Russia’s record employment signals a surprisingly smooth decoupling from the West. Its rapid replacement of McDonald’s and Starbucks says business as usual. Yet pressures are building inside its economic machine, report news agency Reuters.
Six months into the Ukraine war, the strategies and struggles of Russia’s biggest automaker offers an insight into the contrasting fortunes of a country striving to withstand what Vladimir Putin calls an economic «blitzkrieg» (lightning war) by the West.
Avtovaz restarted production of its Lada brand this summer after it was halted in March in the face of Western sanctions, supply shortages and the loss of its French partner Renault. It has not formally laid off any of its 42,000 workers. Nonetheless, the company’s feeling the heat, and it’s shrinking.
The bulk of the 3,200 workers at its factory in the industrial city of Izhevsk – where car production has not resumed – have been furloughed since March, with the company paying two–thirds of their wages, although some staff have been given temporary work around the factory on reduced hours.
This month, the automaker offered all Izhevsk workers one–off payments to quit as it looks to focus more production on its primary plant in Togliatti, 600 km away.
The company did not elaborate on its plans for Izhevsk, though it said earlier this month it remained committed to the plant.
It is planned to be retooled to make the first Russian–made electric car, the Lada e–Largus, and would retain service and support functions.
Ruben Enkipolov, a professor of economics at Moscow’s New Economic School, said the auto sector’s struggles were being masked by «hidden unemployment», where workers were not laid off but instead placed on indefinite furlough.
He said he expected unemployment to rise towards the end of the year, when he said it would likely become clear that sanctions were unlikely to be lifted in the near future.
The Russian Economy ministry declined to comment for this article. This month, Economy Minister Maxim Reshetnikov dismissed any talk of a dramatic rise in joblessness, which official data pegged at a record low of 3.9% in June.
In another sign of official optimism, amid high oil prices and popular policies to cushion the impact of inflation, latest government forecasts indicate the depth of Russia’s economic contraction will be less severe than previously feared this year.
Reuters informs that car manufacturing is not the only Russian industry taking a hit from the showdown with the West.
In total, 236,000 Russian workers were either on furlough or reduced hours as of the end of July, according to Deputy Prime Minister Tatiana Golikova. They are not part of officially 3 million people registered as unemployed in Russia.
About half of all air traffic controllers, or 14,000 people, have been furloughed or put on part–time work, for example.
Several foreign companies leaving Russia, from Swedish furniture giant Ikea to Spanish fashion chain Zara, have also furloughed staff.
Yet the auto sector has suffered more than most, with passenger car output dropping 62% in the first half of the year versus the same stretch in 2021, according to the state statistics agency.
Global carmakers including Volkswagen, Nissan, Hyundai Stellantis, Mitusubshi and Volvo, suspended their Russian operations and furloughed workers on the statutory two–thirds pay after Moscow launched its military campaign in Ukraine on Feb. 24.
That foreign exodus put more than 14,000 Russian auto workers on leave, according to a Reuters review of the industry.