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Russia engages Chinese capital in North Caucasus

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Russian company Northern Caucasus Resorts (NCR OJSC) and Chinese Dalian Wanda Group Corporation and China Oceanwide Holdings Group – in the presence of Heads of both states – signed a Memorandum of Intent regarding China’s investment in the development of Northern Caucasus resorts.

The amount of the said investment is expected to reach about USD 3 bl. to facilitate building of residential premises, trade, hotel and commercial complexes.

Chinese companies intend to invest in projects on the territory of Northern Caucasus federal district, the Krasnodar territory and the Republic of Adydea. According to Russian representatives the key investments are expected to target the regions of the Caspian Lowland in Dagestan, the city of Sochi and resort Arkhyz in Karachayevo-Circassian Republic.

Earlier this region was deemed a potential target by South African, French and Turkish investors. However, the amount of the expected investments was way smaller than those announced by China.

Thus, in June last year NCR OJSC entered into a similar contract with French Caisse des Depots et Consignations group which intended to invest about USD 1.7 bl. in building of recreation infrastructure in the Northern Caucasus. At the same time, public authorities promised back then to increase capitalization of NCR to USD 2 bl. Northern Caucasus is – in theory – an attractive target for investors in tourism infrastructure. Unique climate and rich natural resources make it a promising direction for the development of this business sector. At the same time, however, high rates of crime, separatism, economic underdevelopment and the fact that the main contribution into the gross regional product is made by public administration and social (including community) services sector, abate the investment attractiveness of the region. That is why the volumes of state investments here reach 60-90%, the average Russian indicator being 30%.

High birth and unemployment rates along with the cultural and religious peculiarities bring investment risks to the maximum. The average unemployment rate in the Caucasus (18%) twice exceeds that of Russia in general. This indicator is highest in Chechnya (43.1%) and Ingushetia (49.7%).

Unfavourable social and economic indicators cause destabilization of the situation. According to Caucasian Knot periodical for the first quarter of 2012 no less than 258 people became victims of the armed conflict in the Northern Caucasus. Thus, 163 people were killed and another 95 injured. 82 of them were announced members of an underground armed organization.

Relative stability in the region today is mainly achieved due to Kremlin financing. The Northern Caucasus receives around USD 5.6 bl. annually. The main objectives of public authorities in terms of NCFD development by 2025 are annual gross regional product growth at the level of 7.7%, annual industrial growth of over 10%, reduction of the scale of unemployment to 5%.

At the same time, tremendous rates of corruption will not allow using this support to the benefit of the whole population. Thus, Plenipotentiary Envoy of the President of the Russian Federation in the NCFD Aleksandr Khloponin stated that the Northern Caucasus is the Russia’s leader in terms of money laundering.

According to the obtained information the separatist mood in the region remains the same, and in some districts even grows. In this situation, the Kremlin will need to increase financial support in the nearest future which will be distributed among the local elite. In our opinion, such strategy is not efficient, and the Kremlin’s attempts to set the vertical of the recreation industry in the Northern Caucasus are ill-fated because these tactics of implementation of projects ‘from Moscow to the regions’ is a priori much less effective than allowing local authorities to participate in their management. This will not allow for the full-scale involvement of the local elite in the projects and creation of the interested local powerful forces to ensure their secure functioning. The present-day business model de facto has nothing to do with the attempt of real integration of the NCFD in the RF economy and has a large corruption element instead.

According to our estimations Russia has faced a serious deficit of resources which are of crucial importance for the harmonious development of all the country’s regions. This triggers the necessity of attracting foreign capital to be allocated in the most underdeveloped regions. A similar scheme is now being implemented in Siberia and in the Far East where the same Chinese capital is being actively raised. Therefore, Moscow is striving to ensure provision of the necessary financial resources to the economically depressed Russian regions.

It is worth noting that on May 21st this year Vice-President of China Oceanwide Holdings Tsi Tszysin highlighted the lack of specifics of investment projects in the NCFD and the need to conduct serious work in this direction. Therefore, at the time of signing, the determination of investment volumes could not be based on the actually existing projects. Consequently, the amount of investments can hardly be deemed justified.

