the measures to be pursued will be hammered out at the meeting and these will be only "market steps."
"This is a very dangerous situation, we are just a few days away from a full-blown run on the banks," Russia's leading business daily Vedomosti said in an editorial on Wednesday. "If one does not calm down the currency market right now, the banking system will need robust emergency care."
Another option available to the Russian authorities to stem the selling tide could be imposing capital controls, but Russia's Economic Development Minister Alexei Ulyukayev on Tuesday denied that the government was considering doing so. However, he said the rate hike came too late.
Whatever happens with the ruble over the coming days, the Russian economy is set to shrink next year by 0.8 per cent if oil prices stay above $80 per barrel. With oil prices where they are, below $60, there are fears the Russian economy could contract by up to 5 per cent.
The ruble could come under further pressure this week as President Barack Obama is expected to sign legislation authorizing new economic sanctions on Russia.
Russian officials sought to project a message of confidence on state television, dwelling on the advantages of ruble devaluation, such as a boost to domestic manufacturing.
The German government's coordinator for relations with Russia, Gernot Erler, said the economic crisis in Russia was largely the result of the drop in oil prices, not the sanctions imposed by the West.
"It's an illusion to think that if the sanctions were to fall away tomorrow, the Russian economy would suddenly be all right again," Erler told rbb-Inforadio on Wednesday.