When my wife and I ordered wine in a restaurant soon after our arrival in Moscow, the £15 price tag seemed like a good deal.

It was only when the waiter returned with two small glasses that we realised we had moved to the world's most expensive city. A bottle of this really quite ordinary plonk would have set us back a mere £50, we learned.

It was a rude introduction to what has been confirmed today in a study by Mercer Human Resource Consulting - that Moscow is now the costliest place in the world for expatriates to live, beating even London into second place.

Nine months later, I have become inured to the absurdity of paying 200 rubles for a cappucino, consoling myself that £4 isn't so outrageous for a good cup of coffee. And it's a bargain compared to that £6 slice of cheesecake I just ordered to go with it.

Once the centre of the global struggle against bourgeois decadence, Moscow now luxuriates in its new status as the capital of capitalist excess. The more "elitny" something is, the better, as far as many Russians are concerned.

Soft-top Bentleys appear to be the fashion must-have among the super rich on Moscow's choked roads this year, with high-end BMWs the run-around of choice for the merely very rich. The old joke about "new Russian" businessmen comparing identical ties to see who paid the most continues to ring true.

Even ordinary Muscovites seem to take a perverse pride that their city is No 1 in the World at something - even if it is the dubious honour of living in rip-off central. Many reason that it's only foreigners who are paying such prices and they can afford it, right?

Well, yes and no. Clearly, expats lack the networks of family, friends and local knowledge that helps Muscovites to live much more cheaply than foreigners. But much of the expense of living in Moscow is driven by soaring property prices, which gets passed on to everybody through higher costs for goods and services.

A friend went looking recently for a space to open a store and was offered 100 square metres on the ground floor of an apartment building. The estate agent said that the owner was keen to do a deal and had cut the rent to $1,250 - which turned out to be the price per square metre per year. A mere $125,000.

Finding an apartment can be an equally eye-popping experience for expats, where rents in central Moscow can range from $10,000 to $20,000 per month. As in London, buying a home has become the principal headache facing the city's growing middle class, with prices in excess of $3,000 per square metre.

Income tax in Russia is a flat 13 per cent, which has been a key factor in the booming consumer culture here. But high state tariffs on imported goods make shopping an expensive exercise.

Want shoes? Be ready to fork out £60 for even the cheapest pair in many stores. Want service with that? Forget it - Moscow may have embraced consumerism but standards of service remain resolutely Soviet and the customer is almost always wrong. If you have a problem with a purchase, be ready for a fight either to exchange your goods or to get your money back.

The Mercer survey highlighted the cost of international newspapers as one element of expensive expat life. At £14 an issue in my local store, I was certainly persuded that Vanity Fair was a luxury I should live without.

But prices for internet service are reasonable and mobile phone charges are low, so you never feel cut off from the rest of the world in Moscow.

There are bargains here too. Petrol is 40 pence per litre and a ride on Moscow's magnificent metro costs only about 35 pence, less if you buy multiple tickets.

You can smoke yourself to death for about a dollar a packet. And when it all gets too much you can hit the bottle cheaply, as many Russians do, provided you stick to locally produced vodkas and beers.

Drowning your sorrows with imported wines and spirits will be an all too sobering reminder that you are living in Moscow.

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