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Can New Republic Head Reverse Economic Decline In North Ossetia?

Can Vyacheslav Bitarov rescue North Ossetia from the doldrums?
Can Vyacheslav Bitarov rescue North Ossetia from the doldrums?

On September 18, the parliament of the Republic of North Ossetia-Alania confirmed as republic head Vyacheslav Bitarov, 55, who had acted in that capacity since the untimely death in February after just five months in the post of Tamerlan Aguzarov, under whom Bitarov had served as prime minister.

In his inauguration address the same day, Bitarov, a former brewery magnate, pledged "to work for the people, and not at their expense," an allusion to the pervasive corruption that has reportedly cost the region 400 million rubles ($6.35 million) in the first six months of this year alone.

At the same time, he warned that "it is impossible to turn around the difficult economic situation in the space of an hour, but it is imperative to do everything [possible] to develop our economy and improve people's lives."

The task Bitarov faces is indeed daunting. For much of the past quarter-century, North Ossetia was the poster child among the North Caucasus republics, with the highest per capita income and comparatively low unemployment. And with the exception of the Beslan hostage taking in September 2004, it has been spared the depredations of the North Caucasus insurgency.

Over the past few years, however, the region has experienced steady economic decline. In 2015, industrial production fell by almost 12 percent year on year and agricultural output by 8.8 percent. The number of loss-making enterprises increased by 4.8 percent.

Meanwhile, wage arrears have skyrocketed, municipalities cannot afford street lighting or the government to provide hot meals for schoolchildren, and during the first six months of 2016, as a result of three new loans, the republic's debt rose by 20 percent to reach 10.87 billion rubles ($170 million), which is more than the total combined tax and nontax revenues for 2015.

Registered unemployment is among the highest in the region, with 12 applicants for every job vacancy.

When he took the reins in February shortly after Aguzarov's death, Bitarov listed as his priorities the more effective use of the republic's natural resources, developing agriculture, and reviving the moribund and obsolescent industrial sector. But within weeks he was constrained to admit that the budget did not run to investment in agriculture. Indeed, it is questionable whether such investment is advisable in the long term, given that the return on subsidies is low and the widespread cultivation of maize as raw material for the distilling of vodka risks depleting the soil of nutrients and leaving it uncultivable.

The alcohol sector is, however, currently a vital source of budget revenues. The volume of excise duties on vodka increased 10-fold during the first six months of 2016, to 672 million rubles (total budget revenues for January-June were 4.3 billion rubles). Already in April, projected budget revenues for 2016 were revised upward by 1.27 billion rubles to take that increase into account, and last month Bitarov expressed confidence that the upward trend will enable the government to reduce the state debt by 220 million rubles by the end of the year.

To compensate for the republic's inability to provide investment capital from its own budget, Bitarov set his sights on securing up to 21 billion rubles in funding for individual projects from various ongoing federal programs. In July, he was savagely critical of those government ministers who were at risk of failing to compile and submit applications for such funding before the deadline for doing so elapsed, warning that "in the Soviet Union you could have been fired for that, and in 1937 [during the Stalin purges] you would have been shot."

Yet despite that criticism, Bitarov pledged in his inaugural address not to make major changes in the cabinet, and so far only the ministers for environmental protection and natural resources and nationality relations have been replaced.

Bitarov also retained as prime minister Taymuraz Tuskayev, an economist and former fellow parliament committee chairman whom he had selected as prime minister in February. Tuskayev was unanimously endorsed by parliament, whereas three legislators had voted for an alternative candidate to Bitarov as republic head. A former member of Russia's Public Chamber, Tuskayev wrote his doctoral dissertation on maximizing the republic's agricultural potential.

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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