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Russia’s economy is so bad it has cut vodka prices

The Russian national flag flaps in the wind during previews ahead of the Russian Formula One Grand Prix at Sochi Autodrom on October 9, 2014 in Sochi, Russia. (Photo by Mark Thompson/Getty Images)
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With Russia's inflation rising and its economy contracting, Moscow has come up with a new measure to keep calm on the streets: A 16 percent drop in the price of vodka. The Moscow Times reports that, as of Sunday, the new minimum price for half a liter of vodka is 185 rubles ($2.60), a drop from a previous price of 220 rubles ($3.10).

The move seems designed to appease average Russians who have seen their wages hurt by the country's sanctions and oil-related economic turmoil and who, on the whole, consume a large amount of vodka. According to one study of global drinking habits, Russians consumed almost 14 liters of vodka per person in 2012 — more than seven times the amount consumed by Americans.

It's worth considering why Russia has a minimum price for vodka anyway. A law imposing a minimum price for vodka was implemented in 2009, part of a broader plan to deal with Russian binge drinking. Russia's relationship with alcohol is notorious, of course, but it's no joke: Studies have shown that it contributes to a "extraordinarily high mortality rate" among Russian men (Russian women tend to drink far less).

As the Moscow Times notes, the minimum price for vodka was hiked twice in 2014, almost tripling in the process. Some studies have shown that the price increases have had a positive effect. Yet the higher prices seem to have had an unfortunate side-effect: An increase in the sales of "bootleg" alcohol. Just last year, one Russian politician recently argued that the illegally produced alcohol now has 55 percent of market share, and there are calls for greater transparency about what actually constitutes "vodka" in Russia.

Production of Russian vodka has fallen dramatically in the last year, leading many to speculate that illicit alcohol is taking its place. "The overshoot of vodka prices leads only to increasing consumption of bootleg [spirits]," Russian President Vladimir Putin told a meeting of government officials and regional governors in December. Vadim Drobiz, head of the independent Center for Federal and Regional Alcohol Market Studies, has estimated that consumption of illegal alcohol has grown "as much as 65 percent" since 2009.

By increasing sales of (legal) vodka, Moscow likely hopes to increase tax revenues that will help the economy. But there is also a more humanitarian concern here -- illicit alcohol isn't made with safety standards in mind and can cause serious health problems, even death.

Putin had once hoped to cut alcohol consumption in half and uproot the market for illegal liquor by 2020. It now looks like sanctions and oil prices are making that plan look more and more distant.