How the Ukraine war is reviving Russia’s rust belt – The Irish Times

With his paycheck tripling since 2022, Russian factory worker Anton doesn’t know whether to laugh or cry.

The 37-year-old is painfully aware that this increase is the result of President Vladimir Putin’s decision to invade Ukraine and turn Russia into a war economy.

“On the one hand, it is war and people – even my relatives – are dying,” said Anton, whose uncle was killed in Ukraine.

“But then … there is this rebirth of manufacturing,” he said, and the war has had “a really positive impact” on the quality of life of people in his region. “Has there ever been a time like this in the history of our country when we proles have earned so much?” he added.

As Russia prepares for a long war, government contracts to arm, supply, feed and clothe the army are pumping enormous sums of money into the economy.

This led to a boom when many had expected painful blows from Western sanctions: Russia’s economy is expected to grow by three percent this year, significantly more than the USA and most European countries.

These effects are most evident in the rust belt regions, such as Anton’s Chuvashia in central Russia, where 1.2 million people live and where Soviet factories have been restarted and are working around the clock to supply war supplies.

“Some of the weakest performing regions have suddenly started to grow. Production regions, areas where a lot of defense and related industries are located,” says political scientist Ekaterina Kurbangaleeva.

“The winners are the least developed regions and the low-income population,” said Kurbangaleeva. “That’s where the money goes.”

Understanding the experiences of regions like Chuvashia is crucial to assessing Russia’s long-term ability to sustain its war of attrition against Ukraine both economically and politically, analysts say.

In the fall of 2022, about six months after the invasion of Ukraine began, orders at Anton’s metal plant began to rise.

That moment “was a clear turning point. That’s when the regime realized that this war would not be a short one,” says Laura Solanko of the Bank of Finland’s Institute for Economies in Transition, who has studied the war’s impact on household incomes.

Across Russia, factories began to convert their production to military needs. In Chuvashia, before the war, seven factories fulfilled orders for the armed forces; by October 2022, the number had increased to 36, according to the local governor.

Anton’s plant accepted only a handful of defense orders, instead stepping in to fill gaps in civilian production.

By the end of 2023, industrial production had increased in nearly 60 percent of Russian regions. Chuvashia recorded the second-highest rate, with its factories producing 27 percent more than the year before, local data show.

Across Russia, the defense industry has been rushing to hire staff in an already tight labor market. “The same day I quit my old job, I was offered a new one,” said one worker in his 50s. At his new workplace in the Chuvashia capital of Cheboksary, management has doubled the number of machine units working around the clock.

By August last year, the unemployment rate in Chuvashia had fallen to 2.2 percent. “Things have become easier,” said a 23-year-old worker at a defense factory. “Given the situation in the country, we are really in demand.”

To keep their employees, companies have increased wages. The young worker’s wages have increased “at least double,” while five others said their salaries have also shot up. Anton said his wages have risen from around 40,000 rupees (400 euros) a month before the war to 120,000 rupees today.

Although the majority of Chuvashia’s population works in the public sector, where salaries have remained the same, the average monthly wage in the region reached a record 68,657 rupees in December last year, almost double the pre-war level, official data show.

To meet demand, some are returning to their last jobs from the 1990s, when the Soviet Union collapsed, says Natalia Zubarevich, an economist and expert on Russia’s regions. “They are in their 60s, but they are coming back because it is really lucrative.”

The worker, in his 50s, said older workers are in demand because of their skills. “No one has trained as a turner for years,” he said. “The Soviet foundations have been lost… So the people working are mainly pensioners or nearly pensioners like me.”

Salary negotiations have become easier and management is more willing to compromise, said Anton: “They are really trying hard to keep us.”

Inflation, however, has reduced wage growth. Since the war began, prices across the country have risen by more than 21 percent, with food prices rising even faster.

“Go to a shop and look around. Prices for everything have skyrocketed,” said another factory worker from Chuvashia. “60,000 rupees a month are spent on food alone.”

Anton said his pay rise had not made a “really game-changing difference” due to inflation, but he felt his purchasing power had increased.

This effect is likely to impact the political views of large parts of the Russian population and increase support for the war, sociologists say.

At the beginning of the war, Western politicians hoped that the impact of sanctions and inflation would help turn the Russian public against the war. Lighter wallets and emptier refrigerators would act as a counterweight to the pro-war propaganda on state television.

But more than two years later, “the TV and refrigerator are running in sync,” Ms. Kurbangaleeva said.

While around 2.5 million people work in the arms sector in Russia, far more people are employed in other industries that have experienced a boom as a result of the war, such as the textile industry.

The families of the approximately one million men sent to the front benefit from their high salaries and compensation payments for the dead and injured.

This effect is most evident in the less prosperous regions of Russia, where more soldiers tend to be recruited.

In one of the poorest regions, the Republic of Tuva in eastern Russia, an estimated 160 men per 100,000 inhabitants were killed, compared to four men per 100,000 in Moscow, according to political scientist Ilya Matveyev.

According to Solanko, bank deposits have grown fastest in these regions because many families receive large military payments due to high mobilization rates. But she argued that the impact of the payments may be insignificant in the long run; it is likely just “an ad hoc money transfer that is consumed and dissipates in the form of new televisions or cars.”

Ms Zubarevich said the impact of defence spending in regions such as Chuvashia should not be overstated. Although it had “gone up”, it had started from a very low base and the effects of the war were only temporary.

Several workers in Chuvashia said they did not expect the recovery to continue during the war, but wanted to make the most of it for now. One added: “We must work while the opportunity is there.”

— Copyright The Financial Times Limited 2024