Ukrainian refugees and Russian migrants bring economic benefits but also stresses to Emerging Europe

Ukrainian refugees and Russian migrants bring economic benefits but also stresses to Emerging Europe
Ukrainian refugees arrive at Przemysl station in Poland. / bne IntelliNews
By bne IntelliNews March 3, 2023

Russia’s invasion of Ukraine has caused the largest displacement of people in Europe since the Second World War. One year on, more than 8mn Ukrainian refugees are still living outside their country, according to the United Nations. Meanwhile, around half a million Russians have left to avoid the draft, in opposition to the war or simply because of the country’s dismal economic prospects.

Aside from the estimated 2.8mn who fled from the battle zone of eastern Ukraine to Russia itself, most Ukrainians fled west, with 3.5mn refugees holding temporary protection status on European Union territory at the end of last year, according to Eurostat.

It says Germany and Poland granted temporary protection status to 968,000 and 961,000 Ukrainian refugees at the end of last year, while Czechia granted 432,000. This means that roughly one quarter of Ukrainian refugees in the EU were in Poland, another quarter in Germany, followed by Czechia, which had an 11% share, but the largest number per capita.

More than 2.1mn in total are still living in the Visegrad countries of Central Europe, according to a report from the Bratislava-based Globsec security think-tank in January. It estimates that more than 1.5mn reside in Poland (equal to 4% of the total population), nearly 467,000 in the Czech Republic (4.3%), close to 103,000 in Slovakia (1.9%) and almost 33,000 in Hungary (0.3%).

In the Baltic States there are estimates of 54,000 Ukrainian refugees in Lithuania, 37,000 in Latvia, and 62,000 in Estonia.

By contrast, most Russians fled south, to the South Caucasus countries of Georgia and Armenia, to Turkey, or to Central Asia, but also Serbia – all countries where they usually do not require visas to enter.

These population movements have had a traumatic effect on Ukraine and its people of course, but they have also had a dramatic effect on the surrounding countries.

In Central Europe, despite the lamentable record of Visegrad countries in the 2015-16 Syrian migration crisis and the indifference towards Ukrainian migrant workers before the war, governments and ordinary people have reacted very generously to the current wave of Ukrainian refugees.

The integration of the refugees has on the whole gone very smoothly, helped by the existing networks Ukrainians had.

Popular attitudes to Ukrainians have remained very supportive, largely because of the strong support for Ukraine in the war, the fact that the refugees are largely women and children, and the close cultural similarities. None of these factors were present with the Syrian refugee wave in 2015-16.

“On the whole the war in Ukraine appears to have increased people’s openness to refugees fleeing violence and oppression, ” said the European Bank of Reconstruction and Development’s (EBRD) Transition Report in November.

Nevertheless, it remains highly debatable whether this “openness to refugees” will be carried over to a new wave of refugees from Moslem countries in the Middle East.

So far there have been few signs that Central Europeans are losing patience with their long-staying guests. There have been inevitable stresses as the new arrivals have put extra demand on already overburdened housing, health, education and childcare resources.

But except for Slovakia – which has sizeable residual loyalty to Russia  – an opinion poll conducted for Globsec in September shows that people still back helping Ukrainian refugees.

Again, only in Slovakia have refugees become a significant political issue, with the pro-Russian leftist Smer Party of former premier Robert Fico using it to campaign for a return to power in elections likely to be held this September.

Ironically, support for Ukraine is much stronger in Hungary, despite Prime Minister Viktor Orban’s criticism of sanctions on Russia and refusal to send defence equipment directly across the border to defend Ukraine.

By contrast, the Russian migrants in the Caucasus, Central Asia and Baltic states have often worsened still sensitive tensions between locals and their Russian minorities stemming from Soviet Union days.

In Georgia, the wave of Russian migrants into Tbilisi has upset inhabitants by forcing up rents and leading to shortages of consumer goods.

It has also become a political issue. Opposition parties and President Salome Zourabichvili have criticised the way the Georgian Dream government has appeared to appease Moscow by, for example, refusing entry to Kremlin critics. There have also been calls for the country to impose visas on Russians.

In Kazakhstan similar stresses led the authoritarian government to end the loophole that allowed Russians leave to remain using a rolling three-month tourist visa.

Yet the wave of fleeing Russians has also been of huge benefit to the recipient countries. Significant sums have been transferred into local banks for spending or to keep it safe.

