Boom Time: Siberia's Oil-Rich Middle Class

As you approach Nefteyugansk from the air, the first things you see are hundreds of little flames, spread across the landscape like candles on a birthday cake. The source of the plumes are oil rigs, burning off the gas that accompanies the oil as it rises to the surface.

This is Western Siberian oil country, the bedrock of modern Russia’s economy. Two of Russia’s largest oil companies have their official headquarters in this region: top-ranked Yukos is based in Nefteyugansk, and fourth-ranked Surgutneftegaz resides in Surgut, an hour’s drive away. Situated just a few hundred kilometers from the Polar Circle, these are prosperous, well-run companies, which, by Russian standards, pay their staff extremely well.

At Yukos (which made headlines last October when its then-CEO, Mikhail Khodorkovsky, was arrested at gun point, soon after announcing he was funding the political opposition), a reasonably experienced oil rig worker can bring home $700 a month, over three times the national average. At Surgutneftegaz, which is generally acknowledged to pay higher wages, the same worker can make $1,000.

What is more, in the best traditions of company towns, the oil companies have spurred the growth of an array of small- and medium-sized businesses to cater to the needs of their employees. “Nineteen percent of working citizens are employed in such businesses,” said Viktor Tkachev, Nefteyugansk’s mayor since 1999. And these workers, combined with the other 81% (most of which are employed at Yukos and its subcontractors), comprise that species of Russian rarely acknowledged in the West: the Siberian middle class.

“You can say a family here belongs to the middle class when each of its members can rely on at least 500 dollars a month, and when the family owns an apartment and a car and can afford to spend holidays not necessarily abroad, but at least somewhere in the South,” said Mikhail Martynov, professor of political science at Surgut State University.

That Valeria Abramova belongs to the Siberian middle class is beyond any reasonable doubt. A deputy head of Surgut’s Chamber of Commerce and Industry, the immaculately-groomed, forty-something Abramova seems to have meticulously crossed every item off some imaginary middle class checklist. Salary? She will not disclose anything, but there are obviously no problems there. Apartment? Certainly. Car? Well, she does not drive herself, but she does have a chauffeur to take her where she needs to go to in her official capacities. Holidays? “For 15 years, I have only been vacationing abroad,” Abramova said, her carefully manicured hands fidgeting. “I simply cannot put up with the appalling level of services provided by the Russian tourism industry. In Mallorca, the prices are similar to what you would pay in Russia, say by the Black Sea, but the quality is so much better.”  Not only does Abramova belong to the middle class, but so, apparently, does her driver. “Before the 1998 financial meltdown, he had a Russian car,” she said. “Now, he owns a Toyota. So you see, the middle class is growing.”

Indeed, if one were to judge solely by the rather impressive quantity of Mercedes, Toyota Land Cruisers and Volvos cruising the streets of Nefteyugansk and Surgut, the middle class seems to be doing well here. Yet this is but one sign among many. Walk around downtown Surgut and you’ll constantly bump into cranes, as though the city were one giant construction site. A construction site, however, where countless elegant women in expensive fur coats parade past workers busying themselves on half-completed apartment blocks. Walk into a shop, and chances are you will find yourself in a recently opened liquor store, its shelves teeming with vintage French wines, twelve-year-old single malt whiskies and ageless French cognacs. Now is when you pinch yourself so that you will remember you actually are deep within Siberia.

At times it seems as though the oil boomtowns are scrambling for ways to advertise their affluence. It sometimes takes you into the realm of the bizarre. Of late, residents have developed an obsession with exotic fish. Wherever you go, to offices, shops, restaurants or orphanages, there are aquaria filled with brightly colored fish. The fish are always flooded with light, to the point that they appear to be plastic decoys.

One evening, in a restaurant near Surgut’s central market, I was seated opposite a huge aquarium filled with bright yellow, large-finned, absolutely motionless fish. They floated in close formation, like a squadron of fighter jets frozen in time. For a quarter of an hour, the fish were absolutely still, all facing resolutely to the right. By this point, my dining companion and I were making bets about whether the fish were real fish or just floating toys. “They can’t be real. I can’t see them move!” I said. “Oh, come off it, who would put plastic fish in a tank of water?” my friend replied. Then, as if on cue, they all turned at once, then spent the next twenty minutes facing left.

The underwater drama was all the more gripping since the fish, very much unlike me, were totally unfazed by the deafening noise coming from the restaurant’s band (complete with a pseudo-Latin romance singer in dark glasses). A few nights later, my eardrums were assaulted by a nearly identical band at a Yukos corporate banquet in the restaurant of my Nefteyugansk hotel. Some 40 employees and their spouses had convened around tables richly decked with every conceivable zakuski, to celebrate the 50th birthday of Vladimir Ivanovich, a senior executive. As the vodka started to flow and guests began toasting Vladimir Ivanovich, the hero of the day was presented with his birthday present — a meter-high, glittering, metal model of an oil rig. Then someone turned the top of the rig clockwise, and a cheerful melody came out of the model, revealing the contraption for what it really was: a giant music box.

