MOSCOW TIGHTENS THE SCREWS ON KAZAN

Publication: Prism Volume: 3 Issue: 18

Moscow tightens the screws on Kazan

By Rashid Akhmetov

The end of summer and beginning of fall in 1997 brought a perceptible increase in tension in relations between Kazan and Moscow. This may be due to the fact that the federal center, after its defeat in Chechnya, has decided to toughen its position to prevent such a situation developing in another republic in future. And since Tatarstan is considered the informal leader of the regionalization and sovereignty movement in Russia, Moscow may have decided to strike a series of carefully calculated blows to show Tatarstanis leaders how dependent they are on Moscow.

Here are some of the key events: Officials from Aeroflot, headed by Boris Yeltsin’s son-in-law Valery Okulov, recently visited the Gorbunov Airplane Plant in Kazan. Prior to the visit, the Tatarstani government announced that Aeroflot had promised to buy six Tu-214 aircraft (at 100 billion rubles each) in Kazan. Earlier, the republic’s leadership, in the person of Tatarstan’s prime minister Farid Mukhametshin, had protested to Moscow against Aeroflot’s plans to buy Boeing planes in the West instead of domestic Russian aircraft. A number of sharp statements had been made by Tatarstani officials, in which the policy of the federal authorities was described as little short of a betrayal of the national interest. In response, Moscow announced plans to create a leasing company to develop domestic airplanes, a substantial share of which would consist of Kazan-made Tu-214s. The federal authorities planned to invest up to two trillion rubles in the leasing company. In exchange, Tatarstan was promised export quotas on its oil.

But Okulov’s visit came like a cold shower for the republic’s leadership. Despite its previous benevolent statements, Aeroflot suddenly began to make additional demands (the installation of Western avionics, Pratt & Whitney engines instead of engines from Perm, etc.) and declared that the plane needed further work and testing. No agreements were signed. On the contrary, the federal center soon announced that the export quota for Tatarstan’s oil to support the Tu-214 project would be canceled.

The second blow was Moscow’s cancellation of an oil export quota to support the production of 50,000 Chevrolet Blazers in Tatarstan. The production of Blazers in Elabuga was rather profitable. Automobiles which were almost completely assembled were shipped to Elabuga, where headlights and other small items were put on. This was, in effect, an attempt to evade federal customs duties on importing expensive American jeeps. The cost of a rear-wheel drive Blazer in Kazan was on the order of $23,000-25,000, and a four-wheel drive Blazer could cost as much as $35,000. There were plans to sell 10,000 automobiles by the end of 1997. If one takes into account that the profit to the republic per car would be on the order of $4,000-5,000, the republic expected to make up to $200 million from "assembling" Chevy Blazers. To shore up the deal, Prime Minister Viktor Chernomyrdin was given a four-wheel drive Blazer worth over $40,000.

But Deputy Premier Boris Nemtsov actively opposed the project. In Kazan, it is said that Nemtsov has harbored feelings of jealousy toward Tatarstan ever since his days as governor of nearby Nizhny Novgorod. Be that as it may, the sale of the cars was substantially delayed and, while Moscow bought 60 jeeps for law enforcement agencies, these were purchased abroad. By the middle of October, only about a thousand cars had been sold. Prime Minister Mukhametshin complained in early October that General Motors had "not invested a cent in the project; only know-how." Tatarstan’s government was forced to look for $250 million from Malaysia to continue the project.

The biggest blow of all was the sudden cutback in gas supplies to the republic by Gazprom. Supplies were restored only after Tatarstan’s president, Mintimer Shaimiev, made an urgent phone call to Gazprom chairman Rem Vyakhirev. Tatarstan uses 12 billion cubic meters of gas a year, of which it produces about one billion itself. The remaining 11 billion cubic meters are supplied by Gazprom. The republic’s debt to Gazprom is 4.3 trillion rubles (about one-third of Tatarstan’s budget). Tatarstan is among the top five Russian regions that are Gazprom’s greatest debtors.

Mukhametshin was sent off to Moscow to negotiate with Vyakhirev. Informed sources maintain that Gazprom initially demanded large packets of shares in profitable Tatarstani enterprises (Tatneft, Orgsintez, Nizhnekamskneftkhim and others) to clear off the debt. An agreement was eventually reached according to which the republic would pay off 70 percent of its current debts to Gazprom on an accelerated schedule, 80 percent by November, and 90 percent by December (the national average is 60 percent). No less than 30 percent of the debt must be paid off in cash (Gazprom has long complained that, nationwide, 70 percent of its bills are paid in kind). A government commission was hastily created "to step up collection efforts" and threatened to cut off gas supplies to the debtor-enterprises. Most probably, this is the reason why the truck plant KamAZ stopped production for ten days in late October.

And there is another complicated problem — the head of the Federal Tax Service, Aleksandr Pochinok, recently visited Tatarstan in connection with the Russian government’s efforts to pass the new Tax Code, which the republic’s government vehemently opposes. Kazan complains that the easiest taxes to collect (value added tax, excise taxes, etc.) will go to the federal center, while only the taxes which are hard to collect will be left for the republic. According to a special intergovernmental agreement between Tatarstan and Russia which will expire in 1998, 50 percent of value added tax and excise taxes on alcohol remain in the republic (the latter, to be spent on ecological needs). If the new Tax Code is adopted, the republic could lose several trillion rubles.