According to a report by the Russian RBC news portal, residents of Russia last year transferred some $2bn to Georgia, more than $2.5bn to Kyrgyzstan, and more than $3bn was transferred to Armenia. Uzbekistan received $14.5bn, more the double the 2021 total, while Kazakhstan received $775mn.

Many of the Russian migrants are also highly skilled, for example in IT, and have set up businesses in their host countries.

In late December, the Russian Ministry of Communications said about 10% of the IT workforce, or more than 100,000 people, had left the country in 2022 and did not return.

For Central Europe, hosting refugees has imposed huge costs but it has also provided significant economic benefits in terms of spending power and contributions to taxes and social security contributions. According to Oxford Economics, if 1mn refugees remain in Poland, it would add a total of 2% to GDP by 2030.

The refugee influx could also supply much-needed workers. According to the EBRD’s Transition Report, this inflow could increase the EU’s labour force by 0.5% by the end of 2022, twice the impact of the flow of migrants across the bloc’s southern borders in 2015-6.

Central Europe has long been suffering demographic decline and a shortage of skills, so the wave of Ukrainian refugees could provide at least a short-term palliative.

The new refugees also tend to be higher skilled than the previous wave of Ukrainian migrant builders and cleaners.

“People who leave their counties are ‘positively self-selected’, as economists say,” EBRD chief economist Beata Javorcik told bne IntelliNews in November. “They are better educated, more entrepreneurial. They provide a benefit to their recipient countries.”

Having said that, many refugees have been unable to use their skills properly because of red tape or childcare duties.

A total of 33% of Ukrainians said they do not have a paid job, while 48% said their new job is below their level of education, with 30% claiming they are exploited at work, according to a survey by the EU’s Fundamental Rights Agency carried out in 10 European countries including Bulgaria, Czechia, Estonia, Hungary, Poland, Romania and Slovakia last month.

There has also been a move the other direction, as Ukrainian migrant workers returned to fight for their country.

Looking forward to the end of the war, whenever it happens, policymakers are already speculating on how many of the refugees and migrants are likely to stay and how many will return.

According to the report by the EU’s Fundamental Rights Agency, one in three Ukrainian refugees now feel part of their host country’s community, but the same proportion also wants to go home.

If they do not return, this will obviously be a benefit to their host countries and a loss to Ukraine, which is already facing huge demographic problems.

Yet the EBRD’s Javorcik believes that even if the refugees do not go back, this could be a new driver for cross-regional links that might help bring Ukraine closer to the EU.

“Even if they don’t go back they provide benefits to their home countries through the flow of remittances,” she points out.

“They are a source of investments, they form a bridge between the home and host country providing flows of trade and investment in both directions.”

Below, bne IntelliNews correspondents report on how their countries have been affected by the waves of Ukrainian refugees and Russian migrants.

POLAND

According to daily reports from the Polish Border Guard, nearly 10mn Ukrainians have used Poland as their primary refugee exit route, with just over 8mn returning to Ukraine.

Of the remaining 1.9mn, some have moved on to other EU countries, but Poland estimates that well over 1mn have made it their more or less permanent home, increasing Poland's population by about 3-4% and giving it the largest Ukrainian refugee population in the EU. They are attracted by existing Ukrainian communities in the country and the linguistic similarities between Ukrainian and Polish.

Poland spent PLN18bn (€3.83bn) last year to assist Ukrainian refugees, including welfare payments, organising education for Ukrainian children, or providing refugees with healthcare, which is comparable to what Poles receive.

Private individuals in Poland also spent a lot, with hundreds of thousands, if not millions, of privately funded relief efforts, ranging from one-off donations of money and essentials to long-term renting out of apartments or rooms in their own homes.

Ukrainians are not just recipients of aid. They have also become significant contributors to the tax system, with over 82% of adult Ukrainian refugees having jobs in Poland, according to a recent study by recruiting company EWL and the University of Warsaw.

Some refugees are even active as small business owners, with Ukrainians in Poland starting close to 10,000 businesses, including hairdressers and beauty parlours typically owned by women, software service companies, and firms offering construction and renovation services.

However, some research suggested recently that while Poles may overwhelmingly support Ukraine, they do not necessarily like Ukrainian refugees living next door. There are also concerns that the Polish welcome to refugees may soon wear out, especially as the unfolding economic crisis begins taking a wider toll on the Poles.

CZECHIA

Czechia has welcomed the highest number of Ukrainian refugees per capita in the European   Union. According to Czech interior ministry, around 500,000 refugees from Ukraine have secured temporary protection visas, with about one-fifth of them already having returned home.

