(3 of 4)
Vibrant as the scene is in backwaters like Kaluga, the signs of new prosperity in Russia's cities are even more striking. Yekaterinburg, a city of 1.3 million in the Urals region, 900 miles east of Moscow, is best known as the place where the Bolshevik revolutionaries shot the last Czar and his family in 1918. In the early 1990s, local factories ran out of money, and rival Mafia gangs battled for control of parts of town. The killings haven't entirely stopped (a member of the city council was found hanged in his jail cell last year after being arrested for alleged extortion), but these days cranes rather than guns are a more apt symbol of Yekaterinburg. Office and apartment blocks are springing up. There's an Egyptian-themed bowling alley, a Scottish pub where the barmen wear kilts, a chain of eight fast-food restaurants called McPeak (which McDonald's considered buying), countless sushi bars and a huge German cash-and-carry hypermarket near the airport. "It used to be hard to get credit, but now banks are lining up to lend to us," says Leonid Bazerov, who built a shopping mall in an abandoned theater in the mid-1990s and has expanded it to almost 10 times the original size.
Can the boom times last? Russia has set aside a portion of its oil revenues in a so-called stabilization fund that tops $55 billion, and Moscow is running a budget surplus equal to 7% of GDP. But economists are worried that the Kremlin hasn't used the fat years to cut back on the remnants of Soviet-era bureaucracy, modernize Russian industry or improve the overall investment climate. "Russia will continue to be hooked on oil revenue for the foreseeable future," says Ivan Szegvari, a Russian-economy specialist at the European Bank for Reconstruction and Development in London. Retailing is booming, but there are relatively few examples of other businesses that have whipped themselves into shape.
And without a more generous safety net, millions of Russians risk being left behind. At the Shartashky open-air market in Yekaterinburg, Victor Shkola, 66, hovering by his collection of wrenches, screwdrivers and metal widgets, says he can barely pay the rising rent and utility bills, which eat up about $75 of his $95 monthly pension. On a good day, he can earn $8 from sales of his hardware, but that's not enough. Putin this year has promised to boost spending on social services, and the Kremlin has raised some state pensions. But in the market's food section, Gulfara Shakhulovna, 59, isn't impressed. She's worried about the health of her husband, a carpenter who retired but went back to work to make ends meet. Pensions may be going up, she says, "but that won't help because food and rent are also going up."