Russia and pensions in post-Soviet de facto states

2016-02-01 15 min read Research notes

This post outlines basic information about pensions in Abkhazia, South Ossetia and Transnistria, and the role of Russia in financing the pensions of residents in these territories. It is based on data and information available online, and includes references to relevant legislations and international treaties. All information comes either directly from official sources, or from news agencies quoting official sources.

Pension Fund of the Russian Federation

The open data section on the website of the Pension Fund of the Russian Federation presents some statistics related to the number of people living abroad receiving a pension from the Russian Federation as of 31 December 2014. The breakdown by countries is not particularly detailed:

Number of people living abroad receiving a pension from the Russian Federation

Country Number of recipients of pensions
Germany 96 953
Israel 40 453
Latvia 21 516
United States 20 317
Belarus 18 180
Other countries 61 104
Total 258 523

Source: http://www.pfrf.ru/opendata~7706016118-abroad

Post-Soviet de facto states, including Abkhazia and South Ossetia (recognised by Russia as independent countries), did not make the list. Looking at these data, we have to assume that they are included in “other countries”, and look for such information elsewhere.

As will be seen, overall support offered by the Russian Federation to pensioners in Abkhazia, South Ossetia and Transnistria is substantial and local pensioners are well aware that their income is more or less directly sponsored by the Russian Federation.

How many, how much – Abkhazia

According to official sources quoted by Sputnik Abkhazia and Russia’s Parlamentskaya Gazeta there are 32 154 residents of Abkhazia receiving a Russian pension (the quote is from May 2015), and as of 1 January 2015 their average pension was 6 262 Russian Roubles (RUB), or about 92 euro.1 According to article 15 of the ‘Treaty on Alliance and Strategic Partnership’ signed between Abkhazia and the Russian Federation in November 2014, however, the level of pensions paid to Russian citizens residing in Abkhazia was to be raised within 3 years of 1 January 2015 to the average level of pensions in the Southern federal district, i.e. 10 179 RUB (~150 EUR). On 14 April 2015 in Sochi a specific agreement on pensions was defined, which was later ratified by both sides and signed into law on 29 December 2015 by Vladimir Putin. The Russian side is to take charge of all related expenses.

The amount received by pensioners would increase year by year and reach the expected amount by 2018. On average, compared to 2014 level, the increase of pensions received by Russian citizens resident in Abkhazia would correspond to 598 RUB (~9 EUR) in 2015, 765 RUB (~11 EUR) in 2016 and 1 519 RUB (~22 EUR) in 2017. The estimated additional total expense for the Russian budget is 230 million RUB (3.4 million euro) for 2015, 294 million RUB (4.3 million euro) for 2016, and 584 million RUB (8.6 million euro) for 2017.2

Besides, residents of Abkhazia are also entitled to pensions paid by the government in Sukhumi. While there are a number of categories and levels of payments, most pensioners receive the basic pension of 500 RUB (~7 EUR) a month. According to the latest statistics (October 2015), there are currently 36 210 individuals who, having satisfied the age requirements, receive this amount. A 2013 re-registration process resulted in 47 566 individuals receiving Abkhazian pensions at the time. In October 2014, Abkhazia’s prime minister Beslan Butba claimed there were about 11 000 people in Abkhazia who received an Abkhazian pension, but did not receive a Russian pension and suggested that Russian support would allow to increase the amount they receive (apparently, this has not yet happened).

While the numbers do not correspond exactly, it may be safe to say that there are currently about 32 000 citizens of the Russian Federation residing in Abkhazia who receive a Russian pension, and 11 000-15 000 other residents that receive the Abkhazian pension, but do not receive a Russian pension.3

How many, how much – South Ossetia

According to local officials, there are currently about 3 600 people receiving a pension from the the government in Tskhinvali, with their number expected to grow to up to 4 036 by the end of 2016. As of late 2015, the average pension is 6 221 RUB (~91 EUR).4 It should be noticed that the level of pensions increased dramatically in the last few years; in 2010, the minimum pension in South Ossetia was only 280 RUB (~4 EUR).

