This post first appeared on Russia Insider
This 30 minute in-depth look at Vologda is mostly about its economic renaissance, which is typical for such Russian regions, but it also touches on the cultural riches of this region. Vologda is one of the most unspoiled and charming Russian northern regions with rolling countryside, beautiful churches and monasteries and 18th and 19th century architecture. By Russian standards it is relatively unspoiled, and is known today for its high quality agricultural products, particularly dairy.
We've arrived in Vologda Oblast to show you how its economy is developing. Expectedly, we'll see how Vologda butter is made, how Vologda lace is woven into patterns, how the Severyanka blast furnace burns it fires. There are also unexpected things like products from fertility stones. And, literally, a sweet life.
But first things first. Let's find out how the economy feels, to begin with. We're going to ask Governor Oleg Kuvshinnikov about this.
- Oleg Alexandrovich, I did my homework. A few years ago, the region was in a difficult economic situation. A lot of people say that clearly, a breakthrough was made. I'd like to know what decisions made it possible.
Oleg Kuvshinnikov, Governor of the Vologda Oblast: “What happened to the region — in 2008, the region was in a deep economic crisis. All regions with a monostructured economy have suffered from the crisis because revenues from systemically important enterprises fell sharply. For us, it was the metal industry. We were in 81st place in the country in terms of public debt. This was a disaster. We started with ourselves. We reduced the number of state employees by 32%, and the number of municipal officials by 34%. We started working with the federal center and attracted more than 26 billion rubles ($418 million) of budget and commercial loans.”
Over the years, there are loans. But they are not commercial with a monstrous rate. They're from the federal budget, at 0.1%. It wasn't limited to just such a financial aid. The development of production bore fruit.
Oleg Kuvshinnikov: “Revenues to the budget reached almost 100 billion rubles ($1.6 billion) which is twice as much as it was in 2011. Today, we're in 6th place in terms of growth rates of tax and non-tax payments to the budget. There used to be a deficit of 10 billion, now there's a surplus of 14 billion ($160 mln and $224 mln). We're in 20th place in terms of investments. This suggests that we have balanced the budget and the economy, and we have an opportunity for the development and implementation of major infrastructure projects.”
There are a lot of questions though. Who gives the region money and what will be the development? There are many companies that export their products to approximately 120 countries. It means incomes and, as it was proved in 2008, risks as well. That year, steel prices crashed. The giant Cherepovets steelworks operates in the region. What is the situation there now?
By the way, the governor used to work at the Cherepovets steelworks as a simple worker. This is not only the largest enterprise in the region, it's also one of the biggest in the world. This is a kind of industrial city. Let's have a look.
The heart of any metallurgical industry is, of course, the furnace. Special furnaces are given proper names. Meet Severyanka, a record-holder blast furnace.
- Is it true this blast furnace is in the Guinness Book of Records?
Andrey Kalko, Head of Production Center, Severstal:
- Absolutely. April 12, 1986, blast furnace number 5 was launched at the Cherepovets steelworks. At that time, it was the largest blast furnace in the world, and, therefore, it was listed in the Guinness Book of Records.
- Now it's the largest in Europe, right?
- Now Severyanka, blast furnace number 5, retains the status of the largest metallurgical unit in Europe.
The work goes around the clock. It's 2,200°C inside the furnace (4000°F). It produces more than 9 tons of pig iron per minute and over 4 million tons per year. There are several more furnaces at the factory. Each of them is now more efficient after being upgraded.
And here is an amazing picture even for the industry in modern Russia. A new blast furnace is being built. And all this is without suspending the work at other facilities.
- A blast furnace is expensive as far as I know. What is the amount of investment?
Andrey Kalko: “Our company invests an amount exceeding 30 billion rubles ($482 million) in blast furnace number 3.”
By the way, new technology is being used, investing in environmental protection over 11 billion rubles ($176 million).
Mikhail Belov, ecologist at Severstal:
- If we look back at the times before 2018, we have reduced dust emissions by 17 thousand tons.
