Russia’s One-Industry Towns Continue on the Road to Collapse

Paul Goble

            Staunton, May 18 – Given the difficulties the Russian economy as a whole finds itself, fewer people have been paying attention to something that agitated many only a few years ago: the collapse of 319 company towns left over from Soviet times. But their prospects and those of the ten percent of Russians who live in them are deteriorating far faster than for other Russians.

            The embattled RBC news agency has published a summary of a confidential Russian government report on these cities, known in Russian as “monogorods,” that was prepared by the Federal Protection Service and the Presidential Administration’s Analytic Center (rbc.ru/economics/17/05/2016/573b493e9a7947a4eefec46b?from=main).

            According to the agency’s journalists, two government sources have confirmed its authenticity and said that the authorities will take questions about it later this week. The latest of these monitoring reports, RBC said, involves a survey of 147 firms in the company towns and was conducted in February.

            The reports “main conclusions,” it continued, are the following: in these company towns, production continues to decline, the reserves of these firms are falling especially among those servicing the domestic market, and company debts are rising because of exchange rate difficulties and even though these firms are shedding workers, boosting unemployment.

            Output of these firms corrected for inflation fell by 4.8 percent in 2015, significantly more than the reported 3.4 percent decline for all Russian firms.  Reserves grew slightly in the first months of 2015 but fell “by half” at the end of 2015 and in early 2016.  And prospects for the future are bleak.

            One of the reasons for that conclusion, the report says, is that 40 percent of the debt of companies in the monogorods is denominated in foreign currency; and the continuing weakness of the ruble means that they have to earn far more rubles in order to service this debt, something many of them have been unable to do.

            Meanwhile, unemployment in these company towns has risen twice as fast as in Russia as a whole, by 20 percent rather than by 10 percent. In 206 company towns, unemployment is higher than the Russian average and in 84 of them it is “twice or even more times higher.” And the number of hidden unemployed – those working only part time -- is strikingly higher as well.

            Vladimir Putin’s personal intervention in Pikalyovo,one company town on the brink of disaster, won him support among many Russians. But now it is quite clear that that intervention was stage-managed, and there are more than 300 potential Pikalyovos in Russia today, far more than any Kremlin leader can visit let alone save by such actions.