‘The end of an era’: Ikea, Russia’s middle class and the new cold war

Those of us who grew up in the socialist India of the 1980s will remember how the choice of brands you consume can be a marker not just of your social status but of your political choices. So, drinking a can of Coke smuggled into India in the 1980s indicated both that your family had ready cash for an expensive drink and that they did not buy into the socialist credo which had resulted in India throwing Coca Cola, IBM, etc out of the country in the 1970s. As explained in this FT story, similar battle is playing out in Russia today except that the Russian authorities are awake and alive to the mindgames that Western brands play. The FT story uses Ikea’s suspension of operations in Russia in the wake of the Ukraine crisis to discuss the broader impact that the exit of Western brands might have on Russia. In doing so this story is a useful reality check for many of us in India who have built lifestyles around Western brands:
“…over the past two weeks, since President Vladimir Putin launched an invasion of Ukraine, there has been a dramatic exodus of those same foreign companies as 30 years of economic and business links between Russia and the west are being severed. According to Yale School of Management, more than 300 companies have announced their withdrawal from Russia in protest — even if some, such as Ikea, have for now only suspended operations…
…Just as the 30,000 people who queued outside the first McDonald’s in Pushkin Square in 1990 symbolised the start of something new in Russia at the end of the cold war, she says, the huge crowds that made one final trip to Ikea’s stores last week “mark the end of an era”.
For the past three decades, multinational companies have played an outsized role in Russian society, bringing a slice of the good life to a middle class that had grown up with the drabness of the Soviet era….
In the 2000s, Russians started to use the phrase evroremont, or “Euro-renovation”, to describe the rite of passage around revamping a Soviet-era apartment, often by installing a new bathroom and kitchen from Ikea. On real estate websites, Russians will sometimes advertise a rental property as an “Ikea apartment” — code for clean and modern.
“Ikea first and foremost is a way of life . . . When it appeared here, this was tied up with the idea that Russia could have a middle class,” says sociologist Alexander Filippov, who adds that half the furniture in his home is from the store.”
The FT article talks about how both the West and the Russian authorities see the propaganda war playing out here. First, the Western perspective: “For the western governments looking for non-military means to counter Russia, they hope the psychological impact of the closures will increase the pressure that is building on Putin. While the Russian president sometimes talks about Ukraine in terms of restoring lands that were controlled from Moscow during the Soviet era, the west’s response has been to try and recreate the economic and cultural isolation of the cold war years.
Sergei Guriev, a Russian economist now at Sciences Po Paris, says it is not just the middle class that will suffer: the poor will be hurt even more, from rising food prices and sharply higher costs for imported medicines.
The events of the past fortnight can make it feel as if “modernity is exiting,” he says. “On my last trip to Moscow, I thought how nice and sophisticated everything was”, he adds. Some of that is now being “destroyed.””
And, now the Russian counter-narrative: “The boom in stores such as Ikea in the 2000s had a much wider political resonance. In his first two terms as president, from 2000 to 2008, Putin offered Russians an implicit bargain. There would be less of the freewheeling democracy of the Yeltsin years in the 1990s, as the political system became more tightly controlled by the new leader. But in return, he offered a sharp rise in living standards, including the ability to pursue a western form of consumerism…
However, over the past decade Putin’s legitimacy has rested much less on rising living standards, as the economy has stagnated, and much more on nationalism and standing up to the west. In the process, the political and cultural importance of western consumer goods has diminished. The annexation of Crimea in 2014, which led to a round of sanctions on Russia’s economy, was popular with many Russians.
Not only has some of the novelty value worn off, but there are plenty of Russian brands that can now compete with multinationals, offering similar products or experiences.
With 847 restaurants, McDonald’s was the leading fast-food chain before it announced its own suspension of operations, but it faces homegrown challengers such as Dodo Pizza, and Teremok, an ultra-cheap chain offering Russian-style pancakes. Several Chinese fast-food brands have become popular in recent years. Ikea also now has domestic rivals such as Hoff.
The initial response of the regime has been to try and mobilise a nationalist backlash against the foreign brands. On Thursday, Putin said Russia would find “legal solutions” to seize assets based in the country from international companies that have decided to close their operations….
Speaking on Thursday, Moscow’s mayor Sergei Sobyanin said the government would provide Rbs500mn ($4mn) for preferential credits of Russian fast-food chains to help “to fill the niche which is being vacated by foreign chains”. McDonald’s network could be replaced by domestic businesses within the space of six months to a year, he said, “especially since the foodstuffs themselves are supplied by Russian suppliers”.”