Large Industrial Cities of Russia: in Search of New Development Paradigm

LARGE INDUSTRIAL CITIES OF RUSSIA: IN SEARCH OF NEW DEVELOPMENT PARADIGM

Turgel I.D. Vice Rector for Research Urals Academy of Public Administration Ekaterinburg Russia

The problems and tendencies of development of large industrial cities of Russia with the specialization in the sphere of iron and steel industry are analyzed in the paper. The thesis that large industrial cities under modern circumstances are becoming the cores of rapidly developed regional systems of economy and displacement concentrating on its territory both the main part of productive assets of key industries of national economy, and considerable masses of population is logically developed. Expanded comparative evaluation of economic and social situation of such cities is carried out. By virtue of its results there has been made the conclusion that the cities which are the centers of iron and steel industry are still marked by delay in quality of life indicators and the level of development of economy industries, oriented on the satisfying of needs of the city and surrounding grounds population. The trends of key economic indicators of major iron and steel plants, shaping town-forming complex of the cities are analyzed. It is underlined that for the most complete evaluation of town-forming enterprises influence on the urban economy it is necessary to take into consideration the process of vertical integration. Methodical aspects of town-forming enterprises influence evaluation on the economy of large cities are defined more precisely. The necessity of accounting of direct as well as indirect forms of town-forming enterprises influence on the urban economy is proved. Mechanisms and conditions, encouraging diversification of functional specialization of a large industrial city under the circumstances of economic growth are observed in detail. It is underlined that the most favorable for the city is locating on its territory of the main production center and the center of decision- making of vertically-integrated holding. Finally, perspective trends of development of large industrial Russian cities which are the centers of iron and steel industry are formulated.

For eleven centuries of historic evolution in Russia the chain of urban settlements had been formed, which area position and functions had been shaping under the influence of the complex of unique in their combination factors, among of which the very significant state role, low attention to the interests of the local community, irrevocable priority of the industrial town-forming functions over the city service functions are distinguished. The singularity of a combination of factors, forming the Russian city sistem, determined appearance of unique in their structure and functions types of urban settlements, among of them a large industrial city got the key significance in the Soviet period. The accelerated industrialization, transferring of the agro-industrial country economy to the industrial style required new forms of economics of location that changed demands to the forms of displacement. The basic town-forming factor in that case was building of large heavy industry enterprises, which had state significance. In its turn, the gigantic enterprises start-up, which requires a great number of employees, determined explosive growth of the city population. In the tragic period of the 1990s the loss of development prospects of major enterprises disabled further functioning of the displacement system too. The mono-city, where town-forming enterprise had vanished, was doomed to lingering death. If the opportunities of organized population removal in case of town-forming enterprises closing were discussed in relation to the small resource towns situated in the north of the country, then there were no technological and financial opportunities of the population removal in relation to the large cities. The dismal outlooks of the 1990s were not realized. The large industrial cities of Russia were not only lost in the market conditions, but also proved their absolute necessity as a strategic centre of the national economy. However, it does not mean, that problems, which appeared so sharply last decade, have been solved automatically. First, the transformation period crisis shown clearly to what extent is the urban mono-specialization vulnerable to unfavorable external affects. Those enterprises, which had passed through the crisis, did not get automatic protection

