From Soviet capital to capitalist icon

Soldiers picked cabbages to supplement their income in 1999... now Moscow boasts 33 billionaires. Picture / Reuters.

MOSCOW - When businessman Andrei wanted to talk to a glamorous female celebrity sitting across from him in one of Moscow's trendiest restaurants, he did what all self-respecting new Russians do: he reached for his wallet.

He tipped a waiter US$1000 ($1650) for an introduction, ordered a US$500 bottle of wine, and started talking.

When the duo embarked upon a relationship soon afterwards, Andrei sent his new girlfriend 101 red roses.

A couple of weeks later he bought her a top-of-the-range Mercedes; a couple of months later he bought her a flat in Moscow for US$500,000.

A man like Andrei will go through a similar routine several times a year and may support a wife and children at the same time. Welcome to dating Moscow-style and welcome to a city where money flows like water.

Step aside Oslo, move over Tokyo, and get out of town Zurich. Fifteen years after the collapse of the Soviet Union, Moscow has been crowned the world's most expensive city.

It is an unlikely and dubious honour for a city that was once the capital of world Communism and the epitome of cheap, state-subsidised living.

Yet in an authoritative report that will have diehard Marxists screaming, New York-based Mercer says Moscow is now the world's priciest city.

Booming property prices have pushed the Russian capital from fourth place last year to first in the survey of 144 cities.

Prices for flats have more than doubled in the past year. A modest city centre flat is now hard to find for less than US$350,000, a big price when you consider that the average monthly Moscow wage is about US$640.

Ordinary Russians are embracing mortgages (albeit with interest rates well above 10 per cent) in order to get a foot on the property ladder before it is too late and are rushing to put their names down for apartment blocks that have yet to be built.

Cranes labour over Moscow's skyline and immigrant workers from across the former Soviet Union toil on building sites for poverty-line wages as developers try to snap up more and more land to cash in on the boom.

There are not nearly enough good quality flats to go around and prices seem set to rise even higher.

Indeed buying a flat in the Russian metropolis is now just a dream for many young Muscovites, who can only rent rooms in the city's concrete suburbs in Soviet-era tower blocks.

Others resort to desperate measures; the media often carries stories of contract killers hired to bump off flat owners, of elderly people tricked out of their city centre apartments, and of apartments burnt down "accidentally" to force people to sell.

Hotel prices in Moscow are also higher than anywhere else in the world. The average room rate is US$300 per night, thanks to the city's bizarre strategy of knocking down large cheaper Soviet-era hotels and replacing them with exorbitantly priced, Western-style four and five-star hotels, while making no provision for anyone on a more modest budget.

The Mercer's report should be taken with a slight pinch of salt, however. It was primarily drawn up to help multinational companies decide how much to pay their expatriate employees posted abroad.

In other words the prices it quotes reflect the cost of living for foreigners in Moscow leading a Western-style lifestyle, rather than for locals who have often inherited apartments and live more modestly anyway.

That said, Moscow, a city that was once drab, bereft of restaurants, and whose shelves were once infamously empty, has undergone an amazing transformation in the past 15 years that has pushed prices for everything from caviar to coffee to record levels.

It is not unusual to pay US$7.50 for a pint of (Western) beer, to walk out of a restaurant after a modest meal with a bill for US$35 a head, to choose the cheapest and most mediocre bottle of wine on the menu and find yourself paying the same, to be asked to pay US$55 for a taxi to the airport, and US$110 for a pair of workaday shoes.

Perhaps that is not surprising for a city that boasts 33 billionaires and is awash in oil money as the price of "black gold" hovers at record levels.

That has inevitably had a trickle down effect which has seen officials and businessmen grow rich on the back of Russia's oil and gas reserves.

Tasia Kirichenko, 23, a publishing executive, disagrees that Moscow is exceptionally expensive. "London is dearer than Moscow," she said. "The products here cost the same as they do outside Moscow. We have cheap and expensive restaurants like everywhere else. Transport is also cheap.

"What is incontrovertible is that housing and land here is very expensive. Nobody can argue with that."

Indeed there are two Moscows - one for foreigners who don't know the city and pay a premium for familiarity, and one for the locals who have retained their Soviet-style thrift.

It is still possible to go anywhere on the famous Moscow Metro for just 15 roubles (US55c), to find Russian bars serving beer for US$1.80 a pint, to enjoy a three-course "business lunch" in the centre of Moscow for 150 roubles, to buy a packet of cigarettes for US$1.85, a bottle of vodka for US$7.50 and go anywhere in an unofficial taxi for US$12.

The fact is, though, that if Russians have money, and many people in Moscow do, they love to flaunt it. A popular anecdote about two "new Russians", both of whom have recently bought a tie, is a case in point.

"Mine cost 500 roubles," says one. "You idiot," says the other, "I got the same one for 2500 roubles."

The man who can claim much of the credit for Moscow's transformation from grey Soviet metropolis into a neon-lit playground for the rich is the city's mayor, Yuri Luzhkov.

He is a controversial figure, because his wife, Elena Baturina, is one of the property tycoons who has grown rich on Moscow's housing boom. According to Forbes Magazine, Baturina is worth US$2.5 billion, making her Russia's richest woman.

- INDEPENDENT