Russia’s Economic Performance: Fudging the Stats

“The Country’s Leaders Are Relying on Erroneous Economic Data”
Economist Grigory Hanin Explains How the Official Figures Are Deceiving 
Alexander Trushin
Ogonyok
February 11, 2017

The article “Russia Cannot Be Understand by Labor” (Ogonyok 3, 2017), which dealt with low workforce productivity in Russia, struck a huge chord with readers. Serious academics responded to it, including Grigory Hanin, a professor at RANEPA’s Siberian Institute of Management, and Dmitry Fomin, an assistant professor at the Novosibirsk State University of Economics and Management. They are convinced the official figures on which both government agencies and the authors of the above-mentioned article rely do not jibe with reality.

We quote the letter they sent to us:

“Your magazine has been promptly sounding the alarm as to Russia’s lagging behind in terms of workforce productivity. Your focus on the obsolescence of Russia’s production facilities is also justified. But the stance adopted by the authors is weakened when they rely on figures from Rosstat, which embellish the real state of the economy, as the Soviet Central Statistical Directorate (TsSU) used to do. We have produced alternative estimates of macroeconomic indicators for the Soviet Union since the early 1970s and now for the Russian Federation, based on a number of more reliable figures from Soviet and Russian statistics. We have been able to refine Rosstat’s estimates. The gap in workforce productivity between Russia and the developed countries is greatly underestimated in the article. If instead of the quite dubious cost data cited there, you use the genuine data, you find a gap of five to seven times or more, sometime as much as ten times.

“The authors have greatly underestimated the deterioration of physical capital. We have made alternative estimates of the depreciation of fixed assets in the Russian Federation from 1991 to 2015, taking into account the real value of fixed capital during this period and the preceding Soviet period. The estimates have shown that the depreciation of fixed capital amounted to 64.4% in 2015, rather than the 49.4% indicated by Rosstat. […] For a better understanding of our country’s problems with regard to the depreciation of physical capital, we should factor in the depreciation of human capital, the disastrous decline in education from the 1970s to the present. The objective of navigating a way out oof Russia’s backwardness in terms of workforce productivity is extremly complex, requiring colossal efforts and sacrifices from the entire society[.]”

Ogonyok asked one of the letter’s authors, Grigory Hanin, to explain what was wrong with the statistics cited by everyone from government agencies to ordinary people.

What is the difference between the official figures and your estimates of Russia’s macroeconomic indicators?

According to the longitudinal research Dmitry Fomin and I have been doing, Russia’s GDP has not grown by 13.4% from 1992 to 2015, as Rosstat claims, but has decreased by 10.2%. During the same period, Russia’s workforce productivity has fallen by 30.1% instead of having grown by 9.2%, as the official figures claim. Basic fixed assets (buildings and plant, machinery, machine tools, and other assets involved in production) have decreased by 29.2% in terms of their full book value, although the official figures claim they have increased by 50.9%.

How do you explain this discrepancy?

The official figures deal with basic fixed assets incorrectly. We are talking about physical capital, a vital economic resource. Along with human capital, it defines the level of economic development and shapes GDP’s performance and value and other macroeconomic indicators. No other indicator has been distorted as much in statistics in the Soviet Union and Russia as this one. It is a fairly complicated indicator. Many countries have problems with it, even the World Bank, which does its estimates based on the official data submitted by each country, including Rosstat.

How important is the erroneous estimate of fixed assets?

First of all, when there is inflation, which there has almost always been in the Soviet Union and Russian Federation, the underestimation of fixed assets has always led to exaggerating their performance, since old and new assets are valued in terms of different rubles: old assets in terms oof expensive rubles, and new assets in terms of cheap rubles. All of this impacts the underestimation of the value of depreciation and production costs. Consequently, profits are exaggerated.

Meaning, we cannot get a fix on the real state of the Russian economy?

