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In Russia, bartering underwear for a car

world Updated: Feb 09, 2009 01:16 IST
Ellen Barry
Ellen Barry
Hindustan Times
Highlight Story

In a sign of the financial times in Russia, barter is back on the table.

Advertisements are beginning to appear in newspapers and online, like one that offered “2,500,000 rubles’ worth of premium underwear for any automobile,” and another promising “lumber in Krasnoyarsk for food or medicine.” A crane manufacturer in Yekaterinburg is paying its debtors with excavators.

And one of Russia’s original commodities traders, German L. Sterligov, has rolled out a splashy “anti-crisis” initiative that he says will link long chains of enterprises in a worldwide barter system.

All this evokes a bit of deja vu. In the mid-1990s, barter transactions in Russia accounted for an astonishing 50 per cent of sales for midsize enterprises and 75 per cent for large ones. The practice kept businesses afloat for years but also allowed them to defer some fundamental changes needed to make them more competitive, like layoffs and price reductions. It also hurt tax revenues.

The comeback is on a small scale so far. The most recent statistics available, from November, showed that barter deals made up about 3 per cent to 4 per cent of total sales, according to the Russian Economic Barometer, an independent bulletin.

Nevertheless, economists are taking note. So far, economists doubt that barter will grow to the level it reached in the 1990s.

Russia is in the grip of a liquidity crisis. As in the mid-1990s, the government has made it a priority to shore up the economy by buying up rubles, hoping to avoid the panicky sell-off that comes with rapid devaluation. The ruble has gradually slid from 23.4 to the dollar in early August, before Russia’s war in Georgia, to 36.2 to the dollar last week.

As a result, the money supply continues to contract, and some enterprises turn to barter to survive.

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