We have imposed extraordinary sanctions
These sanctions will hit Russia hard 00:00:09.18 00:00:13.18 [ VO ]Russia's special military operation in Ukraine has triggered a wave of anti-Russian sanctions from the West. And it keeps coming up with new ones almost every day. 00:00:25.26 00:00:31.10 [ VO ]Foreign companies are quitting Russia. ATM cards were blocked and banks disconnected from the international payment system. 00:00:31.10 00:00:36.89 Sharp fluctuations in dollar and euro exchange rates followed. Can Russian businesses overcome this?
I panicked. I thought: 'What will we do now?'
At first, we didn't know what to do
All materials got more expensive
I worried when they closed the borders
Sanctions don't work, but they're good for us!
We try to look at it as a window of opportunity
We work together to resolve the situation
[ Murad ]Some are afraid there will be famine,
or worry about our dependence on other countries
Some are optimistic and say we can feed ourselves
Maybe, all these sanctions work in our favour to some extent
because now we can make money by filling these vacated niches 00:01:32.97 00:01:36.97 [ VO ]Due to sanctions, foreign clothing and shoe stores in Russia closed one after another. 00:01:36.97 00:01:45.12 A times customers form huge queues. In many cases foreign companies decided to stop working overnight, creating even more panic. 00:01:46.70 00:01:56.90 A shoe shortage in Russia? We went to Dagestan looking for an answer. Where some 600 entrepreneurs are in the shoe business here. Murad Dzhalayev is one of them.
- Done? - Almost, 70 boxes left to ship
Now slippers will arrive for packing 00:02:03.98 00:02:09.58 [ VO ]Shoemakers are going through hard times, worrying about shortages of materials imported from abroad.
[ Murad ]We import 40% of the materials we need, mostly from China and Turkey
There could be a temporary shortage of components:
fittings, chemicals for leather processing, adhesives...
[ Omar ]The events in Ukraine started on the 24th
By the 27th, all shops in Dagestan had closed and couldn't provide us with goods
So, we've been using the stocks that we already had since the 27th 00:02:43.86 00:02:48.315 [ VO ]The soles are the trickiest footwear components. Previously, almost all of them were imported from abroad. 00:02:48.31 00:02:54.26 But after the wave of sanctions in 2014, many Russian companies began to produce their own. 00:02:54.26 00:03:02.51 In addition, this factory casts sole molds. Orders are coming from all over Russia, which Murad's is especially proud of.
[ Murad ]We didn't make moulds for sole casting until 2021
This machine's unique in Russia. We got it up and running and working
We'd been ordering moulds for 15 years, from Turkey, China, and Italy
The Italians are the pioneers, with higher prices
- Good morning! - Hi!
- Has he switched to this model? - We want to change the design
- Right. Just a bit, maybe... Small or big? - We need to think of something
We'll have a drink, then work it out 00:03:39.51 00:03:51.06 [ VO ]Andrea used to work at the Prado company. Murad met him in Italy and invited him to come to Dagestan. Andrea agreed and has been designing shoes for a year now, as well as teaching young specialists.
[ Andrea ]We make the same models you see exhibited in Milan, including the Prada models
There are no problems in that respect. However, in terms of technology,
tools, and equipment... Of course, they're lagging behind a little
As for sanctions, they're bad news!
But we have to try to work with what we have 00:04:19.82 00:04:25.94 [ VO ]Andrea is clearly worried. But the director is less so. It’s not the first crisis of this sort he’s experienced.
We've been hit by two crises before. Sanctions were imposed in 2008
We recorded substantial growth back then,
because there were no imported goods and our products were in demand
The same thing happened in 2014. We recorded growth 00:04:48.41 00:04:57.45 [ VO ]Now they are planning to double their shoe production. They have already begun hiring new employees. The main problem –possible shortage of components, - can be solved.