- 17 thousand tons of dust?!
- Yes, and we're talking about dust only.
- Is it true that Red Book birds live around here?
- Yes. Red Book birds live on our sludge collectors. in particular, the white-tailed eagle. which is listed in the Red Book.
The eagles eat fish that are not afraid of a scary word "sludge collector". They seem to like it there. Another unusual feature is the service for forecasting possible accidents.
Sergey Dobrodey, Repair Service: “We try to find out in advance all the defects that may occur at the equipment and prevent them by timely intervention. We have about 4,000 sensors installed. We plan to increase the number up to 10,000 in the near future. Over the next ten years, we plan to spend about 2 billion rubles ($32 million) on this digitization.”
Sergey also told us that they are going to introduce exoskeletons. So that the workers won't hurt their backs when carrying heavy things. The social burden of 25,000 personnel turns out to be serious. The company spends 300 million rubles ($4.8 million) on healthcare alone.
And this is education. The factory museum, where, by the way, we found photos of Oleg Kuvshinnikov and his father, is part of a large program for the development of industrial tourism.
rLyudmila Guseva, Advisor to the General Director: “The museum is interactive. You can see here the whole process of metallurgical production. All stages are presented graphically, beginning with ore and coal, what nature gives us. Such industrial tourism is only in its infancy. This is great. We're one of the first.”
Tourists are allowed to have a look at the production. There is a special area at the hot rolling mill.
Artyom Tarasov, foreman:
— Behind my back, you can see a slab about 100 meters long (330 feet). We can roll it 1.2 millimeters thick (0.047 inches) and it will be about 2 kilometers long (1.2 miles).
— So, it'll be a roll, right.
— Yes, it'll be a roll.
The Severstal factory has a complete cycle. Here, ore is smelted, steel is cast, and even finished products are manufactured. It has the widest assortment among metallurgical enterprises in Russia. A large part of the product will be exported but domestic demand is also growing which adds even more confidence.
This polymer-coated material has a poetic name: steel velvet. It has some resemblance. It's used for roofing. In general, the enterprise produces a lot of different useful metals. It can be used to make ships, bridges, refrigerators, or mining equipment.
Speaking of equipment. This is the products of another enterprise in Cherepovets, the raw materials for which are extracted in the bowels of Murmansk Oblast. These are fertilizers. In the depths of the Murmansk mountains in the city of Kirovsk, as if in a fantastic dwarf city, there are hundreds of miles of tunnels. With the help of modern equipment, some of which is controlled remotely, the Fosagro company extracts a fertility stone — apatite-nepheline ore. It contains phosphorus, one of the main components of fertilizers that will be produced at a factory in Vologda Oblast.
Vladimir Davydenko, CEO of Apatit: “In total, we produce about 50 brands of fertilizers for different seasons and export them to 100 countries of the world.”
Producing fertilizers is difficult and expensive. For example, ammonia is needed. A new installation with a capacity of 760 thousand tons per year costs 64 billion rubles ($1 billion).
Vladimir Davydenko, CEO of Apatit:
— The temperature here is 900°C (1650°F).
— 900 degrees!
— This process is considered the most technologically advanced in the world.
— In the world?
Carbamide is also produced on the new equipment, a type of fertilizer, in the amount of 500 thousand tons per year.
— It looks like polystyrene.
— It's extracted from gases, basically from the air. Money out of thin air. These are environmentally friendly fertilizers.
An ammonium sulfate facility is being built here. More raw materials are needed to expand production. A warehouse with a corrosion-resistant wooden roof is ready.
Vladimir Davydenko, CEO of Apatit: “About 30 billion rubles ($482 million) of investments are spent annually on the development of all our mining and processing departments.”
As for construction, the company is not engaged in industrial construction only. It also builds social objects — residential buildings, hospitals, and churches.
