Russia’s military and arms manufacturers compete with energy companies for employees. Gazprom, Russia’s largest joint-stock energy company, which was one of the world’s largest gas exporters before the war, was until recently an attractive employer for ambitious young Russians. They were attracted by the prospect of career growth and also a generous salary.
However, in connection with the war in Ukraine, many Russian energy companies have found themselves in a situation where they have to compete with the Russian army and arms manufacturers for employees, Bloomberg wrote.
According to analysts and modern-day recruiters, the sign-up bonus alone for a soldier fighting in Ukraine can equal nearly the annual salary of an average oil and gas worker.
Who bids more money
According to recent reports from the Russian Central Bank, staff shortages have affected all sectors of the economy. While the oil and gas industry appears to be moving on, it is the energy sector that may have longer-term implications.
“The lack of workers has affected even the rich industries,” Alexei Zakharov, president of the employment agency Superjob.ru, told Bloomberg. “The oil and gas industry attracted employees with higher salaries, but the state is now competing with them by offering contracts with the military,” he adds.
According to estimates by Moscow-based consultancy Kasatkin Consulting, formerly Deloitte’s research center in the region, Russia’s oil and gas sector is short of around 40,000 workers this year. The industry increased the number of jobs it advertises online in the first quarter by 24 percent compared to a year earlier. At the same time, it is not only looking for qualified workers, but as evidenced by the data from the main Russian recruitment platform hh.ru., this sector also lacks employees with low qualifications.
“This industry has vacancies for electricians, drivers, mechanics, welders, machinists, laborers, business managers, designers and salespeople,” confirms Anna Osipova, head of regional external communications at hh.ru recruitment agency.
Russia’s Energy Ministry did not respond to Bloomberg’s request for comment. The oil and gas industry in Russia has long offered some of the best salaries in the country. As of 2017, wages in this sector exceeded the national average by at least two-thirds, according to Bloomberg calculations based on data from the Federal Bureau of Statistics.
In January and February, the monthly nominal wage in this industry averaged about 125,200 rubles (CZK 32,000), including workers employed in oil and gas extraction, related services, pipeline transportation and storage.
However, the stated amount no longer competes with what the Russian military pays to people who sign a contract with the military. In addition to a flat nationwide entry bonus of 195,000 rubles (CZK 49,500), each Russian region offers its own one-off payment to a new recruit. This can reach up to one million rubles (CZK 254,000).
“Salary competition in the armed forces and the military-industrial complex has certainly affected the availability of labor for the Russian oil and gas industry,” noted Dmitry Kasatkin, a partner at Moscow-based Kasatkin Consulting.
If the person in question does not want to participate in the fighting in Ukraine, where, according to estimates by the British Ministry of Defense, more than 450,000 Russian soldiers have been killed or injured since President Vladimir Putin’s decision to invade in February 2022, he may be tempted by lucrative contracts with manufacturers of military equipment. Demand for tanks, armored vehicles and weapons has soared since the start of the war, and Russian arms companies are still looking for new hires in the domestic labor market.
Russian state-owned arms company Rostec raised salaries by an average of 17.2 percent last year. “We still need people,” CEO Sergei Chemezov confirmed to Putin himself last August. “Many of our facilities operate on weekends, public holidays and at night,” he argued.
Demographic crisis in Russia
Putin’s decision to mobilize the economy for war only exacerbated Russia’s long-standing demographic problem. In the 1990s, economic upheavals following the collapse of the Soviet Union led to a decline in the birth rate. According to statistical data, between 2007 and the end of 2021, the number of working age population in the country decreased by even 5.8 million people.
The Covid pandemic has exacerbated the problem. Almost 750,000 people died in Russia from 2020 to 2022, with Covid-19 listed as one of the leading causes of deaths then, according to data from the country’s Federal Statistics Office.
According to estimates by the auditing and consulting company FinExpertiza, the share of employees under the age of thirty in the Russian labor market has fallen to 14.9 percent in 2022, which is the smallest number of employees in this age category since the beginning of the 1990s.
Another consequence of Russian military aggression against Ukraine was the restriction of the flow of workers from abroad. International sanctions have weakened the ruble, increased inflation and complicated international money transfers. Russia thus became less attractive for migrants from former Soviet countries. Last year, the official net inflow of foreign migrants into the country was less than 110,000 people, a quarter of the level in 2021, the last year of statistics before the start of the war.
This level of immigration is a drop in the ocean compared to Russia’s demand for labor. At the end of March, the country needed 1.86 million additional workers, according to Federal Statistics Office data based on requests addressed to the country’s labor offices.
Stay at work as long as possible
As salaries alone are not enough to attract a new workforce in Russia, the country’s oil and gas companies, whose main operations are located in remote areas with harsh climates, offer additional benefits.
A field worker doing monthly shifts somewhere in Siberia or the Arctic can expect, for example, “hot meals three times a day” as well as “regular medical checkups paid for by the company.” Some employers also add Soviet-style incentives such as “New Year’s gifts for children” or “trips to corporate resorts”.
To expand the pool of potential employees, some companies have introduced a “bring your friend and get paid” policy, offering around US$50 to US$100 per new recruit. It’s not a lot by Western standards, but in Russia it represents a month’s worth of groceries for one person.
However, all these advantages are insufficient to attract the most sought-after young skilled workers to the energy industry. Companies are forced to turn to older vintages.
“The oil industry used to encourage people to retire early with slogans: Are you close to retirement age? We have a big bonus for you, we will see you off with honor to make room for the younger generation,” says Zacharov from the Superjob.ru agency. “Now companies are phasing out these programs and instead encouraging employees to stay working as long as possible,” he adds.
Since the invasion of Ukraine, Russia’s oil and gas sector has been targeted by an ever-tightening web of international sanctions aimed at curbing the flow of petrodollars. Nevertheless, the industry continued to function more or less smoothly, providing Moscow with the funds it needed to continue sending troops to the front lines. And so that it can buy weapons for attacks on Ukrainian cities and infrastructure.
Last year’s rate of oil production reached a post-Soviet record. Russia’s oil exports remain strong even as the country curbs production in cooperation with the Organization of the Petroleum Exporting Countries. The country’s natural gas production is rebounding after a sharp decline in 2022 and 2023, when pipeline flows to Europe were mostly halted. The government expects pipeline fuel exports to increase by almost a fifth this year, thanks to increased exports to China.
However, labor shortages raise questions about whether Russia’s oil and gas industry can sustain this performance in the long term.
“Limited access to Western high-tech oil services creates a risk for maintaining and increasing profitable production and refining of oil and gas,” points out Sofia Mangileva, an analyst at the Moscow consulting company Yakov & Partners. “The lack of qualified personnel exacerbates this challenge, as the task now is not only to operate the equipment, but also to develop our own technologies,” he adds.
