Financial crisis dents Russian steel town
Posted: Friday, February 27, 2009 1:17 PM
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Moscow, Russia
Reporter's Notebook
By Jim Maceda, NBC News Correspondent
ELEKTROSTAL, Russia – Electric Steel – "Elektrostal" in Russian – is the epitome of a "one-company town" whose citizens traditionally either worked at, or depended on, the heavy machine factory that bears the town’s name.
About an hour’s drive from Moscow, Electric Steel became, starting in the 1930’s, a symbol of Soviet strength and economic security. Entering this Stalin-era town, one can’t escape Electric Steel’s insignia – a striking red and yellow icon of a Roman blacksmith pounding a steel slab against a black anvil, setting off electric sparks – which adorns just about every workplace, store and street light.
The town has grown over the years – about 150,000 now live in pastel-painted houses along avenues with names like "Soviet," "Karl Marx" and "Lenin." A large statue of Lenin – frozen in a speech-giving pose – stands in the middle of the main square, next to a hockey rink.
We traveled to Electric Steel to see how the deepening economic crisis was affecting this so-called "mono-town," one of hundreds of industrial projects the old Soviet leadership spread across the nation.
No official welcome mat
It didn’t take long to find out that we were not invited, at least not by officials, who were protective of their town’s image and suspicious of an American TV news team’s ulterior motives.
We were allowed to tape in the streets, but could not enter the main factory plant and talk to workers. Nor could we go inside the local unemployment office, which recently has seen hundreds of laid-off workers looking for jobs each week.
Desperate for information, we visited with our Russian colleagues at Electric Steel’s paper, "News of the Week." The deputy director politely told us he was on deadline and couldn’t help. His boss later relayed a sterner phone message: "We will categorically have nothing to do with you."
The reaction was understandable. People here were reeling as much from shock as from belt-tightening. Electric Steel, like its ubiquitous Roman forger, was supposed to be stronger than any crisis.
This was the place that once mass-produced the Soviet Army’s artillery shells, the ones that defeated Hitler during World War II. That pounded steel into fuel rods for Russia’s nuclear power plants. Here, at the first sign of cutbacks, Prime Minister Vladimir Putin pumped millions of dollars of subsidies into Electric Steel’s four plants, because this town could not be allowed to fail.
"The goods that Electric Steel makes are too important to the country," explained Maxim Popov, the town’s only official voice of opposition, from inside a one-room Communist-era apartment – which was appropriate because Popov is also the local head of the Communist Party. "So Electric Steel’s collapse won’t be explosive. It will be a slow dying process."
‘I have no hope at all’
Electric Steel’s human stress doesn’t scream out at you. It’s more like a pall that’s darkened the pastel houses, and quieted the main plant’s smokestacks.
It was hard to tell if the tears welling in Yuri Maslov’s eyes were from the biting cold or his predicament. Maslov, 55, had worked for three decades, most recently in the fuel rods plant. But with inflation now in double figures, he can’t support his family on his $140 a month pension.
I met him outside the unemployment office, where he’d been looking unsuccessfully for a job since January. "There’s nothing worthwhile in there," he said. "I’m a specialized technician. All they have to offer are low-paying jobs as night watchmen or freight loaders. I’m not there yet."
Galina Moisienko, also 50-something, was unemployed and living poorly on $30 a month of state benefits. She was looking for work after 29 years at the plant. A tear rolled down her cheek. It was minus 15 degrees Celsius. "There’s nothing here for women. If they do have something it’s for a cleaner at $120 a month. Is that money?"
But she sounded like she was resigned to taking that job soon. I asked her if she thought the crisis would last long. "I have no hope at all," she said. "I’ve never seen it this bad here.’’
‘It’s much worse elsewhere’
Igor Matvaev was a bit more optimistic. A 38-year-old construction worker, he was ordered to stay at home without pay by his company – a common technique by employers to avoid unemployment benefits – and then laid off once the company’s credit ran out. But he still thinks Electric Steel isn’t as bad off as elsewhere. "The factory is still functioning, but the five-day week is down to four now. And salaries have been cut as well."
Matvaev can’t find work, but thinks he’ll get by with help from friends. His girlfriend still has a job. He shook with cold during our conversation. He had no scarf or gloves to protect against the bitter wind. Embarrassed, I realized that he probably couldn’t afford gloves and a scarf. "It’s not so bad yet here. It’s much worse elsewhere," he said, through chattering teeth.
He was right. Electric Steel had it better than most Russian towns, which in the course of just two years have gone from boom to bust, as the price of oil plummeted from $140 a barrel to below $40. Thanks largely to government subsides, and a general will to save this "model" town, the pain felt here was still bearable.
But even here, there was fear of social unrest. When I asked Maslov what would happen if people don’t find work, he replied, "Well, they won’t come into the streets yet. But, when it gets really bad, maybe then."
Protests on the rise
Matvaev has cause to worry. Anti-Kremlin protests, which were unheard of in Russia during the halcyon years of Putin’s presidency, are on the rise. From Moscow to Vladivostok, hundreds – sometimes thousands – of protestors are taking to the streets, railing against "bad" government economic policies.
Banners reading "Russia without Putin" and "Shame on You Putin," are striking reminders of how fragile the social contract here really was. Few complained about Putin’s "sovereign democracy" – which eroded personal freedoms and monopolized state TV into a virtual propaganda mouthpiece – while the petrodollars were rolling in and middle class Russians could enjoy foreign cars and vacations in Greece.
But now, just one company – Gazprom, the Kremlin-owned gas monopoly – has more debt than China and Brazil combined. Western bankers took $40 billion out of the country in January alone. Unemployment has skyrocketed 25 percent since the fall, and the ruble – once the "sterling" currency of a resurgent Russia – has lost 25 percent of its value in the same period.
Russia analysts like Nikolai Markov, visiting scholar at Moscow’s Carnegie Center, says that social contract is dead. And he believes that Putin sees the writing on the Kremlin’s walls.
"I think that the understanding that it’s payback time is coming to Putin’s mind step by step," he said. "He had no idea of the scale of the crisis he was facing, the fact that instead of distributing money [as prime minister] he would face very serious problems and share in the responsibility for economic decline.’’
The people of Electric Steel know their Russian history, they know that in this country revolutions have always started with poor, angry people protesting in the streets against the Kremlin. And while many here have blamed the government, fewer have found fault with Putin or his hand-picked replacement President Dmitry Medvedev. Their popularity ratings, according to recent polls, have fallen by about 10 percent – a significant drop – but still remain in the 70’s, solid by any measure.
Valentina, who wouldn’t give me her last name, was one of dozens of Electric Steel pensioners who, to make ends meet, was allowed to open a local flea market in the town. She thanked both Putin and the mayor for the opportunity to earn more cash. "If the price of oil goes back up," she said with a big laugh, "then we’ll all live better again!"
As she spoke I saw a woman approach another makeshift counter selling rickety broom heads. The prospective customer examined four or five heads, all quite intensely, running her fingers through each one, before putting them back. She walked away.
"There’s not even enough money for people here to buy these cheap things," Valentina whispered.Jim Maceda is an NBC News correspondent based in London currently on assignment in Moscow. He’s covered Russia and the former Soviet Union for more than 20 years.
Related links from Newsweek:
Putin faces unrest in Russia's rust belt
Photos of a Russian steel city in decline
