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.
Russia becomes member of International Organization for Migration
After several negotiations, Russia finally becomes as a full-fledged member of the International Organization for Migration (IOM). It means that Russia has adopted, as a mandatory condition for obtaining membership, the constitution of the organization. It simply implies that by joining this international organization, it has given the country an additional status.
After the collapse of the Soviet, Russia has been interacting with the IOM since 1992 only as an observer. In the past years, Russia has shown interest in expanding this cooperation. The decision to admit Russia to the organization was approved at a Council’s meeting by the majority of votes: 116 states voted for it, and two countries voted against – these are Ukraine and Georgia. That however, the United States and Honduras abstained, according to information obtained from Moscow office of International Migration Organization.
“In line with the resolution of the 111th session of the IOM Council of November 24, 2020 that approved Russia’s application for the IOM membership, Russia becomes a full-fledged member of the organization from the day when this notification is handed over to its director general,” the Russian Foreign Ministry said in a website statement in April.
Adoption of the IOM Constitution is a mandatory condition for obtaining its membership, which opens “extra possibilities for developing constructive cooperation with international community on migration-related matters,” the statement stressed in part.
It is significant to recall that Russian President Vladimir Putin issued an order to secure Russia’s membership in the organization in August 2020 and submitted its Constitution to the Russian State Duma (lower house of parliament) in February 2021.
Headquartered in Geneva, the International Organization for Migration, a leading inter-government organization active in the area of migration, was set up on December 5, 1951. It opened its office in Moscow in 1992.
IOM supports migrants across the world, developing effective responses to the shifting dynamics of migration and, as such, is a key source of advice on migration policy and practice. The organization works in emergency situations, developing the resilience of all people on the move, and particularly those in situations of vulnerability, as well as building capacity within governments to manage all forms and impacts of mobility.
IOM’s stated mission is to promote humane and orderly migration by providing services and advice to governments and migrants. It works to help ensure proper management of migration, to promote international cooperation on migration issues, to assist in the search for practical solutions to migration problems and to provide humanitarian assistance to migrants in need, be they refugees, displaced persons or other uprooted people. It is part of the structured system of the United Nations, and includes over 170 countries.
Senator Vladimir Dzhabarov, first deputy chairman of Russia’s Federation Council (Senate) Committee on International Affairs, noted that the organization’s constitution has a provision saying that it is in a nation’s jurisdiction to decide how many migrants it can receive, therefore the IOM membership imposes no extra commitments on Russia and doesn’t restrict its right to conduct an independent migration policy.
On other hand, Russia’s full-fledged membership in IOM will help it increase its influence on international policy in the sphere of migration and use the country’s potential to promote its interests in this sphere, Senator Dzhabarov explained.
Russia has had an inflow of migrants mainly from the former Soviet republics. The migrants have played exceptional roles both in society and in the economy. The inflow of foreign workers to Russia has be resolved in accordance with real needs of the economy and based on the protection of Russian citizens’ interests in the labor market, according to various expert opinions.
The whole activity of labor migrants has to be conducted in strict compliance with legislation of the Russian Federation and generally recognized international norms.
State Duma Chairman Vyacheslav and Foreign Minister Sergei Lavrov and many state officials have repeatedly explained the necessity of holding of partnership dialogues on finding solutions to emerging problems within the framework of harmonization of legislation in various fields including regional security, migration policy and international cooperation. Besides that, Russia is ready for compliance with international treaties and agreements.
Relegating the “Russia Problem” to Turkey
Turkey’s foreign policy is at a crossroads. Its Eurasianist twist is gaining momentum and looking east is becoming a new norm. Expanding its reach into Central Asia, in the hope of forming an alliance of sorts with the Turkic-speaking countries — Kazakhstan, Uzbekistan, Kyrgyzstan, and Turkmenistan — is beginning to look more realistic. In the north, the north-east, in Ukraine, Georgia, and Azerbaijan, there is an identifiable geopolitical arc where Turkey is increasingly able to puncture Russia’s underbelly.
Take Azerbaijan’s victory in Second Karabakh War. It is rarely noticed that the military triumph has also transformed the country into a springboard for Turkey’s energy, cultural and geopolitical interests in the Caspian Sea region of Central Asia. Just two months after the November ceasefire in Nagorno-Karabakh, Turkey signed a new trade deal with Azerbaijan. Turkey also sees benefits from January’s Azerbaijan-Turkmenistan agreement which aims to jointly develop the Dostluk (Friendship) gas field under the Caspian Sea, and it recently hosted a trilateral meeting with the Azerbaijani and Turkmen foreign ministers. The progress around Dostlug removes a significant roadblock on the implementation of the much-touted Trans-Caspian Pipeline (TCP) which would allow gas to flow through the South Caucasus to Europe. Neither Russia nor Iran welcome this — both oppose Turkey’s ambitions of becoming an energy hub and finding new sources of energy.
Official visits followed. On March 6-9, Turkish Foreign Minister Mevlüt Çavuşoğlu visited Uzbekistan, Turkmenistan, and Kyrgyzstan. Defense cooperation, preferential trade deals, and a free trade agreement were discussed in Tashkent. Turkey also resurrected a regional trade agreement during a March 4 virtual meeting of the so-called Economic Cooperation Organization which was formed in 1985 to facilitate trade between Turkey, Iran, and Pakistan. Though it has been largely moribund, the timing of its re-emergence is important as it is designed to be a piece in the new Turkish jigsaw.
