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. Last Updated: 07/27/2016

Money for Restoring Chechnya Stuck in Moscow

None of the $480 million that the government has pledged to spend this year on the restoration of Chechnya has gone toward rebuilding its industry and housing, federal officials acknowledge.

But without progress toward reviving the Chechen economy and providing jobs, pro-Moscow Chechen officials working to end the cycle of violence and restore normal life to the republic say their job is hopeless.

The restoration program, approved by the Cabinet on Feb. 9, provides for spending 14 billion rubles ($480 million) on Chechnya and specifies the main spending targets: providing housing, food, security and jobs, and going ahead with reviving agriculture, the oil and gas industries and construction.

Neither the Finance Ministry nor the Economic Development and Trade Ministry would provide details on how much money already has been allocated for the program, with each ministry referring calls to the other.

Edi Isayev, spokesman for the Moscow office of the pro-Kremlin Chechen administration, said he also has had no success in getting the figures.

Deputy Prime Minister Viktor Khristenko, head of a government commission for the restoration of Chechnya's economy, said at a meeting of his commission in April that fulfillment of the program was "unsatisfactory."

Some money has been allocated for pensions and wages, and the state energy, gas and communications monopolies have used some federal funds to begin restoring their facilities. But little or nothing has been done to jump-start the rest of the economy.

"We haven't spent a single ruble on investments this year," said Nikolai Gudyma, a deputy department head in the Finance Ministry, in a telephone interview. He added, though, that 100 million rubles in federal money had gone toward repairing police stations throughout Chechnya.

One of the problems stalling reconstruction work in Chechnya is a Catch-22 in the Finance Ministry's procedures for allocating the money. The ministry will only transfer money for building projects in Chechnya once it has received documents proving that the work has been completed. But Chechens say they cannot begin major reconstruction projects without first receiving the federal money that has been designated for them. The Finance Ministry is in the process of reviewing this regulation, but in the meantime work is stalled.

The State Construction Committee, essentially the state contractor for all restoration work, refused to respond to questions about the amount of money, if any, it has spent on restoring Chechen enterprises and housing.

Even Chechen Finance Minister Sergei Abramov, interviewed in Gudermes in April, would not comment on how much federal funding had made its way to the republic.

"I would like through you [journalists] to appeal to our ministries of the Russian Federation — more than 25 of them — that they are very slowly starting to work on the fulfillment of this program. First of all, I must name the Agriculture Ministry, Rosneft [oil company] and the State Construction Committee," Isayev said Tuesday at a news conference in Moscow.

"They refrain from transferring their money there [to Chechnya] while the military actions are still on," he said. "I must repeat: The program must be fulfilled. It has been approved by the government and is personally controlled by President [Vladimir] Putin.

"We can't wait until military actions are finished."

The head of the Chechen government, Stanislav Ilyasov, marked his first 100 days in office last month by summing up the state of the republic. Although his assessment was surprisingly positive, he was shown on television shouting at his ministers, telling them he would not tolerate their inefficiency and slowness in restoration of the republic.

Isayev, speaking in an interview, said the ministers were not to blame. "They have appointed ministers and are not giving them funds. What is the use of shouting at people who are not even paid wages?"

The main source of income in Chechnya is from sales of the republic's own oil, Isayev said at Tuesday's news conference. He said Chechnya extracts 5,000 tons of oil a day.

This figure is different from the figure given in April by Vladimir Yelagin, a federal Cabinet minister with the Chechnya portfolio. He said legal extraction of oil reaches about 1,200 tons a day, of which about 300 tons is stolen. Yelagin estimated that, with few jobs available, about 20 percent of Chechens are involved in the illegal oil business. Some Chechens bring in about 1,000 rubles a day by selling gasoline they buy illegally from federal troops.

Unemployment is higher than 90 percent in Chechnya, where the workforce is estimated at 400,000 people, according to Deputy Chechen Labor and Welfare Minister Magomed Vakhayev.

"The restoration of enterprises and creation of jobs is the most important issue at this stage," he said in an interview last month in Gudermes. "It will have not only a major political impact, but also a huge social effect and will stabilize the situation in the republic."

He said many people, especially the young, have no way to earn money to feed their families and essentially go to work for the rebels.

Shirvani Yasayev, head of the administration of Urus-Martan, backed this up. "Local people say that young residents are being attracted by so called envoys of bandit gangs for organizing terrorist attacks," said a report Yasayev prepared in April about the situation in the district.

According to media reports, rebels pay from $200 to $500 for planting a remote-controlled land mine. If a federal officer is killed in a mine attack, up to $5,000 more is paid.

In a vicious cycle, the lack of legitimate jobs in Chechnya is contributing to a continuation of the violence, while the violence is hindering the reconstruction projects that could create more jobs.

Investment into restoration of local enterprises is the hottest issue right now in Chechnya, Yasayev said in a recent telephone interview from his office.

Isayev said the military must do a better job "enforcing order" in the republic.

"Without stability, you could pour even 100 billion rubles into there, not 14 billion rubles, and nothing good would happen there," he said at the news conference.

"We are being told that there are up to 500 rebels in Grozny. God! But there is a big army there, headed by the FSB. They could have examined every bush there. And what do they do? They stop a truck carrying construction materials with all the documentation and not let it through a checkpoint."

Some Chechen businessmen have stopped hoping for federal support and have started looking for opportunities to invest their own money. But most enterprises rely on state investment, and they have come up against the Finance Ministry's funding Catch-22.

Last year, the ministry issued order No. 38 specifying that funds would be transferred only after the ministry received proof that the work was completed.

"How on Earth are we supposed to build under this order?" said Vakhayev, the Chechen labor and welfare minister. "We don't have a single construction company in Chechnya that has some start-up capital to build anything, and we do not have banks here to borrow money from.

"This order just makes me commit a crime — if I fill in forms that the work has been done to get an advance, I will immediately get an inspection team and everyone will shout that we are stealing the money."

He said that last year he failed to spend 17 million rubles that had been allocated for restoration. This year, 35 million rubles has been allocated for his ministry but he has not been able to get any of it.

"Nothing has been provided to us to restore orphanages or old-age homes," he said. "We have relied only on our own hands to fix what we can."

Vyakhayev said the Emergency Situations Ministry provided glass, and a local maintenance service supplied other construction materials to help his employees patch up a Grozny home for 55 disabled people. But even though the home is operating, Vyakhayev said he still has had no success in getting reimbursed from Moscow.

Yelagin agreed at his news conference in April that order No. 38 was a problem and a new order was being prepared.

Yasayev of Urus-Martan said he is eagerly awaiting the change. "If we get 10 percent of the needed financing as downpayment, we will be able to start reconstruction. We expect this cash every day."

The Finance Ministry, however, would not say when the new regulation would be in place.