Institute for War and Peace Reporting | Giving Voice, Driving Change

New Controls over Funds for Chechnya

Chechen officials are being accused of plundering federal funds aimed at "normalising" life in the rebel republic
By Erik Batuev

The Kremlin is taking urgent measures to prevent funds earmarked for rebuilding Chechnya from disappearing into a "black hole".


Representatives of the Russian government in Chechnya have accused local officials of using a range of ingenious scams to plunder federal coffers. They say that Moscow should learn from its mistakes after the last Chechen war when an estimated trillion roubles was embezzled by regional administrations.


Last week, the Kremlin announced that the Bank of Russia would be given direct control over the allocation of pensions and wages in occupied territories. The move comes in the wake of claims that Chechen officials have been making fraudulent claims by submitting lists of "dead souls" to the Russian authorities.


Complaints of mass looting from Grozny's energy facilities have prompted far tougher measures. The capital's governors - who say 3.5 billion roubles-worth of material has been stolen from the city power station alone - have ordered mines to be laid around all industrial compounds in an effort to discourage would-be thieves.


Nikolai Koshman, Russia's official representative in Chechnya, recently visited Moscow to highlight the problems of rebuilding the republic's shattered infrastructure. He said progress had already been made in the energy sector, with power expected to return to the Vedeno and Gudermes regions by the end of the month.


Koshman told the State Duma, Russia's lower house of parliament, that roads in the north of the republic were being rebuilt and two bridges over the Rostov-Kavkaz road were under reconstruction. Over 31,000 hectares of agricultural land had been replanted.


The rebuilding of Grozny, however, remains a bone of contention. Koshman believes it would be cheaper to relocate the capital to Gudermes and claims that reanimating the capital would cost six times more than the entire federal budget for Chechnya.


He would rather see money spent on ongoing projects, such as school reconstruction programmes, which have been suspended due to lack of funds.


Koshman's proposed programme covers "a series of preliminary measures aimed at normalising the socio-political situation in Chechnya over the year 2000." He hopes to raise 4 billion roubles from non-budgetary sources, including more than 800 million


from the regional development fund, 552 million from the reserve fund and nearly one billion from the pension fund.


Beyond allocations for basic utilities, healthcare, education, transport and refugee accommodation, Koshman also wants to spend more than 200 million roubles on restoring local media sources.


The wheels have already been set into motion. Vladimir Putin has announced that nearly 7.5 billion roubles ($270 million) will be needed to rebuild towns and villages pulverised by the fighting.


More than 2.4 billion roubles have been allocated for the first phase of the federal programme - largely with a view to paying outstanding pensions and wages.


However, most analysts agree that Putin's latest budgetary allocations for Chechnya will simply amount to "throwing cash into a black hole". In the aftermath of the first conflict, when President Boris Yeltsin was asked by a TV reporter what had happened to an estimated trillion roubles in misappropriated funds, he shrugged and commented, "God only knows!"


Given that the same administrators are still in office, it seems unlikely that Vladimir Putin will be able to keep a tighter lid on the cookie-jar.


Erik Batuev is a regular IWPR contributor