Publication: Monitor Volume: 2 Issue: 208

Russia’s Security Council met on November 4 under the chairmanship of Prime Minister Viktor Chernomyrdin. Chechnya dominated the agenda. Chernomyrdin confirmed that Moscow is seriously considering creating a free economic zone (FEZ) in Chechnya. (RTR, NTV, November 4) This would be an unusual FEZ in that it would encompass the entire republic. The blueprint for the zone was prepared by former deputy prime minister (now Duma deputy) Sergei Shakhrai, who has been discussing the plan with an informal group of deputies representing all parliamentary factions. (Nezavisimaya gazeta, October 30; Interfax, November 5)

Shakhrai argues that creating a FEZ in Chechnya will give the Chechen leadership a financial incentive to remain within the Russian Federation while at the same time allowing the federal authorities to erect a cordon sanitaire around the republic and isolate it from the rest of the Russian economy. Shakhrai argues that this is necessary because Chechnya’s economy is now dominated by criminal gangs. But he says that if Russia tried openly to erect a cordon sanitaire around Chechnya, there would be an outcry from the international community. Shakhrai believes that a FEZ would attract legitimate foreign investment to the republic, which would eventually squeeze out the gangs. Russia itself, he claims, has no money to invest in Chechen reconstruction, so the Chechens must be allowed free use of their natural resources (oil) to rebuild their economy. All Russia can and should contribute, Shakhrai says, is humanitarian aid and pension payments. "Tax money [raised in Chechnya] will remain in the republic," he says, "and federal money won’t be sent there, [since] only two percent of Russians support the idea of sending tax money to a republic striving for independence." (Nezavisimaya gazeta, October 30; NTV, November 4; Interfax, November 5) The Chechen authorities are said to be keen on a FEZ, but insist that it be set up on the basis not of a Russian law (as Chernomyrdin and Shakhrai envisage) but of an agreement between the Russian and Chechen governments.

Moscow’s decision to switch from carrot to stick is not a new tactic. Just before Russian troops were sent into Chechnya the possibility of an economic blockade of the republic was examined. Whether or not economic coercion would have worked then is a moot point. But after a year and a half of war, the situation has fundamentally changed. Now, Chechnya has a battle-hardened army whose fighters have no doubt that they have defeated Russia. The Chechen leaders are not asking for economic aid — they are demanding contributions. "Just to pull out their troops, without paying us any compensation — that won’t do. The war won’t be over until Russia pays Chechnya for everything, in full," rebel leader Shamil Basayev told Monitor.

Russia Rips U.S. Over Arrest of Former Agent.