'They caught whoever they could': Putin's plan puts more pressure on Russian companies

‘They caught whoever they could’: Putin’s plan puts more pressure on Russian companies

The day after Vladimir Putin announced a massive mobilization of his troops in Ukraine, men across Russia set to work finding already pending conscription notices, ordering them to the offices of recruitment. In the evening, the wives arrived at the places of work, in search of their husbands.

“We had to give them something to drink to calm them down,” recalls an executive from a large metallurgical and mining company, describing desperate scenes in the factory. “You can understand them: their men would go to work in the morning and not come home.

Russian businesses have been rocked by sudden military conscription, which has mobilized at least 300,000 men for war in Ukraine since September 21 and prompted the exodus of hundreds of thousands more.

Interviews with oligarchs, business owners and employees show that although the number of conscripts and emigrants represents only a fraction of Russia’s 72 million strong workforce, the impact of the mobilization on the country’s economy has been disruptive and risks hitting longer-term growth. The Financial Times has chosen not to release the names of executives and staff interviewed for this article due to possible retaliation by authorities.

The mobilization surge has created the biggest labor shortage in Russia since 1993, according to a study by the Gaidar Institute this month. In the business survey, most respondents said they would not be able to increase production to meet demand, while others said they expected reductions in production. production and a decline in the quality of production.

“In simple terms, this will mean that we will have fewer healthy, educated and strong people, the ones who create a country’s GDP,” said Vladimir Gimpelson, a labor market economist who left Moscow for a job. in the USA. “If economic growth were the government’s priority, then I would call it a disastrous mistake.”

A man carries a bag over his head as travelers from Russia cross the border into Georgia at Zemo Larsi/Verkhny Lars station in Georgia
Travelers from Russia cross the border at Zemo Larsi/Verkhny Lars station in Georgia © Irakli Gedenidze/Reuters

Non-commissioned officers distributed conscription notices at home, at work, at the post office, in public places such as subway stations and markets, and even at border crossings to catch those fleeing the country. Ignoring orders usually does not lead to serious repercussions. But drastic measures have sometimes been used to meet regional quotas.

In a sprawling industrial zone in Siberia, “they just grabbed whoever they could,” said the chief executive of another major commodities company.

Despite the disruption, the executive has decided not to push for an exemption for its workers because “it can very easily backfire”. “You are asking for 10 people to be exempted, and you are being asked to list 30 people who can be called up on reserve.”

In addition to the 150 employees officially mobilized, several others quit their jobs preemptively, giving notice only after crossing the border into Central Asia, he added.

Although the number of departures was only a small fraction of the company’s thousands of employees, recruited employees were difficult to replace in the sparsely populated and often remote wilderness areas of Siberia. “Hiring women is the number one option,” the executive said, even for manual jobs reserved for men until a recent change in Russian regulations.

Declining population and aging population of Russia - Population by age and sex (in millions) showing a much older demographic structure for Russia in 2022 compared to 1990

Many company representatives described how the role of press officers and human resources managers had changed overnight: they were now asked to pressure recruitment offices to fire conscripted employees . Some have tried to negotiate with the military through business organizations, while others have tried to pressure recruiting offices using familiar business marketing techniques, including paying to post articles on conscripts in the local press.

Conscription and the brain drain are also aggravating Russia’s population decline. According to the Russian Border Guard Service, part of the FSB security agency, 9.7 million people left the country from July to September, an increase of 1.2 million year-on-year and nearly the double the total of the previous quarter.

Demographers were already predicting a 25% decline in the number of workers aged 20 to 40 by 2030, compared to the late 2010s, Gimpelson said. This age group is critical for productivity.

While Central Asian migrant workers will be able to take unskilled jobs, they will not be able to replace highly skilled employees in IT, which suffered from labor shortages before the mobilization, said Oleg Itskhoki, a professor at the University of California at Los Angeles. . Russian central bank governor Elvira Nabiullina suggested as much last month, saying the project could lead to higher inflation “due to changes in the structure of the labor market and a shortage of certain specialists”.

“We expect the outflow of skilled labor to have a negative impact on long-term growth potential,” said Sofya Donets, economist at Renaissance Capital.

Russia could face a new mortality crisis, life expectancy has been falling since 1900 and periods of generalized increases in mortality

Even though leaders of Yandex, Russia’s largest tech company, successfully lobbied to have their staff excluded from the mobilization, several of them still received draft notices, according to a staff member from Yandex who was called.

Most of them, including the staff member, managed to escape the draft, he said. But the mistakes caused more employees to leave the country than in the first weeks of the invasion, the person added. As a result, around a quarter of Yandex’s 20,000 employees are now based outside of Russia. The company declined to comment for this story.

Big Russian companies were able to cushion the blow more easily than smaller groups, said the billionaire founder of another Russian commodities company, which lost more than 1,000 of its 20,000 workers. And for some sanctioned groups, the mobilization was also an opportunity to save money. Since firing people is politically difficult for big Russian companies, “it seems wrong, but the mobilization actually helped this process,” said one executive.

A courier for food delivery service Yandex Eda checks his smartphone with St. Basil's Cathedral in the background in Moscow
Vladimir Putin’s conscription worsens Russia’s population decline © Andrey Rudakov/Bloomberg

But the departures have also led to indirect strains on the workforce and the economy. There are more dependents, such as elderly family members, to care for per person of working age, according to Donets. Labor also became poorer on average, as those who could afford to emigrate were “clearly better off to begin with”, Itskhoki noted.

That means “a lot of the people who created the demand within the economy are no longer there,” he said.

Many businessmen feel they have no choice but to adjust to the new normal of the wartime Russian economy. Many, including some who have privately said they oppose the war, have at the same time argued that the project would have been handled more efficiently if the companies had been left to manage it.

Another Moscow oligarch remarked that he would have found volunteers for the army among his 10,000 employees in exchange for retaining three crucial workers he feared to lose.

“Tell the companies that for the protection of the sovereignty of the country, 300,000 are needed,” the billionaire said. “Do you think the companies would not have managed to find enough volunteers? »

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