Once a Powerful Symbol in Russia, McDonald’s Withdraws

Hundreds of Muscovites line up outside the first McDonald's restaurant in the Soviet Union on its opening day, in Moscow, Wednesday, Jan. 31, 1990. (AP)
Hundreds of Muscovites line up outside the first McDonald's restaurant in the Soviet Union on its opening day, in Moscow, Wednesday, Jan. 31, 1990. (AP)
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Once a Powerful Symbol in Russia, McDonald’s Withdraws

Hundreds of Muscovites line up outside the first McDonald's restaurant in the Soviet Union on its opening day, in Moscow, Wednesday, Jan. 31, 1990. (AP)
Hundreds of Muscovites line up outside the first McDonald's restaurant in the Soviet Union on its opening day, in Moscow, Wednesday, Jan. 31, 1990. (AP)

Two months after the Berlin Wall fell, another powerful symbol opened its doors in the middle of Moscow: a gleaming new McDonald’s.

It was the first American fast-food restaurant to enter the Soviet Union, reflecting the new political openness of the era. For Vlad Vexler, who as a 9-year-old waited in a two-hour line to enter the restaurant near Moscow’s Pushkin Square on its opening day in January 1990, it was a gateway to the utopia he imagined the West to be.

“We thought that life there was magical and there were no problems,” Vexler said.

So it was all the more poignant for Vexler when McDonald’s announced it would temporarily close that store and nearly 850 others in response to Russia’s invasion of Ukraine.

“That McDonald’s is a sign of optimism that in the end didn’t materialize,” said Vexler, a political philosopher and author who now lives in London. “Now that Russia is entering the period of contraction, isolation and impoverishment, you look back at these openings and think about what might have been.”

McDonald’s said in a statement that “at this juncture, it’s impossible to predict when we might be able to reopen our restaurants in Russia.” But it is continuing to pay its 62,500 Russian employees. The company said this week that it expects the closure to cost around $50 million per month.

Outside a McDonald’s in Moscow last week, student Lev Shalpo bemoaned the closure.

“It’s wrong because it was the only affordable place for me where I could eat,” he said.

Just as McDonald’s paved the way for other brands to enter the Soviet market, its exit led to a cascade of similar announcements from other US brands. Starbucks closed its 130 outlets in Russia. Yum Brands closed its 70 company-owned KFC restaurants and was negotiating the closure of 50 Pizza Huts that are owned by franchisees.

McDonald’s entry into the Soviet Union began with a chance meeting. In 1976, McDonald’s loaned some buses to organizers of the 1980 Moscow Olympics who were touring Olympic venues in Montreal, Canada. George Cohon, then the head of McDonald’s in Canada, took the visitors to McDonald’s as part of the tour. That same night, the group began discussing ways to open a McDonald’s in the Soviet Union.

Fourteen years later, after Soviet laws loosened and McDonald’s built relationships with local farmers, the first McDonald’s opened in downtown Moscow. It was a sensation.

On its opening day, the restaurant’s 27 cash registers rang up 30,000 meals. Vexler and his grandmother waited in a line with thousands of others to enter the 700-seat store, entertained by traditional Russian musicians and costumed characters like Mickey Mouse.

“The feeling was, ‘Let’s go and see how Westerners do things better. Let’s go and see what a healthy society has to offer,’” Vexler said.

Vexler saved money for weeks to buy his first McDonald’s meal: a cheeseburger, fries and a Coca-Cola. The food had a “plasticky goodness” he had never experienced before, he said.

Eileen Kane visited the original McDonald’s often in 1991 and 1992 when she was an exchange student at Moscow State University. She found it a striking contrast from the rest of the country, which was suffering frequent food shortages as the Soviet Union collapsed.

“McDonald’s was bright and colorful and they never ran out of anything. It was like a party atmosphere,” said Kane, who is now a history professor at Connecticut College in New London, Connecticut.

