Moscow’s Envoy to North Caucasus Expected to Assume Greater Powers

Publication: Eurasia Daily Monitor Volume: 10 Issue: 45

Presidential envoy to the North Caucasus Alexander Khloponin (R) visiting ski resorts being constructed in the region (Source: Vestnik Kavkaza)

Russian media have reported that Moscow’s envoy to the North Caucasus, Alexander Khloponin, is expected to become head of the board of directors of the Northern Caucasus Resorts Company by the end of May. Khloponin, thereby, will have the combined power of a deputy prime minister, Moscow’s plenipotentiary representative to the North Caucasus and commanding positions in a major government-supported company. In February, Khloponin’s deputy in the North Caucasus administration, Maksim Bystrov, became head of the Northern Caucasus Resort Company’s board of directors. According to the newspaper Kommersant, the plan is for Bystrov eventually to become general director of the company and for Khloponin to replace him as head of the board (

The major reshuffle in the Northern Caucasus Resorts Company began immediately after President Vladimir Putin visited the Olympic sites in Sochi on February 6 and singled out the ex-director of the company, Akhmed Bilalov, as the person responsible for price hikes and delays in building Olympic infrastructure. While heading the Northern Caucasus Resorts Company, Bilalov was also vice president of the Russian National Olympic Committee and took part in preparations for the Olympics in Sochi in 2014. Putin was visibly outraged by the fact that construction of a complex of ski jumps was not only delayed by several years, but also increased in price more than six-fold. Prosecutors quickly followed up on the case and found numerous instances of Bilalov overspending on trips abroad. Bilalov’s brother Magomed, who is a banker, was also accused of unspecified mishandling of government funds. Both brothers reportedly left Russia within days of Putin’s criticism and are currently in the famous German resort city of Baden-Baden—waiting, apparently, for Putin’s ire to subside (

So far the accusations against Bilalov seem to be fairly trivial compared to the severity of the ostracism he has been subjected to. Bilalov was certainly not the only person who overspent or did not deliver on building Olympic structures on time. In fact, the Russian financial giant Sberbank had a 50-percent stake in the Olympic construction project and was reportedly responsible for the six-fold increase in price after it replaced a contractor. According to some reports, the Northern Caucasus Resorts Company may become the managing company for the Olympic sites in Sochi after the Winter Olympics in 2014. Some suggested this made Moscow wary of Akhmed Bilalov having too much control over such an enormous government project (

In the wake of Bilalov’s sacking, Khloponin is in a good position to assume ever more powers over economic and political developments in the North Caucasus. However, Khloponin’s personal gains may come at the price of further stalling the region’s development. According to a long tradition in the Russian state strategy toward the North Caucasus, the federal government invariably tries to centralize everything it can. When it comes to the region’s economic development in today’s world, however, this approach is unlikely to work, simply because of modern market rules, the fluidity of international capital and so on. In addition, the change in the management of the North Caucasus Resorts Company has overtones of Russian nationalism, given that Akhmed Bilalov, an ethnic Avar from Dagestan, was replaced by an ethnic Russian with no connection to the North Caucasus. This will have negative political reverberations across the region, particularly in Dagestan.

The top-down approach that Moscow has been taking to the economic development of the North Caucasus has produced little progress so far. In 2010, Khloponin unveiled plans to create a network of world-class ski resorts in the North Caucasus and create hundreds of thousands of jobs, thereby virtually eliminating (on paper at least) the endemic unemployment problem in the region. The Northern Caucasus Resorts Company that was established in 2010 was supposed to implement the government’s strategy. Since 2010, the company signed a number of protocols of intention with foreign companies and built several modest projects in Karachaevo-Cherkessia, where ski tourism had already been fairly well developed. Experts are divided over the future of the ski resorts in the North Caucasus, as some say the project is doomed, while others say it will be developed further, regardless of the personalities involved (

It is unlikely that the idea of building ski resorts in the North Caucasus will be abandoned before the Winter Olympic Games in Sochi in 2014, but the likelihood of the project’s survival afterward is fairly low. The Northern Caucasus Resort Company, however, may assume managerial control over the Olympic sites in Sochi and remain a lucrative asset financed by the government even beyond the 2014 Olympics. Bilalov’s dismissal indicates that Moscow wants economic development in the North Caucasus only if it is under the tightest possible control. This top-down approach, however, fails to take into account the various regional intricacies on which the success of the reforms depends. After three years of strenuous efforts to devise a viable strategy for the economic development and domination of the North Caucasus, Moscow appears to find itself back to square one, with no clear solutions in sight.