1 from the further convulsions, which nowadays can be connected with drastic change of the market situation, as well as currency, political and other external risks. Second, the values and the life priorities of the population have changed dramatically. It is impossible to justify the life quality delay in our cities by means of the selflimitation necessity for the achievement of the superior state interests. The postindustrial economy requires creation of the highest possible opportunities for the selfrealization of its main driving force – a man with his abilities, knowledge and skills. The aforesaid factors determine the necessity of fundamental studying of a modern situation and strategic development prospects of large Russian cities. The large industrial cities with the specialization in the sphere of iron and steel industry are the object of our study. The choice is determined by the fact that the most brilliant achievements of industrialization are connected precisely with the foundation of modern domestic iron and steel industry, while metallurgy is precisely the strategic centre of industrial economy. Nowadays, iron and steel industry is one of the key industry engines of economic growth, which provides competitiveness of our country in the world market and realization of the national geopolitics and geoeconomic priorities of Russia. In particular, iron and steel industry production was 14,5% of the total Russian export (second place after oil and gas), 5 % of the GDP, 17 % of the total industrial production, 2 % of the total employment number. Russia occupies the fourth place in the world on the production of steel (after China, Japan and USA) and the third place in the world on the production of rolled metal (after China and Japan). From the viewpoint of population size we used criteria formulated in Urban Planning Code of RF (1998), while distinguishing this group of cities. In accordance with this document large cities are those with the size of the population from 250,000 to 1 million people. It is necessary to note that there is no methodology agreement in this question. New Urban Planning Code does not include any city classification criteria according to the population. In compliance with the norms of Urban Planning Code, adopted in the 1950s, large cities included from 250,000 to 500,000 people. Although, the first approach seems to be more legitimate considering the scale of national economic growth from the time of Gosstroy norms adoption. Nowadays the main metal products producers are nine large integrated iron-and-steel works of the industry: Magnitogorskiy (Magnitogorsk), Cherepovetskiy (Cherepovets), Novolopetskiy (Lipetsk), Nizhnetagilskiy (Nizhnij Tagil), Zapadnosibirskiy and Novokuznetskiy (Novokuznetsk), Chelyabinskiy (Chelyabinsk), Oskolsky (Staryi Oskol), Uralskaya Stal (Novotroitsk). The following figures attest their significance for providing of stable national economy development. In 2007 the aforesaid works ensured 82% of the total steel capacity produced in the country, 89% of the total finished steel volume, more than 90% of pre-tax profit [3]. Thus, the main part of the industrial potential of a national economy strategic branch is concentrated on the territory of eight cities. A brief description of these cities is represented in table 1.

Table 1. The description of the largest RF cities with iron and steel industry specialization Size of the population, City status Administrative City Settlement genesis 1.01.2007, getting status thousand of people  The administrative Worker’s settlement, which centre of the Lipetsk appeared in 1703, when the iron Region Lipetsk 1779 502,6 works building began on the river The centre of Lipovka Lipetsk municipal area Cherepovest Monastic suburb of the 1777 307,8  The city of oblast Cherepovetskiy Voskresenskiy subordination

2 Monastyr, founded in the 50-60s The centre of of XIV century and abolished to Cherepovets trade village Fedosievo municipal area From 1622 the town of  The city of oblast Kuznetsk, after Kuznetsk prison, built in 1618. subordination the Novokuznetsk The smithery was spread among 560,9  The centre of reorganization, natives Novokuznetsk from 1961 is municipal area modern Novokuznetsk The settlement appeared in 1722 with the beginning of magnetic Nizhniy The city of oblast iron ore deposit exploitation on 1919 377,5 Tagil subordination Vysokaya mountain Vyiskiy copper plant Cossack village Magnitnaya, not 1931 The city of oblast Magnitogorsk far from the Magnitnaya mountain 410,5 subordination ironstone exploitation, 1743 The administrative The Russian fortress in Chelyaba Chelyabinsk 1787 1 091,5 centre of the area, 1736 Chelyabinsk Region  The city of oblast subordination Staryi Oskol Ustoublinsk prison, 1571 1593 219,1  The centre of Staryi Oskol municipal area Novotroizk village, founded by The city of oblast Novotroitsk 1945 103,2 the colonists, in around the 1920s subordination

All the cities, except for Novotroitsk, were founded in the Soviet period, most of them have the city status long enough, but at the same time differ in the population size, the time of city status getting, genetic continuity of the economic specialization significantly. The two oldest “metallurgical” cities, Lipetsk and Nizhniy Tagil, have the clearest direct genetic link of the economic specialization. Their appearance is connected with the formation of the oldest metallurgical centers in Russia – the Central and the Ural. They arise initially as the settlements around the first iron and steel plants. It was known about the ironstone deposit on the territory of modern Novokuznetsk and Magnitogorsk long ago, however its active development has started during the Soviet period. The necessity of the large industrial centers formation and the plants’ evacuation from the European part of the country during the II World War were the impulse for the iron and steel industry growth in Chelyabinsk. Cherepovets, Staryi Oskol and Novotroitsk became the largest iron and steel industry centers in the postwar period. The late city status getting by Nizhniy Tagil stands out particularly. The large industrial production formed there in XVIII century. In the analyzed complex of cities Nizhniy Tagil is a unique example of a company town. The company towns building was conducted in accordance with economic demands of the country in metal and its interests in defense capacity strengthen. Most of such settlements have not got a city status, although many of them surpassed cities in their area and economic significance. For example, about 40 industrial enterprises and about 300 commercial establishments worked in Nizhniy Tagil at the beginning of the twentieth century. Nizhniy Tagil was inferior to Perm and Ekaterinburg in size of the population (34,700 people in 1909) in the whole Perm province, which it was related to. According to the classification, which was in act in Russia at that time, such population size corresponded to the province city with 20-100,000 people [1].