It’s a problem that has been dragging on since the late 1920s, when assets were, according to my calculations, undervalued by almost half. Consequently, resources spent on refurbishing the assets were not take into account, nor was the increase in production costs. In the 1930s and 1940s, the underestimation continued to grown, despite reevaluations in certain sectors. Only in 1960 was a general reevaluation of fixed assets carried out, but it was chockablock with mistakes. Afterwards, due to ongoing inflation, the error in calculating the value of fixed assets continued to grow. By the late 1980s, it had grown by four and a half times. By 2015, the fixed assets were underestimated by 7.3 times, according to our calculations.

In the Soviet economy, all cost data that reflected productivity and national income growth, including the value of fixed assets, were distorted. Soviet production figures given in physical terms (tons, units, etc.) can be considered more or less reliable, because the central planning process was based on them.

But the problem persisted when we switched to a market economy in the 1990s?

In the early 1990s, Russian statistics switched to international standards. We seemingly had rid ourselves of the shortcomings of Soviet statistics, but new ones emerged. Several attempts were made in the 1990s to reevaluate fixed assets, but the official figures on the trends in fixed assets still turned out wrong.

What is your estimate of the scale of the disaster?

It was only this year we finished a full year-by-year estimate of the performance of fixed assets from 1991 to 2015. I have to confess the outcome was surprising. I should emphasize from the outset that our calculation does not claim to be totally precise. (There is no such animal in macroeconomic statistics.) But we are confident of its objectivity. So, the volume of fixed assets in terms of depreciation had decreased approximately twofold by 2015 compared to 1991. [This figure differs from the total book value, which is based on the original cost of the assets, to which upgrading costs have been added — Ogonyok.] This is much more than the damage incurred by the Great Patriotic War [i.e., WWII]. The decrease then amounted to 33.5%. Here is another figure. The Russian economy has lost a total of 422.5 trillion rubles in fixed assets, taking into account their depreciation over the last 25 years. This sum is equal to Russia’s GDP for the last five years. The reduction of fixed assets has occurred because capital investment during the post-Soviet period has been less than the scale of asset retirement. Rosstat, however, does not take this into account attempting to persuade us the reverse is true: that physical capital has increased by 51% since 1991. This radically alters how we evaluate the economy’s profitability, because it dramatically increases the costs of depreciating fixed assets. According to our estimates, in the early 2000s, their overestimation led to huge losses for the major manufacturing industries, while the commercial services sectors were highly profitable. Guided by official data on income, however, the tax authorities collected taxes mainly from the loss-making manufacturing sectors, thus exacerbating their financial difficulties, while exacting a minimum of taxes from the service industries.

How does the Russian economy look nowadays?

Let’s begin with the fact that half the fixed assets are left. I should note they are used better now in certain industries where the market economy has had a positive effect. The greatest reduction of fixed assets has occurred in manufacturing, but they have grown in the commercial services sector. At the same time, we have two industries that were almost wholly revived by foreign capital, beer brewing and confectioneries manufacturing. The services sector has increased almost twofold in Russia since 1991. This applies to the private sector of the economy: retail and wholesale trading, food services, hotel management and tourism, vehicle maintenance, private medical care, communications, public information services, and so on. In the public services sector—public healthcare, science and education, sport and physical education, housing and public utilities, the public road system—fixed assets have declined, but not as much as in industry. In Soviet times, there was a disproportion: an emphasis on heavy industry alongside underdeveloped service and consumer sectors. Now we see the hypetrophied growth of commercial services and the underdevelopment of the economy’s investment sector.

How has GDP’s performance fluctuated during this period, according to your calculations?

We have still not reached the level of 1991 in comparable prices, whereas Rosstat shows a surplus of 13%. However, in the 1990s, Rosstat even undervalued the drop in GDP a bit, because it gave insufficient weight to the gray economy. GDP was greater in the 1990s than Rosstat has claimed. On the other hand, from 1998 to 2007, the official figures greatly exaggerated the growth in GDP: 82%. According to our figures, growth amounted to only 48%. The upsurge in the early noughties, aside from a rise in the oil price, was due to the use of the reserve production capacity and manpower that had formed in the 1990s. By 2007, however, these growth opportunities had been tapped out. Stagnation and then a decline in economic growth inevitably had to set in. Which was what happened.

And things are also not kosher with the official inflation estimates?

