oDR: Feature

As Western firms flee Russia, many workers’ futures are uncertain

The war has created a divide: while some white collar workers can leave Russia, lower-paid employees are left behind

Azamat Ismailov
27 May 2022, 12.00am

"Goodbye!" read this sticker with the logos of foreign firms in Moscow

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(c) Nikolay Vinokurov / Alamy Stock Photo

Until 24 February, it was hard to imagine life in Russia without McDonalds, IKEA furniture or iPhones. International companies supplied the vast majority of the country’s non-food items, and provided around two million jobs.

This is because no matter how hostile the Kremlin’s relations with the Western world, the Russian Federation was, until recently, considered a relatively attractive location for international investors.

Since the 1990s, foreign companies have actively settled in the country. In addition to a large consumer market, they have enjoyed comparatively low taxes and a cheap, relatively skilled labour force that was not prone to mobilisation or strikes.

Their presence was especially noticeable in Russia’s automotive industry, as well as in the production of household appliances, the food, tobacco and pharmaceutical industries, trade and catering.

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The invasion of Ukraine changed everything.

In the three months since, roughly 1,000 foreign firms have curtailed or sold off at least some, if not all, of their activities in Russia as sanctions hit the country. As a result, between 250,000 and 600,000 people risk losing their jobs. The latter figure is comparable to the total number of people who are officially registered as unemployed in the country.

Most employees of foreign companies have not yet actually lost their jobs – at least not formally. This is why Russia’s official statistics are yet to register what is undoubtedly a catastrophic event for the country’s labour market, leading to conflicting estimates.

Downsizing is a time-consuming process in Russia, and some firms are instead waiting to see how the invasion of Ukraine will play out. As they are not in a hurry to make dismissals, employees are being put on ‘idle time’ (forced leave for two-thirds of regular salary) or given a part-time work week.

We spoke with Russian employees of foreign companies to understand what the future holds for them and what they think about the war. Their names have been changed to protect their identities.

What do workers lose?

Although international corporations operating in Russia have often been accused of double standards and exploiting cheap labour, their employees were still considered – and considered themselves – lucky to have their jobs.

Arseniy*, a 26-year-old mechanical engineer for a Swedish engineering corporation in Russia, said: “Any foreign company provides better social assistance than a Russian one.

“[Medical] insurance, additional payments, bonuses, gifts for children, compensation for sports, online services, books – all this is scarce or absent in Russian companies.”

He added that salaries were also often considerably higher at international companies.

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The city of Tolyatti, Samara region is home to AvtoVAZ - until recently part owned by Renault, together with Russian state company Rostec

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(c) Dmitry Bezrukov / Alamy Stock Photo. All rights reserved

But it is not just financial and social benefits that have attracted Russian employees to foreign firms. Some of the people I spoke with said these companies also have more democratic management styles than Russian businesses.

“There are small teams of nine or ten people here. There is no ‘power vertical’,” explained Alina*, an IT professional from St Petersburg, who works for a US digital marketing company – which has now moved its Russian staff to Europe. “Decisions are made, if not by consensus, then by something close to it.

“The bosses don’t tinker with [little things] but set long-term goals.”

Of course, this doesn’t hold true for every foreign firm operating in Russia. But foreign businesses became a favourable environment for Russia’s so-called ‘new trade unions’, which usually emerged organically from work collectives and were focused on collective action.

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European, and particularly Scandinavian, investors have introduced many progressive working practices to Russia: substantive collective agreements, support for women’s leadership and working parents, ethics codes prohibiting discrimination, and so on.

Some of this has since been copied by Russian businesses, which are arguably slightly obsessed with the global trend of ‘ESG’ (environmental, social and governance) policies and investing.

As Yulia Ostrovskaya, the deputy director of the Center for Social and Labour Rights, a Russian think tank, said: “[Foreign] managers did not find it surprising if workers banded together to protect their rights. Undoubtedly, this is an achievement of the labour movement in the West.”

Ostrovskaya believes Russia’s invasion of Ukraine will put an end to this trend.

“When there is no competition [for personnel at foreign companies], competition between employees intensifies, and Russia is withdrawing from international organisations and agreements, the incentives for socially responsible behaviour will disappear,” she said.

"You used to work according to the standards of Swedish socialism, and now you will work according to the global standards"

If Ostrovskaya is correct, the sale of foreign companies to Russian owners could lead to worse working conditions in the country. The employees I spoke to said some employers are starting to be explicit about this.

For example, Arseniy said that following the invasion of Ukraine, the managing director of his company bought a separate distribution firm and invited some employees to transfer there.

“He warned us: ‘You used to work according to the standards of Swedish socialism, and now you will work according to the global standards’,” Arseniy said, claiming this means “less social provision, more sweatshop-style work”.

His company has since moved some of its employees to Kazakhstan.

Between precarisation and relocation

Many workers in Russian industries closely linked to the world market now face precarity.

The number of vacancies in Russia’s auto industry in April fell by 69% compared to last year; in banks, it fell by 60%; and in IT by 11%, according to Russian job site HeadHunter.

At the same time, due to foreign companies leaving Russia, “a lot of specialists have splashed into the labour market, which, for employers, is a reason to cut wages”, Arseniy said.

The IT sector has attracted particular attention from the Russian government, which is attempting to limit the number of IT workers leaving the country by offering those who stay preferential 5% mortgages and a deferment from army service.

At the broader level, though, Russian state media is trumpeting ‘import substitution’ – an opportunity for domestic firms to take up industries suffering from Western sanctions. But if this happens, it will not be implemented evenly, nor immediately.

