Vietnamese in Russia feel the pinch as sanctions bite

Tran Van Thao, a factory worker in Moscow, was “rattled” and “scared” when the ruble was trading at an all-time low of 150 to the dollar on March 7.

Ever since the Russia-Ukraine war erupted, he has been feeling the ripple effects of the sanctions, which caused the ruble to depreciate and sent the prices of most things skyrocketing.

Though he is relieved that the ruble has made a dramatic recovery and is currently at over ₽60 to the dollar, he fears “the worst might be yet to come” since the Russian economy is still being pinned down by sanctions and is wrestling with rapidly rising inflation.

“A bowl of pho used to cost ₽300 in 2019 but now costs ₽550,” he says, adding that the prices of milk, sugar and other necessities have doubled.

He has been working around the clock to continue sending money back home and has only taken a day off each month.

“Times are tough right now. The amount I send home now is only a fifth of what it used to be.”

The U.S. and its allies have been imposing unprecedented sanctions on Russia.

It has been expelled from the western financial system and hit with a variety of economic and financial penalties. The country has stopped publishing most data on financial flows, making it difficult to assess the impact of sanctions.

Inflation meanwhile was 17.8 percent year-on-year in April, the highest in 20 years.

Central bank chief Elvira Nabiullina warned in April that problems were emerging “in all sectors, both in large and small companies.”

AFP reported earlier this month that officials and ordinary Russians are reporting a litany of problems, including shortages of everything from paper to medicine.

“Russia is heavily reliant on imports of everything from manufacturing equipment to consumer goods, and economists believe the worst effects of the sanctions are still to come.”

Nguyen Thi Hong Dung, a fabric merchant in Moscow, says people have become “frugal” after many saw their incomes fall drastically or lost jobs as a result of foreign companies withdrawing from the country.

“It is like the economy is freezing.

“People are watching their spending carefully to cope with inflation.”

What worries her the most is what might happen to the ruble. She buys fabric using dollars and sells them through major supermarket chains. They only pay her in rubles and after three months.

“Sometimes I suffer heavy losses when the ruble crashes overnight,” she says, claiming her loss can exceed $10 million.

“It’s not just me; many other Vietnamese merchants have racked up big losses too.”

Many people ask her why she continues to do business at this challenging time, but believes she can both recover the money lost in the past few months and make profits again once the market stabilizes.

“Though the chance of going bankrupt is high, it is a risk I am willing to take.”

But some other Vietnamese merchants have sold their business and returned home amid the poor economic outlook and disrupted supply chains.

After giving it much thought, Thuy Chi, 58, says, she closed her cloth shop for good since she barely made any profits and the cost of extending her temporary residence permit was high.

“It’s such a shame; my business was doing really well,” she says.

Before the war broke out she had planned to extend her documents, which expire in August, she says.

But she has sold her shop and plans to move back to Vietnam soon though she knows it will be challenging to find a good job at her age.

But she thinks it is better to return amid the economic crisis.

“There is so much uncertainty at the moment.”

She says people are less willing to spend as the soaring prices of food and other basic items squeeze them.

Thao says many Vietnamese he knew, who were working as farmers or in garment factories, had returned home after seeing their incomes shrink dramatically and the ruble becoming “too volatile.”

“Many Vietnamese here are blue-collar workers who do not have any sort of financial support to fall back on … and many are being laid off.”

Moscow Mayor Sergei Sobyanin wrote in an official blog post in April that around 200,000 people are at risk of losing their jobs.

Thao estimates that one in every five Vietnamese has left.

Many others are struggling to buy flight tickets since the fare is very high because of airspace restrictions and limited number of flights as a result.

“The last time I checked, I was shocked to see a ticket cost over ₽100,000 ($1,000),” Thao says.

Some Vietnamese business owners who have decided to stay are also facing a labor shortage.

Tran Minh Phong for instance is finding it hard to find employees for his Vietnamese restaurant.

He says: “My business is being hammered by the constant rise in the prices of ingredients. On top of that, with Vietnamese leaving in droves, I might have to hire chefs and helpers from the Middle East if I cannot find anyone soon.”

Fitch Solutions said in late May that it forecast real household spending in Russia to contract by -20.4 percent in 2022.

But Reuters quoted Russian officials as saying in late May that the economy was holding up.

President Vladimir Putin has been defiant in the face of western sanctions, insisting that the Russian economy will emerge stronger, and pointing to “chaotic measures” in Europe that have boosted global energy prices, according to AFP.

Officials have said the damage from sanctions will be temporary, with the economy expected to shrink by 8 percent this year and bounce back to growth in 2024, it added.

Reuters reported that the central bank slashed interest rates by three percentage points to 11 percent and expects to cut its forecast for inflation for this year from the current 18-23 percent.

Though fear of inflation looms over the country and many people are struggling to cope, members of the Vietnamese community are trying their best to support each other.

Phong constantly shares job openings at his and other restaurants on online community groups.

Thao donates money to some poor families looking to return to Vietnam but cannot afford tickets yet.

“We have to help our compatriots during this tough time,” she says.

“Though I don’t have much, I still make some small donations to really poor families.”