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How Much More Money Will Moscow Throw At Daghestan?

Daghestani leader Ramazan Abdulatipov
Daghestani leader Ramazan Abdulatipov

The Russian daily Kommersant has reported that the federal Ministry for the North Caucasus is mulling a separate program of financial support for Daghestan under which that republic would receive a total of 170 billion rubles ($3.4 billion) over the 10-year period from now until 2025. Some analysts doubt, however, whether that would be enough to resolve the chronic social and economic problems the region faces. And officials from the federal Finance Ministry are reportedly wary of setting a precedent that could lead other North Caucasus republics to demand similar privileged treatment.

The separate program for Daghestan has reportedly been under discussion for two years, which suggests that it was the brainchild of current Republic of Daghestan head Ramazan Abdulatipov, whom Russian President Vladimir Putin named to that post in early 2013. Abdulatipov publicly stressed the need for such a program last fall, complaining that many federal politicians responsible for the North Caucasus "don't know...what problems we face."

The rationale cited by the North Caucasus Ministry for a separate financial program for Daghestan stressed the need for sustained and dynamic economic growth in order to reduce poverty and unemployment, which currently stands at 10.7 percent, according to official statistics, but in all likelihood is at least double that figure.

The ministry also noted that oil and gas extraction in Daghestan has been declining steadily over the past few years, with a concomitant fall in the sum the sector contributes in taxes to the republican budget. At Abdulatipov's behest, a Daghestan State Oil and Gas Company was established in March 2014 to attract investment into that sector and thereby reverse the decline in its contribution to budget revenues.

The federal Economy Ministry, however, considers a separate program for Daghestan inexpedient, according to Kommersant. Ministry officials fear other North Caucasus republics might demand similar programs, and point out that Daghestan is already scheduled to receive 3 billion rubles in 2015 from the separate South of Russia federal program and a further 2.1 billion rubles in 2016.

Meanwhile, the news agency Regnum quoted Mikhail Chernyshev of the Russian Academy of Sciences Institute for Market Problems as arguing that spread over a period of 10 years, the sum earmarked for Daghestan under the new program is insufficient to bring about the desired economic breakthrough.

None of the media comments on the proposed new program mentions the risk that a sizable proportion of the funds allocated will be embezzled.

Assuming that the new financial program for Daghestan goes ahead, it will be funded from the Socio-Economic Development Program for the North Caucasus 2012-25 approved in December 2012, under which Daghestan was to receive 33 billion rubles. The dimensions of that program were progressively cut from 3.89 trillion rubles in the initial draft in early 2011 (of which Daghestan was to have received 1.2 trillion) to 2.55 trillion.

But even if the federal Economy Ministry succeeds in nixing the planned new financial program, Daghestan is still in line to receive an additional 1 billion rubles from a nonbudget fund established last fall to promote the development of cities dominated by a single branch of industry. That money will be channeled toward the cost of developing infrastructure in the industrial zone of the town of Kaspiisk, southeast of Makhachkala. Abdulatipov's son Dalgat occupies a senior position in the Kaspiisk municipal administration.

-- Liz Fuller

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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