Exactly. The underestimation of inflation levels is determined, albeit roughly, by the difference between Rosstat’s GDP performance stats and ours. This difference amounts annually to around two percentage points. Instead of 5% per year, say, it amounts to 7%.

Why do we need to calculate inflation accurately?

It affects social spending by the state: pensions, benefits, and all other payments that the state should index for inflation. And besides, there are the state’s investment costs, which have to account for inflation. But if accurate figures do not exist, then there is not enough money for new projects, which happens quite often.

Have foreign experts provided more accurate assessments of the state of the Russian economy?

No, they have all been mistaken, because they used Rosstat’s figures for their estimates. In the 1990s, they thought that since Rosstat had switched to international standards, they would not need to recalculate anything. On the other hand, the World Bank monitors two hundred countries, and it is simply physically incapable of recalculating the data for every country’s economy.

You have claimed that workforce productivity in Russian is lower than in developed countries, by five to seven times, or even ten times. What is the basis for these estimates?

There are two types of economists: macroeconomists and industrial economists. And there are methods of estimating workforce productivity. The first focus on price indicators, while the second focus on non-monetary indicators. The first calculation is often wrong due to the dubiousness of the ruble-to-dollar conversion factors. But you can use non-monetary indicators for certain industries, and then you obtain different outcomes. For example, petroleum production. Divide the volume of production by the number of people employed in the industry, and you get output per worker. You can do the same thing with metallurgy, machine building, agriculture, and all industries, and then compare them with other countries. That was how we got the outcome about which we wrote to you. The estimate was derived from numerous Russian industry publications.

How do you assess the state of human capital in Russia?

We suffered huge demographic losses in the twentieth century through wars, purges, famine, emigration. According to my estimates, we lost between 70 and 80 million people. Moreover, the losses affected the intellectual segment of the populace more: such people were more likely to die in wars and more likely to emigrate. Three of the four living Russian Nobel Prize winners work abroad. Add to that the degradation of secondary and higher education that has been observed since the 1970s. Plus the stupefaction of the populace by the media, especially the electronic media. I go to our library in Novosibirsk, one of the largest libraries in Russia. The reading roooms are nearly empty: there are more librarians there than readers. Recently, I visited the Bavarian State Library. Tears welled up in my eyes. I saw an enormous reading room, nearly a kilometer long, chockablock with people. If you go into our main bookstore in Novosibirsk you’ll find ten to fifteen shoppers, while in Munich they have a seven-storey bookstore. There are something like two hundred people people browsing the shelves, picking out books, sitting on couches, sipping coffee, and chatting.

Can we bridge the gap with the developed countries?

Bridging the gap is unthinkable. Imagine you are standing at the starting line, and your competitors have taken off and have a five-kilometer headstart on you. The government relies on erroneous economic data and underestimates the depth of problems. The illusion is generated that economic recovery is possible without serious costs. We have estimated that, in terms of 2015 prices, 14.6 trillion rubles in investments would be required to maintain fixed assets and grow them by 3%. Plus, we would need 900 billion rubles for working capital. To develop human capital—education, healthcare, research—we would have to invest 10.3 trillion rubles. This would amount to 25.8 trillion rubles a year, which is a third of Russia’s annual GDP.

And nothing can be done?

It’s possible to narrow the gap. To do this, we would have to redistribute incomes to physical and human capital, and to the neediest segments of the populace. But even that would require enormous efforts. We could, for example, redistribute incomes to narrow the social differentiation among decile groups from the current ratio of 30:1 to 6:1, that is, the figure that exists in most Western European countries. But this would all take many years to accomplish.

***

Ogonyok asked Rosstat to comment on the divergence in key economic development indicators for Russia. We are waiting for a response to this request.