According to a press release by the Pension Fund of the Russian Federation, in 2014 there were about 700 Russian citizens residing in South Ossetia who receive a Russian pension, a number that seems extremely low.

According to art. 8 of the “ Treaty of Alliance and Integration” signed between South Ossetia and the Russian Federation in March 2015, starting with 2016 the pension of Russian citizens residing in South Ossetia must correspond with the average pension paid in the North Caucasus federal district.

It should be highlighted, however, that 92.2% of South Ossetia’s planned budget for 2016 is financed by the Russian Federation – Russia’s total contribution amounts to more than 8 billion roubles (more precisely, 8 225 870 000 RUB, or about 120 million euro).

How many, how much – Transnistria

According to the data included in Transnistria’s statistical yearbook, as of 31 December 2014, there were 141 300 pensioners in Transnistria, receiving an average pensions of 122 USD (~110 EUR).5

The number of pensioners is up from 130 900 pensioners recorded in 2005, but with significantly lower numbers of working people; in 1995 there were 241 100 people working in Transnistria, while by the end of 2014 that figure fell to 142 400. In other words, there is currently a one to one ratio: one pensioner for each working person in Transnistria.6

It is worth noticing that the average pension in Transnistria is substantially higher than in both neighbouring Moldova (1087.6 Moldovan LEI, or about 48 EUR, according to 2015 data of the Moldovan statistical office and average exchange rate for 2015 as calculate by the Moldovan national bank) and Ukraine (1691.55 hryvnia, or about 68 EUR, as of October 2015, according to the Ukrainian pension fund).

Traditionally, residents of Transnistria (including Russian citizens) received a pension only from the Transnistrian authorities, and not from the Russian pension fund. However, since 2008, all Transnistrian pensioners receive an additional component sponsored directly by the Russian Federation (commonly known as the rossiskaya nadbavka) as humanitarian support. As of 2014, this component was of about 15 USD per month, but due to the devaluation of the Russian rouble, its value decreased significantly in 2015 once converted to the local currency.7This form of humanitarian support from the Russian government has remained stable at around 1 billion RUB per year (about 15 million EUR at average 2015 exchange rate).

For the first three months of 2015, Transnistrian authorities have not been able to pay out in full salaries to public workers and pensions. Payments of the pensions has been restored since March, when long-awaited financial support from Russia reached Transnistria.

Starting with Autumn of 2014, pensioners in Transnistria that are also citizens of the Russian federation received a form that would allow them to give up the Transnistrian pension, and start receiving a Russian pension instead. Thousands (exact numbers are not currently available) did the switch, but according to a 21 January 2016 news story by a local tv channel, some of them would like to revert to the Transnistrian pension, since the devaluation of the Russian Rouble is having a substantial impact on their incomes (apparently, local authorities are contemplating options to compensate them for the loss). According to news published on Transnsitria’s state news agency on 12 January 2016, quoting Transnistria’s Minister for Social Defence and Work, Transnistria’s Unitary State Fund for Social Insurance had about 90 million USD of deficit (its total expenses are about 220 million USD), but in spite of this, resources where found to pay all pensions and arrears, and slightly increase pensions for 2016. She also claimed that the number of pensioners decreased of about 15 000 individuals; even if she didn’t explain the reason, this must broadly correspond to the number of people who decided to switch to the Russian pensions.8

It should be highlighted, however, that most of Russia’s financial support for Transnistria comes through provisions of natural gas, without expectations of repayment. Back in 2007, as described by Isachenko (Isachenko, 2009, 66). On the Political Economy of Unrecognised State-building Projects."), “[t]o ensure timely payment of pensions and other social benefits, local authorities decided to borrow $US 14 million from the special fund that had been created in 2006 to accumulate gas payments directed to Gazprom.” This was only the beginning of a new approach for finding resources for supporting Transnistria’s welfare state that is by now established; according to Moldova’s Ministry of Economics, by 1 July 2015, Transnistria’s unpaid debt towards Gazprom amounted to more than 4 billion USD (4 356 million USD).9 In practice, simplifying the process, Gapzrom continues to provide gas to the region without expectation of repayment; money paid by consumers and enterprises for gas largely go to the state budget and are used to support public expenditures, including the payment of pensions and other social subsidies.

