The Russian government is split on the ambitious program of unprecedented trillions of rubles of subsidies to volatile North Caucasus and the finance ministry said a resolute “no”.
The regional development ministry estimated total federal expenditure to develop North Caucasus up to 2025 at over 3.8 trillion rubles (140 billion dollars) which means 10 billion dollars a year. The federal budget is to appropriate 2,604 billion, regional budgets have to earmark 195.2 billion, and the remaining 1,096.9 billion are to come from extra-budgetary funds. The proposed financing exceeds nearly ten-fold the expenditure of operating federal targeted programs for North Caucasus.
The program comprised requests from North Caucasus leaders which explains its huge scope. The main aim of the program is “to create conditions for enhanced economic, social and political security in North Caucasus.” It also has “to improve the investment climate, considerably reduce the productivity gap in key sectors of the economy, ensure deep modernization of social and urban infrastructure, population and longevity increase, higher human capital quality and living standards, the creation of new economic development centers and elimination of regional backwardness.”
The finance ministry said it will never agree to such huge costs. “We shall not approve the program in such an amount, everything will be within budget limits,” Deputy Finance Minister Tatyana Nesterenko told a meeting devoted to North Caucasus development and chaired by Prime Minister Vladimir Putin.
She said the program violates the existing budget concept as it requests money for concrete territories rather than guidelines, such as health care, transport, industry, etc.
A high-ranking finance ministry official told Vedomosti daily North Caucasus requests were “unreal”. “No additional finances will be appropriated as increased expenditure will up the budget deficit and taxes,” he warned.
Now the program will be examined by the economic development ministry. Its official already expressed pessimism and told Vedomosti the program envisages no institutional transformations.
Experts said huge costs to pacify North Caucasus are a political decision which the ministries cannot make all by themselves and the government will have to look for a compromise.
A government official said the huge costs will not be approved. “A search for compromise will begin but the budget construction for the coming six months has been approved and if you want to add something to anyone you will have to take it from somebody else.”
Putin’s spokesman Dmitry Peskov said the ministries “have completely opposite views, but the government will ask them to find a compromise.”
Alfa-Bank economist Natalya Orlova believes Russia can afford higher North Caucasus costs due to low sovereign debt and growing oil prices. The necessity to subsidize Caucasus will be a reason for tax increases after the 2012 presidential election, she believes.
Huge costs to calm North Caucasus irritate nationalists in Russia. The Russian Civil Union movement held a rally in Moscow in April under the slogan “Stop Feeding Caucasus.”
Participants branded North Caucasus as “a voracious crocodile which demands more blood and money” and said the problem of financial injustice was common for most people in Russia. According to the Union, 50 thousand rubles are allocated on average to each Chechen resident while people in ethnic Russian regions get ten times less. In 10 years Russian budget appropriations to North Caucasus grew 12 times, it estimated.
North Caucasus expert Ivan Sukhov told the Russian BBC service budget subsidies fuel corruption which causes irritation and hatred of the population and thus expands the mobilization base of militants.
Opposition politician Vladimir Milov told Vedomosti the program of the regional development ministry “shocks by its obtrusiveness.” It was submitted ignoring the fact that the 2012-2013 federal budget has been made up and protests of the finance ministry. “They simply propose to write out a 4-trillion ruble cheque to the Caucasus,” he said.
He disagreed with claims that higher subsidies can pacify belligerent North Caucasus republics. “The degree of violence was on the rise alongside growing subsidies in the past years. It is a bad encouragement: if you want to get more federal money you have to secretly arm the militants. In this way tensions in Caucasus will never end and will only mount,” he said.
“If North Caucasus needs financial assistance let them carry out political and economic reforms and learn to earn money like recently warring Balkan countries did,” Milov said.
MOSCOW, August 4