Russian president Vladimir Putin has decided to lower the price of Vodka in the hopes the move will slow the downward spiral of the Russian economy.
Russia's state agency that strictly and holistically controls the region's alcohol market confirmed that it will slash vodka prices in February by about 16 percent. The price cut signals a surprising volte-face by Russian policymakers, who have always insisted on discouraging excessive drinking. The country has always levied heavy taxes in the hopes of ensuring its citizens remain sober. Moreover, despite being a national drink, advertising about Vodka is strictly banned, and the agency continually tries to tweak old laws and introduces new ones to curb the consumption of vodka.
However, 2014 has been one of the toughest years for Russia. Though it began on a high note with the costliest global sporting event -- at a total expenditure of $50 billion -- the Sochi Olympics put a huge strain on Russia's budget. Thereafter, Ukraine erupted in civil unrest, which many believed Russia was secretly fueling. Then the oil prices tumbled more than 40 percent, which threatened the northern country as crude consists of 75 percent of the country's exports. Bad times continued with a commercial jetliner being shot down and sanctions being imposed by America. Currently, Russia is sitting on a super-massive $600 billion debt, which seems insurmountable unless Russia manages to ease off the sanctions.
Now that the inflation in Russia has climbed to double digits and the ruble has fallen by more than 40 percent, Russia appears desperate for any solution that will ease the economic burden and the impending recession. For the country that regularly indulges in drinking copious amounts of vodka, its price reduction might help citizens take the edge off, literally.
Vodka, being expensive, was forcing Russians to drink cheaper bootlegged substitutes. What's more concerning besides the obvious health risks is that the Russian economy doesn't benefit from the bootlegged variants since they cannot be fully taxed nor regulated. For a country where almost 33 percent of the vodka consumed originates from spurious sources, reducing prices of the legal stuff could greatly help in supporting the national budget.
Russians consumed nearly 1.2 billion liters of vodka drinks in 2013, according to research from Mintel. Though it may seem like a large amount, the consumption has been down by 12 percent when compared to the previous year. As alcoholism in Russia is considered a major problem (500,000 deaths per year are attributed to the addiction), lowering prices of vodka appears to be a purely economic decision.
[Image Credit | Martin Godwin, Alexei Sazonov/AP]