Russian retailers are rushing to set up shop in the country’s rustbelt, tapping into new wealth flowing from soldiers’ bonuses and rampant military production.
Shops, restaurants and gym chains have opened up in Russia’s most deprived regions, which serve as recruiting pools for Vladimir Putin’s invasion of Ukraine. The country’s war economy has also created jobs, increased salaries for factory workers and injected unprecedented sums of money into historically poor towns and cities.
“The war is in a way a big equaliser,” said Janis Kluge, an expert on Russia’s economy with the German Institute for International and Security Affairs. “It gives a lot of money to the people who in peace time don’t have a lot of prospects, people who don’t have an education and are living in deprived regions.”
As the war in Ukraine drags into its fourth year, state orders to supply the army with weapons and clothes have given well-paid factory jobs to residents of Russia’s poorer industrial towns. Conscripts — who tend to come from disadvantaged areas — get high bonuses for joining the army, and their families receive payouts if they die.
“Demand is popping up in new areas where it wasn’t before, because people were simply too poor to go to some big retail store,” Kluge said.
Russian retailers and leisure companies have caught on to the trend, launching an expansion drive at a time when western sanctions and skyrocketing domestic interest rates were meant to damp business activity.
The X5 Group, which owns some of Russia’s most prominent supermarket chains, said it was expanding in the country’s far east, a region recently boosted by Russia’s import partners seeking alternative trading routes that circumvent western sanctions.
The number of retail and hospitality jobs advertised in the southeastern Khabarovsk region almost doubled in the year to January 2025, according to Financial Times analysis of vacancies posted by a sample of Russian businesses.
Supermarket Pyaterochka, fast-food chain Rostic’s and electronics retailer M.Video-Eldorado are among Russian businesses recruiting new employees.
M.Video-Eldorado last year opened 100 shops entering 25 new locations such as Kachkanar, Solikamsk, Volzhsk — all towns with less than 100,000 inhabitants in the central Russian industrial heartland.
Russia’s unemployment rate fell to 2.4 per cent in winter 2024, from 4.3 per cent in the same period of 2021, as the state poured money into new vacancies in the country’s booming defence sector as well as auxiliary industrial sites making clothing, food and fuel for the army.
Salaries have also gone up in unrelated industries, as the already tight labour market came under strain from workers being recruited to the army or fleeing abroad to avoid conscription — though those wage increases are being undermined by high inflation.
The central Russian republic of Mari El offers Rbs3mn ($35,600) as starting bonus for new army recruits, which is more than three times the annual salary in the region. Nominal incomes in the traditionally disadvantaged republic have grown by almost 80 per cent from December 2021 to 2024, compared to a roughly 60 per cent increase in Moscow, according to Rosstat, the Russian state statistics agency.
“The [army] payouts are gigantic, so those who wouldn’t even think to buy a high-end smartphone before can do it easily now,” said Sergei Polovnikov, the head of Russia’s Content Review, a market analysis group.
One local person of the central Russian city of Cheboksary, who asked not to be named, told the FT he saw a marked difference in the number of people getting takeaway coffee in his town.
“These days, you can spend half an hour in a queue at a fast-food chain,” he said. “In some nicer restaurants you need to book a table a week in advance, which was definitely not the case here before.”
He noted the rise in disposable income was compounded by the fact that loans for big ticket purchases still felt out of reach for many Russians, at a time when the country’s central bank increased interest rates to 21 per cent in efforts to bring down stubborn inflation. Russian consumer prices rose 9.5 per cent last year, up from 7.4 per cent in 2023, official statistical data shows.
“I have a good income, but I can’t buy an apartment or a car, so I spend on maybe getting a slightly better quality of groceries, and eat out a bit more often,” he added.
One woman from the neighbouring town of Shumerlya, which has a population of less than 30,000 people, noticed more beauty salons opening in her neighbourhood: “Almost all women get manicures now [ . . .] There are more nail specialists around, and places that offer hardware cosmetology or even some basic injections.”
“We even got a private dog grooming service in our town, now that’s a real indicator,” she said.
Larger regional cities have begun to attract businesses that were previously confined to the remits of Moscow. Spirit Fitness, a gym chain where a monthly membership costs up to $70, last year opened a branch in the Ural city of Chelyabinsk.
“People now have money to spend on themselves,” said Mikhail Rychagov, spokesperson for Russia’s Shopping Centres Association. “They can pay more for maintaining their health, and growth of the fitness industry confirms that.”
Payouts for fallen soldiers were another factor driving up household incomes. One widow shared on Instagram that she bought property in Vladivostok with the money she received for the death of her husband. “How much does a life cost? . . . 12 million roubles,” she wrote — or little more than $140,000.
Laura Solanko, of the Bank of Finland’s Institute for Economies in Transition, predicted soldiers will be the first to lose their incomes with the end of Russia’s war, but some shifts in the country’s regional economy will remain.
“Regions that benefit from the changes in the geography of foreign trade will not disappear fast,” she said. “As well as those with increased production and military industry enterprises, as Russia will need to re-arm for many years going forward.”
Additional reporting by Chris Cook
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