Publication: Prism Volume: 4 Issue: 8

By Rashid Akhmetov

The Kama Automobile Factory (KamAZ) in Tatarstan’s Naberezhnye Chelny was the brainchild of avid motorist Leonid Brezhnev. In the late sixties, the USSR had almost caught up with the US in the arms race and needed millions of modern heavy trucks to serve its military-industrial complex. The Gorky Automobile Factory (GAZ), built by Stalin in the 1930s, was clearly not up to the task. Countries in the socialist camp were also required to use only Soviet trucks. This became a political issue after the Warsaw Pact invasion of Czechoslovakia in 1968. This was the inspiration for the founding of KamAZ in 1969.

The site was chosen taking account of both economic factors (the Kama river, a tributary of the Volga, and the abundance of labor and energy resources) and non-economic considerations (such as the persistent request of Tatarstan’s leaders that the autonomous republic be compensated for the two billion tons of oil extracted there, and Central Committee Secretary Mikhail Suslov’s desire to promote his native Central Volga region). Tatar nationalists allege, too, that Moscow was pursuing the goal of the Russification of Tatarstan, since several hundred thousand workers would arrive from all over the USSR to build and work in the auto giant.

About $10 million was spent building the factory. Construction took place under the special supervision of the Politburo. KamAZ was glorified in numerous songs such as “We’re Building KamAZ, Building KamAZ…”; novels and short stories (in the literary magazine Novy mir, for example) and poems were written about the people building the factory. Up to 5,000 foreign specialists also took part in the building. Politburo members, artists, and poets came to visit. The construction site was supplied at the so-called “Moscow level,” that is, meat was sold freely for a dollar a kilo. But a “dry law” was also established, under which the sale of vodka was absolutely forbidden. Veterans of the factory’s construction on the naked, windswept steppes of Tatarstan have memories of how they took flights to other cities on their days off to buy a case of vodka.

The general director of KamAZ, by virtue of his position, held the rank of USSR first deputy minister of the automobile industry. The factory was counted on to produce 150,000 trucks a year, each with a carrying capacity of 10-13 tons. The main factories formed a 5,000-hectare square. The factory also had two hundred auto-servicing centers in the USSR. KamAZes were responsible for up to 80 percent of the USSR’s road transport. More than 120,000 workers were employed at the factory. The population of Naberezhnye Chelny grew from 20,000 to 550,000 in 15 years. Today, 40.6 percent of the local population are Tatars and 48.7 percent are ethnic Russians. The Tatars came from neighboring rural districts and were employed in unskilled work. The general director’s office and the management of the factory, highly-qualified specialists, were non-Tatars, and came from other parts of the Soviet Union.

This stratification helps to explain why Naberezhnye Chelny subsequently became a center of the radical wing of the Tatar national movement. Russian flags were burned here on numerous occasions and, from here, columns of KamAZes set off to carry humanitarian aid to Chechnya. In the early nineties, the leader of the Tatar independence party Ittifak, Fauzia Bairamova, moved from Kazan to Naberezhnye Chelny. On numerous occasions, radical Tatar nationalists have held meetings, demanding that the “Jewish bosses” of KamAZ be fired and that a Tatar be appointed to head the factory. The leaders of Kazan’s nationalistic Tatar Social Center have criticized these radicals for their anti-Semitism.

In the summer of 1990, the factory was reorganized into a corporation by order of the USSR Council of Ministers. The Ministry of the Automotive and Agricultural Machine-Building Industry (Minavtoselkhozmash) got 51 percent of the shares, and the remaining 49 percent were given to the factory’s labor collective. Later, 13 percent of the ministry’s packet of shares was transferred to Tatarstan’s State Property Committee. In May 1992, Tatarstan’s Supreme Soviet made a bid for on KamAZ and passed a resolution calling for all of the shares belonging to Minavtoselkhozmash to be transferred to the republic. KamAZ’s leadership simply ignored the move, and it quietly died. At the end of 1993, the Russian government declared that KamAZ was no longer a state enterprise, and transferred all of Minavtoselkhozmash’s shares to the factory’s labor collective. But in reality, almost all the shares remained in the hands of the factory’s directors.

In the Soviet period, about 40 percent of KamAZ’s production went to the military, while another third went to agriculture. KamAZ’s market was guaranteed. But with the abolition of central planning, the collapse of socialist camp, the breakup of the USSR and Russia’s move toward world markets, it became clear that the gigantic factory was doomed. The military order was sharply cut back — now, it is for only 5,000-6,000 trucks. Moreover, the Ministry of Defense is often late with its payments.

KamAZ’s basic model was designed back in the early seventies and is not competitive. Specialists estimate that, in the early nineties, a truck cost $31,000 to build and sold for $21-24,000. In other words, each one lost about $10,000. Russian farmers and other CIS countries have virtually stopped buying KamAZ trucks. A fire in the engine factory was a further blow, causing losses of $200 million. A program for the reconstruction of KamAZ was worked out, which called for $4.6 billion in investment.

