October 27, 2008

Briefing from Asher Ostrin - October 24, 2008

Below is a briefing from Asher Ostrin, Executive Director of JDC Programs in the Former Soviet Union. In this briefing, Asher looks at how the current global economic situation has affected Jewish communities of Former Soviet Union countries.

Dear all,

We all know the stories about the Jewish grandmother combing the obituary section of the newspaper each day to see whom among those mentioned was a Jew. Each loss was taken personally- a nodding of the head and a clucking of the tongue as the Jewish People lost another soul.

The next step was to turn back to the news section and filter all news, local or national, critical or comical, through a Jewish lens: "is it good or bad for the Jews?" More often than not, the initial interpretation was the latter, not necessarily based on any objective criteria. (Latent anti Semitism could even be found in decisions of municipalities to require walking dogs on a leash- but that will be the subject of another briefing).

And so we come to the current financial crisis- and the question for this briefing: "How will it impact the Jews of the former Soviet Union?" I'll try and tackle this region by region, because although there are some things that impact all of the communities, there are also subtle differences. While in some instances I will refer to macro economic trends, I do not pretend to be an expert on these and only give them where they are relevant to the situation of the Jews and Jewish communities.

1. Russia
Here, there are three macro factors at play that brought about the current situation. In Russia, the vulnerability of the economy predated the September events. Already in August, as a direct result of the incursion into Georgia, the Russian economy suffered a blow. International investors froze a number of key projects because of their assessment that the Russian actions bode ill for a stable and liberalizing economy, which caused a dramatic downturn in the local stock market (which had enjoyed incredible gains over the last three years).

The second important factor is the global crisis, which has hurt local oligarchs. Commodities in which they specialize are losing value, and the general world economic downturn, depressing demand and therefore prices, has hit them hard. Finally, and most critically, the Russian economy has been hard hit by the erosion of the price of oil. Depending on who you believe, the economic forecasts and 2008/2009 budgets were predicated on a minimum price of oil anywhere between 60 and 70 dollars per barrel. The current price is scraping this level.

Now, for the Jews.

a. There are few oligarchs supporting JDC programs directly, and where they are, the impact is not significant. However, we need to remember that JDC is not involved in every aspect of community life. The two key areas in which we are not directly involved are religious life (synagogues), and formal education (schools).

Support for local Jewish schools comes primarily from sources abroad. There are three main streams- Habad is the largest, followed by non Habad religious schools, and a secular school system. There is some local support for the schools, but in most instances they receive the lion's share of funding from sources outside of the FSU. This funding has constricted to a considerable degree due to the general crisis. Or Avner, funded by Lev Leviev, has informed its network that for now funding is frozen, which has caused an enormous cash flow problem. While Leviev is not the only funder for this system, his is the largest single gift. Teachers are paid very late, if at all. The other two systems are also experiencing difficulties, which are expected to grow as the full, impact of the crisis hits.

The schools in the periphery are the ones that suffer the most, as they are generally the ones most reliant on foreign sources. During the first few months of the school year most will survive. However, reserves will be eaten away by January, and barring a dramatic improvement of the situation, I expect that schools will close in the spring. At the very least, this will be the last school year for some institutions.

The situation with Jewish schools applies across the FSU in equal measure.

The same is true for synagogues. In the large cities these will do fine. However, in the periphery they will suffer. This is a very big blow for communities. Synagogues in smaller communities serve several functions. They are generally the only communal property in a community. Thus, community events- holiday celebrations, community meetings, etc. often take place there. They often have small budgets to provide welfare services to Jews ineligible for Hesed support- e.g. a 45 year old who is unemployed. In locales in which the rabbi is community minded, the synagogue plays an important role in community life.

b. It is likely that a protracted crisis in the Russian economy will cause cutbacks in the state budget. If past experience is any indication, this means that social services will be reduced. This will affect both our elderly clients and children at risk.

c. A growth in unemployment is to be expected. The big question is how this will affect the middle class who are the backbone of the fee for service programs we have instituted in JCCs. In discussions with some of the people in this category in St Petersburg- people who are paying considerable sums to send their children to the Yesod pre school program- they said that for now they are confident that things will continue. They do not see cutbacks in the private sector for now, at least in the major centers. All will have to wait and see.