3 The city status granting to large industrial centers was out of state policy. The lack of local authorities, municipal treasury, local community will expression forms let control firmly the process of settlement activity, submitting it to both state and metallurgical enterprises owners (the Stroganovs, the Demidovs, the Rastorguevs, the Turchaninovs etc.) interests. Although it is typical for all cities, which are metallurgical centers, to be oriented first on state tasks fulfillment and “city for the country”, but not “for themselves” existence, this peculiarity got special demonstration in Nizhniy Tagil. This genetic specific character to a large extent determined its course and problems of modern development. Established almost simultaneously with Nizhniy Tagil, Lipetsk got the city status in 1779 that is in the historical context a success. From the viewpoint of administrative status, Lipetsk and Chelyabinsk are the administrative centers of regions. Other cities, except for Novotroitsk, are the so called “second” cities of the Federal Subjects. Henceforth, we shall focus our attention on the analysis of the situation in Cherepovets, Lipetsk, Magnitogorsk, Nizhniy Tagil and Novokuznetsk. Chelyabinsk is a “capital” city with the population of more than one million people. Mechanisms and economic structure of such a large city will differ from the other group significantly. Novotroitsk with its population of about 100,000 people is too small to consider it as a large one. Staryi Oskol is formally near the population size border of a large city, however, it has become developing as the centre of iron and steel industry not long ago, from the beginning of the 1980s. The description of town-forming iron-and-steel works is shown in table 2.

Table 2. - The town-forming iron-and-steel works description Town-forming works Date of establishment / Employees, 2007 Holding date of first production OJSC Novolipetsk steelworks 1931- building start up / 34 895 OJSC “NLMK” (OJSC “NLMK”) 1934 – first production OJSC Cherepovets steelworks 1940 – decision-making 35 392 OJSC “Severstal” (OJSC “CherMK”) on building / 1955 - first production OJSC West-Siberian steelworks 1957 - building start up / 22 271 (OJSC “ZSMK”) 1964 - first production OJSC Novokuznetsk steelworks The late 20s- building 10 500 (OJSC “NKMK”) start up / 1932 - first production Evraz Group OJSC Nizhniy Tagil steelworks Nizhniy Tagil plant, 23 316 (OJSC “NTMK”) 1720 – building start up / 1725 - first production Nizhniy Tagil steelworks, 1931 - building start up / 1940 – first production OJSC Magnitogorsk iron and steel 1929 - building start up / 26 049 OJSC “MMK” works (OJSC “MMK”) 1932 – first production group OJSC Chelyabinsk steelworks 1941 - building start up / OJSC “Mechel” (OJSC “ChMK”) 1943– first production OJSC Oskolsky 1974 – decision on 11 700 Holding electrometallurgical works (OJSC building have been made/ “Metalloinvest” “OEMK”) 1982 - first production OJSC “Uralskaya Stal” (Orsko- 1940 – building start up / 18 443 Khalilovsky steelworks before) 1955 - first production

A steelworks is a town-forming complex strategic centre in most of analyzed cities. However, the town- forming complex structure has dualistic nature in Novokuznetsk and Nizhniy Tagil. In Novokuznetsk there are two steelworks, which are included in one holding, Evraz Group. The situation in Nizhniy Tagil is more difficult.

