Moscow’s Plan to Increase Control over the North Caucasus Imperils its Effort to Modernize the Region

Publication: Eurasia Daily Monitor Volume: 8 Issue: 118

Medvedev and leaders of North Caucasus republics at the St. Petersburg International Economic Forum plenary session "New Tourist Destinations – The North Caucasus" (Source: RIA Novosti)

The International Economic Forum took place in St. Petersburg, Russia, over June 16-18. Delegations from the North Caucasian republics attended the event and a special session “North Caucasus: Unlocking the Potential” took place on June 18. From the statements of Russian officials, it transpired that Moscow’s main focus remains developing tourism in the region. The editor-in-chief of the Kremlin propaganda TV channel Russia Today, Margarita Simonian, moderated the discussion on the North Caucasus. The session featured Moscow’s envoy to the North Caucasus, Aleksandr Khloponin; the head of the state-owned North Caucasian Resorts corporation, Akhmed Bilalov; former Russian Foreign Minister Igor Ivanov; representatives of France, Austria and international organizations. Notably, no head of a North Caucasian republic or lower republican official spoke at the panel (
On June 17, France’s Caisse des Depots et Consignations group and the North Caucasus Resorts corporation signed a preliminary agreement on cooperation in developing North Caucasus ski resorts. According to RIA Novosti, French investments in North Caucasus development might amount up to $1.7 billion. An estimated 20 to 30 French companies are expected to provide equipment and possibly “know-how” to building ski resort areas in select areas of the mountainous North Caucasus. But it will reportedly take an additional 5-6 months to see the details of emerging Franco-Russian cooperation (, June 19).
The business agreements signed by the North Caucasian republics appeared modest, with only Dagestan signing an agreement with a foreign company. Finland’s Arvotec will build a fishing farm in Kizlyar, in northern Dagestan. Dagestan will also receive a solar energy plant, built by the Russian company Hevel LLC and powered by the Swiss high-tech corporation Oerlikon. Russia’s Renova Group has a 42 percent stake in Oerlikon and 51 percent of Hevel LLC, while the remaining 49 percent of Hevel LLC belongs to the Russian state corporation Rosnano. The Chechen capital Grozny will receive an investment from the Russian state bank Vnesheconombank to upgrade the city’s infrastructure (,, June 19).
The striking detail about the discussion on North Caucasus economic development is the fact that real investment in the region is still being discussed. The grand vision for developing “the North Caucasian tourism cluster” was unveiled by Khloponin one year ago and the actual investment and implementation of the project is still in its very early stages. Khloponin stated at the forum that the North Caucasian Resorts Corporation would receive additional government funds, raising its capitalization to $2 billion. This particular promise was made several times over the past year. Khloponin outlined the government’s plans for the socio-economic development of the North Caucasus, which includes the development of tourism, the construction industry and the agricultural sector, and the extraction of natural resources. Aside from that, Moscow’s envoy emphasized the urgent need for unemployed North Caucasian youth to migrate to inner Russian regions because of the lack of employment opportunities in the North Caucasus (
The idea of “dissolving” the peoples of the North Caucasus in greater Russia seems to remain an idee fixe for the Russian government.  Apart from organizing a massive exodus from the North Caucasus, the government is preoccupied with bolstering the region’s ethnic Russian population. On June 15, Khloponin proposed distributing arable lands in the North Caucasian republics that are still directly owned by Moscow among the Cossacks. The proposal, if implemented, is expected to spark another round of conflicts in the North Caucasus, which suffers from a lack of arable lands. Some observers have already made parallels to the Russian policies in the Tsarist period, when North Caucasians were arbitrarily moved from one place to another and their best lands were distributed among the Cossacks and ethnic Russian settlers (
There were also some novelties at the special session on the North Caucasus at the St. Petersburg forum. Former Russian Foreign Minister Igor Ivanov brushed aside widespread suspicions inside the Russian government that hostile foreign influences are the primary cause of violence in the North Caucasus. Ivanov also stated that suspicions in the West that Moscow is deliberately aggravating the situation in the region were unfounded. According to Ivanov, the vicious cycle of economic underdevelopment, unemployment and violence, on the one hand, and a lack of investment, on the other, make the North Caucasus problem particularly hard to tackle (
Russian politicians and analysts habitually refer to the violence in the North Caucasus as an "inexplicable phenomenon." While there may be a degree of irrationality and inexplicability in any conflict, including bloodshed in the North Caucasus, the violence in the region is easily explained by very simple practical things, like the lack of popular participation in politics, the artificially imposed isolation of the region from the outside world and the government’s crackdown on political dissent.
Igor Yurgens, the liberal economist and one of the closest economic advisors of President Dmitry Medvedev, raised a provocative issue at the forum, asking the panelists about the possibility of the Russian government replicating the Soviet experience of an “affirmative action” for North Caucasians. Yurgens proposed promoting North Caucasians to high positions in the Russian government, the same way that the Soviet government promoted USSR minorities to the Politburo ( Such cooptation would probably well serve Moscow, as a way of showing the North Caucasian elites that they are integrated into the country’s leadership and have a stake in keeping it going. There are, however, serious doubts about its feasibility. Russian nationalism is on rise, and with last year’s riot at Moscow’s Manezhka Square and other outbursts of Russian nationalism, the Russian government is unlikely to take the risk of carrying out affirmative action on behalf of North Caucasians.
Wolfgang Schuessel, the former federal chancellor of Austria, made important comments highlighting the weak spots in Moscow’s evolving project to develop tourism in the North Caucasus. He warned that developing tourism is a long-term objective that requires today’s generation to work for the benefit of future generations. Moscow expects much quicker returns – within 10 years at the most, according to official estimates. Schuessel urged the Russian government to integrate the local population into the project from the very beginning, avoiding a top-down approach. Schuessel said that in Austria, projects in which municipalities were given 10-15 percent stakes in tourism projects worked better than projects in which such stakes were not distributed (
The Russian government’s approach to developing tourism in the North Caucasus is manifestly top-down. Its approach to tourism development is to put the local economies and elites under tighter control from Moscow, so the North Caucasian republics and municipalities are highly unlikely to receive stakes or a sense of being integrated in the project to build ski resorts. Moscow’s tourism development project yet again displays the contradictions between the real economic needs of the North Caucasus and the stagnating political evolution that hampers regional economic development.