Abramovich's Chukotka Miracle
- By Nikolai Petrov
- Jul. 08 2008 00:00
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At one point there was talk of appointing other oligarchs as governors to bestow "personal patronage" on the regions, as Abramovich did in Chukotka. For example, Viktor Vekselberg was expected to become governor of the Kamchatka region and Oleg Deripaska was pegged to become head of the Kuban region. But there have been no other takers so far. Other oligarchs are apparently not willing to trade their thriving business careers for an uncertain political post.
When Abramovich first came on as governor of Chukotka, observers were trying to guess why the man who was the "chief banker" to former President Boris Yeltsin's family had any interest in the position. Some speculated that Abramovich was using the post to secure immunity from possible criminal prosecution for alleged shady business deals, while others thought it was all a big scheme to lower the corporate tax obligations for his various holdings. There was even talk of Abramovich using the post to spearhead huge government-financed infrastructure projects, such as building a bridge across the Bering Strait to link Chukotka with Alaska. Looking back, however, it seems that the then-34-year-old oligarch wanted to show the world how he could actually transform an isolated and neglected area into a prosperous region.
And he did just that over the next seven years of his governorship. His professional team of managers pulled Chukotka out of its state of crisis. New schools and hospitals were built, housing units were repaired and investment flowed into the region. Last year the government approved a development program for Chukotka based on the region's mineral resources that was submitted by Abramovich's Millhouse Capital company, which owns two gold mines there.
Already, cash revenues in Chukotka are among the highest in Russia, lagging behind only Tyumen, Yamal-Nenets and the Moscow region, and average salaries surpass those in both Moscow and Tyumen. In addition, while Abramovich was governor, the number of people who left Chukotka for other cities dropped, and both alcoholism and the crime rate declined.
The "Chukotka miracle" is a result not only of modern and effective management. The taxes on Abramovich's enormous personal income, which were about 1 billion rubles, went to the region's treasury. Moreover, until 2006, 60 percent of the regional budget was financed by business deals connected with Sibneft, which Abramovich sold to Gazprom for $13 billion in 2005.
After the Sibneft sale, however, Abramovich had to compensate for the lost income to the budget by drawing on his personal funds. From that moment on, it is believed, the governorship became a burden for Abramovich, and he began looking for ways to tender his resignation. Another reason why Abramovich may have decided to resign is that for a person who is so creative and loves starting new ventures, the Chukotka governorship became too routine.
In contrast to all other governors, Abramovich's political weight is not affected by whether he serves in a government post. But it is unclear how Chukotka will fare without Abramovich as its main patron. Abramovich's representatives have announced that he will continue to pay his personal taxes in Chukotka and that two of his charitable funds in the region will continue operations. Chukotka can only hope that Abramovich will fulfill all of his promises.
Nikolai Petrov is a scholar in residence at the Carnegie Moscow Center.