Accessibility links

Breaking News

Economics: Russia And Chechnya Maintain Trade Links

The Russian army says it is cordoning off Chechnya, but unofficial and semi-official trade in oil and weapons may be difficult to staunch. Moscow correspondent Sophie Lambroschini reports on the intertwined economic ties of Russia and Chechnya.

Moscow, 28 September 1999 (RFE/RL) -- Economic activity in Chechnya is largely unofficial, especially since two years of war against Russian forces ended in 1996. Chechnya is suspected by international crime-fighting authorities of being an important transit zone for illegal trade in and out of Russia. Narcotics and weapons smuggling allegedly make up much of the traffic through this strategic and uncontrolled borderland. And frequent kidnappings of Russians and foreigners are a source of ready cash for some Chechens.

But apart from such illegal activities, Chechnya also conducts a more or less official trade with Russia -- particularly in oil and weapons. In addition to the Baku-to-Novorossiisk oil pipeline that runs through Chechnya, many smaller businesses have proved necessary enough to overcome the partial isolation of the republic. Whether on an official level or a cross-border local one, Russia and Chechnya are business partners, for better or for worse.

What do Chechen separatist fighters need most? Weapons, of course. And who can readily supply weapons to that region? The Russian army.

Chechnya is awash in weapons. The Russian government says that is because the breakaway province is receiving foreign military aid. But Yuri Golotyuk, an expert on military affairs for the Moscow-based newspaper Izvestia, writes that much of Chechnya's weaponry comes from Russia. Golotyuk says there is no evidence of foreign military aid. Shoulder fired anti-aircraft missiles used by Chechen fighters have turned out to be Russian models, N-O-T US-built Stinger missiles left over from the Soviet-Afghanistan war.

Quoting sources in the Russian special services, Golotyuk says many Russian-made weapons may have been acquired by Chechnya legally under a 1997 agreement. At that time, Shamil Basayev -- the Islamist insurgent who has been leading recent separatist raids in Dagestan -- was prime minister of Chechnya. Under the agreement for a "common defense space," Basayev could order weapons, ammunition, and other equipment from Russia to fight crime in the North Caucasus.

Oil is the main source of income for Chechnya. Mikhail Delyagin, the head of a Moscow think tank who used to work for the presidential administration, has studied the economic aspects of the Chechen problem. He says Chechnya and the Russian regions that border it are economically interdependent, and their interdependence stems largely from Chechnya's trade in oil.

The pipeline that carries oil from Azerbaijan's capital of Baku, on the Caspian Sea, to the Russian Black Sea port of Novorossiisk crosses through Chechnya. That means Chechen warlords can raise significant revenues by illegally siphoning off some oil.

According to Delyagin, it is thanks to the modest but regular revenues from oil refineries that Chechnya actually survived the 1994-96 war. He says Russian authorities knew even before Moscow's December 1994 offensive that Russian firms were illegally exporting oil through Chechnya. Russia should have tried to close the Chechen border earlier, he says, to cut off illegal export outlets and redirect the refinery business toward legal enterprises. Delyagin says if the warlords had received official revenues from the Chechen government budget, they may have become ordinary local authorities.

This plan was partly enacted by former Russian prime minister Sergei Stepashin. But it was hard to implement without harming the fragile economies of Russian regions that border Chechnya. Stavropol krai, for example, an agricultural region bordering the breakaway republic, depends on cheap fuel from Chechnya. Without it, Delyagin says harvesting could be compromised for want of gasoline and diesel.

Russia may now be trying to close off the Chechen oil business. Last week, Fuel and Energy Minister Viktor Kalyuzhny said Russia was committed to building a new pipeline that would bypass Chechnya.

Weapons and oil aren't the only products that have been traded between Russia and Chechnya. Ordinary citizens kept up a brisk exchange until the recent Islamist incursions into Dagestan. Whenever possible, Chechen residents avoided expensive local shops by driving to a big wholesale market in Khasavyurt -- a Dagestani town just an hour from Grozny. Others did business in nearby Ingushetia and North Ossetia.

This trans-border traffic was also lucrative for Russian Interior Ministry troops guarding the main routes out of Chechnya. Russian journalists report that even when Islamists were waging raids on Dagestan, Russian border guards would allow cars and trucks across the border for a small bribe.

The new blockade of Chechnya by the Russian army may prove just as porous -- or it could put a halt to some of the trade. In the past few days, the only thing obviously flowing from Chechnya to Russia was the thousands of refugees fleeing Russian bombs that are now targeting Grozny.