After Crimea: Who's Left in Russia? An Expat Exodus

This article originally appeared in Russia! magazine, which is not linked due to no longer being in print. It was written by Sophia Tupolev and Louise Dickson, with photography by Anna Belkina.

Russians looking over a winter river scene. Photo courtesy of Anna Belkina

Russia’s opportunities for expats are shrinking faster than its economy, it seems. Economic growth is forecast to contract by as much as 5% in 2015, the ruble has depreciated 50% against the dollar, and foreign companies are jettisoning off Russian ventures. Since this time last year, 499,000 fewer Westerners lived in, visited, or studied in Russia, or an average net loss of 1,360 per day. This acceleration reflects Russia’s collapsing economy that no longer demands as many Western specialists. Many have left, but some have stayed.

Here, we profile five expats on their experience in Moscow’s rapidly changing business landscape.

1. Diana Moldavsky, a Russian American, came back to her native Moscow in 2004 and left for the US in 2014. Her last job while in Russia was Chief Revenue Officer at ZeptoLab, the developer of popular mobile game Cut the Rope. She left Moscow in November 2014 because she “really didn’t like the current political and economic situation” and “wanted to come back to San Francisco and Silicon Valley, the Mecca of tech startups.”

“In 2004, I wanted to help the Russian up-and-coming tech/internet sector. I saw things were changing, but all executives in the industry complained about lack of business talent with US experience and education. I previously worked at Google in Mountain View, CA and ended up joining Yandex in Moscow.

The last 10 years were an exciting time to be in Moscow, so many good changes were taking place both in the industry and in the country overall. However with all the changes in policies and new laws of 2014 it’s sad to see everything rolling back, all the hard work of people who wanted to make Russia full of innovation and freedom to be scraped off. In the mid 2000s Moscow had an amazing energy, it was the place to be… people from all over the world were coming for business, many fell in love with it and stayed.

The energy was no longer there in 2014. People and some companies started to leave the country, while other companies started to cut down their business and investment in Russia. It felt like the right time to go back, especially with all the amazing things happening in tech in Silicon Valley these days and after all 10 years was already much longer than I originally planned to stay.”

Shoppers outside GUM Department Store in Moscow, Russia. Photo courtesy of Anna Belkina

2. This 32-year-old British expat works as a director in the financial industry and has been in Moscow since 2010. His salary is fixed in rubles and is not pegged to another currency. “If it were, I would be living like a king. Very few people have had that luxury.”

“I was talking to a broker about when is a good point to drop your position when you know that you are on a losing deal. Do you wait and wait until the recovery or do you cut your losses and draw a line under it and buy something else? My red line has been crossed. I am staying here more based on an emotional level. Thinking about it objectively, I wouldn’t say that as a foreigner, staying here makes any sense anymore, unless you have huge prospects. The other thing that worries me about leaving is that it might be difficult to get back into Russia if I wanted to. It feels like an all or nothing decision.

There is some great opportunity for arbitrage and cheap deals specifically now. What saddens me is that most people, expat or Russian, don’t realize the full impact that will happen later on in the year: massive inflation, linked with a currency devaluation and readjusted supply chains.

Everything that I buy here is a foreign product. That goes from food to clothing to household goods. My main outgoing cost is travel. This takes a big chunk out of my paycheck every month, decreasing my disposable income. I have massively cut back on my expenditures in Moscow and thereby contributed towards the oncoming recession.”

As of January 2014, there were 10.9 million foreigners remaining in Russia. Source: Russian Federal Migration Service

3. American John Mann has lived in Moscow for 13.5 years. He is the Head of Public Relations at Millhouse LLC, a privately held investment company. He has “no plans to leave at the moment. My job is here. I have a lot of friends here. I came to a realization a couple of years ago that Moscow is the city where I live, and I enjoy my life here. Once you get to that point, you stop thinking about the eternal expat question of ‘where to next?’” Mr. Mann is paid a monthly income in rubles, with an annual bonus indexed in dollars but paid in rubles.

“I am sure that my grocery bills have increased…I saw zucchini for over 600 rubles/kg [$18/pound] the other day at one of the cheapest supermarkets in town, which blew my mind.

Businesses across the board have been forced to raise consumer prices, so I’m sure that’s being reflected in what we pay at bars, restaurants, etc. Some of them are trying hard to hold the line on price increases, but they’ll have to give in at some point as their supply costs rise. As a business, you can’t ignore double-digit inflation and survive. On the flip side, I just paid less for petrol yesterday [in January] than the last time I filled up my car in December.

A lot of the industries we’re involved in will benefit somewhat from the weaker ruble as they sell commodities priced in dollars. If anything, that will be the silver lining for industry - if the competitive advantage of costs in rubles can outweigh lower domestic demand and restricted access to capital. Other non-commodity parts of our business may be adversely affected by the economy, but it’s hard to determine the extent at this point.

I have begun to think about investing in real estate more often than in the past if only because the portion of my savings kept in hard currency would go further now. However, the interest rates the banks are now charging for mortgages kill a lot of that extra value. I have a long-term dream of starting a restaurant business, but there are a lot of factors involved in getting to that point that aren’t necessarily reliant on the economy.”

4. Dutch business intelligence consultant Erik Jansma has made Moscow his home the last ten years and has no plans to leave. He is a managing partner for CIS at a Dutch company called Sapindigo and in his spare time, administers top website www.expat.ru. The management structure of Sapindigo is based in The Netherlands, and Mr. Jansma is paid in euros. He says what really counts is “what you make on the local market and over here that’s rubles. So it has become more difficult to earn my salary back.”