McDonald’s entry into the Soviet Union was so groundbreaking it gave rise to a political theory. The Golden Arches Theory holds that two countries that both have McDonald’s in them won’t go to war, because the presence of a McDonald’s is an indicator of the countries’ level of inter-dependence and their alignment with US laws, said Bernd Kaussler, a political science professor at James Madison University in Harrisonburg, Virginia.

That theory held until 2014, when Russia annexed Crimea, Kaussler said.

Kaussler said the number of countries now withdrawing from Russia, and the speed with which they acted, is unprecedented. He thinks some - including McDonald’s - might calculate that it's unwise to reopen, which would leave Russia more isolated and the world less secure.

“As the Russian economy is becoming less inter-dependent with the US and Europe, we basically have fewer domestic economic factors that could mitigate current aggressive policies,” Kaussler said.

Vexler said the admiration for the West that caused Russians to embrace McDonald’s three decades ago has also shifted. Russians now tend to be more anti-Western, he said.

Anastasia Chubina visited a McDonald’s in Moscow last week because her child wanted one last meal there. But she was indifferent about its closure, suggesting Russians will get healthier if they stop eating fast food.

“I think we lived without it before and will live further,” she said.

Entrepreneur Yekaterina Kochergina said the closure could be a good opportunity for Russian fast-food brands to enter the market.

“It is sad, but it’s not a big deal. We’ll survive without McDonald’s,” she said.



Borderless Europe Fights Brain Drain as Talent Heads North

Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo
Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo
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Borderless Europe Fights Brain Drain as Talent Heads North

Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo
Eszter Czovek, 45, packs up her house as she moves to Austria, in Budapest, Hungary, October 28, 2024. REUTERS/Bernadett Szabo