In sum, the Russia piece is problematic, but more in terms of what is expected than actual changes to date. This is not the case in Ukraine.

2. Ukraine
Here, the impact of the crisis is already being felt. Perhaps this is because the crisis in the Ukrainian economy began more than 6 months ago, for a host of reasons, not relevant to this discussion. The banking system is not regulated in the way that banks in the west are, and several intermediate size banks failed in the last 6 months.

(At this point a note of interest regarding JDC's activities. When the ruble collapsed in 1998 a series of banks throughout the FSU folded in its wake. We learned several lessons from those events. We spread out our holdings in local banks, and do not keep large amounts of cash in our accounts, to minimize our exposure. This is true in all of the major centers in which we work. Recently we began even limiting the exposure further by transferring smaller amounts of cash more frequently).

In addition to the material presented above, the Ukraine situation has further complications. Credit has completely dried up. The situation is exacerbated by a prolonged (going on 4 years) political crisis that has paralyzed the decision making apparatus at all levels.

a. The Hesed system is a major consumer of commodities. It buys large amounts of food and medicines. The supply of these items has continued uninterrupted. A number of suppliers have requested payment in cash so as not to be involved with the banking system and its attendant risks, but they have produced the ordered goods. This could change, especially with respect to imported medicines if the credit crunch and unstable currency continues.

b. Much of our Jewish renewal programming contains an element of fees for services. This is especially true in JCCs, family camps, preschools, and more. If discretionary funds of middle class families become limited due to the failure of small and intermediate size businesses, there will be fallout in this system.

c. Local donations are not a major part of Hesed budgets, but in some instances there is money available from local donors. In one community in eastern Ukraine a Hesed built a 2007 budget predicated on 15,000 USD of local donations. When that goal was met, they increased their 08 target by 15%. They will be fortunate to bring in half of that this year. This is money for non Nazi victims. While the overall percentage of the budget lost will not cause real hardship, there is a psychological blow.

d. Ukraine has an interesting phenomenon of local oligarchs who create Jewish organizations to serve as a platform to advance their own, often political, agendas. These organizations do not do very much. They generally sponsor a newspaper (often complementing the NY Times, in that the Times offers "all the news that's fit to print", and these papers everything else). In addition, they run annual congresses in which Jewish delegates from around Ukraine get to spend a few days in a nice setting in return for their support of the oligarch's concerns of the day. The disappearance of these organizations (at least 7 in number at last count) will be lamented by few, but they often do serve a purpose: there is positive, high profile publicity for the Jewish community during these events. Again, the damage by their disappearance is more perceived than real.

e. Ukraine has an inordinate number of small organizations in local Jewish communities. Almost every medium sized community has a Holocaust museum, and there are other small organizations- Maccabi, and others. These will inevitably by effected, and many will be victims of the crisis.

3. Other FSU Countries
As for other FSU areas, they are generally "blessed" with strong government involvement in the economy that cushions locals from the impact, and/or have underdeveloped private sectors that mean there is little discretionary money or private investment to be lost, with a minimal concomitant impact on communal life.

There is one country that is the exception to the descriptions above. Its political system is not autocratic, so one would expect manifestations of the problems as we see in Russia and Ukraine. But they do not exist. It does have other problems- a serious issue with internal refugees and contested borders, but it is awash with cash. Credit is not a problem- there is cash and lots of it as a result of events there this summer. American money, European money, IMF, World Bank – and many others have contributed billions to this small country to ensure its rehabilitation after a nasty encounter with its neighbor to the north. The mouse that roared! That's all I'll say- I leave the guessing as to identity up to each of the readers.

Of course it is too early to predict the total effect of what is happening around the world. However, it is clear that we will shortly be facing a new reality in the FSU. JDC's role will grow- while we may have to make budget adjustments, there will be fewer players in the FSU, and the responsibility will be greater. We will have to see if any of our current programs will need to offset closures in other fields. For example- we will not move into formal Jewish education- but what impact will the closing of schools have on our informal education program (JCCs?). Will the goals of the fee for service program have to be adjusted, and if so, at the expense of what other programs?

To be determined.


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