[ Murad ]We can make parts too. We've already started on moulds,
making soles and parts for sole production
In the future, I hope we'll make adhesives, chemicals, and everything else too 00:05:15.24 00:05:22.72 [ VO ]In the wake of the sanctions, food giants are leaving Russia or suspending operations. Including Coca-Cola, PepsiCo, and Nestlé. 00:05:22.72 00:05:26.72 Among other things, the largest producers of dairy products and baby food. 00:05:30.15 00:05:32.51 WILL THERE BE A SHORTAGE OF DAIRY PRODUCTS IN RUSSIA?
[ John ]The cows leave. The milking session is over
The next group is coming in 00:05:41.39 00:05:51.55 [ VO ]John Kopisky, who is British, considers himself a Russian farmer. He’s been living in Russia since 1991. He put a collective farm in the Vladimir region back on its feet 00:05:51.55 00:05:58.58 Today, it is the largest farm in the region, employing 200 people. It produces 65 tons of milk a day.
[ John ]Cows are female... capricious!
But you must give them comfort...
give them fodder, a nice place to sleep,
and if they feel good, then we get milk 00:06:13.21 00:06:22.65 [ VO ]90% of the milk John’s farm produces is bought by PepsiCo for making baby food. So news of the company’s possible pull-out was naturally a cause for concern. 00:06:23.57 00:06:30.69 But PepsiCo, just like CocaCola, only decided to stop making soda drinks, and would continue producing dairy products. 00:06:30.69 00:06:40.03 So sales of milk remain the same and no shortages are expected. The main problem for farmers these days is the volatility of the ruble.
[ John ]We have a big budget for meds:
90% of it is imported
We use Russian cereals and corn
And then, there's vitamins and additives, also imported...
from either China or Europe
If the exchange rate is 100, it'll be sustainable, but 130 will be a nightmare 00:07:05.87 00:07:13.71 [ VO ]John's son Timothy helps him face the difficulties. He is now in charge of the dairy production. And this is the first crisis in his career.
[ Timofey ]Price hikes panicked me at first. I thought:
'How are we going to function now?'
Prices of imported parts did go up by 20-50%,
and even by more than 50%
Semen, which we inseminate our cows with, mostly came from abroad
Prices have shot up... Also, of course, for meds
These are the 3 areas where we've already felt the pinch!
[ John ]We have a new order and have to buy new moulds 00:07:49.14 00:07:58.98 [ VO ]10 percent of the Kopisky farm’s milk is used by their cheese factory, which the family is particularly proud of. They produce around 40 kinds of cheeses, yoghurt, butter, and kefir.
[ John ]Cheese is worse than women, very fickle!
You must feel every step 00:08:06.57 00:08:14.21 [ VO ]John always wanted to get into the cheese business, but it wasn’t until the ban on cheese imports in 2014 that he was able to do it. 00:08:14.21 00:08:21.88 Those sanctions played into his hands, and to ensure they wouldn’t be dependent on imports, they decided to buy Russian equipment.
[ John ]All the equipment is Russian, from A to Z
The installation and design, it's all ours 00:08:30.55 00:08:36.60 [ VO ]When Russian banks raised their interest rates to 20 percent, the Kopiskys feared they’d have to suspend their new projects. 00:08:36.60 00:08:43.35 This rate was beyond their means. However, loans for agricultural enterprises did not become more expensive.
[ John ]And the way our government departments have worked, I think it's great
You know, as a farmer, I can now get
an 8-year loan at 5%
I can get a short-term loan at 5%
[ Timofey ]In fact, we can see that the government was prepared
We keep the old interest rates on loans and leases
As they say, don't lose heart, if we all keep doing what we're doing, we'll get through
The key thing is, not to panic 00:09:18.59 00:09:23.55 [ VO ]The beauty industry was also hit by the sanctions. Several luxury brands left Russia at once, 00:09:23.55 00:09:28.86 the largest US manufacturer of Botox and fillers stopped supplying its products.
[ Maria ]We worried when borders started closing. We realised how many foreign drugs we use
We had to ask, are imports still possible, and will prices soar?