Alexander Gilgenberg, First Deputy General Director: “The annual budget of our company for social initiatives is several billion rubles. Suffice it to say that we have invested about 3.5 billion rubles ($56 million) in the ski resort alone over the past 5 years.”
Production volumes increased by 10% per year. It's planned to reach 11 million tons compared to the current 6 million tons. With such numbers, Fosagro is the largest producer of mineral fertilizers in Europe. Just like the metal industry, the company has more customers inside the country.
Vladimir Davydenko, CEO of Apatit: “Almost 30% of all our produce goes to the Russian market. The number increases by 6-7% per year.”
This company is a vivid example of diversification. Vologda Oblast should not depend heavily on steel prices. Expanding production means taxes, investments, jobs. When fertilizers sell well, the region feels well.
Moreover, as soon as the economic situation improved, foreigners came here.
— Is the region interesting to foreign investors?
Oleg Kuvshinnikov, Governor of the Vologda Oblast: “It is indeed. According to the results of 2018, we took 20th place in the volume of investments per capita among 85 regions of Russia. The total investment amounted to 150 billion rubles ($2.4 billion).”
Speaking of foreigners. Did you know that Vologda was unofficially called the diplomatic capital of Russia? In February 1918, the Germans were advancing on Petrograd. It was decided to evacuate diplomatic missions of the Entente countries. For example, the American embassy was located in this building.
Today, there are measures to support foreign and Russian business. One of them is the territory of advanced social and economic development.
Oleg Kuvshinnikov: “Today, there are already 13 residents. The volume of investments is 3 billion rubles ($48 million). 500 jobs have been created. This is going to be the country's biggest territory of advanced development where there will be 40 residents, 10 billion rubles of investments ($160 million), 2,500 jobs.”
Now, we continue the topic of fertilizers. When in Vologda, you have a desire to grow something good, literally and figuratively. There is someone to sow, there is someone to reap the crop, to milk the cows and make some Vologda butter.
The recipe for Vologda butter, in which hundreds of herbs of flood meadows mix, was made up by nobleman Vereshchagin in the 19th century. Nothing has changed since that time. Except for the equipment, of course, which is used to make other products as well.
Sergey Molotov, CEO of the dairy plant: “Together with butter, we produce milk powder and an almost complete set of dairy products. Therefore, what is produced here is a continuation of the tradition. And it's just high-quality products that have established themselves in the market.”
This is not just an enterprise. This is a scientific-experimental dairy plant.
Vladimir Shevchuk, Dean in Vologda State Dairy Academy:
—This is the unique equipment. There's no such equipment anywhere else in Russia. Here's a canned milk production line. This is a flash film concentrator and a spray dryer. There is no such equipment anywhere else.
— That is, specialists are trained here.
— The number of applications for employment exceeds the number of graduates.
Practice is key. Starting with the basics of the production of the famous butter.
— People are trained at this quite simple unit.
— So the lid goes on top, right?
— Yeah, some cream is put in there, then it's covered, and a student starts spinning this thing.
— Until they learn the basics, I got it.
By the way, the plant management is afraid they won't be able to maintain the training base and original products if the enterprise is privatized.
Vladimir Shevchuk: “The general tendency to take over businesses hasn't spared us. We have been excluded from the privatization plan until the end of 2019. But an unhealthy interest in the plant still persists. Starting next year, they want to include us in the privatization plan. To date, I think, it will all depend on what the governing bodies will think on this matter and it will decide the fate of the plant. And whether we can maintain the production facilities and the traditions that we have maintained over the past 20 years.”
It is interesting that the butter and other products of Vologda, which we are going to tell you about later, have become a regional brand, Soul of the Russian North. So that people could know, just like that Veliky Ustyug is the home of Ded Moroz. Also, there's industrial tourism. All this promises a 6% increase in the tourism flow for the year. This is more than 3.2 million people. But the potential is much greater if the infrastructure is further developed.