According to the survey conducted out last month by the EU Agency for Fundamental Rights, close to 45% of refugee respondents were employed at the time of the survey. In the latest unemployment figures, the Czech Labour Office stated that by the end of January, 94,383 Ukrainians were working in Czechia.

On a political level, Czechia's efforts to provide assistance to Ukrainians fleeing Russian aggression have served to improve the country's tainted international image. This was damaged at the height of the refugee crisis in 2016-17, during which Czechia, together with other V4 countries, blocked EU policies aimed at redistributing the refugee inflow across the member states.

The government's support of Ukrainians seeking refuge in the country was accompanied by a wave of popular support and civic solidarity. This also helped to improve the perception of Ukrainians, who have constituted a significant minority in the country already before the war and were frequently relegated to manual and low-income jobs. 

As the war dragged on, popular support waned somewhat and was openly challenged during a series of nationalist demonstrations in the autumn of 2022.

The far-right SPD party, which is one of the two opposition parties in the parliament, has picked the alleged prioritising of Ukrainians over the needs of the Czech population as one of its main political issues. A more moderate version of exploiting the frustration from the spill-over effect of the Russian invasion of Ukraine has been picked up by the leading opposition party, the populist ANO of controversial billionaire Andrej Babis, who has stressed a peace settlement as his new international priority.

SLOVAKIA

The Slovak government has strongly supported Ukraine in its defence against Russian aggression, as well as the Ukrainian refugees who crossed the border on their way west. Around 100,000 are still estimated to be in the country.

However, public opinion has swung against the refugees, moved by loyalty to Russia among older Slovaks, successful Russian disinformation messaging, as well as political campaigning by the left-wing populist Smer Party of former premier Robert Fico.

Only 41.5% see hosting refugees as positive, while 52.5% are opposed, according to a survey carried out for the Bratislava-based Globsec think-tank in September.

Some 19.7% back support for refugees at current levels, while 35.1% want reduced support, and 42.4% are against continued support. 58.3% are negatively disposed to their town or city accepting more refugees.  

If Smer, which is currently leading opinion polls, is able to form a government in the elections planned for this September, Slovak support for Ukraine’s defence and for refugees may be sharply reduced.

MOLDOVA

From the days immediately after the invasion, Moldova was one of the main exit points for Ukrainians fleeing the war in their home country; Moldova and Ukraine share a border that is nearly 1,000 km long.

bne IntelliNews has reported from on the ground in Moldova that despite high poverty levels within the country, thousands of Moldovans opened their homes to Ukrainian refugees and offered food and other support. This happened in the Russia-leaning regions of Gagauzia and Transnistria as well as other parts of the country.

As of the end of December 2022, over 730,000 Ukrainian refugees had entered Moldova, according to data from the United Nations High Commissioner for Refugees (UNHCR). Many moved on to other countries, but almost 100,000 were still registered as refugees in Moldova as of mid-December, making it the main destination per capita for Ukrainian refugees.

The arrival of hundreds of thousands of refugees in one of Europe’s poorest countries added to the strains on the Moldovan economy caused by the war and sanctions on Russia. Sandwiched between Ukraine and Romania, Moldova’s economy was one of the worst hit in Emerging Europe by the war, and is expected to contract further this year.

Analysis from the Ministry of Economy shows public investments slumped in 2022, as a result of the triple shocks of the pandemic, the energy crisis and the inflow of refugees.

This is despite multiple packages of support announced by the EU and other international organisations and country donors. Proposing an additional €145mn to help Moldova combat the energy crisis and host more Ukrainian refugees in January, European Commission President Ursula von der Leyen said in a statement: "We stand in solidarity with Moldova while the shock waves of Russia's brutal war continue to hit the country.”

ROMANIA

As of January, there were 107,241 Ukrainian refugees in Romania, according to a government report published in January. Since the start of the war, more than 3.2mn border crossings directly from Ukraine and via Moldova into Romania had been recorded. The onset of winter and Russian attacks on Ukraine's energy system that interrupted power supplies in both Ukraine and Moldova resulted in a new influx of refugees in recent months.

Romania is a staunch member of the Western camp and an important country on Nato’s eastern flank. While not taking such a bullish tone as, for example, Poland on weapons deliveries, the country has extended support to refugees since the start of the conflict.

Government data shows private and public funds amounting to €565mn were used to help Ukrainian refugees. The sum included €200mn provided by UN agencies and €106mn from public funds.