4 Nizhniy Tagil steelworks is also included in Evraz Group Holding, but OJSC “Uralvagonzavod”, one of the largest machine building enterprises in the country, is the leading. Being a federal state unitary enterprise before, nowadays, it is transformed into the public corporation, joining 15 defense enterprises situated in the different part of country. All the organizations are included in the vertically integrated groups. In other words, modern situation differs from that of the 90s, when a town-forming frequently had to manage with internal and external risks on its own. Nowadays, the holding itself deals with a considerable part of the risks, connected with feedstock providing, making of corresponding production, technological, transporting, financial, service infrastructure. The vertically integrated groups’ components, of course, differ in number of enterprises and organizations significantly, but they are close in structure. As a rule, they include the main metallurgical subdivision, ore and coal extraction enterprises, transport subdivisions, financial organizations. All the cities of the analyzed group are characterized by dramatic, explosive population size growth (table 3). The years of nation census are taken as the boundary years for population size estimate (except for 2007). However, the population reduction has been observed according to the 2002 census. The reasons are not just in the demographic situation. Iron and steel industry development has an intensive character in the formed territory production centers more and more, and an extensive personnel increase does not cause production growth any more, that naturally limits a population increase in cities. On the whole, the population size in Novokuznetsk has increased by more than 180 times, in Cherepovets and Magnitogorsk – by more than 40 times, in Lipetsk – by almost 25 times for the last 110 years. The population size in Nizhniy Tagil has increased a little less – by 12.5 times (table 3). It is necessary to note, that indices are given not in per cent, but in relative amount, because of their high level.

Table 3. – The rate of population growth in cities - iron and steel industry centers 1939/1897 1959/1939 1989/1959 2002/1989 2007/2002 2007/1897 Lipetsk 3,28 2,36 2,86 1,13 0,99 24,76 Novokuznetsk 54,5 2,25 1,58 0,94 0,99 180,9 Cherepovets 4,7 2,83 3,38 1,01 0,99 44,6 Nizhniy Tagil 5,3 2,11 1,18 0,98 0,97 12,6 Magnitogorsk 14,44 2,13 1,42 0,95 0,98 40,6 * Calculated on [2]. The analysis of cities - iron and steel industry centers in the regional settlement systems gave interesting results. In the analyzed group Lipetsk is the only city, which is an administrative centre of the Federal Subject, i. e. it carries out not just industrial, but also administrative functions. Other cities have their own specific (table 4).

Table 4. – The ratio of “capital” cities – regional centers and “non-capital” industrial cities in the regional indices, 2007, % the Vologda the Kemerovo the Sverdlovsk the Chelyabinsk Region Region Region Region Vologd Cherep Kemer Novoku Ekateri Nizhniy Chelya Magniti a ovets ovo znetsk nburg Tagil binsk gorsk The size of population 23,3 25,1 18,4 19,8 30,6 8,6 31,0 11,7 (on 1.01.2007 г.) The average annual personnel number in 28,5 29,7 22,6 23,3 37,0 10,0 35,8 14,0 organizations The availability of capital stock of 57,2 30,0 37,6 20,3 26,3 5,3 38,2 20,5 organizations (for the end of a year)

5 The volume of shipped goods, executed works and services by type of activity:

 Mining - - 2,1 17,7 1,3 13,1 3,4 12,2  Manufacturing 6,3 86,4 13,0 73,9 19,3 19,2 34,0 43,1 activity  Producing and distributing of 58,3 15,4 25,6 29,6 33,9 10,6 36,2 10,3 electric power, gas and water

The volume of works executed on the type of 37,8 25,3 21,9 23,9 54,9 6,8 44,0 32,8 activity “Building” Putting into service of 35,1 31,2 24,9 25,1 57,3 5,5 41,5 13,3 dwelling-houses Retailing turnover 32,4 31,9 30,4 28,8 66,0 5,5 57,9 14,9 Fixed investment 8,3 33,7 21,0 22,2 34,3 10,2 37,5 33,0 * Calculated on [4]. Thus, Cherepovets and Novokuznetsk exceed in the population size their regional centers, Vologda and Kemerovo correspondingly, that is not typical for Russia with its overcentrtalization of production and settlement. This exceeding is relatively small (in Cherepovets is 21,500 people more in 2007, in Novokuznetsk is 41,100 people more), however, it can become an important factor, which determines the economical activity growth limits, in terms of intensive workforce shortage. Herewith, having higher level of the population size than the administrative centers do in the region, Cherepovets and Novokuznetsk have fewer in the volume of works executed in building, putting into service of dwelling-houses, retailing turnover. At the same time, the presence of two large comparable on economical activity scale city centers has positive influence in long-term perspective. Competition of such cities does not suppress business initiative, the effect of labour, financial and material resources in a capital city will not be so evident in a region, the regional system of production and settlement is relatively decentralized. The situation in Magnitogorsk and Nizhniy Tagil, which are, at first sight, typical “second” cities, is not less interesting. Thus, Magnitogorsk, which share in the regional population size is by 3 times less than Chelyabinsk share is, at the same time, is becoming closer to the regional centre on the volume of building works and investments. However, according to the index of regional dwelling-houses putting into service share and retailing turnover the gap with the regional centre is depressingly high (28.2 and 48% correspondingly (!)). In addition, the nominal monthly average charged salary achieved 13,000 roubles in Magnitogorsk in 2006 that is 2,000 roubles more than the salary in a regional centre. It proves a significant disbalance between the population spending capacity and the level of city consumer market development. The situation in Nizhniy Tagil is less definite. Here, the city, which takes the second place on the population size, has desperately lower indices, which characterize the share in capital stock, building, dwelling- houses putting into service and retailing turnover, than the regional centre does. Thus, concentrating 8.6% of the total regional population size, Nizhniy Tagil covers 6.8% of the building works volume and just 5.5% of the dwelling-houses putting into service and retailing turnover volume. Quite on the contrary, Ekaterinburg, where live about 30% of the regional population, at the same time, concentrates 57% of the total regional dwelling-houses putting into service volume and 66% (!) of retailing turnover. In such a case, the average salary was a little higher than 10,500 roubles in the city, that is 3,500 roubles less than in the regional centre.