I always watch the costs of products, especially because I like to cook and often do the household shopping. Sure, prices have gone up, but so far I have not been deliberately cutting my expenses. This is because some products I used to buy are simply not in the shops anymore, like Dutch cheese, Italian sausage, et cetera. Our favorite supermarket always used to have fresh sushi, and I used to buy it frequently for my oldest daughter and wife. The shop stopped selling it because all ingredients were foreign and have been banned by the sanctions.

You need two things to start a business in Russia, papers and knowledge of Russian. Business development has become more difficult because we need to check every (potential) customer if they are somehow impacted by EU sanctions. If they are, it’s a no-go for the company and even for me personally, as an EU citizen. In the end, economic and diplomatic relations (and all that politicians can say about it) comes down to personal relations of people working together.”

“My daughters go to a very good Russian school (no, not a private one), have their friends here and are happy. My wife loves her job as a journalist, and as Russian is her native language, she could never accomplish that back in The Netherlands.

5. American Yuval Weber is an Assistant Professor at Moscow’s Faculty of World Economy and International Affairs at the National Research University Higher School of Economics. Based permanently in Moscow since September 2014, he also spent 2012 and the first half of 2014 in country. He plans to stay for professional reasons, joking “Russia is recession-proof in terms of study.” His salary is paid in rubles but indexed to inflation on an annual basis. Speaking of inflation, he says “I will say that my personal inflation index is to observe the price of shawarmas [street kebabs] in Moscow. When I first moved here in 2012, 80 rubles was pretty standard. Now 120 doesn’t deter people. This is the real Big Mac index of Moscow.”

This is a transcendental time in Russian politics and I have the front row seat I want.

“The city still provides opportunities to do big and exciting projects that would be unavailable elsewhere. I’ve made some dear friends, and my Russian is improving. Second, my research is about Russia, and I’m about a year into a research cycle on Russia-related subjects that I need to finish. I will then start another Russia-related research cycle about the country’s pivot to Asia, and that will require another year or so. I have a professional interest in being here; moreover, the country’s political and economic environment is endlessly fascinating.

I have certainly noticed that my grocery bills are going up, but I think that been caused by greater domestic demand after the counter-sanctions as well as inflation because I don’t really consume too many foreign food products.

As I study international politics and economics, the political/economic situation has increased the demand for people like me who can explain what’s going on through teaching, research, and public writing. My savings and salary have gone down in dollar terms like everyone else, but:

1) I didn’t go into academia to get rich (damn!), as a single person I don’t have any dependents, and my personal tastes are very modest. I cleared all my dollar-denominated debt (100% student) before I moved to Russia because I didn’t want my salary to be in a different currency and then have to worry about being exposed to currency risk.

2) My salary is still pretty good in ruble terms; I think many expats are ignorant of their good fortune relative to locals because they’re comparing themselves to back home or others who are paid in foreign currency. Many expats have dollar/euro/sterling-denominated debts (student loans, mortgages, etc.) but they should have been more careful about hedging their currency risk.

3) This is a transcendental time in Russian politics and I have the front row seat I want.”

Regional geopolitical turmoil has caused inflation to soar, and the war in Ukraine has killed Russia’s appeal, even for the bravest of businessmen. For much of the 1990’s and the early 2000’s, Russia offered its skilled western foreign workforce salaries and bonuses they could never dream of getting back home. Skilled western expats came for two to three-year stints in sectors including banking, consulting, teaching and tech.

According to a British director at a Russian financial institution who declined to be identified, “The differences in working standards and practices take getting used to. Many expats treat Russia as a way to increase net worth, enjoying high pay, low taxes, and lots of privileges.” Due to sanctions and stalled growth, Western business interests in Russia have dramatically decreased in the past year.

If it was not difficult enough, on December 16th, 2014, the Russian ruble collapsed more than 20%, and Western news outlets began reporting new hurdles and even hostility towards foreigners. Recent data obtained from the Federal Migration Service by leading Russian media outlet RBC only confirms reports of a mass expat flight from Russia.

Germans led the exodus. The population of Germans that entered Russia fell to 250,000 from last year’s 348,000. More than 79,000 Americans and 69,000 UK citizens skipped out on Russia this year.

The outflow accelerated significantly in the second half of 2014 after Russia annexed Crimea, and the West slapped Moscow with economic sanctions. Expats with ruble-denominated salaries saw their real income split in half, and many employees pegged to a foreign currency found their company could no longer afford them. Sanctions made life more difficult for some, as they could no longer sign off on loans from sanctioned-banks, or perform other operations.

Every expat destination comes with its challenges. Russia has more than its fair share. The biggest barrier is, of course, the Russian language itself; your stay in the land of sub-zero temperatures, bureaucracy, and paperwork at every turn is made more complicated if you can’t read street signs or understand your bank teller. If the lack of English does not get you down, the dearth of sunlight in the winter will.

Expats often stay abroad for the financial inducements, and Russia was ranked 17th in HSBC’s 2014 Expat Explorer survey, a ranking of 100 countries based on quality of life. Both government and private sector jobs try and compensate expats in Russia well. The US State Department gives its employees in Moscow a 25% cost of living allowance, and another 15% hardship pay. A top foreign executive in the Russian media industry said that standard corporate compensation packages usually include an apartment, a car, guaranteed spousal employment, insurance and gym memberships, housekeeping, foreign income tax return preparation, and depending on the company, up to five trips home for the entire family.

Not everyone is joining the mad-dash out of Moscow. The RBC study shows there is another demographic clamoring at Russia’s borders: ex-Soviet states like Belarus and Ukraine. The civil war in eastern Ukraine has forced about 1 million of its citizens to flee to Russia. In fact, others are rushing in. Nearly 68,000 Chinese nationals relocated to Russia last year and more than 9,000 Koreans. This is certainly testimony to Moscow’s ‘pivot’ towards the Asian economic bloc.