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|RUSSIA MONITOR: Pension reform and the Moscow Exchange, 10 May 2013|
|UPDATE: Russian privatization: Rumours of its death are exaggerated, Christopher Granville, Irina Lebedeva, CFA, Jan Cleave, 7 May 2013|
|Russia Monitor: Fiscal key to recession scare; Sollers; MRSKs; Putin vs Navalny, 25 Apr 2013|
|Russia Monitor: TNK-BP; corruption; GDP lessons, 10 Apr 2013|
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Recent blog posts
Russian election notes: 1996 and all that,
23 Feb 2012
Russian election notes: Back to the fiscal-oil price risk,
17 Feb 2012
Gas sector reform breakthrough – good news for Russian oil companies,
9 Feb 2011
Domodedovo explosion: What is to be done?,
25 Jan 2011
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Domodedovo explosion: What is to be done?
“That suicide bomber in Domodedovo was trying to kill people like me.” This thought must be uppermost in the minds of international financial and business types who fly frequently to Moscow on the European airlines which increasingly use Domodedovo – especially as the bomber’s 4.30pm timing was obviously set to “meet” the main flights from Western Europe with his lethal and mutilating shrapnel-laden blast. My own mind is certainly concentrated by the fact that but for the last-minute postponement of a meeting, I would myself have been flying into Domodedovo yesterday. Emotions rarely bring enlightenment, and I have no outstandingly original insight to offer on jihadi terrorism in Russia: but now still seems a good time to rehearse some all-too-easily forgotten basics.
The North Caucasus – and, by extension, the rest of Russia – became a theatre for the international jihad following President Yeltsin’s calamitous decision in 1994 to throw the incompetent Russian army at the problem of armed separatism in Chechnya. But consider the counter-factual case. What if Russia had gone along with Chechen independence, likely triggering a domino secession effect throughout the patchwork of Russia’s other North Caucasian territories? Or what if Putin, on coming to power in late 1999, had acted like Charles De Gaulle in accepting France’s defeat in the equally brutal colonial war in Algeria?
In either case, it seems far-fetched to assume that Russia would have been spared murderous “Islamist” fanaticism. Just as we can see today in independent central Asian states (notably Uzbekistan and Tajikistan), secular “strong-man” regimes in the Caucasus would have combated insurgents inspired by Al-Qaeda. Russia would inevitably have been embroiled. Although the problem has been aggravated by Russian security policies, it would have existed anyway. So the key does not lie in “brutal Kremlin imperialism” against which Western newspaper editorialists preach.
Instead, what policies would really make a difference? The short answer is improved governance in the North Caucasus. As it happens, President Medvedev is heading to Davos today to front an investor presentation on new ski resorts in the North Caucasus. A friend gave me a sight last week of the accompanying press release, which leads on the slogan “investment and jobs are the antidote to poverty and terrorism”. No one could argue with that. The arbitrary and corrupt rule of entrenched clans fuels unemployment and alienation in one of Russia’s few demographically healthy regions. The result is fertile ground for Islamist agitation.
This ski resort initiative encapsulates the chicken-and-egg obstacle to progress. A beautiful part of the world where high mountains cascade down to a balmy Mediterranean coast, the North Caucasus has a natural comparative advantage in tourism. The region should be able to compete in the international leisure market besides catering for domestic middle-class consumers. But foreign tourists will not, of course, flock to danger zones. And even if risk perceptions improve (for example, on the back of the 2014 Sochi Winter Olympics passing off without incident amid tight security), jihadis will surely aim to drive tourists away – as they do, for instance, by regularly killing holidaymakers (including Russians) on Egypt’s Red Sea Riviera.
For all that, Medvedev is right to push on with such investment initiatives – which, since last year, are being directly overseen by his high representative in the region, the able Alexander Khloponin, who announced last Friday a Rb400 billion target for investment in the region this year, with a hefty contribution from public funds. The key must be to turn the tide. The terrorist threat to investment and economic growth is cumulative. In the short run, markets will barely notice even the most appalling outrages (such as the death of hundreds of children in the school at Beslan in 2004). Instead, the attrition of year after year of horrors – eroding political legitimacy and the perception of risk-reward balance that drives marginal investment decisions – will take its toll.
A positive incentive here is self-preservation. By this I mean not so much physical survival (given the low statistical probability of any one person becoming a terrorist victim) but rather the career prospects of politicians and officials. Speaking to FSB top brass in the Lubyanka this morning, Medvedev put them on notice that their jobs depend not on catching spies but on more successfully protecting the public from terrorists. Thus can minds be concentrated in constructive ways.