Can the Russian doll survive the recession?

The Russian nesting doll, the pride of a nation, is in trouble. For more than 200 years, the matryoshka has come to symbolise Russian handicraft at its finest, the brightly-painted dolls within dolls also revealing something of the mystery and complexity of the famed Russian soul. Today, as the country suffers its worst economic crisis in a decade, it appears no industry is immune.

"Without government support, pretty soon those businesses that now make goods with a multi-century history will disappear from the face of the earth," said Oleg Korotkov, general director of Semyonovskaya Painting, one of Russia's top handicraft makers.

Matryoshka makers have spoken of sales falling up to 90 per cent, as the economic crisis brings fewer tourists to Russia and Russians at home find themselves with less cash to spare on frivolous items.That has led to firings and wage cuts across the handicraft industry, which employs an estimated 30,000 people in 240 companies.

A few weeks ago, the government stepped in, saying it would place orders worth 1bn roubles (£20 million) for nesting dolls and other handicrafts in a bid to rescue the industry. The plan, crafted by the Industry and Trade ministry after a concerted appeal by handicraft makers, will see the Kremlin and various state agencies buy up dolls and dishes to hand out as gifts. But some warn that may not be enough.

The financial crisis first hit Russia last September and by November many matryoshka makers, centred around Nizhny Novgorod, the country's third largest city, saw their workshops fall silent. Production was slashed, and unsold dolls lined the shelves of the region's top handicraft makers.

The Khokhloma Painting Plant, the country's biggest matryoshka maker, sold around 100,000 nesting dolls last year, bringing in around £600,000, but this year it has slashed production to nearly half. For some, wages have been cut, from around £160 per month before the crisis to £60 today.

Recent optimism that Russia would soon plough its way out of the economic crisis has been quashed, as officials warn the country will likely see no growth until well into 2010, if not later. Last week, President Dmitry Medvedev made a rare admission of the dire situation in which Russia finds itself, revealing a budget with wide-ranging cuts and ordering the government of Prime Minister Vladimir Putin to prepare to address a crisis that will last for at least another year. "We all understand what a difficult situation our country, our economy, is in," he said.

This year, Russia will run its first budget deficit in a decade and pessimists warn the economy may shrink as much as six per cent. The government has made no mention of turning back on its matryoshka bailout plan and some producers are ploughing forward. "Unfortunately, we had to stop production of items made from birch trees, wood carvings," said Mr Korotkov, of Semyonovskaya Painting. "The reason is understandable – our output isn't being exported, there's no demand.

"But our main souvenir – the Semyonovskaya matryoshka – we're continuing to produce. Orders continue to come in. Our nesting dolls are going to Japan, Germany, Argentina, other countries," he said.

Along the Arbat, Russia's most famous street, bustling with street artists, Soviet souvenir sellers and, of course, the ubiquitous matryoshka vendor, the stands remain full. Here you can find the traditional matryoshka, featuring a Russian peasant woman, full in the belly and painted in bright reds and yellows, purples and blues. There is the more modern take, with likenesses of Vladimir Putin or Barack Obama, but the doll painted as Adolf Hitler is one that many might not mourn were it to disappear from the shelves.