China Makes Inroads Into Strategically Located North Caucasus Republic

On July 27, Ingushetia’s governor, Yunus-Bek Yevkurov, met members of two Chinese delegations in the republic’s capital, Magas. Chinese investors have reportedly expressed interest in some of the republic’s old oil fields that can be reclaimed. According to Yevkurov, the rights to own the republic’s oil resources are sometimes unclear, and the related legal issues would take time to resolve. A Chinese company, Huaxin Group, is reportedly interested in using new technologies to extract oil in Ingushetia. Chinese investors are also interested in Ingushetia’s agricultural sector and plan to rent 100 hectares of land in the republic to grow crops using intensive agricultural methods. Yevkurov emphasized that the conditions for Chinese investments in the republic would include environmental friendliness and employment opportunities for the local population (Ingushetia.ru, July 23).

The arrival of Chinese investors in Ingushetia is interesting because it suggests Moscow is trying to find an alternative to the current system of financing the North Caucasus. With Russia’s coffers emptying and expected to decline further, the authorities are trying to find foreign investors who would keep the rulers of the North Caucasus republics happy while allowing Moscow to retain control over the region. Russian authorities likely regard China as a relatively “safe” investor because it is not known as a beacon of democracy and rule of law and cannot “contaminate” the region with such ideas. Given the current Western economic sanctions against Russia, Moscow’s choice of investors is limited in any case, and China is probably willing to cooperate with Russia in the North Caucasus.

China’s strategy appears to be designed to pave the way for a steady increase of its presence in the area. While Chinese investors talk about oil extraction and agribusiness in Ingushetia, China may be primarily interested in establishing a base in the North Caucasus, given that Ingushetia is a small republic with no known large oil reserves or large empty swaths of arable land. Geographically, Ingushetia lies in the central part of the North Caucasus: the capitals of Dagestan, Chechnya, North Ossetia and Kabardino-Balkaria lie a few hours’ drive from Ingushetia’s main city, Nazran.

Chinese government entrepreneurs are also making use of “soft power” in courting Ingushetia’s government. Chinese companies have proposed establishing Mandarin language instruction at a local school and the university in Ingushetia. The plan is to select the ten best Ingush students and send them to a Chinese university for further study. Governor Yevkurov also appears to be quite happy to welcome unexpected foreign investors, and even decreed renaming a square in the republican capital “Chinese Square” (Onkavkaz.com, July 27).

Ingushetia, along with the rest of the North Caucasus republics, is a place with high investment risks. The security risks are well-known, as is clear from the regular reports about insurgent attacks. In one of the latest incidents, on August 2, government forces claimed they killed eight militants in the mountainous area of the republic (Kavkazsky Uzel, August 4).

Besides the obvious security risks tied to the insurgency, local governments and Moscow are also quite unpredictable. In March 2014, a mob in the Dagestani village of Sivukh burned down greenhouses belonging to Chinese farmers. The local partner of the Chinese entrepreneurs, Shakhban Gaziev, told the media at the time: “The investors invested about $2 million in greenhouses, they created about 100 jobs and workers received $20 per day [which was then considered to be fairly good pay for a seasonal worker in Dagestan]. Now they [the mob] came and destroyed everything. This is a crime! No investor will want to invest in the republic again.” Interestingly, Chinese farmers experienced similar pressure in other areas in southern Russia, including the majority ethnic-Russian regions of Stavropol and Krasnodar. According to the Chinese farmers themselves, these incidents were the result of a decision made at a high political level (Novy Region, March 11, 2014).

The Chinese farmers’ insights may have been quite close to the reality, since no member of the mob who attacked and destroyed their property was prosecuted. In contemporary Russia, this is usually a reliable indicator that the government itself is behind the attack. Attacks on the Chinese investors are one manifestation of the love-hate attitude of Russia toward China. On the one hand, the Russian government would like to use Chinese money to solve its domestic issues, but on the other hand, Moscow treats Chinese inroads into Russia with suspicion.

Even though Moscow certainly regards China as a lesser evil in the North Caucasus than Western investors or Turkey, the ideal situation for the Russian government would be to have no foreign presence in the region at all. It appears that various forces within the Russian political establishment remain undecided over which foreign investors should be allowed to work in the North Caucasus. Meanwhile, the investors, even smalltime ones like the Chinese farmers in Dagestan, face serious risks that mainly come from the Russian government itself.