Such scenes are like taking a trip down memory lane — to Moscow in the wild 1990s of the Yeltsin-era. The metropolis had just shaken off the long slumber of Communism, and seemed prepared to go to any length to awe itself with boundless displays of gaudiness. In restaurants, you would routinely see wealthy customers ordering ridiculously priced bottles of wine, just to prove they could afford them. And, in the background, there was always the ridiculously deafening music. Showing off was the order of the day. Immodesty was beautiful.

These days, Moscow has, at least to some extent, outgrown the adolescent urge to impress. The capital’s middle class is gradually discovering more refined ways to spend their money, for instance in cafés. Unthinkable just a couple of years ago, hip, warm, cozy, reasonably-priced cafés are everywhere. You can buy a cup of coffee and stay as long as you like, enjoying the atmosphere. Or there are the arts and crafts shops, much like those you can find in Paris or London.

Yet, matters of taste aside, the differences between the Moscow and West Siberian middle classes are actually not that significant. In each case, the middle class represents about 25 percent of the population, and the level of wealth required to qualify as a member is roughly comparable. In fact, this similarity, and the fact that a real middle class can exist so far away from large European cities like Moscow and St. Petersburg, is precisely what is remarkable, said Nefteyugansk Mayor Tkachev. “This region has the second highest living standard in Russia after Moscow,” Tkachev said with obvious pride. This, he adds, is reflected in the level of Nefteyugansk’s annual municipal budget, which this year is R3.2 billion (a little over $112 million). “If you divide the municipal budget by the number of citizens, you get a ratio of 30,000 rubles [$1,052] per resident. In most other Russian regions, with the exception of Moscow, this ratio will range between R2,000 and R6,000 [from $70-210].”

It has not always been this way. In Nefteyugansk, after Khodorkovsky purchased Yukos for a fraction of its real value (during the rigged privatizations of the 1990s), wages fell precipitously and, for several years, were routinely paid several months late. Yukos employees envied the workers at Surgutneftegaz, where wages remained comparatively high (and remain so to this day), and many jumped ship. The 1998 financial meltdown was the low point. Starting in 1999, Khodorkovsky began to understand that it would be in his best interest to turn Yukos into a transparent, Western-style company paying decent wages. The situation gradually began to improve.

This, of course, does not mean that everyone in Western Siberia is well-off or belongs to the middle-class. In fact, 75 percent of the population does not. Take for instance Alexei, a 40-year-old driver who works for a Yukos subcontractor. Born in Crimea, Alexei is married and has two children, and earns just R12,000 a month [$420]. Still, Aleksei said he cannot complain — he still makes a lot more money than he would elsewhere in Russia.

Salaries are heavily subsidized to compensate for difficult living conditions, where winter temperatures can fall to -50o C. Albina Tsykyna, head of the Surgut office of the Oil and Gas Workers’ Union, said this subsidy extends to all workers, not just those in the oil and gas industry. “By law,” she said, “all salaries here are increased by 120 percent over what they would be in more temperate regions, in effect more than doubling them. In Soviet times, the subsidy was paid by the government. But this responsibility has now been transferred to the companies.” Yet Alexei notes that higher salaries are at least partially offset by a higher cost of living “Because of the economic boom here in the last few years,” he said, “prices have also gone way up. For instance, a loaf of bread here costs as much as R15 [53 cents].” In Moscow, the same loaf costs 10 rubles.

While the Surgut Chamber of Commerce and Industry’s Abramova clearly belongs to the middle class and Alexei the driver clearly does not, lines are not always so clearly drawn, in spite of apparently objective criteria based on wages and property, said political scientist Martynov. “Objectively, about 25 percent of the population here belongs to the middle class. But there is also a subjective element. Indeed, when you ask people, 65 percent say they view themselves as part of the middle class.” In other words, the middle class in Siberia is not merely a question of how much money you actually make, it is also a state of mind.

The Galchenkos are a case in point. Nina heads a training institute for accountants in Nefteyugansk. Vladimir is a small businessman trading in heating fuel. Together they earn $1,800 a month, on which they support themselves and two children. Thus, “objectively,” they barely qualify as members of the middle class. But don’t tell them that; they are so proud to belong. So proud in fact, that Vladimir cannot resist the temptation to enumerate everything that makes them, in his opinion, a bona fide middle class family, emphasizing in particular their trips abroad: “We can afford to send our children abroad, and we, the parents, also go there every once in a while. I have been to Turkey, Austria and the United Arab Emirates,” said the sturdy, balding 51-year-old. It is no accident that traveling abroad comes up regularly in conversations with residents of Surgut and Nefteyugansk, as they try to establish their middle class credentials. In a region where winter starts in September and lasts well into April, being able to bask under the sun is a defining luxury. The towns have countless travel agencies advertising package tours to Turkey, Egypt or Cyprus. There are even, Abramova said, direct charter flights between Surgut and certain sun-bathed countries.