6 Thus, the regional settlement system of the Sverdlovsk Region is characterized by the high level of centralization and resource concentration. From the viewpoint of the main present economical profile preserving prospects, the answer is definite for the whole analyzed city group: their further development in the nearest future will take place keeping the leading role of the steelworks in the structure of the town-forming complex. These integrated iron-and-steel works are the leaders of the industry, demonstrating the stable enough rate of production indices growth. All the town-forming steelworks are the export oriented enterprises with a full circle of metallurgical production. They launch a great variety of products, but at the same time each of them has its own unique competitive position. Thus, NLMK is one of the largest electrical-sheet steel manufactures in the world, NTMK – one of the largest plants on concentrated vanadium titaniferious ore processing worldwide, NKMK – is one of the largest different type rails producers in Russia, i. e. from the formal viewpoint, industrial mono-specialization of the large cities will be preserved. However, it is necessary to warn from simple understanding of the city mono-specialization phenomena. A town- forming enterprise influence on the city is versatile and carried out in both direct and indirect way. The direct town-forming enterprise influence on the city vital activity is determined by such indices as town-forming enterprise share in the industrial production volume, financial results, city investments, municipal budget income, the share of the enterprises’ employees in the total population size and in the number of the city economy employed, town-forming enterprise share in the volume of harmful substances in the environment. As the results of the analysis shown, most enterprises are really town-forming for their cities (table 5). Their share in the population number is from 1.9 to 11.5%. This index increases significantly, if we estimate the share of the average number of city economy employed and equals from 4.5 to 29.8%.

Table 5. – The share of the steelworks employees in the total population size and in the average number of the city economy employed, 2007, % NLMK CherMK NKMK ZSMK NTMK MMK ОEMK Uralskaya Stal The share in the 6,9 11,5 1,9 4,03 6,2 6,3 5,3 17,9 population size The share of the 19,5 29,8 4,5 9,8 15,7 18,3 15,5 45,2 employed number * Calculated on [3, 4]. The leading enterprise in the personnel number in Nizhniy Tagil, as it was pointed out above, is OJSC “Uralvagonzavod”, the percentage of which is 21.9% in the employed number and is 8.6% in the city population size. Thus, 37.6% of the total number of employed in the economy work in just two enterprises (!). The data on the Uralskaya Stal steelworks, situated in Novotroitsk, is given to show the difference between the level of labour force concentration in the town-forming enterprise in a large and relatively small settlement. However, from the formal viewpoint, Cherepovets steelworks is the only town-forming enterprise in a large city. In accordance with section 169 of the Federal Law “On insolvency (bankruptcy)” from 26 Oct 2002 No 127-FZ a town-forming organization is a legal entity, which personnel number is not less than 25% of the working population number in a corresponding settlement. At the same time, it is necessary to point out, that the most complete estimate of the steelworks share in the city economy can be received just taking into consideration all the indices of the enterprises, included in a holding. Rather unpredictable results have been got, while analyzing MMK shares in the leading economic indices of Magnitogorsk for the last 10 years (table 6).

