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EDITIONS
Tuesday, 25 June, 2002, 07:31 GMT 08:31 UK
Russia faces new economic realities
Noyarbrsk, Siberia
Noyarbrsk: Built to serve communist industry

To cut costs, Russian oil companies are removing some of the perks traditionally enjoyed under communism. In the second of two articles, BBC News Online reports on how workers are adapting to new economic realities.

The oil town of Noyabrsk rose from the frozen Siberian wilderness during the 1970s and was once a model of communism's industrial strength.

Larissa Golovina, a production site office worker
Golovina: 'Conditions at the wells are better'
High salaries, privileged living conditions and pioneering pride attracted some of the Soviet Union's most highly skilled engineers to work in this hostile environment where temperatures often plummet to minus 50.

Today, Russia is enjoying an oil boom, and after a decade of decline and poverty the fortunes of Noyabrsk are rising.

Wages here average $550 (367) or five times the normal Russian salary and people are confident about the future.

"More attention is being paid to the workers and production," says Larissa Golovina, a production site office worker and one of the town's earliest settlers.

"Living conditions at the drilling wells are much better and wages are paid on time now."

New realities

Like thousands of other industrial cities across the former Soviet Union, Noyabrsk was established with little concern for cost - the Soviet state picked up the bill for everything.


People are now trying to cut their living expenses, but they can't give up things like heating

Konstantin Gallinger
Town administration
But Russia's free market transition has brought new economic realities to places like this and worries for the people who live here.

The oil companies now say that running the town's social infrastructure, including everything from hospitals to buses, is no longer their business and have handed these responsibilities over to the local administration.

"We are an oil company and need to concentrate on our core assets," says Latysh Rostislav, head of the planning department at Sibneft, one of the town's main employers.

"We are in the oil business, not the housing or schools business."

The cost of living

The administration has since had to privatise some social services to help balance the budget, and started charging local residents for basic services like heating and maintenance.

Konstantin Gallinger, head of economics for the town administration
Gallinger has to work out what people can afford
"People are now trying to cut their living expenses, to give up certain services, but they can't give up things like heating," says Konstantin Gallinger, head of economics for the town administration.

"We have to work out how to pay people decent wages if we expect them to pay these new charges."

Monthly costs are about $75 for a typical two-room apartment in the town's crumbling soviet-era housing blocks.

To help ease the burden, the costs are being phased in slowly.

Last year residents paid just 50% towards the bills, while this year they must contribute 80% and will soon have to pay the full amount.

The harsh face of capitalism

Other problems exist as well, according to Mr Gallinger.

The Well nightclub
A new nightclub is a sign of private enterprise
Drug use among the town's teenage population is a new and growing worry, while the town's aging water system is crumbling - tap water is unfit for drinking.

Perhaps most worryingly for local residents once used to the communist guarantee of a job for life, no one can rely on employment any longer.

Last year Sibneft cut staff levels here by almost a fifth and has also spun off in-house service departments to compete with international contractors for lucrative service agreements.

Signs of hope

But amid the problems, private enterprise is slowly taking root. A new nightclub known as "The Well" has opened in town and is a rare example of the revival.

Vitaly, the bar manager, is optimistic for new ventures like this one.

"There are people starting new businesses. People have learnt how to make money and now they are learning how to spend it.

"I think it's a good time to do business here."

However, as the city of Noyabrsk makes the difficult transition from public to private enterprise, there do seem few opportunities to diversify the local economy.

It's clear the future of Noyabrsk, and thousands of similar industrial cities across Russia, will remain closely bound to the oil industry they were built to serve.

See also:

24 Jun 02 | Business
17 May 02 | Business
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