So, that's when we started to worry
Drugs from the Allergan pharmaceutical company were widely sold in all clinics,
accounting for about 30 to 40% of all the drugs we used
Of course, it's inconvenient when a doctor, who's used to specific drugs and knows their effect,
has to use substitutes. We buy more Russian drugs now
Demand grew all over the Russian market, so they soon ran out
That's why we had anxious days when we basically had nothing to work with
- Is that comfortable? - Yes 00:10:24.78 00:10:31.50 [ VO ]When the special military operation in Ukraine began, beauty salons lost clients. Everyone was trying to save money.
Among the few that did come, I noticed very high anxiety levels
So we often replaced some scheduled treatments
with something more relaxing, something to calm their nerves a little 00:10:46.81 00:10:52.57 [ VO ]Now Maria is fully booked again. Prices are still changing. But there is definitely enough Botox and fillers. 00:10:52.57 00:10:59.69 Numerous companies supply them. The main cause for concern now is rising prices, not the lack of beauty products.
[ Maria ]Now sadly, not everyone can afford the treatments they had in recent years
So, what do cosmetologists do?
They must be creative, but still clinicians, and reconsider their therapeutic plans
Maybe focus more on using equipment, because that won't go anywhere
We just need to rely a bit less on injections 00:11:24.09 00:11:27.65 [ VO ]Maria may have lost some of her clients, but not because of soaring prices. 00:11:27.65 00:11:31.41 It’s because of Russia’s decision to block certain social media.
[ Maria ]Social media really is great for promotion
Instagram was a microblog for posting your work, contacts, videos,
before & after pictures, some articles...
When we read that Instagram would shut down in a day, then Facebook,
we were nervous 00:11:53.08 00:11:57.08 [ VO ]Western sanctions have also put a total block on Russian media in Europe and America. 00:11:59.55 00:12:08.75 The Meta corporation even allows calls to kill Russian military personnel on its platforms. In response, Moscow blocked Meta’s Instagram and Facebook 00:12:10.75 00:12:14.31 For many Russian companies, they were important tools for promoting their businesses.
[ Ivan ]Our dying Instagram page! It lost 600 followers when the ban came in
We keep posting, publishing stories, but it's not the same 00:12:27.51 00:12:37.43 [ VO ]Ivan Kolobov owns a small furniture workshop in the Moscow region, making metal frame shelving units, tables, closets, mirrors, and wood-trimmed bar counters. 00:12:37.43 00:12:43.65 His furniture has been sold not only in Russia, but also in Germany and America.
[ Ivan ]My business relied heavily on Facebook,
and Instagram, because we used targeted advertising,
and certain Instagram posts brought in more orders
It's compelling: people saw videos and photos, and often came by to touch 00:13:02.05 00:13:07.37 [ VO ]Ivan is transitioning to Russian platforms, and his social media managers are testing new options.
I've got a question: what's up with VKontakte?
- Our new outlet? - For now, at the moment...
honestly... VK is very bad
As for visitors, I do see people coming from Yandex
Some items went on Telegram, we have some subscribers, but not many
We have nothing but Yandex for now. So, we'll live on Yandex, so to speak 00:13:33.54 00:13:36.70 [ VO ]Despite the crisis, Ivan has had some good news.
[ Ivan ]I was driving to a meeting, and heard on the radio that IKEA was closing
It didn't upset me, because basically IKEA was my competitor
They had similar goods to ours
Truly, I was glad 00:13:53.06 00:14:01.30 {VO ]Ivan expects more orders. With Ikea’s disappearance, he should get new customers. He’s trying to keep his prices down so as not to scare them off.
[ Ivan ]I try to support my staff with money, pay and so on, because most have kids, families...
We'll fight and hold on to the end. In fact, we do get some orders
We're considering changing our product line a little,
and cutting costs somehow to meet buying capacity 00:14:22.58 00:14:30.22 [ VO ]Some large foreign pharmaceutical companies have stopped clinical trials of drugs in Russia. So there's a chance that their new drugs won't reach the country. 00:14:30.22 00:14:38.71 However, they continue supplying vital drugs to Russia. Despite this, there’ve been long queues at pharmacies, as people stock up on meds. 00:14:38.71 00:14:42.55 Will Russia face pharmaceutical shortages? 00:14:47.66 00:14:54.26 The AMEDART company develops and produces life-saving medications. It was launched in 2014 , post sanctions, 00:14:54.26 00:15:01.11 after it became obvious that as many drugs as possible should be manufactured in the country, rather than rely on imports.