Press Secretary of RF Prime-Minister Dmitriy Peskov said that Chinese investors asked for support in entering investment markets of Moscow and Saint-Petersburg in lieu of the Northern Caucasian projects. According to the information provided by the sources in Moscow government, however, these Chinese companies never addressed the Mayer’s office with development project proposals. At the same time, China is one of the key foreign investors in Saint-Petersburg which may be a proof of existence of secret covenants between Moscow and Beijing related to investments in the Northern Caucasus.

In view of the aforesaid, we believe that involvement by Moscow of significant geopolitical players in the NCFD is aimed at ensuring capital inflow to the region for the purpose of levelling social and economic destabilization factors the influence of which is now growing.

The main interest for China, in our opinion, lies in the area of consistent interstate arrangements. Today Russian and China have a number of strategic projects related to the joint use of raw materials and high technologies. This refers to aircraft engineering, nuclear energy, oil and gas industry etc. Investments in the Northern Caucasus district may be one of the aspects of some broader arrangements, a sort of payment for the compromises in other areas of cooperation.

We believe that China’s participation in investing in this region will allow it to increase geopolitical competition with Turkey. Quite a lot of Turkic peoples inhabit the territory of the Northern Caucasus, the largest of them being Kumyks, Karachais, Balkarians, Nogais, Azerbaijani, Akhaltsikhe Turks. China with its serious problems with the Uigurs and concern about the activation of pan-Turkish sentiments in the region may consider investments in the Northern Caucasus as a way to strengthen its position, thus opposing Ankara. A similar system of geopolitical behaviour may be also caused by the concern about the enhancement of radical Islamist activities within the region. At this point, the key goal of Chinese geopolitics in the Caucasus is strengthening of economic connections with the region aimed at decreasing the possibility of penetration of pan-Turkism and Islamic fundamentalism in China.

These interests go in line with those of Moscow which due to the strengthening of China slows down the rapid growth of Ankara’s influence. It is not impossible that the choice of French investors in 2011 was determined by the peculiarities of France-Turkey relations. Therefore, Moscow may select investors for cooperation in the NCFD purposely – those who would have interests in the Northern Caucasus similar with the Kremlin’s aimed at the creation of a system of external balances and geopolitical counter weights in the region.

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Russia lacks sufficient number of migrants to fulfill its ambitious development plans

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Despite various official efforts, including regular payment of maternal capital to stimulate birth rates and regulating migration policy to boost population, Russia is reportedly experiencing decreasing population. According to the Federal State Statistics Service, Russia’s population currently stands at approximately 144 million, down from 148.3 million.

Experts at the Higher School of Economics believe that regulating the legal status of migrants, majority of them arriving from the Commonwealth of Independent States or the former Soviet republics, could be useful or resourceful for developing the economy, especially on various infrastructure projects planned for country. These huge human resources could be used in the vast agricultural fields to boost domestic agricultural production. On the contrary, the Federal Migration Service plans to deport all illegal migrants from Russia.

Within the long-term sustainable development program, Russia has multibillion dollar plans to address its infrastructure deficit especially in the provinces, and undertake megaprojects across its vast territory, and migrant labor could be useful here. The government can ensure that steady improvements are consistently made with the strategy of legalizing (regulating legal status) and redeploying the available foreign labor, majority from the former Soviet republics rather than deporting back to their countries of origin.

Moscow Mayor Sergei Sobyanin has been credited for transforming the city into a very neat and smart modern one, thanks partly to foreign labor – invaluable reliable asset – performing excellently in maintaining cleanliness and on the large-scale construction sites, and so also in various micro-regions on the edge or outskirts of Moscow.

With its accumulated experience, the Moscow City Hall has now started hosting the Smart Cities Moscow, international forum dedicated to the development of smart cities and for discussing about changes in development strategies, infrastructure challenges and adaptation of the urban environment to the realities of the new normal society.

Kremlin Spokesman Dmitry Peskov told reporters that Russia lacks sufficient number of migrants to fulfill its ambitious development plans. He further acknowledged that the number of migrants in Russia has reduced significantly, and now their numbers are not sufficient to implement ambitious projects in the country.

“I can only speak about the real state of affairs, which suggests that, in fact, we have very few migrants remaining over the past year. Actually, we have a severe dearth of these migrants to implement our ambitious plans,” the Kremlin spokesman pointed out.