With the local economy going strongly and so many people insisting they belong to the middle class, this should be fertile ground for liberal politicians. Yet, exactly the opposite seems to be true. And this is not just a Siberian phenomenon: according to a study published by the Moscow-based Public Opinion Foundation last February, of those Russians who describe themselves as belonging to the middle class, just five percent favored the liberal parties SPS and Yabloko. The pro-Putin United Russia party led in middle class support, with 35 percent, followed by the ultranationalist LDPR (10%) and the Communist Party (6%). While separate figures were not cited for Western Siberia, the region certainly reflects this national trend amongst the middle class: rejection of the liberal parties.

Much of this has to do with the track record. In the 1990s, according to the common perception, the liberals were running the country. It was a time of underemployment, massive sell-offs of state assets at bargain prices, wipeouts of family savings and endless salary delays. In short, the liberals did little to help the economy, said Alexei Safolin, a young businessman who heads a 500 person construction company. A tall, articulate man in his mid-thirties sporting an impeccably-cut suit and Nina Ricci cufflinks, Safolin, who can talk at length about the benefits he hopes to gain for his company when Russia finally joins the World Trade Organization, at first glance looks like a poster boy for Yabloko. But impressions can be deceptive. “The liberals have already been in power, and we saw the results. They are not the people we need,” he said.

Moreover, many argue, the liberals made the strategic mistake of associating themselves with Anatoly Chubais, who appeared third on the SPS electoral list in last December’s parliamentary elections. Chubais, architect of many of the rigged privatizations of the 1990s, currently heads the national electricity grid RAO UES and is easily one of Russia’s most hated public figures. “To any Russian, Chubais represents absolute evil,” Abramova says. “Chubais made two huge mistakes: during the 1990s, he engineered a privatization scheme that was too hurried and way too favorable to the oligarchs (the Russian tycoons who made fabulous fortunes thanks to their Kremlin connections). And, as head of RAO UES, he is seen as the man who cuts off power all over the country,” she said, adding that she supports President Putin. “It is very difficult for you [a foreigner] to truly understand what Chubais means to Russians,” said Nina Galchenko, another Putin enthusiast.

While the economy was in permanent chaos during the 1990s, when the liberals were at the helm, it has performed remarkably well since Putin became president in 2000, largely due to high international oil prices (foreign oil sales equal between nine and 25 percent of Russia’s GDP, depending on which estimates you believe). Thus, to more than a few members of the Surgut and Nefteyugansk middle class, Russia’s one genuine liberal politician, at least economically, is Putin. “I think that Putin is on his way to creating conditions for sound competition, allowing business to develop,” Safolin said. Vladimir Galchenko agreed: “We must support the vertical of power [Putin’s much publicized restoration of top-to-bottom order], because this will in turn support the economy.”

That Putin is perceived to be re-establishing much needed order is a powerful reason why the middle class, traumatized by the free-for-all of the Yeltsin years, endorses him. Economic security and the need to be protected is deeply rooted in the collective Russian mind, Martynov said. And it seems to trump any concerns about shutdowns of mass media outlets or creeping authoritarianism.

“The concept of liberty has developed differently in Siberia than in the West,” Martynov said. “Whereas in the western sense, liberty means the independence of one individual from others, here, partly because the natural environment is so harsh, liberty means liberty of one person within the community, before which he has duties, but which in return protects him. In Russian,” he continued, “the English word ‘freedom’ has two different translations: svoboda and volya. Svoboda is individual freedom in the western sense, self-limiting so as not to infringe on the rights of others. By contrast, volya is freedom in the Russian sense, where one allows oneself absolutely everything...And many, including those within the middle class, are prepared to give away some of their svoboda, in exchange for protection against others’ volya.” This, Martynov concluded, has been a major obstacle in Russia’s development of politically liberal ideals.

Yuri Levada, one of Russia’s most respected sociologists and pollsters, heads the independent Levada Center. He said Martynov’s observations hold true for Russia as a whole. “The Russian middle class does not exist in the Western sense,” Levada said, “because it does not view itself as a class made out of people sharing common interests, or represented by its own institutions, or its own newspapers.” The middle class is a powerful economic force, but a political nobody. To paraphrase Stalin’s reply when asked about the Vatican’s response to a foreign policy issue: “The middle class? Why should we care about them? How many divisions do they have?”   RL