Unlike in Moldova, the number of refugees is relatively small compared to Romania’s population of over 19mn. Nonetheless, their impact on the economy is seen in figures such as the increase in retail sales over the summer and robust net imports of goods in 2022.

Despite the need for skilled workers in sectors such as IT, only 5,000 refugees have secured official employment in Romania. Ukrainian refugees face various obstacles to employment in Romania, as well as integration into the education system. These include the refugees' anticipation of a short-term stay, language barriers (Romanian is one of the few non-Slavic languages in Eastern Europe), and the fact that Romanian education degrees are not recognised in Ukraine.

State counsellor Madeline Turza commented, as quoted in the government report, that Ukrainian refugees “have not only been wholeheartedly welcomed in Romania, but also provided with a comprehensive array of support services”.

However, the report acknowledged: “While there has been overwhelming support for Ukrainians and global condemnation of Russia’s invasion, the economic pressures, security concerns, and energy crisis pose an additional burden on neighbouring countries and necessitate robust strategies for refugee integration and inclusion.”

SERBIA

As one of the few countries in Europe to maintain friendly relations with Moscow, Serbia has received numerous Russians avoiding the conflict and more recently mass mobilisation in their home country. Serbia became a popular exit route from Russia to Western countries as direct flights between Belgrade and Moscow continued following the invasion.

In particular, Serbia has benefited from the arrival of thousands of Russian tech professionals, who left their own country following the latter's invasion of Ukraine. That has benefited Serbia, which has an expanding IT sector, but suffers from the emigration of skilled professionals to Western Europe and other parts of the world.

Since the start of the war, both Russian companies and Western companies that have quit the Russian market have shown interest in setting up in Serbia. In November, international software company Luxoft opened a development centre in Serbia, and announced plans to double its headcount in the country. While Luxoft is Switzerland-based, a Serbian government statement said 85% of the company’s employees are from Russia. The following day, Russia’s Yandex unveiled plans to open its own development centre in Serbia. 

Prime Minister Ana Brnabic said at the time she will try to bring more IT companies from Russia and other countries, and to make Serbia an IT hub.

ARMENIA

Figures from Armenia’s Migration and Citizenship Service show that over 1.1mn Russian citizens travelled to Armenia last year amid the fallout from Russia’s full-scale invasion of Ukraine in February. Approximately 65,000 of them have stayed.

According to central bank data, banks in Armenia recorded an unprecedented net inflow of about $2.5bn in transfers in 2022. Martin Galstyan, the head of the central bank, said at a press conference last month that over 70% of the transfers came from Russia.

Rating agencies have rushed to raise their outlooks for Armenia’s economy as a result of the influx of Russian migrants.

“A very large influx of immigrants and capital from Russia in 2022 has boosted external as well as macroeconomic and fiscal performance,” Fitch Ratings said in January. “It led to a 140% increase in remittances/money transfers and Fitch anticipates that a substantial proportion of new immigrants will stay in Armenia for at least two to three years.”

Labour and financial inflows from Russia could enhance Armenia's long-term economic growth potential and structurally improve its fiscal and external balance sheets, reducing its vulnerability to shocks, Standard and Poor’s reported last month.

Armenia has emerged as a "critical destination for Russian individuals and businesses looking to avoid domestic political risks and the adverse effects of international sanctions due to deep economic and cultural ties and strong travel links," it said.

Migrant inflows have boosted economic growth to double digits and narrowed Armenia's persistent twin deficits, resulting in the appreciation of the Armenian dram against the US dollar by almost 18% year on year. This has reduced external and governmental debt stocks in US dollars and partially mitigated price pressures.

GEORGIA

In late December, Georgian officials reported that around 60,000 people who fled Russia in 2022 due to the war and economic effects of Western sanctions remain in Georgia.

Since Russia launched its full-scale invasion of Ukraine, nearly 110,000 bank accounts in Georgian banks have been opened by Russian citizens, according to data released by the National Bank of Georgia. In 2022 overall, money transfers to Georgia amounted to $4.37bln, nearly half of which came from Russia. Meanwhile, last year Russians spent $891mn in Georgia.

However, the influx of Russians has sparked protests in Georgia, with demands to introduce a visa regime for Russian citizens, who currently enjoy free travel to the South Caucasian country. However, Georgian officials have repeatedly stated that they do not support such a measure.

President Salome Zurabishvili has called on the government to look into the issue of thousands of Russians who have migrated to Georgia since the start of the war in Ukraine so that “society develops a conviction that the country’s national interests and security are protected”. 