[ Andrey ]We specialise in oncological treatments
and a wide range of drugs to treat AIDS 00:15:12.43 00:15:17.59 [ VO ]Many imported ingredients are used for making drugs. But there is no shortage of them and none is expected. 00:15:17.59 00:15:24.54 Ingredients are mainly sourced in China and India. Foreign companies continue to supply ready-made drugs to Russia. 00:15:24.54 00:15:29.66 Some drugs have vanished from pharmacies, but it is not because of sanctions
[ Andrey ]Technically, Russian manufacturers can provide enough medicine for the country
If needed, factories can work three shifts, seven days a week
This isn't the issue. The issue's panic buying 00:15:46.77 00:15:53.49 [ VO ]Difficulties may arise regarding medications produced by a single foreign company, with no Russian companies licensed to do so. 00:15:53.49 00:16:01.93 But this is where mandatory licensing might work, because with this the government can give domestic companies the right to produce patented drugs.
[ Andrey ]We pay big money to foreign companies
In return, they export innovative drugs to Russia
But the agreement has been violated, because all foreign companies
have publicly stated that they won't start new clinical trials here
It means they won't bring any new drugs here
So we're banking on compulsory licensing,
and that the government will allow us to produce these particular drugs 00:16:35.88 00:16:46.52 [ VO ]Amedart plans to produce about 1 million packages of vital drugs this year, and by 2023 – up to 4 million. The company’s well-placed to do so.
[ Andrey ]We know that it clearly needs to be done
We hope the country will need us even more
If foreign companies are out, we can fill their niche 00:17:03.16 00:17:07.16 [ VO ]Lithuania and Latvia are seriously thinking of completely closing their borders with Russia. 00:17:07.36 00:17:15.38 This could isolate the Kaliningrad region, which is cut off from the main part of Russia and has borders with Lithuania and Poland. 00:17:16.17 00:17:26.25 Russian trucks are already banned from entering the EU. An exception is made for the delivery of medicine, food and fuel. Transit to Kaliningrad is allowed so far.
Welcome aboard Aeroflot. Travel time is 2 hours 20 minutes 00:17:34.76 00:17:45.12 [ VO ]European airspace is already closed to Russian planes. The route to Kaliningrad is now 30 mins longer. Planes have to skirt the European Union and come in from the sea. 00:17:46.91 00:17:52.31 About one million people live in the Kaliningrad region. They all worry that Europe might close them off. 00:17:52.31 00:18:00.90 The governor is in a difficult situation, with new problems arising every day. He needs solutions to reassure the residents.
[ Anton ]Remember, Kaliningrad has the advantage of being the Baltic Fleet's main base
We're perfectly safe here. Actually, with such protection,
we just need to work, develop and get on with it! 00:18:18.03 00:18:26.55 [ VO ]After sanctions, cargo shipments plunged into chaos. It was impossible to predict whether goods would be shipped and whether they could be delivered to Russia. 00:18:26.55 00:18:30.55 Navigating ever-changing laws and regulations is a challenge.
[ Anton ]Sure, we're not thrilled with the sanctions
We're in the West of Russia,
surrounded by NATO and EU states
We're more oriented towards cooperation, development and trading with the EU
The EU has obligations regarding transit through Kaliningrad,
but we see the Europeans have thrown the law out of the window,
and we can expect anything of them now! 00:19:05.23 00:19:15.63 [ VO ]Kaliningrad region is a free economic zone. Tax incentives and cheap loans attracted big businesses and several foreign automobile companies started assembling their cars in the region. 00:19:15.63 00:19:20.62 But after sanctions were imposed, BMW decided to stop production there.