In particular, it concerns projects in agricultural and construction sectors. “We need to build more than we are building now. It should be more tangible, and this requires working hands. There is certainly a shortage in migrants. Now there are few of them due to the pandemic,” Peskov said.

Early April, an official from the Russian Interior Ministry told TASS News Agency that the number of illegal migrants working in Russia decreased by 40% in 2020 if compared to the previous year. It also stated that 5.5 million foreign citizens were registered staying in Russia last year, while the average figure previously ranged between nine and eleven million.

On March 30, 2021, President Vladimir Putin chaired the tenth meeting of the Presidential Council for Interethnic Relations via videoconference, noted that tackling the tasks facing the country needs not only an effective economy but also competent management. For a huge multinational state such as Russia, it is fundamentally, and even crucially important, to ensure public solidarity and a feeling of involvement in the life, and responsibility for its present and future.

At this moment, over 80 percent of Russian citizens have a positive view on interethnic relations, and it is important in harmonizing interethnic relations in the country, Putin noted during the meeting, and added “Russia has a unique and original heritage of its peoples. It is part of our common wealth, it should be accessible to every resident of our country, every citizen, everyone who lives on this land. Of course, we will need to review the proposal to extend the terms for temporary stay of minors of foreign citizens in the Russian Federation.”

President Vladimir Putin has already approved a list of instructions aimed at reforming the migration requirements and the institution of citizenship in Russia based on the proposals drafted by the working group for implementation of the State Migration Policy Concept of the Russian Federation for 2019-2025.

“Within the framework of the working group for implementation of the State Migration Policy Concept of the Russian Federation for 2019-2025, the Presidential Executive Office of the Russian Federation shall organize work aimed at reforming the migration requirements and the institution of citizenship of the Russian Federation,” an official statement posted to Kremlin website.

In addition, the president ordered the Government, the Interior and Foreign Ministries, the Federal Security Service (FSB), and the Justice Ministry alongside the Presidential Executive Office to make amendments to the plan of action for 2019-2021, aimed at implementing the State Migration Policy Concept of the Russian Federation for 2019-2025.

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Nobody Wants a War in Donbass

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image source: euromaidanpress.com

Any escalation is unique in its own way. Right now there’s a combination of unfavorable trends on both sides, which are leading to an escalation of the conflict. This combination creates additional risks and threats that weren’t there before.

On the Ukrainian side, the problem is that the president is losing his political position and becoming a hostage of right-wing and nationalist forces. Many of the reform initiatives that he came to power with have stalled. Political sentiments are changing within his faction. They’re saying that with his recent steps, in particular the language law and the closure of television stations that Kyiv dislikes, he’s starting to stray towards the agenda of his predecessor, Poroshenko. And this means a weakening of his position. Probably, he’s already thinking about re-election and how he will look during the campaign. Here, the trend is unfavorable.

On the other hand, there’s the arrival of Biden, who will always be more attentive to Ukraine than Trump. There’s an expectation that the U.S. will be more consistent and decisive in its support for the Ukrainian side in the event of a conflict. This invigorates the forces that are looking for an escalation.

The conflict in Nagorno-Karabakh also played a role. They said there was only a political path to resolving the conflict, but in Karabakh [the Azerbaijanis] used force and made real progress. This motivates the people who think that military force can resolve a conflict. Moreover, Ukraine is carrying out defense cooperation with Turkey, so there may be hopes that the balance of forces will shift in Kyiv’s favor.

There’s also a radicalization of the political leadership of the DNR and LNR. They say that [full-scale] war is, if not inevitable, than very likely—and Russia must intervene. The idea that the DNR and LNR should join Russia is gaining popularity once again. This is facilitated by Russia’s actions. In the last two years, the mechanisms for granting Russian citizenship to residents of the LNR and DNR have changed. Hundreds of thousands of LNR and DNR residents are already citizens of the Russian Federation, and Russia has—or at the very least should have—some obligations towards its citizens. This gives hope to [the residents] of the LNR and DNR that if an escalation begins, Russia won’t remain on the sidelines and we will see large-scale intervention. Without Russia, the conflict will not develop in the favor of the republics.

As for Russia, our relations with the West continue to deteriorate. There’s Biden’s statement about Putin being a killer, and relations with the European Union. We are witnessing an accumulation of destabilizing trends.