7 Table 6. - The dynamics of MMK shares in the leading economic indicates of Magnitogorsk, % Index 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 The share in the 6,5 8,0 7,8 7,9 8,2 8,2 7,6 6,9 6,4 6,3 population size The share in the 82,0 87,5 87,9 85,0 85,9 85,5 83,9 78,7 76,1 72,3 volume of industrial production The share in the 59,7 59,9 65,7 69,0 46,8 66,5 64,4 48,0 48,9 40,6 volume of investments

The trend of township-building enterprise share decrease is observed on all indices, but with different level of intensity in Magnitogorsk. Similar process takes place in other cities. Thus, the shares of NLMK in the population size of Lipetsk have 30% decreased for the period from 2000 to 2007. On the whole, there is no need to expect the steelworks personnel share growth in the total number of employed under the intensive type of reproduction conditions in future. Thus, formally, the rate of direct influence and the intensity of direct town-forming steelworks enterprises’ economic links on the city economy are falling. However, against this background the dramatic complication of the indirect influence forms is observed. The holdings’ policy on allocation of maintaining productive steel work types of activities in the independent business, diversification of the vertically integrated group’s structure. Repairing, building, transporting, financial structures get opportunities of independent activity on regional and interregional markets as well as maintaining of productive work necessities that, in its turn, promotes the economic activity growth in the city area. As a result, a formerly strict limit between economic floods and town-forming enterprise links and urban economy itself is disappearing. On their border a sector, which unites enterprises, on the one hand, organically connected with productive steel work, included in a holding, on the other hand, interested in strengthening of horizontal relations and getting of their own local market segment, arises and starts working actively. The diversification tendency appears not just in the sphere of production. The organizations of social sphere, allotted on the independent balance (health resorts, patient care institutions, rest houses etc.), which had worked only for the town-forming personnel before, function rather successfully in the market environment too. These enterprises can become a foundation for the new types of functional city specialization in case of proper positioning. Thus, LLC “Abzakovo”, LLC “Akvapark”, “Metallurg” and “Jubileynyi” sanatoriums included in OJSC “MMK” have become the basis for the specialized tourist recreation centre of the interregional significance in Magnitogorsk. In its turn, growing productive work makes demand for different business services – financial, patent, engineering and legal. Although metallurgical holdings try to attract well-known Russian and foreign companies to the realization of the most difficult orders in this sphere, however, opportunities for business services sector growth in the city, certainly, appear. Availability of a steady working large town-forming enterprise provokes a stable demand for educational services too, beginning from the regular labour force training and extension courses, ending in highly qualified specialists training, forming of its own scientific schools. It is not accidentally, that there is a large regional academic complex, which includes specialized institution of higher technical education (university or regional university subsidiary), several institutions of intermediate vocational education, which carry out the training of mining and smelting type specialists, scientific research institutes in each of the analyzed cities. If the relations

8 between a town-forming enterprise and scientific educational institutions had to a large extent a random character during the period of total economic decrease, then, nowadays, partnership is more often based on the long-term foundation. One more interesting effect, connected with the development of metallurgical holdings, is the effect of management and administrative functions concentration of a holding in the managing company area. In this case, a large industrial city starts to accomplish leading functions, which are new for it, becoming not just the main production area, but also the centre of strategic decisions making. Thus, the city, where both the main production area and holding management center are situated gets additional competitive advantages, becomes a peculiar holding “capital”. In this case extra motives for the city sphere of highly qualified special services for business and population appear. The other positive thing is that it is a managing company, which concentrates financial flows and makes decision on their usage, particularly, in the sphere of social investments. The situation, when the productivity area and the managing centre of a group coincide – big opportunities for the growth of social investments in the city development are made, the contacts between officials and municipal government and the top management of a company are simplified. Even psychologically, managing company interests are higher in the presence area development, if it is located in the same city, but not in the other region or abroad. From this viewpoint, Lipetsk, Cherepovets and Magnitogorsk, in which area the corresponding holdings have joint production centers (steelworks themselves) with managing centers are in better situation. Novokuznetsk and Nizhniy Tagil are just distributing productive work centers. Under existing conditions, the strategic priorities of cities – iron and steel industry centers development will be:  enrichment of the traditional industrial mono-specialization, development of central service functions, connected with providing services for business and population;  space enlargement of service and sales areas, maximum realization of the positive agglomerative effects, strengthening of horizon economic links with population clusters, included in economic space of a large city;  strengthening of strategic partnership among the powers, population and big business, in which frame positioning of local authorities as coordinators of the social investments of large metallurgical holdings on their presence territories. However, it is necessary to admonish that we do not absolutize the exposed positive trends. In the period of economic decrease mono-cities become the most vulnerable. Thus, all the Federal Subjects, which specialization is connected with metallurgy, suffered from the crisis more. The specific of modern situation is that, a dramatic decrease of the production output expressed in the physical terms is observed in the sphere of iron and steel industry first time for many years. The crisis has touched all the largest steelworks (fig. 1).