Turkey is slowly trying to build an economic and cultural basis for cooperation based on the Turkish Cooperation and Coordination Agency founded in 1991 and the Turkic Council in 2009. Although Turkey’s economic presence in the region remains overshadowed by China and Russia, there is a potential to exploit. Regional dependence on Russia and China is not always welcome and Central Asian states looking for alternatives to re-balance see Turkey as a good candidate. Furthermore, states such as Kyrgyzstan and Turkmenistan are also cash-strapped, which increases the potential for Turkish involvement.
There is also another dimension to the eastward push. Turkey increasingly views Ukraine, Georgia, and Azerbaijan as parts of an emerging geopolitical area that can help it balance Russia’s growing military presence in the Black Sea and in the South Caucasus. With this in mind, Turkey is stepping up its military cooperation not only with Azerbaijan, but also with Georgia and Ukraine. The recent visit of Ukraine’s President Volodymyr Zelenskyy to Turkey highlighted the defense and economic spheres. This builds upon ongoing work of joint drone production, increasing arms trade, and naval cooperation between the two Black Sea states.
The trilateral Azerbaijan-Georgia-Turkey partnership works in support of Georgia’s push to join NATO. Joint military drills are also taking place involving scenarios of repelling enemy attacks targeting the regional infrastructure.
Even though Turkey and Russia have shown that they are able to cooperate in different theaters, notably in Syria, they nonetheless remain geopolitical competitors with diverging visions. There is an emerging two-pronged strategy Turkey is now pursuing to address what President Recep Tayyip Erdoğan sees as a geopolitical imbalance. Cooperate with Vladimir Putin where possible, but cooperate with regional powers hostile to Russia where necessary.
There is one final theme for Turkey to exploit. The West knows its limits. The Caspian Sea is too far, while an over-close relationship with Ukraine and Georgia seems too risky. This creates a potential for cooperation between Turkey and the collective West. Delegating the “Russia problem” to Turkey could be beneficial, though it cannot change the balance of power overnight and there will be setbacks down the road.
The Future of the Arctic
The harsh ecological conditions of the Arctic in the past have sustained economic activity in the region. Climate change, new technologies and innovations open new perspectives for the development of these territories. The Arctic has turned into one of the hotspots of geopolitics: global and regional players are striving to expand their borders. Watching the Arctic is a complex problem, so the solution can only be secured by integrating the forces of all parties in the Arctic.
It is impossible to discuss the development of the Arctic from the standpoint “whether we are going to exploit it or not”, as the industrial development of the Arctic started about 100 years ago. Today 10 million people live around Arctic, only about 10% of them are indigenous peoples. The main question is how we can make this development responsible and sustainable to ensure all three aspects – economic, social and environmental – in the long term and who should be a stakeholder in this activity.
Scientists from Russia, Norway and Iceland, despite the difficulties and deteriorating relations between Russia and the West, are conducting an active dialogue on the future of the Arctic. They call for enhanced cooperation and joint development of the Arctic for the benefit of humanity, not for geopolitical confrontation, because “Together we are stronger.” Scientists have also called for attracting the capabilities of space satellites to conquer the Arctic and solve various tasks and problems. They hope to strengthen public and private investment in human capital, for better education, to attract more talented people, to create high-paying jobs for young people, to create and develop smart cities. The Arctic is an excellent opportunity for a clean and green economy, for Industry 4.0 and for the creation of new industries.
As part of the High North Dialogue Arctic 2050: Mapping the future, a panel discussion was held on April 23, 2021. The umbrella theme of all Arctic 2050 presentations: Mapping The Future of the Arctic and exhibitors tried to give their views on development and change in the Arctic over the next few decades from the standpoint of economy, trade and maritime transport, energy, ecology and social trends. During the panel Russian scientists from the Skolkovo School of Management, one of the leading research centers in Russia and their Norwegian colleagues discussed possible scenarios for the development of the Arctic in the next 30 years
Although almost all exhibitors were wary of more accurate predictions given the many factors that potentially determine the course of events in this area, the general impression that could be gained from different presentations is that greater importance is expected in this area in world economic and traffic flows. Development opportunities in mining, energy and maritime transport are great, but there are also great unknowns and potential temptations regarding the mutual rivalry of countries in this area, regulating legal and policy frameworks for the implementation of development policies and finally regarding climate change and risk environment.
The ability to think long-term, and to maintain a balance between all three dimensions, is what is called a ‘sustainable mindset’ and this is exactly what the Arctic needs from leaders now and in the future. A new leadership agenda emerges in each and every sector, reflecting the paradigm shift: policymakers will have to work towards creating an enabling environment, incentivizing more responsible investment in the Arctic, instead of trying to find a balance between economic activity and environmental footprint business needs to turn away from the cost reduction imperative and concentrate on creating innovation in technology and business models that together will make it possible to do business in the Arctic sustainably, which means both at the new level of productivity as well as in an environmentally and socially responsible manner. NGOs must concentrate on facilitating multi-stakeholder dialogs aimed at finding a balance of interests, rather than lobbying for limiting policies and challenging business activity in the region. What is more important, is that, just as with the triple bottom line, these paradigm shifts should be synchronized and synergetic. The sustainable future of the Arctic tarts with the sustainable thinking of the leaders of today.
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