On January 19, President Dmitri Medvedev finally made good on his pledge to invest one particular official with ‘personal responsibility’ for overseeing the situation in the Northern Caucasus. Alexander Khloponin is the president’s plenipotentiary representative to the ‘North Caucasus Federal District’, a new jurisdictional entity created by Medvedev, and has also been awarded the rank of a deputy prime minister in the federal government. Given that Medvedev has identified an underperforming economy as the main reason for the instability in the region, how does the new envoy propose to stimulate the economic situation there? 

BACKGROUND: The new North Caucasus Federal District (SKFD) will include Chechnya, Dagestan, Ingushetia, Karachaevo-Cherkessia, Kabardino-Balkaria, North Ossetia and Stavropol Krai. The republic of Adygeya and Krasnodar Krai, along with four other districts, will remain within the truncated Southern Federal District (YuFO). After a delay of seven weeks, President Medvedev introduced Alexander Khloponin as his new ‘Caucasus Tsar’. To all appearances, the creation of the SKFD was Medvedev’s personal initiative. However, some reports suggest that Khloponin was not the president’s first-choice appointee. Vedomosti reported that the post had first been offered to Deputy Prime Minister Dmitri Kozak, who refused it.

Medvedev’s conspicuous seven week delay in announcing Khloponin as his appointee certainly lends credence to reports that he was not the president’s preferred choice. Khloponin, however, had apparently been seeking a fresh posting for some time, and while few would describe the role of envoy to the SKFD as politically lucrative, the concurrent decision to make him a deputy premier in the federal government probably made the offer more attractive.

Khloponin had been the governor of Krasnoyarsk Krai, a heavily industrialized region in Siberia, since 2002. He received praise for his stewardship of Krasnoyarsk’s economy which reportedly grew fivefold during the years 2001-2008. He is also a former chairman of the Norilsk Nickel company, one of the world’s leading producers of nickel and palladium. By accepting this most difficult introduction to the highest tier of Russian politics, Khloponin is perhaps hoping his career will follow the same trajectory as that of Sergei Sobyanin, who was governor of Tyumen Oblast before being appointed as then-President Vladimir Putin’s chief of staff in 2005. Sobyanin is currently one of Prime Minister Putin’s deputies and is regarded as a figure of considerable influence within the Russian government.

Khloponin’s mandate as Medvedev’s envoy to the SKFD is wide-ranging, at least in theory. Introducing him as his new plenipotentiary representative on January 19, Medvedev stated that Khloponin would wield “the powers traditionally belonging to a presidential representative”, including “supervision over defense and law enforcement agencies”. What makes Khloponin’s appointment unique is the fact that, in his dual capacity as presidential envoy and deputy premier, he will possess extensive economic decision making powers – a brief that previous incumbents in the plenipotentiary office have been denied, both in the Southern Federal District and elsewhere. Welcomed by most Russian pundits as an “effective manager”, it is entirely possible that Khloponin might have some interesting, even promising, ideas on how to improve the regional economy.

It is of interest that Khloponin has already indicated a willingness to defer to the various federal security agencies on matters of security: “I have a full understanding that security issues are top priority… but there is a powerful state security, defense and law enforcement system to take care of this…” One should also be mindful of how Khloponin will be perceived by the region’s foremost indigent political force: the president of Chechnya, Ramzan Kadyrov. Kadyrov is clearly under the impression that Khloponin’s responsibilities pertain chiefly to economic matters, describing the new envoy as ‘a man of a purely economic standing’.

IMPLICATIONS: Khloponin’s first task will be to select his deputies. There has been speculation that Khloponin will appoint Yuri Oleynikov, a successful businessman and Khloponin’s onetime deputy during his tenure as governor of Krasnoyarsk, as one of his assistants. Mikhail Gutseriyev, a controversial businessman of considerable wealth, may also become a member of Khloponin’s new team. Born in Ingushetia, Gutseriyev has recently mended his fences with Russia’s elite and has been allowed to reacquire the Russneft energy concern from fellow oligarch Oleg Deripaska.

Previously touted as a candidate for Khloponin’s current post, Gutseriyev would certainly be in a position to invest in his native Ingushetia, and perhaps elsewhere in the Northern Caucasus. The Dagestani billionaire, Suleiman Kerimov, is also believed to be on close terms with Khloponin and may form a part of the new team. Khloponin may also seek to inaugurate his relationship with Ramzan Kadyrov on a positive footing by adding the ambitious Chechen leader to his staff.

The next task will be to assess the economic situation in the region and to formulate a strategy for improving it. Khloponin has been reluctant thus far to reveal any ideas he might have in this regard and has restricted himself to talking up the region’s raw economic potential. One recent development in the region that will surely play a pivotal role in whatever economic strategy Khloponin elects to follow is the bestowal of international status on Grozny’s civilian airport. This airport is now in a position to forge links with destinations outside the Russian Federation and this should help facilitate the region’s fledgling export economy.

Speaking in Pyatigorsk on January 23, Putin urged Khloponin to make use of special economic zones (SEZ) and industrial parks as part of his efforts to enhance the region’s economy. A special economic zone based on Grozny airport and its surrounds would allow foreign and domestic investors to establish their enterprises close to a major transportation hub while availing themselves of the kind of tax-breaks commonly associated with such zones. Khloponin certainly appreciates the value of special economic zones. In 2008 he signed an agreement for the creation of an airport-based SEZ in Krasnoyarsk. This initiative was supported by both Russian and foreign companies and was linked to the development of other transport infrastructure (railways, for example) in Krasnoyarsk.

Khloponin is clearly enthused by the proximity of the Northern Caucasus to foreign markets and has compared its geographical situation favorably with that of Krasnoyarsk where, as he put it, it took “4,000 kilometers to reach European markets and 4,000 kilometers to reach Asian markets”. He also emphasized the Northern Caucasus’ richness in raw materials and its “gorgeous transportation infrastructure”. Khloponin’s remarks about the importance of adequate transport infrastructure, coupled with his emphasis on the importance of attracting inward investment, are in perfect harmony with Prime Minister Putin’s explicit directive that special economic zones and industrial parks be incorporated into the forthcoming economic strategy for improving the region’s economy.

CONCLUSIONS: Amid discussions about whether Alexander Khloponin is a suitable appointee to this new post and deliberations as to whether he is closer to Putin or Medvedev, a development of substantial importance has been overlooked. For the first time Vladimir Putin has publicly endorsed the creation of special economic zones in the Northern Caucasus. Pro-Moscow political leaders in the Northern Caucasus, like the rest of Russia’s political elite, discern a direct correlation between the region’s desperate economic plight and the increasingly tenuous security situation. The possibility of special economic zones being established, not alone in Chechnya, but throughout the region, will therefore be enthusiastically welcomed by regional leaders as a means of creating jobs and attracting investment. Both Medvedev and Putin appreciate the value of these zones. Until last month, however, the Russian government had resisted petitions from Chechen officials, and officials elsewhere in the Northern Caucasus, asking it to establish an SEZ in the region. With Putin directing Khloponin specifically to incorporate special economic zones into his economic plan for the region, we can expect announcements on the establishment of several such zones across the Northern Caucasus in the coming year.

AUTHOR’S BIO: Kevin Daniel Leahy holds a postgraduate degree from University College Cork, Ireland.