By 1997, the factory was virtually at a standstill: that year, it put out only 12,000 trucks (in 1993, it had produced 85,700, and in 1994 — 24,700). Today, the factory is working at 10 percent of capacity. It takes, on average, one man-year to produce one truck. Therefore, KamAZ now needs only 12,000 workers. But Naberezhnye Chelny is a one-factory town. Where are the other 100,000 workers and their families to go?

In spring 1997, Tatarstan’s leaders tried to take the factory over, acquiring 40 percent of its shares in exchange for KamAZ’s debts to the republic budget. At that point, it became clear that the factory was more than a billion dollars in debt. It owes more than $300 million to the federal government, a further $160 million to the federal pension fund, $100 million to the European Bank for Reconstruction and Development, and $300 million to Russian banks (Vneshtorgbank, Vneshekonombank, Promstroibank, Sberbank and Tokobank). The total debt to the Tatarstani budget, the budget of Naberezhnye Chelny, and suppliers in Tatarstan amounts to just under $300 million.

Tatarstan refused to acquire 40 percent of KamAZ’s shares, since this would have entailed taking on the burden of its debts. At the present time, Tatarstan owns only nine percent of KamAZ’s shares.

KamAZ General Director Nikolai Bekh was fired, and nine officials from the government of Tatarstan were named to the board of directors. Ravil Muratov, a first deputy premier, was appointed chairman and called on the republic’s prosecutor general to investigate abuses at KamAZ. More than fifty criminal cases were filed, and hundreds of people were arrested. An investigation by Tatarstan’s Committee of State Security and Ministry of Internal Affairs found that as many as one hundred dubious firms had received tens of millions of dollars for supplying metal to the company at inflated prices or for serving as middlemen in the sale of KamAZ trucks. Entire consignments of finished trucks appeared to have been stolen from the factory.

Muratov proclaimed a “new economic course” which can be described as follows. The production of automobiles has been reduced to a bare minimum and only guaranteed orders are fulfilled. As a result, the factory did not start operating this year until February 16. There is only one working week per month, sometimes even less. The factory’s main products are now spare parts for KamAZes which have already been built. The production of “Oka” automobiles, by contrast, will increase to 25,000 cars per year. The factory now produces 7,000 of these small cars per year. An Oka costs $3,000, gets 100 kilometers per 5 liters in gas mileage and is in demand in Russia.

If this cost-cutting regime did not deliver the desired results, Muratov declared, KamAZ would be declared bankrupt. The announcement of the factory’s possible bankruptcy caused alarm and embarrassment in the Russian and Tatarstani governments. President Shaimiev said he was personally opposed to declaring the factory bankrupt and that the republic would help KamAZ. Meanwhile, Muratov’s relations with Tatarstani Premier Farid Mukhametshin began to deteriorate. Saying that KamAZ could not be restored to health using only republic funding, Mukhametshin got the republic’s leadership to leave the restoration of the auto factory off its list of top priorities. Mukhametshin is said to be of the opinion that the only way to save KamAZ would be to sell it rather cheaply to a Western company.

The last, and most serious, blow was the decision by Russia’s Ministry of the Economy. Muratov asked the Russian government to restructure the company’s debt of $1 billion, to simplify and reduce KamAZ’s tax when supplying daughter enterprises, to allow KamAZ to postpone paying its VAT and customs duties on new equipment bought, to invest $65 million in creating a family of trucks with a carrying capacity of 19-30 tons, and to issue a state order to supply trucks for the agricultural complex and highway construction. The Ministry refused all these proposals and declared that any federal budget money to assist the auto factory would have to be paid back. It also asked the company to present a report on the possibility of further share emissions and liquidity. It pointed out that the Russian government had already restructured $200 million of the company’s debt but that no positive results had been produced; instead, the factory’s economic situation had continued to deteriorate. The Ministry expressed the opinion that there was no reason to expect that any money it lent would be paid back on time.

The federal government’s refusal to help the auto factory puts the government of Tatarstan in a very difficult position. In essence, it has made the republic’s leadership a hostage of the situation. Where to put the 100,000 workers and employees of the idle factory, and how to take care of their families — this has become a tragic question for President Shaimiev. This is apparently why Shaimiev noted, in his annual message to the republic’s State Council on February 10, that 1998 would be much worse for Tatarstan than 1997. One may expect the situation in Naberezhnye Chelny to grow more tense by the summer. The Russian government is using KamAZ to show Tatarstan’s leaders the true price of sovereignty. The price for forgiving the factory’s debts will probably be complete, absolute loyalty to the federal center.

Translated by Mark Eckert

Rashid Akhmetov is an independent journalist in Kazan.