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Chechen Leader Kadyrov Challenges Moscow Over Budget Subsidies

Chechen leader Ramzan Kadyrov says that because the region "is only just getting back on its feet," Chechnya should not be subject to the same financial constraints as other federation subjects.

Just weeks after Russia's Ministry of Sport condemned the participation of three of his young sons in a public boxing match as part of the celebrations to mark his 40th birthday, Chechen Republic head Ramzan Kadyrov has picked yet another fight with the federal leadership.

Contradicting Finance Minister Anton Siluanov's assurance just days earlier that Russia's draft budget for 2017-2019 would make full provision for all the country's social spending needs, Kadyrov declared on October 31 that the budget model proposed by Moscow "is unacceptable for the Chechen Republic." He said that because the region "is only just getting back on its feet," Chechnya should not be subject to the same financial constraints as other federation subjects.

Among the "many problems" that Kadyrov said still exist, he cited the fact that some Chechen schools still operate in three shifts due to the shortage of school buildings. Chechnya still needs to develop the basic sectors of the economy, he said.

That line of argument is misleading in several respects.

First, under Kadyrov's watch, over the past 12 years Grozny and other large towns have been largely rebuilt and huge sums invested in infrastructure. To imply, as Kadyrov does, that the republic's leadership is still burdened with the aftermath of the mass destruction resulting from the wars of 1994-96 and 1999-2000 is simply untrue. Indeed, Kadyrov himself told a Chechen government session in mid-March 2016 that despite the past "military campaign," Chechnya today is among the leading Russian regions in terms of development.

And in August, Kadyrov informed Russian President Vladimir Putin that during the first six months of this year, industrial production increased by 11.6 percent and agricultural output by 7.4 percent.

Second, the shortage of school facilities is largely due to the fact that Chechnya has one of the highest birth rates in the Russian Federation. The same problem of schools with three teaching shifts exists in Ingushetia and Daghestan, for the same reason.

Kadyrov did not cite specific figures showing by how much budget spending will be cut in 2017 compared with 2016 either during his discussion with Chechen government officials or in a subsequent interview he gave to Interfax to publicize his grievance. But economist Natalya Zubarevich of the Independent Institute for Social Policy explained that Chechnya has long been in a privileged position with regard to federal funding. For example, while Russia’s regions as a whole received 12 percent less in subsidies from the federal government during the first half of this year, with 68 of them suffering a reduction, Chechnya received 14 percent more than in 2015.

A second economist, Aleksandra Suslina, made the point that, in 2015, Chechnya’s budget revenues were set at 73.7 billion rubles ($1.13 billion at today's exchange rate) or 6 percent more than in 2014, but of that sum only 12.3 billion rubles was covered by Chechen tax and nontax revenues, a reduction of 4 percent. In 2015, subsidies from the federal government accounted for 81 percent of Chechnya's total budget.

To compensate for the unspecified sum Kadyrov implies Chechnya will not receive in 2017 to cover social spending, he advocated that additional funding via the sequestered Federal Program to Revive Chechnya's Economy and Social Sphere, which was due to run in stages until 2020, be renewed. That program, which was launched in 2002, was abolished in 2007 because the funds made available were not being used effectively.

Moscow has thus far given no indication that it intends to make an exception for Chechnya and meet Kadyrov's demands for more money. Asked to comment on them, Putin's press secretary, Dmitry Peskov, said "intensive discussion" of the budget will continue in the State Duma and will focus on the country as a whole and not on "the interests of one region."

Analysts have suggested two reasons Moscow may have decided to reduce subsidies to Chechnya.

The first is the imminent handover to Grozny of the joint stock company Chechenneftekhimprom that controls the republic's oil-refining and petrochemical industry infrastructure, a move that will boost tax revenues. The second is the suspicion that the population of Chechnya is almost one-third less than the official figure of 1.3 million. (Over the past few years, some 150,000 Chechens have fled to Europe and a further 20,000 to 30,000 to Turkey and the Middle East.)

Putin has, nonetheless, instructed the federal government to "consider the possibility" of increasing funding for the State Program for the North Caucasus in 2018-20. Projected spending under that program in 2017 was reduced last month from 31.8 billion rubles ($491 million) to just 13.7 billion ($212 million). But according to Minister for the North Caucasus Lev Kuznetsov, the primary focus of the program will be attracting investment with the aim of expanding the republic's tax base, rather than alleviating social problems, in the first instance shortcomings in education and medical care, which seem to be Kadyrov's primary concern. And it will not compensate for any reduction in external funding next year.

On November 2, Kadyrov followed up on his designation of the draft 2017 budget as "unacceptable" with the announcement that Chechnya considers it "expedient" to suspend implementation of an agreement signed two years ago with the federal Finance Ministry under which the volume of subsidies Chechnya receives from the federal budget was to be reduced by 5 percent annually until 2018. (In 2015, such subsidies accounted for 81 percent of the republic's budget.) The ensuing shortfall in revenues was to be met either by increasing tax revenues or reducing spending, according to Chechen Finance Minister Usman Rassukhanov.

Kadyrov has also signed off on a legislative amendment abolishing the deadline for the republic's government to submit the draft budget to parliament for debate.

The views expressed in this blog post do not necessarily reflect the views of RFE/RL.

About This Blog

This blog presents analyst Liz Fuller's personal take on events in the region, following on from her work in the "RFE/RL Caucasus Report." It also aims, to borrow a metaphor from Tom de Waal, to act as a smoke detector, focusing attention on potential conflict situations and crises throughout the region. The views are the author's own and do not represent those of RFE/RL.


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