[ Anton ]BMW's production share in Kaliningrad plants is about 10%
It's not a critical share for us, we continue to work as usual with other brands 00:19:36.69 00:19:45.98 [ Anton ]After the 2014 sanctions, food security issues became pressing for Kaliningrad. The authorities have invested heavily in the development of agriculture. 00:19:45.98 00:19:52.43 So, if overland transit suddenly stops, Kaliningrad residents will be able to provide for themselves. 00:19:52.43 00:20:02.10 There are plans afoot to build a large dairy farm and a dried milk factory. Greenhouse enterprises are growing and the fish industry is also forging ahead.
[ Sergey ]These are our traditional sprats. Our fishermen caught them this morning
We smoke them, harvest alder and make wood chips too
This is refined sunflower oil, sourced from Voronezh 00:20:16.54 00:20:21.42 [ VO ]This fish factory bearing the patriotic name "For the Motherland" employs 1200 people. 00:20:21.42 00:20:29.43 200 of theses are fishermen, the plant operates a fleet of 12 vessels. The factory produces 100 million cans of seafood a year.
[ Sergey ]Each woman has to pack about 1,500 of these cans per shift
Only a woman can do it, trust me! 00:20:38.06 00:20:44.86 [ VO ]To ensure stocks of canned seafood, a new supply chain had to be developed. Goods had been delivered by road or rail, 00:20:44.86 00:20:48.86 but now the manufacturer is switching to ferries. Another headache: 00:20:49.11 00:20:53.11 it became impossible to get equipment and ingredients needed for production.
[ Sergey ]By early March, we didn't know what to do,
because the supplies we'd bought were impounded in the port in Amsterdam
and couldn't be transported by Russian ships or trucks
Our main issue was tin imports, because the German tin we had before was banned for us,
and deliveries from China took too long. So we panicked 00:21:18.04 00:21:22.04 [ VO ]Alternative suppliers are needed. Frozen vegetables now come from Serbia. 00:21:22.08 00:21:27.56 Negotiations are ongoing with Iran for tomato paste, and Turkey might supply tin.
[ Sergey ]We're overhauling our supply chains, looking for alternatives
I can't see any difficulties if supplies are delivered by ferry
Ferry logistics for both cargos and passengers 00:21:44.19 00:21:51.03 [ VO ]Kaliningrad hopes transit through Europe will be maintained, and the route overland to the rest of Russia won’t be closed completely. 00:21:51.03 00:22:00.62 But obviously there’s a backup plan. Currently, three ferries are shuttling between Kaliningrad and St. Petersburg. Another is expected to be launched in September.
[ Anton ]We've already addressed the issue of attracting additional cargo ships and tankers
We need about 20 ships of various types to serve our economy fully and completely 00:22:25.30 00:22:32.98 [ VO ]In these difficult times, many Russian companies are rearranging their logistics, and looking for alternative suppliers of goods and materials. 00:22:32.98 00:22:37.49 Some have already found a way out, while others are still looking for one.
[ Ivan ]I know a lot of people who want to manufacture things
I think it's definitely a window of opportunity
If we have the components and raw materials, I think we'll be fine
[ John ]I used to live under sanctions in South Africa and Iran
Sanctions don't work. They're just a political tool
It's a good tool for us now. We need to make more products:
our own cheese, furniture, and so on
[ Timofey ]I can't say we're in the pink, and it didn't affect us, but prospects are good
[ Sergey ]I think Moscow's task is to take a good look at import-substitution,
which would work long term for the country
For example, buy metal in China to make tins
Can we make our own? Sure, we can. And tomato paste we get from Iran and China...
Can we produce that in Russia? I'm sure we have the potential nobody else has
We'll export stuff we never did before
[ Maria ]As a doctor, I'm optimistic about the future,
because cosmetology has and always will be in demand
Hardware cosmetology and injection procedures... Many products will be available
With some changes, all will be OK, and services will continue
[ Andrey ]We understand that Russian producers must manufacture and deliver drugs
We realise, if we don't, who will?
[ Murad ]We're in good spirits and ready to work
We've been through crises before, and we'll get through this one
We'll go on working for the good of the country