I don’t think anyone wants a real, big war, since the costs of such a conflict will exceed the political dividends. It’s difficult to predict what such a conflict might lead to, given that the stakes are very high. But an unintended escalation could occur.

Hopefully, all of those involved have enough wisdom, determination, and tolerance to find a positive solution. So far, we are far from a serious conflict, but we’re closer than at the beginning of April 2020 or 2019. Unfortunately, we’re headed downhill, and it’s difficult to say how long it will go on.

To prevent a [full-scale] war from starting, the situation in Donbass needs to be stabilized. That’s the first task. In recent weeks, the number of ceasefire violations has been increasing, and the number of victims is growing. We need to return to the issues of the withdrawal of heavy weapons, the OSCE mission, and monitoring the ceasefire.

The second task is to discuss issues of political regulation. The main uncertainty is how flexible all the parties can be. The Minsk agreements were signed a long time ago, [but] it’s difficult to implement them in full, there needs to be a demonstrated willingness not to revise them, but to somehow bring them up to date. How ready are the parties for this? So far, we aren’t seeing much of this, but without it we will not advance any further.

The third issue is that it’s impossible to resolve the Donbass problem separately from the problem of European security as a whole. If we limit ourselves to how we fought in Donbass, Kyiv will always be afraid that Russia will build up its strength and an intervention will begin. And in Russia there will always be the fear that NATO infrastructure will be developed near Voronezh and Belgorod. We have to deal not only with this issue, but also think about how to create the entire architecture of European security. And it isn’t a question of experts lacking imagination and qualifications, but of statesmen lacking the political will to seriously deal with these issues. Because if you reduce everything to the requirements of the formal implementation of the Minsk agreements, this is what we’ve been fighting about for seven years already.

I think that Ukraine will now try to increase the political pressure on Moscow and get away from the issue of the Minsk agreements. And going forward a lot depends on what the position of the West and U.S. will be. To what extent and in what format will they provide support in the event of an escalation? This is still an open question. And, I think, even Biden doesn’t know the answer to it.

From our partner RIAC

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Updating the USSR: A Test for Freedom

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Thirty years ago, on March 17, 1991, the only all-Union referendum in the history of the USSR took place. One question was put to a vote: “Do you consider it necessary to preserve the Union of Soviet Socialist Republics as a renewed federation of equal sovereign republics, in which the rights and freedoms of a person of any nationality will be fully guaranteed?” Almost 77 percent of those who voted said “yes” to the preservation of the USSR in an updated form. The authorities of Armenia, Georgia, Latvia, Lithuania, Moldova and Estonia refused to hold the referendum on their territory. By that time, the legislative and executive bodies and institutions in these republics were already controlled by secessionist forces, which did not hide their intentions to leave the USSR.

The March 17 referendum at that time was the only convincing attempt to appeal to public opinion on the most important issue of the political life of a huge country. However, the results did not change anything — by December 8 of the same year, the leaders of Belarus, Russia and Ukraine decided to dissolve the USSR. The referendum itself became the beginning of the end of a unique state — an experiment in the vast expanses of Eurasia. By that time, the republican elites were already ready to take power and wealth into their own hands; the events of August 1991 spurred this readiness — in Turkmenistan, where almost 100 percent of the population voted to preserve the USSR, on August 22, 1991, all enterprises were placed under republican control.

All the republics of the USSR met the new year in 1992 as newly independent states. For some of them, this status was a long-awaited event, for which they had fought. Others were, according to former Prime Minister of Kyrgyzstan Apas Jumagulov, “thrown out of the union, cut off as an unnecessary part of the body.” Many economic ties broke off immediately, while others collapsed gradually; the rest survived and were even strengthened. In politics, everyone was left to their own problems. Azerbaijan, Armenia, Georgia, Moldova and Tajikistan plunged into bloody political and interethnic conflicts during their first years of independence.

The path of the countries that emerged from the ruins of the USSR over the years was the road to gaining their own subjectivity in international politics. With great difficulty and despite all odds, Armenia and Moldova are coping with this task. The majority — Russia, Azerbaijan and all the countries of Central Asia — were able to solve the problem more or less successfully. Georgia and two Slavic republics — Belarus and Ukraine, were hanging in the “limbo” between external management and full-fledged statehood. The three Baltic republics quickly transferred their sovereignty to the European Union and NATO. In their independent development, they had to make, in fact, the only decision, which, moreover, was due to historical reasons and external circumstances. This decision was made and now the fate of Latvia, Lithuania and Estonia cannot be perceived outside the context of Russia-West interaction.