9 100 90 80 70 60 50 40 30 20 10 0

0 0 0 5 6 7 8 9 0 1 2 3 4 5 6 7 8 7 8 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2

Cast iron Steel Rolled ferrous metal Steel tubes

Fig. 1. Dynamics of the cast iron, steel, rolled ferrous metal, steel tubes production output, mln. of tons

The relative steadiness is demonstrated only by comparatively small companies, which have guaranteed sales market. However, medium-term and short-term circle economic fluctuations are not the reason for refusal from strategic territory selection. The properly chosen priorities of area development have long-term character; reflect historically composed conditions, area development specific, long-term social economic trends. At the same time, the crisis process can speed up or slow down strategic priorities realization, requiring the changing of social economic tools. Local authorities cannot change the process of general economic cycling. Their task is to soften, as it is possible, negative social consequences, not to let the social disorganization of a local community, hold-up of the public goods and services production, provide the effective work of a municipal economic sector on the basis of costs optimization, operative and effective participation in recession-proof actions, realized the Federal Subject powers, intensify activities on favourable conditions for small and medium business forming. That is why it is necessary to speak not about special recession-proof policy, but about effectiveness improvement, enrichment and changing of the municipal management tools. New content filling of the public-private partnership system can become an important condition of the social situation stabilization on the municipal level. Both traditional partner relations between administration and town-forming enterprises and partner relations among municipal units appear to be the most effective. As far as town-forming enterprises relations concerned, the most effective will be those of social efficiency improvement ones. Dramatic decrease of town-forming enterprises financial resources will require distinct formulation of the social investments priorities from local administration during the crisis. In relation to the inter-municipal cooperation it is necessary to point out the perspective of contacts development among the neighbouring areas with different economic specialization. At the same time, the inter-municipal cooperation should stimulate economic integration expansion, formation of a more receptive internal market, strengthening of intra- agglomerating links. Thus, creating of conditions for free access of agricultural producers from the neighbouring regions to the consumer goods market can not just stabilize the situation in the sphere of population food secure at reasonable prices, but stimulate agricultural and food processing development in the near-by area.

10 During the postcrisis period the steady in a long-term plan tendency of staff reduction in the largest metallurgical town-forming enterprises will continue, the process of city economy diversification will be intensified. Under existing conditions the maintaining of strategic course of local administrations on the diversification of large industrial cities functions, the rise of their roles in the area economic systems and the displacement as a metropolitan agglomeration centre, the internal market expansion take special significance. Preservation of this course seems to be of great importance as far as a long-term world economy development trend is reduction of the main economy branches role, which is the basis of traditional industrial form. If medium-term and short-term circle economic fluctuations preserve continuation of strategic selection of area and urban policy tools, then underestimation of long- term development trends can cause a long recession. The only way out will be connected with high expenses for conducting of the pivotal structure area economy reorganization and unpredictable social consequences. Bibliography 1. A city and a village in European Russia: one hundred years of changes / Ed. T. Nefedova, P. Polyana, A. Treyvisha. M.: OGI, 2001. 560 p. 2. My city // Research and information portal www.mojgorod.ru 3. Production and economic indices of the largest metallurgical enterprises of Russia in 2006-2008 // Official website of Ferrous Metals Manufactures Corporation ”Chermet”. www.k-chermet.ru 4. Russian regions. The main urban social and economic indices. 2007: Stat. coll./ Rosstat. M., 2008 // Official website of Federal State Statistics Service. www.gks.ru 5. Safronov M.F. Special features of socially economic development of cities with the town-forming enterprises of ferrous metallurgy. Chinovnick. №1, 2003. P. 46-49. 6. Turgel I.D. Mono-specialized city: theory and practice of strategic management of the social and economic growth. Ekaterinburg, URSMU publishing, 2001. 259 pp.