Business Card

An  Economist with a Stance

Grigory Hanin finished graduate school at the Leningrad Finance and Economic Institute in 1962, and then worked at Novosibirsk State University. In 1968, he successfully defended his candidate’s dissertation, but the Higher Attestation Commission (VAK) refused to approve it due to its “market-based approach.” In 1972, Hanin was dismissed from the university for his dissenting views on the economy, which were, allegedly, “negatively affecting” students in the economics department. Hanin could not be expelled from academics, however. He successfully defended his candidate’s dissertation at the Institute of World Economy and International Relations of the Russian Academy of Sciences (IMEMO RAN), and then his doctor’s dissertation at the Central Economic and Mathematical Institute of the Russian Academy of Sciences (TsEMI RAN). Hanin did research on alternative macroeconomic estimates of the Soviet economy. In 1987, Hanin and journalist Vasily Selyunin published the famous article “Tricky Numbers” in the journal Novy Mir, causing a huge public outcry. Hanin is currently a professor at RANEPA’s Siberian Institute of Management, where he researches recent Russian economic history.

The Numbers

A Big Difference

How official and alternative estimates of Russia’s macroeconomic performance vary

Rosstat’s figures Alternative estimates
GDP* 113.4% 89.8%
Productivity* 109.2% 69.9%
Inflation** 5.38% 7.38%

* In 2015, relative to 1991

** In 2016

Translated by the Russian Reader. Thanks to Sergey Shpilkin for the heads-up

Alexei Gaskarov: A 25,000 Ruble Minimum Monthly Wage Is a Good Idea

Rank-and-file Russians deserve a mandatory minimum wage, argues Alexei Gaskarov, and it would be good for the economy. Street scene near Haymarket Square in Petersburg, 4 February 2017. Photo by TRR
Rank-and-file Russians deserve a mandatory minimum wage, argues Alexei Gaskarov, and it would be good for the economy. Street scene near Haymarket Square in Petersburg, 4 February 2017. Photo by TRR

A 25,000 Ruble Minimum Monthly Wage Is a Good Idea
Alexei Gaskarov
Snob
February 8, 2017

How would a high minimum wage help Russia turn into a developed country? Why is Alexei Navalny’s campaign pledge not stupid at all? Financial analyst Alexei Gaskarov shares his opinion. 

What’s Wrong with Russia?
Russia ranks at the very top in international ratings of social inequality.

There are different means of combating inequality, including progressive taxation and raising unemployment benefits. But as soon as someone proposes a solution to the problem, he is immediately dubbed a populist.

This fate has befallen Alexei Navalny. In his presidential election program, he proposed setting a minimum wage of 25,000 rubles a month [approx. 400 euros at current exchange rates].

Is This Populism?
Let’s see how the structure of Russia’s GDP would change if this measure were implemented under current macroeconomic parameters. And let’s compare Russia’s GDP with the GDPs of the G20 countries.

GDP is the market value of all goods sold and services rendered in the country during the year. Costs are always someone’s income, so GDP can be calculated not only in terms of consumption, investment, government expenditures, and net exports but also in terms of income.

STRUCTURE OF RUSSIAN GDP IN TERMS OF INCOME IN % (PER ROSSTAT)
2015 2016 2017
GROSS DOMESTIC PRODUCT 100.0 100.0 100.0
Compensation of employees, including wages and mixed income not captured by direct statistical methods 47.2 45.0 46.6
Net taxes on manufacturing and imports 13.9 11.1 10.7
Gross economic profit and gross mixed income 38.9 43.9 42.7

There are three types of income:

  1. Compensation of employees, includes expenditures on insurance and pensions.
  2. Net taxes on production and imports. Essentially, this is revenue from the extraction of natural resources and their subsequent import abroad.
  3. Business income: company profits, capital gains, incomes of individual entrepreneurs.

The table shows that business income is nearly equal to the income of all employees.

Indirect taxes (e.g., income tax and VAT) are not included in GDP in order to avoid duplication, since they are based on the same profits and wages.

This is what average income distribution looks like in the G20 countries:

Source: The Labour Share in G20 Economies (ILO, 2015)

The labor share in Russia is 6–7% lower than the average for the G20 countries. The reason for the difference is the weakness of democracy and civic institutions in Russia. Election results do not depend on the opinion of the populace, trade unions are weak, and protests against social policy are far and few between. So it makes no sense to redistribute incomes to benefit employees.