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In St Petersburg, an installation reads "We will substitute", made up of the logos of companies which have left Russia - a reference to the official policy of "import substitution"

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(c) REUTERS / Alamy Stock Photo. All rights reserved

This means that qualified personnel, who are used to salaries paid officially as well as social guarantees, will have to look for employment in Russia’s low-paid service sector or in the shadow economy.

In an attempt to save jobs, the Russian government is nationalising the assets of some foreign companies. This is the case with automobile manufacturing firm AvtoVAZ. The company was privatised in the 1990s, and since 2016 has been a subsidiary of the French car manufacturer, Renault. Earlier this month, it was reacquired by Russia’s government via a state-backed car research institute, in a sale that gave Renault a six-year buy-back option.

But whether AvtoVAZ’s plants – and others in Russia controlled by foreign owners – will be able to continue operating as supply chains for key components break down is unclear.

Mikhail*, a production worker at AvtoVAZ, told openDemocracy that the plant he works at in Tolyatti, a city on the Volga river, now felt “like a broken toy” since Renault’s departure.

While the plant used to have full-cycle production – meaning all parts were made on site, and then converted into cars – since Renault purchased its first stake in the company in 2008, the plant “became a link in the [production] chain of Renault”, Mikhail said.

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After Renault took over in 2016, Mikhail said management effectively “beheaded” the plant’s development and technical infrastructure. “All that remained was assembly, stamping, metallurgy,” he said.

“I wouldn’t say that VAZ changed [for the better] under the French, but now we can’t work without them,” Mikhail added.

AvtoVAZ has reported that its production has stopped on several occasions since the war. (During the pandemic, production stopped due to a shortage of microcircuits.)

Mikhail says workers in Tolyatti are “fed with promises” that the plant is about to receive new components from China, and there will be no job cuts as a result of Renault’s departure. Not everyone, he says, believes these promises.

Speaking on 13 May, Samara regional governor Dmitry Azarov said new lockdowns in China had prevented the timely delivery of parts to AvtoVAZ.

“I have two children. Yesterday we ate potatoes, but there was no bread. It’s good that we don’t have any loans to pay off”

Due to production stopping, AvtoVAZ employees are reported to have lost a third of their wages. Given the monthly average wage at the plant is believed to be around 47,000 rubles (£578 on 26 May), incomes may have fallen to about 30,000 (£369). A normal salary in the Samara region is considered to be about 40,000 rubles (£490).

Few factory workers have savings, and most live paycheck to paycheck. As Mikhail says: “I have two children. Yesterday we ate potatoes, but there was no bread. It’s good that we don’t have any loans to pay off.”

To make some extra money, Mikhail has taken up extra work for the local authority – such as dismantling old equipment, mowing grass, digging up flower beds and painting borders and hydrants.

The regional authorities have organised these jobs to help slow the outflow of people out of the city, Mikhail explained, adding that he was paid 13,800 rubles (around £170) for 40 hours of work. Others have taken up work as food delivery couriers.

What do employees of foreign firms think about the war?

Some experts claim Russians whose professions involve international connections (for example, IT specialists, scientists, businessmen, creative workers) are more likely to adhere to pro-Western views.

But Alina, Arseniy and Mikhail say their colleagues – programmers, engineers and factory workers – have reacted to the war in different ways.

“People from my close circle are all against the war,” said Alina, who said her entire team left Russia before their company made an official relocation announcement.

“Some people are afraid to be called up [to fight]. Others say they will never return.”

But this unanimity appears to be the exception – not the rule. Like in Russian society as a whole, most workplaces have been divided by the country’s invasion of Ukraine. Some employees have been forced to choose between their loyalty to the Russian state and their company.

“For many, their savings are coming to an end. They joke that now they will have to go [to fight] under contract”

“When our managing director announced that the company was leaving [Russia] and there would be cuts, many took it as a betrayal,” said Arseniy. “Those engineers who support the special operation did not want to leave [for Kazakhstan]. But there are also those who condemn the war (although there are fewer of them). This is just our team – those who are leaving.”

Yet ordinary workers, whose companies have not relocated, have nowhere to go. And regardless, many believe winning the war will end Russia’s economic problems and even make a ‘better world’ possible.

Inside AvtoVAZ plant in Tolyatti

On 25 March, AvtoVAZ introduced a four-day work week in response to domestic market forecasts and component shortages

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(c) dpa picture alliance / Alamy Stock Photo. All rights reserved

Mikhail said that, in the first weeks of the war, his colleagues at AvtoVAZ claimed “if Putin is trying to take control of Ukraine, then he wants to build the USSR, where everything will be fine – guarantees, jobs, independence from other [countries].

“They shouted: ‘We must drive the French away!’”

But while this “tunnel vision” characterised the initial stage of the war, Mikhail said his colleagues now “dream that [the war] will end as soon as possible”.

“People have felt the horror of this ‘non-war’. They discuss whose friends or relatives have died, whose mother went to identify a body. Many have relatives who are fighting in Ukraine… If mobilisation had been announced, no one would have wanted to go,” he added.

Many workers at AvtoVAZ come from rural areas – where signing up as a professional soldier is one of the few ways out of poverty. For them, war is not just footage on the television screen – it’s an alternative, if not an attractive one, to unemployment.

“Yesterday I was talking about Ukraine [with other factory workers] after the shift,” Mikhail says. “For many, their savings are coming to an end. They joke that now they will have to go [to fight] under contract.

“At least their children will receive seven [million rubles] if they are killed, they say. But this is just ‘humour’, like when a person is hysterical, they are scared, but they are laughing.”

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