This happens in line with Transnistria’s legislation, albeit without a formal agreement with either Gazprom or the Russian government. The original version of the law “On the peculiarities of payment for natural gas” approved by Transnistria’s parliament on 27 December 2006, stated clearly in its article 10 that all money collected for gas consumption should be paid to the company that provides gas; later amendments10 changed that article, and introduced the possibility to transfer those resources to Transnistria’s state budget. This is no secret: as recently as 28 January 2016, Transnistria’s president Shevchuk stated that “‘gas money’ are a source for dealing with the deficit of the republican budget and the pension fund.”

To summarise, pensioners with Russian citizenship who starting with 2015 decided to switch to Russian pensions in Transnistria (about 15 000 individuals, if estimates outlined above are correct) receive their pensions directly from the coffers of the Russian pension fund. But Russia finances an important part of the pensions received by all other 127 000 pensioners resident in Transnistria, either directly through the rossiskaya nadbavka provided in the form of humanitarian support, or indirectly, since the transfer of money that would otherwise need to be paid to Gazprom go to fill the about 41% deficit in the budget of Transnistria’s Unitary State Fund for Social Insurance.

Besides, according to official data presented by the news website Moldova.org, there are twenty individuals living in territories controlled by Tiraspol who receive a pension from Moldova’s government. According to news reports, the Moldovan government clearly recommends to demand pension from Transnistrian authorities, and Transnistrian pensions are substantially higher, which explains the low figures.11

Some back-of-the-envelope calculation

How much does Russia spend overall to support pensioners in Abkhazia, South Ossetia and Transnistria every year? Here are some rough estimates.

  • Abkhazia: as of 2015, considering 32 154 people receiving Russian pensions, of an average 6 262 RUB per month, for 12 months, we end up with a total cost of 2,4 billion RUB, or about 35 million EUR per year.12 If the number of pensioners remains stable, due to planned increased in the amount they receive, by 2018 this sum should correspond to about 58 million EUR per year.13
  • South Ossetia: with only about 3 600 pensioners, the total amount spent for pensioners in South Ossetia as of 2015 should be of about 4 million EUR (no matter if the pension is paid directly from Russia or from Tskhinvali’s budget, we’d still be talking of almost exclusively Russian money), expected to grow to about 7 million EUR a year by 2018 considering the expected increase in the number of pensioners and in the amount they receive.
  • Transnistria: for Transnsitria the math is slightly different. About 15 million EUR every year come as humanitarian support in the form of the rossiskaya nadbavka. But by not demanding repayment of gas, effectively Russia is paying the bill also for the about 81 million EUR (in 2015) deficit of the Transnistrian pension fund. The total amount will vary according to the deficit, and might well increase if more pensioners switch to pensions that are 100 per cent paid from Russia, but for the time being Russia is apparently spending about 100 million EUR per year to pay Transnistria’s pensions.

Additional information

Pension age

In all of these territories, the pension age is the same as in Russia: 60 for men and 55 for women.

Russia’s state budget

In Russia’s state budget for 2016 (made public in the form of a pdf file composed of 2384 scanned, unsearchable pages – reference to Abkhazia and South Ossetia at page 941) , there are 7 986 104 900 RUB (~117 million EUR) earmarked for Abkhazia and 8 225 870 000 (~121 million EUR) earmarked for South Ossetia.14 Apparently, these do not include pensions paid directly by the Russian side, nor, for example, expenses by the Russian Ministry of Defence for deploying its military in these territories. There is no evident reference to financial support for Transnistria.

Summary table

Territory Total number of pensioners (~2015) Total number of people receiving Russian pension (~2015) Average Russian pension (in euro, 2015) Total amount spent yearly by the Russian Federation specifically to support local pensions (in euro, 2015)
Abkhazia 43 000 32 154 92 (~150 by 2018) 35 million (58 million by 2018)
South Ossetia 3 600 700 91 (~150 by 2018) 4 million (7 million by 2018)
Transnistria 141 300 15 000 110 (Transnistrian pension) about 100 million

References

Isachenko, Daria. 2009. “On the Political Economy of Unrecognised State-Building Projects.” The International Spectator 44 (4): 61–75. https://doi.org/10.1080/03932720903351161.

