A crucial industry in Russia is facing a big problem caused by the war in Ukraine

Russia’s oil and gas industry was crucial to financing the invasion of Ukraine, giving the Kremlin the funds it needs to keep fighting, but it is this sector that is facing a shortage of personnel as the mobilization for war exacerbates a demographic crisis. older, reports Bloomberg.

According to analysts and recruitment companies working for the oil and gas industry, energy companies that once offered Russian citizens the best salaries and career opportunities now have to compete for employees with the military and arms manufacturers. Only the bonus paid upon employment for a soldier fighting in Ukraine is equivalent to almost a year’s salary of an ordinary worker in the oil and gas industry, writes Agerpres.

The personnel crisis is not a completely new phenomenon, considering that Russia has been facing a decrease in the active population for almost two decades. The collapse of the birthrate in the 1990s is at the root of the problem, and the Covid pandemic has created new difficulties, but the invasion of Ukraine has aggravated the problem.

According to a recent study by the Central Bank of Russia, staff shortages are now affecting companies in all sectors of the economy. Even if the oil and gas industry appears to continue to operate smoothly, there could be a long-term impact.

“Staff shortages affect even the richest industries. The oil and gas sector can afford to attract employees thanks to high salaries, but the state competes by offering contracts in the army,” said Alexei Zakharov, president of the online recruitment company Superjob.ru.

Staff shortage of approximately 40,000 employees

The Russian consulting firm Kasatkin Consulting, the former Moscow subsidiary of the Deloitte group, estimates that the oil and gas sector in Russia currently has a staff shortage of approximately 40,000 employees. The number of job ads posted online in the first quarter of this year by the Russian oil and gas industry is 24% higher than in the same period last year, and in addition, not only are they looking for employees with training in the field, but and unskilled workers, shows the data of the recruitment platform hh.ru.

“The industry has vacancies for electricians, drivers, mechanics, welders, machinists, unskilled workers, sales managers, engineers and sales staff,” says Anna Osipova, communications director at hh.ru.

The oil and gas industry has long been Russia’s most generous employer, offering salaries that exceed the national average by at least two-thirds, according to Bloomberg calculations. In January and February, the average nominal wage for the oil and gas industry was about 125,200 rubles ($1,340).

But such an amount can no longer compete with what the Russian army offers for contract soldiers. In addition to the national signing bonus of 195,000 rubles, each region in Russia also offers new recruits a signing bonus, so they can receive a total of up to one million rubles.

Salaries in the oil and gas industry are no longer so attractive

“Competition with salaries from the armed forces and the military-industrial complex has certainly had an impact on the workforce available for the Russian oil and gas industry,” says Dmitry Kasatkin, partner at Kasatkin Consulting.

As wages are no longer sufficient to attract new hires, Russian oil and gas companies, which often have operations in remote areas of the Arctic, have begun to offer other benefits.

According to the ads posted on hh.ru., a worker working somewhere in Siberia or the Arctic can expect to receive “three hot meals a day” and regular medical check-ups paid for by the employer. Some employers even offer incentives similar to those of the USSR era such as “New Year’s gifts for children” and vacations in company resorts.

To expand the recruitment base, some companies have also introduced a “bring a friend and we’ll pay you” policy, offering a bonus of $50 to $100 for a new employee. Perhaps, according to Western standards, the amount is not very high, but in Russia it is the minimum amount that a person spends for a month to buy food.

Retirement, postponed

But despite all these incentives, the oil and gas industry in Russia fails to attract qualified young people. That forces companies to turn to older employees.

“The oil industry used to encourage people to retire early. Are you close to retirement age? Here you have a consistent premium and goodbye, let’s make room for the younger generation. Now companies have eliminated these programs and encourage employees to work as long as they can,” says Alexei Zakharov.