How Much Would We Spend?
72,323,000 people are employed in Russia. We have to subtract entrepreneurs [i.e., the self-employed] from this figure. According to the Unified State Register of Individual Entrepreneurs (EGRIP), they amount to approximately 3.5 million people. We also have to subtract those people who work part-time: according to Rosstat, there are around one million such people, if we discount those involved in small business. So the upper limit of full-time employees in Russia is 67,820,000 people. Within this group, 50.3% earn less than 25,000 rubles a month.

However, 1.4% of employees earn between 5,000 and 5,000 rubles a month, and 20.9%, between 17,000 and 25,000 rubles a month. Another 50 percent of employees receive an average monthly wage of 15,329 rubles [approx. 240 euros].

Accordingly, the poorest wage earners would benefit most of all from the introduction of a mandatory minimum wage. On average, every employee currently earning less than 25,000 rubles a month would be paid an additional 9,671 rubles (i.e., 25,000 rubles – 15,329 rubles = 9,671 rubles ).

We would thus have to reallocate almost 3.96 trillion rubles annually: 9,671 rubles (the average pay rise) x 67,820,000 (the number of employees) x 50.3% (the share of those currently earning less than 25,000 rubles a month) x 12 (months) ≈ 3.96 trillion rubles.

Let us add in insurance premiums and pension contributions, which amount to 30.2%. The overall total would be around 5.15 trillion rubles (3.96 trillion x 1.302).

Russia’s GDP in 2015 was 83.23 trillion rubles. If we reallocate 5.15 trillion rubles from profits to wages, we arrive at the following ratio.

2015 2015 (%) 2015* 2015* (%)
GROSS DOMESTIC PRODUCT 83.233 trillion rubles 100 82.233 rubles 100
Compensation of employees 37.471 trillion rubles 45 42.621 trillion rubles 51
Net taxes on manufacturing and imports 9.272 trillion rubles 11 9.272 trillion rubles 11
Gross economic profit and gross mixed income

 

36.489 trillion rubles 44 31.339 trillion rubles 38

In the resulting structure, the share of labor income is slightly higher than the average figure among the G20 countries.

Obviously, many people would lose their jobs after a minimum wage of this kind was introduced, primarily those people who dig pits with a shovel where an excavator should be doing the work. These jobs are safe nowadays only because you can pay people almost nothing in Russia.

In turn, employers would seek to maintain profits by increasing prices for finished products. In aggregate, these effects would shape an economy typical of developed countries.

What Do We Risk?
Many people fear inflation. Let’s evaluate the risks. To introduce a mandatory minimum wage of 25,000 rubles a month, according to the structure indicated above, we would have to increase wage costs by 13.7%. The share of labor costs in the economy is 45%. Accordingly, to cover the increased costs, the price of finished products would have to be increased by 6.165% (13.7% x 45% = 6.165%). That would be the upper limit of possible inflation.

In reality, however, a rise in prices decreases consumption and forces prices to creep downwards. In addition, unemployment and inflation are inversely proportional to one another, meaning the higher the unemployment rate, the lower the rate of inflation.

Additional inflation would be two or three percent, and for the most part it would be spread out over the whole of society, meaning that people who earn a lot would forfeit this percentage of income, while the incomes of the poorest workers would increase significantly.

Of course, such a drastic rise in wages is a rather radical measure, given that the minimum wage is currently even below the subsistence level, and it is bound up with a variety of social benefits that would also automatically increase. But the tenor of the reform is absolutely correct and corresponds to successful examples in world practice.

The introduction of a statutory minimum wages in Germany has lead neither to inflation nor unemployment. In the US, increases in the minimum wage have increased the salaries of low-paid workers while maintaining employment.

Translated by the Russian Reader. Thanks to Alexei Gaskarov for the heads-up. For another take on the Russian economy’s performance and the figures provided by Rosstat, see yesterday’s featured post, “Lies, Damned Lies, and Statistics,” a translation of an op-ed piece by liberal economist Sergei Aleksashenko.

Pizzeria Workers on Hunger Strike in Moscow

"Be human beings! Give us our pay!"
“Be human beings! Give us our pay!”

Hunger Strike, Strike, Pressure on Workers: Protest by Workers at Moscow Restaurant Chain Grows
Novoprof
February 3, 2017

Workers at the fastfood chain Pizzeria (formerly known as Sbarro) who have not been paid continued their hunger strike for the third day in a restaurant on Krasnoprudnaya Street in Moscow. All the tricks played by the “strange” management to make the workers flinch and stop their protest have failed.

