The Pikalyovo Virus Spreads to Tolyatti

avtovaz080709.jpegWhen wide scale protests over wage arrears broke out in the town of Pikalyovo, near St. Petersburg, this past June, Vladimir Putin leaped into action to put out the fire.  He toured the factories, met with protest leaders, called the Kremlin-loyal business magnate Oleg Deripaska a “greedy cockroach,” and then offered to solve all the problems directly with funds out of the state budget.  Someone even made a spoof song about Putin’s macho image and the rescuing of Pikalyovo (“Putin, Putin goes to Pikalyovo. Putin, Putin will make it cool for us,” the Russian lyrics say as a bearded man in a suit gyrates. “Putin, Putin is quick to do justice. Putin, Putin is our Prime Minister.”)

It is hard to object to a social bailout like this, especially after watching billions get thrown into the oligarch rescue plan, but there are some potential problems going forward.  We interviewed the blogger and analyst Paul Goble on this subject some time ago, and like some other observers, he pointed out that the government’s handling of Pikalyovo demonstrated something to all other struggling one-industry towns in Russia:  if you make enough noise, the Kremlin will  cave in and come running to pick up the tab.  In other words, it sets a difficult precedent to keep up with.

Case in point, it appears that the Pikalyovo virus may be spreading, as the Financial Times is carrying news of some 2,000 AvtoVAZ workers are protesting wage cuts and firings at the country’s largest plant in Tolyatti on the Volga river. 

The article reports that “AvtoVAZ denied reports it plans to lay off 27,691 people, or a quarterof its staff. But workers will do a 20 hour working week starting onSeptember 1, cutting monthly wages down to half the pre-crisis level ofRbs21,931.

Tolyatti,though controlled by the state’owned Russian Technologies with 25%participation by Renault, is notoriously corrupt and inefficient, yetcarries the employment heft of a Russian version of Detroit.  Like manyother markets, there are signs that Russia’s automotive sector is quickly going down the toilet.  No news yet on whether or not Putin will ride his horse into town,toss out the money bags, and then call RT CEO Sergei Chemezov (asilovik heavyweight who knows Putin back from the Dresden days) a”cockroach” or some other equivalent.  That would give a whole new definition to the clan wars.

Photo Credit:  Government of the Russian Federation: Prime Minister Vladimir Putin, who is touring the Volga FederalDistrict, visited the AvtoVAZ automaker in Togliatti, where he met withthe company’s workers, March 30, 2009.