Oleg Kuvshinnikov: “The first thing we started to do was reconstructing the airport. The next task is the expansion of railway communication and to increase the throughput of the Northern Railway. The third task is the reconstruction of federal and regional routes. This includes the construction of a bridge over the Sheksna River in Cherepovets. The volume of investments is 16.5 billion rubles ($265 million). This is the largest infrastructure project in Vologda Oblast.”
Speaking of tourism, we have to tell you about the famous Vologda lace. Just look at this beauty. What is the secret? Let's have a look.
— I mean you can't tell the volume, everything's sold by the piece, right?
Maria Agapova, Director of Snezhin lace company: “Right. We don't even set the goal to expand the production volumes. Fabergé eggs have never been measured in pounds and feet.”
There are more than 30 items: tablecloths, napkins, scarves, vests, bedspreads, blankets. People from all over Russia and from abroad buy them for themselves and as a gift.
Maria Agapova: “During the visit of Barack Obama and Michelle Obama to Moscow, we prepared a gift for Michelle Obama and made the table decoration for the dinner of the two presidents.”
Lace is expensive. Large pieces can cost hundreds of thousands of rubles. But if you have a look at the work of the lace-makers you'll get the reason for this.
— What was your largest work?
Tatyana Makarova, lacemaker:
- We made curtains to order. They were huge, and the whole team had to work from August to January.
— Can you show me the simplest pattern so I could try?
— I'm going to show you the easiest element of lace-making. It's called "pleteshok" (weft).
— Maybe, another 20 hours and I'll be able to do it a little bit faster.
There's another fine piece of work at this enterprise to have a look at or, to be more precise, to have a look through. Now, the Vologda Optical and Mechanical Plant, part of Schwabe Holding owned by Rostec, is one of the largest manufacturers of aiming optics in Russia. But since 1971, there have been several crises at the enterprise. There were many troubles, workers here even were given sewing machines as salary. For example, this is the world's largest microwave oven. This is another experiment. But now the plant works only in the field of its expertise.
Vasily Morozov, CEO: “We manufacture sighting systems, fire control systems for our armored vehicles. Our latest Armata tank also looks at the world through our sights.”
They also produce civilian devices. There are 40 kinds of sights for fans of shooting and hunting. They are sold under the brand of Pilad in 32 countries.
Vasily Morozov, CEO: “Last year we grew by 13%. According to preliminary estimates, this year the growth will be 15%. This year, for the first time, we will hit the milestone of 10 billion rubles ($160 million) in commodity output. Over the past 5 years, we have invested more than 2 billion rubles ($32 million) in the investment program of our company.”
Here is the very beginning of the creation of a sight. First, a 3D model is built, and then a blueprint is made. Here's one of the next stages. After grinding and polishing, this optical component is made from a workpiece. The plant produces thousands of types of such parts. Together with making lenses, the plant also produces other parts of sights. They cast and process metal right here. These are before and after. Then, after machining, a protective coating is applied on a special galvanic line. Now the share of innovative products is more than 40%.
They come up with new products: holographic sights, digital sights, infrared imagers. They will also be cheaper than foreign ones, but no worse.
Vasily Morozov, CEO: “Products undergo tests that simulate combat conditions, namely humidity tests, impact tests, fogging tests.”
Thus, a new question arises — accurate sights, new steel grades, fertilizers. All this can't be produced without specialists. The region is experiencing a shortage of personnel. Colleges increase the number of state-funded scholarships.
Enterprises themselves train personnel. But good living conditions are another necessity. Therefore, new houses are built and mortgage loans are subsidized.
Oleg Kuvshinnikov: “We have just introduced a new measure of state support. At the birth of the first child, we provide a preferential mortgage, we pay 3% of the mortgage at the expense of the regional budget.”
We want to tell about the older generation as well. Elderly people are very active here, even during an interview.
— We've been talking about you. That you're doing everything nicely.
— That's very kind of you.
— We're in our 80s.
— Oh really? We will always help and support you.