Other restaurants in the chain have joined the protest of their comrades on Krasnoprudnaya. Workers at Pizzeria in the Vegas Shopping Center on Kashirka have not worked for three days since joining the trade union. Novoprof has taken calls from a number of other restaurants in the chain, as well as from restaurants in the Yolki-Palki chain.

The workers are desperate because they do not know how to get their hard-earned money. They have been kicked out of rented flats and have no way to pay back their debts, and there is no one and nowhere they can borrow any more money.

Instead of doing everything they can to pay the money they owe their workers, the real employers have been hiding behind “strange” managers. Practically speaking, there is no one with whom workers can negotiate. Trade union members suspect the Yelashvili brothers (Murab and Georgy) are still the actual proprietors of the chains. Instead of solving the problems that have arisen at the restaurants, management has attempted to divide workers by paying out tiny sums on their bankcards, but not everyone’s. They have been trying to throw them a bone, as it were, thus making the workers shut up and return to work.  There have also been attempts to mentally coerce the workers who are on hunger strike.

"There is no crisis. We're just being robbed blind."
“There is no crisis. We’re just being robbed blind.”

We have found out that the former Sbarro, Yolki-Palki, YamKee, and other chains have been re-registered as new legal entities with names like Italian Eatery, Ltd., One-Stop Service, Ltd., and so on. These legal entities have different executive directors, but surprisingly they have the same official address. They do not have their own websites. Similarly, we have been unable to find a website for Rus RST Holding Company, which, allegedly, had taken over management of the restaurants from the Yelashvili-owned G.M.R. Planet of Hospitality.*

Novoprof will continue to support the protesting workers with all their their might, uniting them in the fight for their hard-earned money.

Translated by the Russian Reader. Thanks again to Comrade Ivan Ovsyannikov for the heads-up. Novoprof is short for the New Trade Unions Interregional Trade Union. It was founded in 2011 by brewers from the Baltica plant in Rostov-on-Don, and printers and heating plant workers in Petersburg. Photos courtesy of Ivan Ovsyannikov and Novoprof

Merab Yelashvili. Photo courtesy of Alyona Kondyurina/RBC
Merab Yelashvili. Photo courtesy of Alyona Kondyurina/RBC

Merab Yelashvili

Born in the Georgian village of Kulashi in 1974 to the family of a Georgian Jewish community leader. At the age of 19, he came to conquer Moscow, where, with his brother Georgy Yelashvili and brother-in-law Roman Shamilashvili, he founded GMR, which distributes products by leading European producers, in particular, Kinder Surprise chocolate eggs. He then moved into real estate. In 1997, he persuaded American franchisors to give him a master franchising agreement to open Sbarro pizzerias in Russia. Since 2007, he has been president of the company G.M.R. Planet of Hospitality. 

In September 2008, on the eve of the Jewish New Year, he and his relatives opened a Sephardic synagogue in the Triumph Palace residential complex in the north of Moscow. In April 2016, Yelashvili set tongues wagging when he organized the wedding of his eldest daughter Anna in Tel Aviv. The two thousand guests who attended the festivities were entertained by Nikolay Baskov, Soso Pavliashvili, and American rapper Ryan Leslie. A year earlier, Merab’s brother and business partner Georgy had celebrated the wedding of his son in the Moscow Manege, inviting over one and a half thousand people.

Source: RBC

Dynamo Stadium Builders Getting the Run Around

Dynamo Stadium under reconstruction. Photo courtesy of Wikipedia
Dynamo Stadium under reconstruction. Photo courtesy of Wikipedia

Dynamo Stadium Builders Getting the Round Around
MPRA
February 6, 2017

Workers at StroyProf, Ltd. (aka SMP, Ltd.) have been on strike since January 9. The firm has done electrical work in the Moscow subway, Dynamo Stadium, and other facilities. StroyProf is yet another example of the fraud thriving in the Moscow construction industry.

