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. Last Updated: 07/27/2016

Paying the Chechen Bill

A number of high-ranking government officials have been reporting that the astronomical figure of 1 trillion rubles ($295 million) has been earmarked for the restoration of the economy of the breakaway region of Chechnya. Asked to estimate the maximum cost of this project in the long run, officials give various guesses ranging as high as 2 trillion rubles. However, it is completely unclear what these figures are based on and why, for example, the project won't end up costing 3, 4 or even 10 trillion rubles.


The figures cited by Russian officials seem dubious for many reasons. For one thing, estimates of how much the Russian government has spent just supporting the Chechen opposition run as high as 100 billion rubles. This figure includes the cost of paying back wages to the residents of the Nadterechny district and buying the loyalty of Yeltsin's puppet in that region, Umar Avturkhanov. All this for just one small region.


In the government's official announcements so far it is strongly implied that Yeltsin's administration intends to devote large sums to pay back wages to "all the Russian citizens of the Chechen republic." It must be noted, though, that people in the majority of the region's agricultural districts have not received any wages for the last 18 months to 2 years. There are still no reliable estimates as to how much this debt will amount to.


Moreover, the haste with which the government's 2 trillion ruble figure appeared indicates that it was essentially pulled out of a hat. Such statements began coming out as soon as the military intervention got underway, which means that there was no time to conduct any economically-based calculations, even on the basic questions of restoring the local economy of Grozny. As far as anyone can tell, not a single ministry or organ of government was actually assigned to research the question of restoring the Chechen economy. Moreover, of course, the fighting there is just beginning and there is no way to tell how much damage the economy will end up suffering before the "restoration" process can begin.


Even the government officials who have been bandying the 1 and 2 trillion ruble figures around admit that these estimates hold only if the situation is Chechnya is resolved normally. If events take a catastrophic turn, the prime minister can expect to be worn out by the process of totaling up the budget deficit.


But let's say, for the sake of argument, that 1 trillion rubles is a realistic figure: Where will that money come from? It is unlikely that President Boris Yeltsin thinks he will be able to attract foreign economic assistance into the region, especially in view of the fact that huge sums of foreign credits have already been written into the 1995 budget to make up expected shortfalls.


In short, there are two ways to come up with the money, both of which amount to cutting off the branch on which the entire Russian economy is sitting. The first is easy: just have Gosznak print up the necessary money. Of course, everyone knows what consequences this would entail for Russia and its people, already worn out by the constant devaluation of their money.


The second way to find the money is simply to redistribute existing resources, which in reality means forcefully taking money pledged to law-abiding and hard-working Russian citizens and giving it to others who, it should be remembered, don't want to live in Russia in the first place. This policy would amount to the confiscation of the property of Russians throughout the provinces, people who have already gone months without their state paychecks, people who are working in state-owned industrial enterprises or on collective farms.


The government already owes its citizens no less than 600 billion rubles in back pay for work already completed. That means the trillion rubles already earmarked for Chechnya would be more than enough to make up that entire debt. Moreover, Finance Minister Vladimir Panskov recently pledged to liquidate that debt, or at least substantially reduce it, in the immediate future. It would seem this is just another government lie, as back wages are certain to continue to mount in the light of "the events in Chechnya." To say nothing of the fact that the unpaid wages will continue to lose their value from day to day.


There is, of course, no point in even thinking about how much the on-going military action in Chechnya is costing, or how much it will cost to set up a pro-Russian bureaucracy there and how much it will cost to buy off Dzhokhar Dudayev's supporters ...


The intervention in Chechnya was largely determined by political factors. For one thing, considering the complete isolation of Russia internationally -- as NATO prepares to expand into Central Europe, over Russia's objections, and as Russia was pointedly excluded from the new Asian-Pacific trading bloc that was the centerpiece of the recent summit in Jakarta -- the government is pushed to demonstrate its power and decisiveness where it can. In addition, the mood of the populace continues to drift to the right, toward the nationalist/patriotic position, and Yeltsin's popularity continues to fall, clearly pushing the government to bolster its own "patriotic" image as the only guarantor of a united Russia.


But how does the government intend to cover the costs of these moves? There has been a lot of talk about Chechnya's enormous oil reserves, which -- by the way -- Dudayev has been squandering pitilessly for three years now to support his regime despite economic pressure from Russia. But it is unlikely that these reserves will cover the expenses, even over the long term. After all, experience clearly shows that Russia does not know how to profitably handle the colossal oil reserves it already controls in much cooler regions of the country.





Vladimir Buyev is a researcher at the Center for Economic Reform. He contributed this comment to The Moscow Times.