Ramzan Kadyrov’s Regime is Unable to Cope with Sagging Chechen Economy

On November 4, mass protests occurred in Chechnya. Workers with the state construction firm Spetsstroi stayed off the job after not having been paid for four months, and went back to work only after they were promised that they would soon receive their back pay. According to an anonymous employee, the management of Spetsstroi was taking advantage of workers because there are practically no jobs available in Chechnya and the managers knew the workers would not quit their jobs (www.kavkaz-uzel.ru, November 4).

Thus, even under the fearsome rule of Ramzan Kadyrov, Chechens staged a muted protest action when the socio-economic well being of the people was in question. The event probably was indicative of Chechnya’s poor economic performance, which official Russian statistics do not capture. Kadyrov was credited even by his opponents for rebuilding Grozny, Gudermes and other locations in Chechnya. However, the biggest and perhaps most important part of Chechnya’s rapid reconstruction was the continuously increasing flow of money from the federal budget into the republic. Even more importantly, the quasi-omnipotent Russian leader, Vladimir Putin, probably personally controlled the process in order to ensure that most of the money actually reached Grozny and did not stay in Moscow.

However, facing mounting difficulties in its own economy and budgets and probably also on the basis of political calculations, the Russian government finally decided to restrict its support for Chechnya. Moscow has reduced its financial assistance to Chechnya by $100 million or five percent of its initial budget for 2010 (www.chechnya.gov.ru, November 6, 2009). Then construction workers, like those with the aforementioned Spetsstroi, started to complain about backlogs in payment.

The 2010 budget for Chechnya, with an official population of 1.3 million, was still confirmed at over $18 billion. By way of comparison, the 2010 budget for neighboring Dagestan, with its official population of 2.7 million, was less than $1.6 billion. The 2010 budget for Kabardino-Balkaria, with a population of 900,000, was $650 million while the budget for North Ossetia, with a population of 700,000, was $400 million (www.gks.ru, openbudget.karelia.ru, accessed on November 7).

Given the evident disparity between the budget-to-population ratio of Chechnya and those of the other North Caucasian republics –and also bearing in mind Ramzan Kadyrov’s illustrious feats in rebuilding Chechnya– one would assume that Chechnya has built significantly more housing than the other republics. Yet, a comparison of housing construction in all the republics works shows quite the opposite. Since the beginning of 2010, a mere 19,600 square meters of housing space was built in Chechnya. In the same period, Dagestan built 154,800 square meters of housing, Kabardino-Balkaria built 31,900 square meters and North Ossetia built 48,400 square meters. Even tiny Ingushetia built 30,100 square meters of housing. Only Karachaevo-Cherkessia, with its population of less than 500,000, has built less housing than Chechnya –constructing only 12,600 square meters (www.minregion.ru, accessed on November 7).

While there is no direct relationship between the size of the state budget and the volume of newly built housing space, the North Caucasian republics are similar enough to draw certain conclusions. All of the North Caucasian republics are heavily dependent on Moscow’s financial aid, but only Chechnya’s population is so utterly dependent on federal budget funds. Yet a whopping 60 percent of Chechnya’s population is officially registered as unemployed, according to the Russian ministry for regional development.

It should be noted that Russian methods for calculating unemployment do not comply with the standards of the International Labor Organization. In Russia, only those who are officially registered as unemployed are counted, while many people are left outside of this definition. The exact numbers are unknown for Chechnya, but for Stavropol region the official unemployment rate, calculated using the Russian methodology, is 1.7 percent, which is lower than the healthy 5 percent that most economists recommend. But if unemployment in Stavropol region is calculated according to ILO standards, it jumps up to 6.4 percent (www.kavkaz-uzel.ru, November 5). So the real unemployment rate in Chechnya is probably significantly higher than even the officially accepted 60 percent.

Ramzan Kadyrov’s unlimited control over Chechnya’s budget spending, as well as sporadic reports about Kadyrov’s fondness of luxury, imply that Chechnya’s population is under enormous pressure to survive under these conditions. Either Kadyrov’s incompetence or corruption, or both, are likely to affect the population of the republic more and more as the financial flows from Moscow dwindle. Moreover, the revival of the insurgency in Chechnya and numerous cases of young Chechens heading for the forests to fight with the insurgents are probably caused at least in part not by the original aspiration for Chechen independence, but also by secondary factors deriving from the lack of opportunities for the youth.

A proper policy analysis of the situation in Chechnya, as well as across the North Caucasus, is additionally hampered by the lack of reliable statistics. Even basic information, such as population size and ethnic composition are considered to be highly sensitive and are invariably rigged. While the official population of Chechnya nears 1.3 million, some sociologists and other experts have persuasively argued that it is significantly exaggerated. The same goes for unexpected jumps in population estimates for Dagestan, Ingushetia and Kabardino-Balkaria.  

Such erroneous figures even made it into Moscow’s official strategy for the North Caucasus, which was published this past September. It wrongly estimated that the region had a population surplus of 1.7 million in the past 20 years, and then spoke of this as being a negative factor (www.government.ru, September 6, pp. 4-9).

Moscow’s reluctance to reveal even the basic North Caucasus demographic and population figures is influenced by several factors. The Russian government does not want the statistics to indicate how Chechnya’s population was decimated during two devastating wars with Russia. For political reasons, the government does not want to admit the full scale of the Russian population’s outflow from the North Caucasus. The government also has a vested interest in beefing up the birthrates in the North Caucasus to provide a plausible reason for its attempts to increase the rate migration of North Caucasians into Russia proper. In the end, however, manipulating the numbers obstructs Moscow’s own efforts to make informed political decisions about the North Caucasus.