New brand, same ingredients as McDonald's reopens in Russia

MOSCOW • McDonald's restaurants are reopening in Russia today, but without the Golden Arches.

After the American fast-food giant pulled out this spring to protest against President Vladimir Putin's invasion of Ukraine, a Siberian oil mogul bought its 840 Russian stores.

Because almost all the ingredients came from inside the country, he said, the restaurants could keep on serving much of the same food.

The gambit might just work, underscoring the Russian economy's surprising resilience in the face of one of the most intense barrages of sanctions ever meted out by the West. Some 3½ months into the war, it has become clear that the sanctions - and the torrent of Western companies voluntarily leaving Russia - have failed to completely dismantle the economy or spark a popular backlash against Mr Putin.

Russia spent much of Mr Putin's 22 years in power integrating into the world economy. Unravelling business ties so large and so interwoven, it turns out, is not easy.

To be sure, the impact of sanctions will be deep and broad, with the consequences only beginning to play out. Living standards in Russia are already falling, economists and business people say, and the situation is likely to get worse as stocks of imports run low and more firms announce layoffs.

Some do-it-yourself efforts by Russia may fall short of Western standards. When the first post-sanctions model of the Lada Granta - a Russian sedan co-produced by Renault before the French automaker pulled out this spring - rolled off an assembly line at a plant near the Volga last Wednesday, it lacked air bags, modern pollution controls or anti-lock brakes. But the economic decline is not as precipitous as some experts had expected it would be after the Feb 24 invasion. Inflation is still high, around 17 per cent on an annual basis, but it has come down from a 20-year peak in April.

A closely watched measure of factory activity, the S&P Global Purchasing Managers' Index, showed that Russian manufacturing expanded in May for the first time since the war began.

The Russian economy's survival is playing into Mr Putin's hands by bolstering his narrative that Russia will stand tall in the face of the West's determination to destroy it.

And when it comes to food, at least, Russia is more prepared.

When McDonald's opened in the Soviet Union in 1990, the Americans had to bring in everything. Soviet potatoes were too small to make fries, so they had to acquire their own russet potato seeds; Soviet apples did not work for the pie, so the company imported them from Bulgaria. But by the time McDonald's pulled out this year, its Russian stores were getting almost all their ingredients from Russian suppliers.

So when McDonald's, which employed 62,000 workers in Russia, announced on March 8 that it was suspending operations because it could not "ignore the needless human suffering unfolding in Ukraine", one of its Siberian franchisees, Mr Alexander Govor, was able to keep his 25 restaurants open.

Last month, he bought the entire Russian business of McDonald's for an undisclosed sum.

On Russia Day today, a patriotic holiday, he will reopen 15 stores, including the former flagship McDonald's in Moscow's Pushkin Square under a still-to-be-disclosed new brand.

It is the place where, in 1990, thousands of Soviets famously lined up for a taste of the West.

The hash browns will go by a Russian name, according to a menu leaked to a Russian tabloid. And since the secret sauce is proprietary, there will be no Big Mac on offer.

NYTIMES