Prime Minister Medvedev Visits Grozny

On June 19, the first meeting of the new Russian government commission for the socio-economic development of the North Caucasus took place in Grozny, Chechnya. Prime Minister Dmitry Medvedev presided over the meeting and stated that development of the North Caucasus was “one of the most important state priorities.” According to Medvedev, three primary federal programs have disbursed $4 billion to the North Caucasus in the past four years. They included developmental programs for Ingushetia and Chechnya, and another for the North Caucasus as a whole. Although Medvedev specified the number of pieces of infrastructure built in the region, he also recognized that little had been done to advance developing tourism. The unified government program for the socio-economic development of the North Caucasus was expected in August 2011, but the actual adoption of the program was stalled, with Medvedev at the meeting moving the deadline to December 1 of this year (https://government.ru, June 19).

Medvedev’s remarks on the high priority given to the North Caucasus on the Russian government’s agenda do not correspond to the relatively modest amount of funds spent on the region. The problem the Russian government faces with assistance to the North Caucasus is that financial assistance not only appears to be ineffective, but has a politically damaging aspect. On the one hand, Moscow likes pointing out how much the region depends on Russian support, but on the other hand, Moscow is increasingly afraid to provoke the Russian public’s wrath over the very same issue. Ethnic Russians increasingly view the North Caucasus as a foreign body inside the Russian Federation that receives undeservedly more assistance from the central government than other regions.

Russia’s Ministry for Regional Development drafted a new plan for the development of the North Caucasus until 2025. The cost of the plan is now estimated at $57 billion, of which only $15 billion is supposed to come from the federal budget, with the rest coming from republican budgets and investors (https://government.ru, June 19). This is less than a third of the $183 billion aid package initially proposed by the same ministry for the same purpose in 2011. About half of the latter amount was supposed to come from the federal budget and the other half from “non-budget” investments. In the Russian reality, since there are large state corporations that spend funds on the orders of the government, “non-budget” financing does not necessarily mean private financing. According to the then deputy minister for regional development, Sergei Vereshagin, $183 billion was necessary to help the North Caucasus catch up with the rest of the Russian Federation. For example, according to Vereshagin, the region needed 673 more schools and 270 more clinics and hospitals in order to reach parity with the rest of the country. The Russian Finance and Economic Development Ministries criticized the plan on various grounds, including a lack of financial instruments for planning for such an extended period as 2011-2025 (https://ria.ru, January 25).

At the meeting in Grozny, the head of Chechnya, Ramzan Kadyrov, asked the Russian Prime Minister to include Chechnya in the government’s project to develop the North Caucasus’ tourism sector. Medvedev promised to tweak the government decree to incorporate Chechnya’s project to develop a ski resort near the village of Veduchi in the republic’s Itum-Kale district in the North Caucasus-wide government program (www.gazeta.ru, June 19).

Meanwhile, Nezavisimaya Gazeta reported figures on payments for gas and electricity supplies in the North Caucasus that appear to be shockingly lower than elsewhere in Russia. According to the paper, only 68 percent of the North Caucasus’ population pays for natural gas regularly, in comparison to 99 percent in northwestern Russia. In Chechnya and Dagestan, only 42 percent of the consumers pay for gas. The paper alleged that the “law abiding payers,” who happened to reside in the ethnic Russian regions, had to pay more in order to make up for the unpaid gas bills of North Caucasians. In addition, the payment arrears for electricity came to over $3 billion across the North Caucasus Federal District in 2011. In 2012, Chechnya’s unpaid electricity bill reached $1.6 billion while Dagestan’s was almost $2 billion. Experts say the purchasing power of the impoverished populations of the North Caucasus republics is so low that customers cannot afford paying for utilities (www.ng.ru, June 19).

This scandalous information about yet another way the North Caucasus is being subsidized provoked a large-scale response from Russian observers. Even journalists from liberal-leaning, pro-democracy media like Ekho Moskvy radio expressed outrage over the issue. “In the [North] Caucasus less than half [of the people] pay for gas, yet they have 100 percent turnout during the elections and nearly 100 percent voting for you-know-for-whom. Could this be the explanation?” asked commentator Anton Orekh (https://www.echo.msk.ru/blog/oreh/900637-echo/). The view that ethnic Russians are paying out of their pockets for the North Caucasians’ well-being is very popular in Russia. If the country experiences an economic shock, the Russian public may demand even more vociferously why state funds are being spent on a region that is considered to be hostile to the Russians.

Experts warn that the Russian economy may be less prepared for economic shocks in 2012 than it was in 2008. An oil price of $90 per barrel is now the cut off for balancing the Russian budget, according to the First Deputy Prime Minister Igor Shuvalov. The country’s dependence on oil prices has further increased over the past four years, despite multiple statements by Russian officials about their determination to diversify the economy (www.ng.ru, June 20).

Economic uncertainty and rising Russian economic nationalism are likely to be the main reasons for Moscow reducing its assistance to the North Caucasus. In effect, it will mean that there will be more disaffection with Russia in the North Caucasus as the government’s propensity to crack down on regional dissenters with force increases. This explosive combination could make the region even more prone to further destabilization and the spread of violence.