  1. Throughout this post, the average EUR/RUB exchange rate for 2015 as provided by the European Central Bank (68.072 RUB for 1 EUR) will be used. It should be highlighted, however, that in the last couple of years the exchange rate fluctuated widely, and as of 29 January 2016 stands at 82.2 RUB for 1 EUR. ↩︎

  2. Beyond pensions, there is also a separate agreement that similarly increases the salary of public workers in Abkhazia at the expense of Russia’s budget. More than 9000 people are expected to benefit of the boast to salaries. ↩︎

  3. At least some of them probably reside in Gali, and may be receiving Georgian government social benefits or pensions. ↩︎

  4. More details about the pensions paid to different classes of recipients can be found following this link. ↩︎

  5. Transnistria’s statistical office provides data in both Transnistrian Roubles and US dollars. Since the exchange rate between USD and Transnistrian Rouble has remained stable since 2012, for simplicity, data in USD are used in this post, using the average USD/EUR exchange rate for 2015 as calculated by the European Central Bank for reference (1.1095 USD for 1 EUR). ↩︎

  6. It is worth mentioning that out of the 142 400 people officially working in Transnistria, only about 78 300 work in the private sector. ↩︎

  7. Since 2012, the Transnistrian Central Bank has a policy of maintaining a stable exchange rate of the Transnistrian Rouble against the dollar around 11 Transnistrian Rouble for 1 USD. The current plan of the Transnistrian Central Bank is to keep the exchange rate in the range of 11.0-11.3 Transnistrian Roubles for 1 USD also for the period 2015-2017. This means that in recent years the local currency has increased its value compared to – among others – the Russian, Moldovan and Ukrainian currency. ↩︎

  8. The total number of pensioners in Transnistria has remained relatively stable/growing slightly in recent years (137 000 pensioners in 2010, 140 800 pensioners in 2013, 141 300 in 2014), so there is nothing else that would explain such a dramatic drop in 2015. ↩︎

  9. Chișinău knows this exactly because formally Gazprom sells the gas aimed at consumers based in Transnistria to Chișinău-based Moldovagaz (which is 50% owned by Gazprom itself), which then transfers it to Tiraspoltransgaz, i.e. the gas provider to consumers and enterprises in Transnistria. ↩︎

  10. The current version of the law is available at this link. ↩︎

  11. Information available online, however, is not sufficient to clarify this completely. On the hand, it seems that people living in territories not controlled by Chișinău are not entitled to a Moldovan pension, on the other, there are apparently twenty people who do receive this pension. In theory, these might either be principled individuals who are faithful to the government in Chișinău and prefer to receive a lower pension rather than accept money from Tiraspol, or – in the lack of exchange of information among the sides – pragmatic individuals who draw pensions from both Chișinău and Tiraspol. ↩︎

  12. In his excellent article on the political economy of post-Soviet de facto states, Broers (:18) estimates, without providing additional details, “annual transfers in the region of $70,000,000 to pay for Abkhazian pensions.” The discrepancy is mostly due to the combined effect of the fluctuation of exchange rates of both US dollars to the EUR (on average in the first half of 2014, 1 EUR was exchanged with 1,37 USD, while today it stands at about 1,1), and Russian Rouble to both USD and EUR. This is an additional reminder of the importance of clarifying currency details in times of substantial fluctuations of exchange rates. ↩︎

  13. Once again, it should be highlighted that the RUB/EUR exchange rate applied is the average rate of 2015. Using instead the current exchange rate as of 29 January 2016, the value in euro would be about 20 per cent lower. ↩︎

  14. The number included in the Russian state budget under expenditures corresponds exactly to the sum included in South Ossetia’s budget for 2016. ↩︎

post-soviet de facto states
Avatar
Giorgio Comai
Researcher, data analyst

Related