There is a Demography national project. One of its tasks is to improve the quality of life of elderly people. Social centers are being created all over the country. There are already several of them in Vologda.
Lyudmila Kundina, Director of Zabota center: “Initially, the center was created under the slogan "old age won't make you stay at home". Life only begins when you retire. So it turned out that our visitors are mainly pensioners. We have more than a hundred hobby groups. Therefore, we have about 3,500 visitors. Their composition is changing constantly.”
Tatyana decided not to stay at home and be an active pensioner. At first, she came to the sports section. But it turned out she wasn't satisfied with table tennis and training devices.
— I saw people dance. I came to the group leader and said that I had a dream. He said it wasn't a problem at all and invited me to join.
— So, you want to take part?
— Absolutely. We started rehearsing with my partner. I think that my most cherished dream will come true and I will take part in the ball.
Every year, there are more and more rewards for participating in races, heats, hikes. Some people dance in their 70s, some people sing, some people make dolls and stage plays for their grandchildren. Most importantly, in their youthful spirit, pensioners are making plans on how to hold an exhibition and perform a dance. There are also new acquaintances. Weddings happen quite often.
Lyudmila Kundina: “Students of our Vologda State University began to write a thesis on factors affecting old age. It turned out that those pensioners who go to our center now have their health and mood improved by 60%.”
Speaking of active people, both young and old. The authorities of the region began to conduct urban development councils. The execution of orders is under the control of residents.
— For every day of delay, they are ready to…
— Tear apart!
— Yes, tear apart the contractors. 54 billion rubles ($867 million) were allocated for the next three years to implement these orders. It is very important that we have a surplus budget. In October, we will begin a new wave of urban development councils which will take place at the end of this year and in early 2020. For these purposes, we allocate an additional 10 billion rubles ($160 million).
Few people have the illusion that they can easily arrange a sweet life for themselves without any support. Even if it is literally sweet.
In 22 years, Atag confectionery in the village of Sheksna has gone from a small enterprise to a company whose products are sold throughout Russia, in the CIS countries, and even in China. They produce 120 kinds of candies. The secret behind this is to create something that no one can.
— I always wanted to do this. Can I taste one right from here?
— You're welcome to it.
— For free, taking advantage of my position. Is it difficult to make such a candy?
Svetlana Kartashova, Production Manager: “Very difficult. Large manufacturers don't even undertake to produce small-sized candies because it's just too small, about only 6 grams, meaning you have to put 4 grams of filling inside, and 2 grams of chocolate to cover.”
Up to 60 types of such small-sized candies are produced per year. Seems a bit of a challenge to come up with a name for each of them.
— What names, for example?
— Man's Tear, Woman's Bite, Fireman Petya — these are the well-known ones.
— Fireman Petya?!
— Oh, because of the steel production in the region, I got it.
Here is a new stage of development — industrial tourism we talked about.
Children will be taken on an excursion, and then, of course, to a tasting.
— They're going to eat everything.
— That's fine. That's why, as I said, preparatory work is necessary. We need to think everything through so that the children would be safe.
— What measures are taken to support small and medium-sized businesses?
— We have opened a single platform, My business, where you can get all the necessary consulting, property, and credit support at lower rates. And of course, we have a simplified tax system. We reduce tax rates so that small and medium-sized businesses are profitable and in demand. And we have the Development Corporation which supports all major projects in the region.
— How much have you reduced the tax rate?
— We reduced the rate from 15% to 10% and from 6% to 4% for receipts less expenditure.
There is another initiative, the Vologda hectare which is issued not for rent, but for ownership to support agriculture. People can come, maybe stay here, and, most importantly, work with the soul of the Russian North.
“A blast furnace is feminine in Russian. So, she's treated like a woman. Each of them has their own personality.”
“Our production is just like the song — the salt of the earth.”
“It's amazing that's the lace was called Vologda lace.”
Oleg Kuvshinnikov: “We are proud to be Vologda residents and we love our small homeland.”
This post first appeared on Russia Insider
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