Like workers at other construction companies such as SMU-77, Ingeocom, and Horizon, workers at StroyProf have been hoodwinked. Instead of the 30,000 to 40,000 rubles a month they were promised, they have been issued 500 to 2,500 rubles from time to time for food and travel expenses. This has been going on since November 8, 2016. In early January, StroyProf owed different workers between 30,000 and 60,000 rubles.

StroyProf skimps altogether on working conditions and occupational safety.

“One day, the foreman tried to restrict our lunch break to ten minutes. We replied we wouldn’t be eating lunch for an hour. It wouldn’t be ten minutes, either, but as long as we needed. […] On November 14, we went to work at Dynamo Stadium. We were installing ducts. On the first day, we expected the uniforms and shoes required for safety. We were only offered the uniforms and shoes of workers who had the day off. We turned them down, since that doesn’t meet sanitary requirements,” the workers recalled.

In addition, management attempted to force the electricians to work alone on jobs that, according to work safety rules, can be done only by two workers.

On January 9, the workforce downed tools. The strikers contacted the MPRA trade union that had already been coordinating the campaign mounted by workers at SMU-77 and Horizon. On February 9, Horizon and StroyProf workers plan to pay a collective visit to the Moscow office of the Investigative Committee.

The Investigative Committee has become actively involved in the search for Anzor Khubuluri, head of SMU-77, which owes back wages to subway construction workers. Criminal charges have been filed.

The situation with Horizon’s workers, who had been working without contracts, is not as hopeful. The company has officially claimed the workers demanding back pay did not work for them, but off the record they have offered to pay back part of their debt, using the Tajik Migrant Workers movement as mediators.

StroyProf management has also been trying to avoid accountability for their actions. They have threatened workers they will be charged with extortion for demanding payment of wages. However, the example of the subway construction workers, who with MPRA’s help have achieved an appropriate response from law enforcement agencies, has given hope to other groups of hoodwinked workers.

Based on reporting from MPRA Moscow and Moscow Region

Translated by the Russian Reader. Thanks again to Comrade Ivan Ovsyannikov for the heads-up. MPRA is the Interregional Trade Union Workers Association. MPRA is affiliated with the IndustriALL Global Union.

Biysk Plywood Workers Strike Successfully for Back Pay

The Match Flares Up
MPRA
January 26, 2017

Petroneft-Biysk LLC has nothing to do with so-called black gold. As the company’s website reports, it is the legal successor to the Biysk Plywood and Match Mill, known to Biysk residents as the Match. The Match mainly produces plywood. On January 12, around 200 workers in the plywood facility went on strike, demanding payment of wage arrears dating back to September 2016. Around 300 people are employed at the plant.

Photo courtesy of amic

According to local media, back wages were the cause of the conflict, but the workers themselves talked about an under-the-table bonus. According to them, since new management took over the plant, it has paid a third of their wages off the books. In the autumn, the company stopped paying wages altogether.

Wage delays are not news at Petroneft. As early as January 2016, management had tried to persuade staff to be patient while the company got back on its feet.

“We appealed to people: if you care about the company’s plight and you can make the decision for yourself, we ask you to go on an unpaid leave of absence. We didn’t force anyone to do it. We asked them to understand and accept the situation,” Olga Fischer, the company’s chief economist, said in an interview published in Nash Biysk in January 2016.

A year passed, and the workers’ patience finally snapped.

“The whole plywood facility went on strike. We notified the employer and got everyone in the shop to sign a petition naming the cause of the strike. We got copies of the strike notice back from management, with a stamp and number indicating they had received it. On Thursday, we didn’t go to work. There was no pressure. The foreman relayed our conditions to management, and ultimately they put us on technical downtime,” a striker told MPRA Omsk activists.

However, the workers did not have to sit at home for long. On January 17, the employer paid six months of back wages to workers from the striking shop floors. Support staff, who did not strike, were not paid the wages owed them, however.

“Afterwards, that bonus was issued, but it was issued only to those workers who had been on strike. Now they’re looking for the instigators, but we won’t give them up. The minutes of the trade union organizing meeting we had do exist, but unfortunately it won’t go any farther than that,” said our source in the mill.