For the rest, the direct link between success in creating their own statehood and the scale of interaction with the West (Europe and the United States) is quite obvious. This historical fact reveals a relationship between the ability of small and medium states to ensure their sovereignty and the interests of the great powers in their neighbourhood. Such powers were Russia and the European states, united into the European Union simultaneously with the collapse of the USSR. Also, an important role was played by the United States, which always sought to limit Russian opportunities and supported the newly independent states. At the same time, an attempt to choose in favour of closer relations with the West to the detriment of Russian interests in all cases, without exception, led to a very shaky statehood and the loss of territory.

The dramatic fate of Armenia, Georgia, Moldova and Ukraine shows that the strong collective institutions of the West are capable of exerting a stabilising effect only on those states that directly became part of them.

In all other cases, no matter how complete absorption becomes possible, an orientation towards these institutions only leads to the use of small countries in a diplomatic game with bigger partners.

Therefore, the experience of the development of such major players as Azerbaijan or Uzbekistan is indicative — they were able to confidently form their own statehood, without finding themselves in a situation of choosing between conflicting poles of power. Their main resource turned out to be a rather fair demographic situation. But not only this — the population of Ukraine has also been and remains large by European standards. Kazakhstan is a success by this indicator; equal to the average European country or small Asian states.

Therefore, the ability of most of the countries of the former USSR to build relatively independent and stable statehood played no less important role. In many ways, this ability was established during the years of the Soviet Union’s existence. Founded on December 30, 1922, it was not just a continuation of the Russian Empire, which had collapsed five years earlier. Its main distinguishing feature was its unique model of state administration, based on the full power of one political party. As long as the unique position of the Communist Party remained in the Soviet state, the experiment could exist. With the abolition of Article 6 of the Constitution of the USSR, its days were numbered regardless of the desire of the population or the real readiness of the elites to take full responsibility for what was happening.

The USSR model of state structure, new by historical standards, created the conditions for a rather unique experiment, within the framework of which union republics were created, none of which, except for Russia, Georgia and Armenia, had the experience of centralised state administration within the territorial boundaries that they acquired within the framework of the USSR. At least the peoples inhabiting them can boast of a significant experience of statehood as such. Thus, most of the countries of Central Asia trace their ancestry back to great empires or urban civilizations of past centuries.

The Baltic republics were always on the sidelines — their independent statehood arose during the collapse of the Russian Empire and existed as such for almost 20 years before being incorporated into the USSR in 1940. Russia has returned to its historical state of being a major European power or empire of the 19th century, with the development of a multinational and multi-faith society central to its development objectives. In fact, Russia has not lost anything really necessary for its survival in international politics.

The peculiar structure of the USSR formalised the situation in which the former outskirts of the Russian Empire ceased to be part of the Russian state, although Moscow served as the centre of the union. Russia among them was in the most ambiguous position — it did not have its own most important institutions of Soviet statehood — the party organisation and the republican State Security Committee. Russian nationalism was subjected to the most severe and consistent persecution by the Soviet authorities.

The vast majority of republics within the USSR, for the first time, received the experience of building their own state and their national elite.

The backbone of the ruling class was the Soviet and party nomenklatura, which all took power, with few exceptions, after 1991. Even in Tajikistan, where the first years of independence were overshadowed by the civil war, it was this part of society that was eventually able to establish control over the situation. In other Central Asian countries, elites formed on the basis of the state tradition established during the Soviet era, gradually supplemented by representatives of a new generation that grew professionally after the collapse of the USSR.

Thirty years is a sufficient period to assess the results of the independent development of the countries that emerged from the republics of the former USSR. Now the period of their growing up can be considered complete; ahead is an independent future. Russia is increasingly feeling independent and not particularly obligated to its neighbours. In any event, Moscow will continue to follow a moral imperative of responsibility for maintaining peace and strictly ensure that its neighbours correlate their actions with Russian security interests.

From our partner RIAC

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