Russia’s one-factory towns are in trouble

YASNOGORSK, RUSSIA —  Three decades ago, the Yasnogorsk Machine-Building Factory stamped out thousands of pounds of steel and iron into parts for wagons, pumps and locomotives for Russia’s mining industry.

Now two-thirds of its stamping and welding machines have been shut down. The old Soviet-era equipment is rusting, and fewer than 280 employees clock in every day -- from a peak of 7,000. The factory that had kept this town alive since the days of the czar is on its last breath, the victim of a global recession that has shaken Russia to the core.

Yasnogorsk is one of about 500 communities across Russia built around a single company, whose very existence hangs by a delicate thread. The challenges such “monocities” face are compounded by the legacy of the Soviet era, as well as deep-rooted Russian traditions that make it hard to start over somewhere else.

“What’s happening in our town is not capitalism,” said Alexander Gorbachev, a 59-year-old mechanic previously employed at the factory, who now works at a small machine shop.

To help keep food on the table, Gorbachev does what millions of Russians did during earlier times of trouble: He grows his own potatoes, beets and other vegetables and sells the rest at the market. “It’s like we’re in medieval times again.”

Russia’s unemployment has risen to 8.3%, and industrial output declined by more than 14% in the first seven months of the year compared with same period in 2008.

In Gus Khrustalny, about 100 miles east of Moscow, workers at the local decorative glass factory were paid with the crystal vases they made because the company had no money.

In April, workers in a tungsten fabrication plant in the Primorye region in the Far East staged a hunger strike after they weren’t paid for months. And in Yasnogorsk, about 80 miles south of the capital, factory employees estimate they are collectively owed about $200,000 in back wages.

These towns all saw their peak in the Soviet era, when a few plants would produce, say, all the Soviet Union’s tires. The whole system lurched along guided by a massive bureaucracy of central planners rather than market forces.

But in 1991, after 70 years of Soviet rule, the huge, clanking structure collapsed. Some factories simply closed their doors. Others were purchased for a pittance by a generation of future young billionaires, now called oligarchs, who milked them for profits rather than investing in them.

“We’ve seen that all those factories that were privatized eventually went bankrupt,” said Nikolai Medvedev, 55, who has worked at the Yasnogorsk plant for more than 30 years, sharpening metal parts. “The management is bad, because the owners who buy the factories don’t really care about Russia. Their souls are in the West.”

Many Russian industries have benefited from the privatizations, with more efficient companies that offer employees competitive wages. But others have been unprofitable for decades and are still simply limping along.

In Yasnogorsk, the factory opened in 1895 and expanded over the years in this town of 18,000 people. Along with jobs, the factory provided social services -- everything from medical treatment and child care to family holidays at a local resort.

In 1991, factory owners gradually cut back on these services. In the last six years, the factory has changed owners at least twice, and recently went bankrupt for the second time.

Now children sit at home, alone, and parents worry that they will turn to drugs or petty crime. Doctors and other professionals have fled the town, so residents are forced to travel close to an hour to see a pediatrician or an optometrist.

The park in the center of town, with its once-proud Palace of Culture, is a seedy wasteland, its cultural center a shambles, its fountains broken, and trash and bottles littering the paths.

Residents say their town is slowly dying.

“There is no future for my kids here,” said Sergei Ovsyanikov, a father of two and a plumber at the factory. “They will probably have to leave once they grow up.”

Ovsyanikov knows it’s only a matter of time before his own job is eliminated.

He could take part in government retraining programs or look for work in Tula, a medium-size city 40 minutes away by train. Some of his laid-off co-workers already commute daily to Moscow, three hours each way. Although he is only 35, he says he is too old and too tired to retrain, relocate or make a long journey to work every day.

“It’s just too hard,” he said. “If I get fired, then I’ll do what I have to do. Now I’m just waiting.”

Nikolai Petrov, an expert on regional issues at the Carnegie Moscow Center, said being unemployed is different for workers in Russia than in many other industrialized nations.

“In Western Europe, if you lose your job, you just move somewhere else, but in Russia that’s not an option for most people,” he said.

Many people who moved to Siberia and the Far East during the Soviet era, when they were paid premium wages, found themselves unable to return west to what is sometimes called “mainland” Russia after the Soviet collapse.

“Just selling your apartment in a town that is economically depressed is impossible. And even if you do manage to sell it, the money you receive is not enough to buy housing in a larger city where there might be work,” Petrov said.

Economists say some monocities would be in better shape if Russia had made the massive investment needed to phase out antiquated industries and create a modern capitalist economy. Too much of Russian industry, some say, is still state-owned and -managed.

Yevgeny Yasin, a former economics minister and director of the New Economic School in Moscow, said Russia’s government uses protectionist and other measures to keep a strong grip on the country’s privately owned industries. Company managers, he said, haven’t learned how to survive in the open market. “The social mechanism must change,” he said.

Management at the Yasnogorsk Machine-Building Factory, which took over from previous owners just three years ago, said it is trying to attract new business, taking orders it would have rejected in the past.

“The crisis dictates its own rules,” Nikolai Dupak, general director of the factory, said in a written statement. “We had big plans to diversify our production, but we didn’t have time to realize them. . . . But we have a commitment to our workers and it’s our goal to make sure they get paid all they are due.”

Besides the drop in orders, the factory was slapped with a fine of almost $2 million from the regional government (for what Dupak called a “bookkeeping error”), which Yasnogorsk Machine-Building has not been able to pay. Officials from the region did not answer requests for comment.

The federal government has helped industries limp along, with subsidies and tariffs. But many workers want Moscow to do more.

Several in Yasnogorsk said they hoped Prime Minister Vladimir Putin would drop in on them, like he did on another economically depressed town near St. Petersburg in June. There, Putin reprimanded the owner of one shuttered factory for poor management and ordered him to sign an agreement to pay back wages.

In the meantime, patience is wearing out.

“I pay my taxes and do everything I’m supposed to,” said an exasperated Ovsyanikov. “But I don’t feel like life is getting any better. In fact, it’s getting much worse.”