MPRA congratulates the workers on their first victory. However, their success will not endure if they do not secure it by forming a trade union. We hope the folks in Biysk will be able to take this second, decisive step towards fairness. Then the Match will kindle the flame.

Based on reporting from MPRA Omsk

Translated by the Russian Reader. Thanks again to Comrade Ivan Ovsyannikov for the heads-up. MPRA is the Interregional Trade Union Workers Association. MPRA is affiliated with the IndustriALL Global Union.

Steel Workers in Novosibirsk Go on Wildcat Strike

Techsteel facilities in Novosibirsk
Techsteel facilities in Novosibirsk

Employees of the company Techsteel (Tekhstal’) in Novosibirsk have walked off the job, organizing a wildcat strike. The reason for the protest is prolonged nonpayment of wages. According to the workers, they have not been paid since last July.

Today, it transpired that management had placed everyone on administrative leave. Although no one had signed any consent forms, and people had continued to work during this time.

Irina Kochkina, crane operator:

“We didn’t submit any requests for leave. We found out by chance. They rename [the company]: I don’t know what organization I work for. We don’t know a thing. They don’t give us our pay stubs. We go to management, we go to accounting. There they tell us they’ve been forbidden to say how big the debt is. Director General Mikhailov said the debts were frozen, and there is no telling when they will be paid.”

The workers have filed complaints with the Labor Inspectorate and the prosecutor’s office, to no avail. Today, they downed tools. The plant’s workers say they won’t go back to their lathes until they get their wages.

Techsteel manufactures steel products.

Source: Vesti Novosibirsk

Translated by the Russian Reader. Thanks to Comrade Ivan Ovysannikov for the annotation and heads-up. Photo courtesy of Top54

Truckers Block New Tollway in Petersburg

Protesting Truckers Block Western High-Speed Diameter Highway in Petersburg
Delovoi Peterburg
January 5, 2017

Car sporting anti-Plato road tolls payment system sticker blocks entrance to Western High-Speed Diameter in Petersburg. Photo courtesy of Anton Vaganov/Delovoi Peterburg

Truckers protesting against tolls for traveling on the Western High-Speed Diameter (ZSD) blocked the entrances to the tollway. Our correspondent reported from the scene that the protest lasted about an hour, and the protesters blocked five lanes.

A truck, a GAZelle van, three cars, and approximately ten people were involved in the protest. They rammed the barriers at the entrance to the tollway with their vehicles and blocked traffic. A small traffic jam formed at the entrance during the protest. ZSD staff reacted charitably to the incident, avoiding provoking the truckers. Traffic police who arrived at the scene wrote up the incident as a traffic accident—as a collision with the barriers. No police were involved in the protest, and no arrests were made.*

One of the protest’s organizers, Andrei Bazhutin, chair of the Association of Russian Carriers (OPR), explained that the truckers’ main demand was to make travel on the highway free, despite the fact it was built as a public-private partnership.

“Basically, the protest is not far from our focus on transportation, on the Plato tolls system, because the site of the protest is another toll road. Since we cannot block federal highways, we can quite legally come to a stop at the toll booths,” said Bazhutin in an interview with Business FM.

The ZSD’s central section opened in the wee hours of December 3. A day earlier, on December 2, President Vladimir Putin inspected the highway. The highway is nearly 47 kilometers long. The toll for travel on various sections of the highway ranges from 45 to 300 rubles for different types of vehicles. If the annual income of the operator, Northern Capital Highway, falls below 9.6 billion rubles, the city will offset the investor’s losses. Moreover, the concession agreement, signed by the operator and the city, predicts that collected tolls will not reach this level until 2019.

Translated by the Russian Reader. See my previous posts on the ZSD’s horrific visual impact on the Petersburg cityscape.

* UPDATE. OVD Info reports that one protester, Alexander Makarov, was arrested at the scene, according to his attorney Dinar Idrisov. Makarov was initially charged with a misdemeanor under Article 20.19 (blocking transportation routes) of the Administrative Offense Code. Later, he was additionally charged with disobeying the lawful demands of police officers (Article 19.3). The second charge made it possible for police to keep Makarov in custody overnight before his court hearing.