According to her, Georgia “need[s] regulations regarding labour rights, business registration, purchase of property, or opening of Russian-language schools.”

TURKEY

By the time Vladimir Putin announced his military “partial mobilisation” last September, Turkey was already a big bolthole attraction for well-heeled and super-rich Russians looking to protect assets from sanctions and ailing markets caused by the February invasion of Ukraine.

Russian oligarchs’ yachts were becoming a near-permanent feature of Turkish marinas and the amount of Russians buying Turkish properties was soaring.

The fact that Turkey declined to close its airspace to Russian civilian aircraft, plus the attraction of the Istanbul “mega airport” offering connections to a huge number of destinations around the world, made Russia’s maritime neighbour over the Black Sea even more appealing to Russians.

Nato member Turkey, of course, also remained on amicable terms with Kyiv, which made for some interesting mingling of Russians and Ukrainians in Turkish cities and resorts during the first year of the Ukraine war.

After the mobilisation announcement, flights to Turkey from Russia quickly sold out for weeks ahead despite skyrocketing prices as ordinary Russians joined the rush to exit their homeland. Turkey was also a favourite as Russia’s IT brain drain gathered pace.

A blow for Russians in Turkey came in late September when Turkish banks, threatened by US sanctions, moved to shut down use of the Russian Mir bank card system.

By January, it appeared Turkish officials had calculated that it was time to end the big influx of Russians. Turkey was reported to have stopped issuing short-term residence permits to relocating Russians.

KAZAKHSTAN

Kazakhstan’s border with Russia runs to 7,591 kilometres, while the country’s authoritarian government of President Kassym-Jomart Tokayev has frequently and clearly signalled it is no fan of Putin’s war in Ukraine.

No wonder Kazakhstan immediately became a big favourite with Russians looking to flee the draft after the mobilisation was declared five months ago.

And Russians looking for an encouraging welcome from the authorities were not disappointed.

As many as 200,000 Russians entered the country by early October, if official statistics are correct, though 147,000 Russians were said to have exited Kazakhstan in the same time period, with many heading for third-country self-exile options.

"A lot of people from Russia have come here over the last few days," Tokayev said in a late September speech. "Most of them were forced to leave by the desperate situation. We must take care of them and ensure their safety. This is a political and humanitarian matter."

Displeasure caused to Kazakhs by higher inflation in rents and other consumer goods and services caused by the Russian arrivals was tempered by news of an investment boon by October, Kazakh officials were saying more than 50 Russian firms had relocated to Kazakhstan since the Ukraine invasion, with scores more interested in making the move.

But by mid-January, Kazakhstan was moving to tighten up on the Russian addition to the population, with the announcement that the country would no longer permit Russian citizens to take advantage of the “three-month visa run” loophole to stay in the country indefinitely. This prompted speculation that neighbouring Kyrgyzstan, largely Bishkek, was set to see the arrival of many of the Russians no longer so welcome in Kazakhstan.

Absorbing more Russians remains a headache for the Tokayev administration, what with occasional provocative comments from the more revanchist Russian nationalists who insist that one day Russia should take back territories of northern Kazakhstan, where most of the country’s ethnic Russians around 16% of the population live.

Still, there are tempting economic advantages to be had from working with both Putin, in cooperating with some of his reoriented economic plans, and skilled or entrepreneurial Russians not minded to go back home.

OTHER CENTRAL ASIAN STATES

Uzbekistan is dealing with similar considerations. While it faces no threat to its territorial integrity from Russia, it does jealously guard its multi-vector foreign policy, not liking to get too close to Moscow.

Statistics on how many Russians have made their way to Tashkent and other Uzbek locations are hard to come by, but a total of 2,300 people took up permanent residence in Uzbekistan last year, up by a fifth year on year. Among them were 813 Russians.

As regards Tajikistan, President Emomali Rahmon remarked to Putin in late October last year that "30,000, we will not call them refugees, the relocated ones, Russian speakers, came... to us".

Tightly-controlled, remote Turkmenistan is not really an option for almost any ordinary Russian in their right mind, but Mongolia has become a sanctuary to a significant number of Russians escaping the military call-up, albeit usually often a tough one.

This article is part of bne IntelliNews’s series marking one year since Russia’s invasion of Ukraine.

Reporting by Robert Anderson in Prague, Wojciech Kosc in Warsaw, Albin Sybera in Ljubljana, Clare Nuttall in Glasgow and Will Conroy in Prague.

 

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