Until recently aerospace engineer Pedro Monteiro figured he'd join many of his peers moving from Portugal to its richer European neighbors in the quest for a better-paid job once he completes his master's degree in Lisbon.
But tax breaks proposed by Portugal's government for young workers - up to a temporary 100% income tax exemption in some cases - plus help with housing are making him think twice.
"Previous governments left young people behind," said Monteiro, 23, who is studying engineering and industrial management at the Higher Technical Institute in the Portuguese capital. "The country needs us and we want to stay but we need to see signs from the government that they are implementing policies that will help."
Monteiro cites in particular the cost of buying or renting a home amid a housing crisis aggravated by the arrival of wealthy foreigners lured by easy residency rights and tax breaks, Reuters said.
He is doubtful the government's new measures will be enough.
"Some of my friends are now working abroad and earn substantially more money... and have better career development opportunities," he said. "I'm a little bit skeptical concerning my job opportunities here in Portugal."
Portugal is the latest country in Europe to seek to tackle a brain drain holding back its economy. Tax breaks for young workers in the budget currently going through parliament will take effect next year and could benefit as many as 400,000 young people at an annual cost of 525 million euros.
Talent flight to wealthier countries of the north is a problem Portugal shares with several others in southern and central Europe, as workers take advantage of freedom of movement rules within the trade bloc. Countries including Italy have tried other schemes to counter the flight, with mixed results.
By exacerbating regional labor shortages and depriving poorer countries of tax revenues, it is yet another hurdle for the EU as it tries to improve its ebbing economic growth while addressing population decline and lagging labor productivity.
Donald Trump's victory in US elections this month raises the stakes, with the risk of across-the-board trade tariffs on European exports of at least 10% - a move that economists say could turn Europe's anaemic growth into outright recession.
About 2.3 million people born in Portugal, or 23% of its population, currently live abroad, according to Portugal's Emigration Observatory. That includes 850,000 Portuguese nationals aged 15-39, or about 30% of young Portuguese and 12.6% of its working-age population.
More concerning still is that about 40% of 50,000 people who graduate from universities or technical colleges emigrate each year, according to a study by Business Roundtable Portugal and Deloitte based on official statistics, costing Portugal billions of euros in lost income tax revenue and social security contributions.
DEMOGRAPHIC HELL
"This is not a country for young people," said Pedro Ginjeira do Nascimento, executive director of Business Roundtable Portugal, which represents 43 of the largest companies in the nation of 10 million people. "Portugal is experiencing a true demographic hell because the country is unable to create conditions to retain and attract young talent."
Internal migration within the EU is partly driven by the disparity in wages between its member states. Some economic migrants also say they are looking for better benefits such as pensions and healthcare and less rigid, hierarchichal structures that give more responsibility to those in junior roles.
Concerns are mounting over the long-term viability of Europe's economic model with its rapidly ageing population and failure to win substantial shares of high-growth markets of the future, from tech to renewable energy.
Presenting a raft of reform proposals aimed at boosting local innovation and investment, former European Central Bank chief Mario Draghi said in September the region faced a "slow agony" of decline if it did not compete more effectively.
Eszter Czovek, 45, and her husband are moving from Hungary to Austria, where workers earn an average 40.9 euros ($29.95) per hour compared to 12.8 euros per hour in Hungary, the largest wage gap between neighboring countries in the EU.
The number of Hungarians living in Austria increased to 107,264 by the beginning of 2024 from just 14,151 when Hungary joined the EU.
Czovek's husband, who works in construction, was offered a job in Austria, while she has worked in media and accounting at various multinationals. She cited better pay, pensions, work conditions and healthcare as motives for moving. She also mentioned her concern over the political situation in Hungary, which she fears might join Britain in leaving the EU.
"There was a change of regime here in 1989 and 30 years later we are still waiting for the miracle that will see us catch up with Austria," Czovek said of the revolution over three decades ago that ended communist rule in Hungary.
Since Brexit, the Netherlands has replaced Britain as a preferred destination for Portuguese talent while Germany and Scandinavian countries are also popular.
Many Europeans still head to the United States in search of better jobs - about 4.7 million were living there in 2022, according to the Washington-based Migration Policy Institute, which nonetheless notes a long-term decline since the 1960s.
In 2023, 4,892 Portuguese emigrated to the Netherlands, surpassing Britain for the first time, which in 2019 received 24,500 Portuguese.
At home, they face the eighth-highest tax burden in the Organization for Economic Co-operation and Development (OECD) even as house prices rose 186% and rents by 94% since 2015, according to property specialists Confidencial Imobiliario.
A single person in Portugal without children earned an average of 16,943 euros after tax in 2023 compared to 45,429 euros in the Netherlands, according to Eurostat.
Portugal will offer under 35s earning up to 28,000 euros a year a 100% tax exemption during their first year of work, gradually reducing the benefit to a 25% deduction between the eighth and tenth years.
Young people would also be exempted from transaction taxes and stamp duty when buying their first home as well as access to loans guaranteed by the state and rent subsidies.
"We are designing a solid package that tries to solve the main reasons why the young leave," Cabinet Minister Antonio Leitao Amaro said in an interview with Reuters.
'THINGS WON'T CHANGE'
Leitao Amaro said he did not know for sure if the tax breaks would work but that his government, which came into office in April, had to try something new.
"If we don't act ambitiously, things won't change and Portugal will continue down this path," he said.
The Italian government has already found that tax breaks used as incentives are costly and open to fraud.
In January, Italy abruptly curtailed its own scheme that was costing 1.3 billion euros in lost tax revenue, even as it lured tech workers such as Alessandra Mariani back home.
Before 2024, returners were offered a 70% tax break for five years, extendable for another five years in certain circumstances. Now, it plans to offer a slimmed-down scheme targeting specific skills after it attracted only 1,200 teachers or researchers - areas where Italy has a particular shortage.
Mariani said the incentives were key to persuading her to return to Milan in 2021 by allowing her to maintain the same standard of living she enjoyed in London.
"Had the opportunity been the same without the scheme, I would not have done it at all," said Mariani, now working at the Italian arm of the same large tech company.
With her tax breaks poised to be phased out by 2026 unless she buys a house or has a child, Mariani faces a drop in salary and she said she's once again eyeing the exit door.