Recently, too, the intergovernmental agreements between Tatarstan and Russia in the area of defense industry have given rise to friction. At a session of Tatarstan’s State Council, lawmakers made serious charges against the Russian government. For example: "In spite of the agreements which have been reached, no state order has been drawn up which would guarantee a minimum technological capacity for Tatarstan’s defense enterprises"; "no program of economic security for Tatarstan has been created"; and, in short, "the agreements are not working."

Public dissatisfaction with the economic situation in the republic is gradually growing. A poll of 3,000 respondents was conducted in August 1997. To the question, "How would you describe your family’s present standard of living?" 8.4 percent of those polled answered "we are living on the brink of poverty"; 51 percent said "we can barely make ends meet"; 32.7 percent said "we live more or less decently"; 3.3 percent said that "we live without any material difficulties"; and 4.6 percent could not answer. As a consequence of economic difficulties, the poll ratings of the republic’s leaders have fallen. And this makes them nervous.

The republic’s government has responded by introducing a series of belt-tightening measures. The new budget calls for the first time for cuts in subsidies to agriculture — President Shaimiev’s pet sector, hitherto considered sacrosanct. This year, a record harvest of 6.2 million tons of grain was collected (though it is true that, for the most part, this was low-quality fodder grain). Cutting subsidies to the agrarian sector will save the republic almost a trillion rubles. Prices on consumer services are rising. The government has created a state vodka monopoly, Tatspirtprom, which includes all of the republic’s distilleries. With the help of this state monopoly, the republic government hopes to bring in up to two trillion rubles. Tatarstan is considered the largest producer of vodka in Russia (though it is of relatively low quality). Shaimiev plans to create a super-bank, called Ak bars (White Leopard), into which budget money is being pumped and ten off-budget funds are accumulating money. But the republic’s financial system is considered weak. Most of the 32 local commercial banks are undercapitalized (their total capital is 1.3 trillion rubles, and the total credit investment in the economy adds up to 3 trillion rubles) and lack skilled staff. The level of customer service is low and Tatarstan’s banks find it hard to compete with the big Moscow banks.

The increase in the federal center’s financial might, accompanied by Tatarstan’s relative lack of progress in implementing market reforms, has created the economic conditions for a shift in relations between Moscow and Kazan. The republic is gradually being transformed from a region whose relations with the center were conducted on a relatively equal basis and which could afford to take independent positions on the political crises shaking the Russian Federation — such as its position on Chechnya — into a common-or-garden supplicant. Tatarstan’s big economic development projects are being blocked in Moscow, almost as if the center were trying to prove a point. At the latest exhibition in Nizhny Novgorod, according to the Tatarstani press, Boris Nemtsov dragged Yeltsin roughly away from Tatarstan’s booths.

It used to be thought that Tatarstan could make a so-called soft entrance into the market (charging significantly lower prices for food products and services than the Russian national average) by relying on its oil export quotas (up to 8 million tons of the 24 billion tons of extractable oil) and tax exemptions. Now, in connection with the proposed adoption of a new Tax Code applicable to all of Russia, Tatarstan’s special tax status will virtually cease to exist. Oil income has also gone down substantially because the Russian government has introduced excise taxes on oil. This drastically narrows the republic’s financial base.

In order to withstand the pressure of the federal center, the republic’s leaders may be prepared to tolerate an increase in demands by nationalist organizations for the republic’s independence. More than 1,500 people took part this year in the "funeral procession" which takes place every year on Remembrance Day (October 15 — the day that Kazan was captured by Ivan the Terrible in 1552). At this year’s ceremony, members of the nationalist Tatar Social Center burned a model of the new Russian passport, which bears the imperial Russian double-headed eagle on its cover. State Council deputy Fandas Safiullin, the leader of the Idel Yort group of deputies, told the crowd that the introduction of a Russian passport with no entry for "nationality" meant the beginning of Russian fascism. Rinat Mukhammadeev, chairman of Tatarstan’s Writers’ Union, complained that "We are being deprived of the right to be Tatars. I will not take the new passport." The chairman of the National Library, also a State Council deputy, declared that, "Our nation is disappearing. Our national concerns, our language and our culture will all cease to exist. And then what shall we do with the Constitution of Tatarstan, which speaks of dual citizenship?" At the October 16 session of Tatarstan’s State Council, after heated debate, a decree was passed halting the distribution of the new passports on the territory of the republic. The deputies urgently proposed the introduction of a law on Tatarstan citizenship and the issuing of Tatarstan’s own passports.

Tatarstan’s press also covered an insignificant incident which took place at the World Unarmed Combat Championship in Tbilisi. Tatarstan tried to send a team separate from that of the Russian Federation. This was resisted by the Georgian organizers; they cited the position of the Spanish and French teams, which supposedly said that, if Tatarstan were allowed to compete, the Basque team would also have to be recognized. Tatarstan vehemently protested the Georgian position, which was explained, according to Tatarstan’s newspapers, by the fact that allowing Tatarstan’s team to participate would create a precedent for allowing an Abkhazian team to participate independently of the Georgian team.

The calm that followed the signing in February 1994 of a power-sharing treaty between the Republic of Tatarstan and the Russian Federation is, it seems, giving way to storm clouds.

Translated by Mark Eckert

Rashid Akhmetov is an independent journalist in Kazan.

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