Expat Exodus Shows Economic Struggles In Russia

According to the Federal Migration Service, the number of foreign expatriates in Russia has suffered a sharp decline.

The numbers paint a sorry picture of the confidence that Western nationals have in the continued economic and social prospects of Russia. The Noviye Izvestia newspaper reports that since January 2014, 41% of Spanish nationals, 38% of British nationals, 36% of U.S. nationals and 31% of German nationals have all left Russia, writes Daria Litvinova for The Moscow Times.

Economic crisis worsens in Russia

The country is suffering an economic crisis induced by Western sanctions and the falling price of oil, both of which caused the ruble to lose 40% of its value versus the dollar last year.

The Russian economy shrank by 2.2% in the first quarter of 2015, and the International Monetary Fund predicts more bad news. IMF economists estimate that the economy will contract by 3.8% over the course of 2015, and 2016 will bring a further contraction of just over 1%.

Western sanctions have effectively banned many U.S. and EU companies from conducting business in Russia. Some have shut down their local branches, or fired their foreign specialists.

Foreign specialists working in Russia generally earn far more than similarly qualified Russians. Noviye Izvestia cited consultant Ella Mikhailova, who said that foreigners can earn 25-30% more than Russian counterparts.

“In addition to that, expats often get perks — such as an apartment in the city center, a car, a gym membership, health insurance, compensation for plane tickets,” all of which adds to their cost to businesses struggling to deal with the economic crisis, she said.

Immigrants and Russians affected by downturn

Western nationals are not the only immigrants fleeing Russian. According to Vedomosti financial daily, 20% of Tajik nationals had left Russia by the beginning of July. There remain 1 million Tajiks working in Russia, down from 1.2-1.3 million in 2014.

The Interfax news agency cited Sumangul Tagoizoda, Tajik minister of labor and migration, who said that the population movements were due to the economic crisis in Russia, and tighter laws on immigration.

For millions of Russians, the economic crisis is having a profound effect on day-to-day life. The official poverty rate is rising for the first time since Putin came to power 15 years ago.

In March, official statistics revealed that 23 million Russians were living on less than $169 per month, up from 20 million in March last year. The collapse of the ruble means that prices have gone up, and pay checks are worth far less than before. The situation has deteriorated to such an extent that Deputy Prime Minister Olga Golodets called it “critical.”

The figures show that 16% of the the Russian population are now living in poverty, compared to 11% in 2014.

Austerity hits Russian civil servants

Russians are also losing their jobs as a result of economic downturn. President Vladimir Putin announced massive job cuts at the Interior Ministry, which controls police, paramilitary security forces and the road traffic safety agency. 110,000 government workers will lose their jobs, which represents 10% of the total employees at the ministry.

Not even Putin himself has escaped unscathed from the crisis enveloping Russia. The President announced that his pay packet would be reduced by 10% this year, perhaps to set an example to a variety of ministries from which he asked for savings.

Overall employment in Russia reached 5.4% in June, up from 4.8% at this point last year.

Military modernization program to be affected by cuts?

It had previously appeared that Russian military spending was immune to the economic downturn, with various Russian officials announcing new tanks, missiles and warships in an effort to modernize the armed forces. Putin promised that $400 billion would be invested in the military in order to counteract the growing threat of NATO, however the TASS news agency has since reported that the 2016 budget will also see cuts to military spending.

TASS cited Finance Minister Anton Siluanov, who promised that cuts would be less than the 10% that other ministries would suffer.

Sanctions mean that trade with the EU fell by over 30% in January and February. Prime Minister Dmitry Medvedev estimates that sanctions will cost Russia $106 billion over the course of 2015.

The outlook for Russia is dire, with sanctions recently extended until 2016. Attempts to galvanize domestic industry by banning food imports from the EU led to a 21% increase in food prices in June, backfiring spectacularly and making life more difficult for ordinary Russians.

It appears that Putin is planning to pivot towards the East, with greater involvement in the Shanghai Cooperation Organization and the BRICS grouping. Progress in developing greater levels of cooperation cannot come quickly enough for Russia, but it looks as though Moscow’s economic struggles will continue for the foreseeable future.