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Russian Regional Report (Vol Russian Regional Report (Vol. 10, No. 1, 14 January 2005) A bi-weekly publication jointly produced by the Center for Security Studies at the Swiss Federal Institute of Technology (ETH) Zurich (http://www.isn.ethz.ch) and the Transnational Crime and Corruption Center (TraCCC) at American University, Washington, DC (http://www.American.edu/traccc) TABLE OF CONTENTS Regional Perspectives The Yukos Affair: A View from Tomsk Russian Border Abkhazia Elects New Leader Torture in Russia Marii El Group Exposes Police Abuse Political Parties Kursk Governor Leaves Communist Party Regional Elections Volgograd: Communist Nikolai Maksyuta Wins New Term Astrakhan, Ulyanovsk: United Russia Wins Governors' Races RRR on-line (with archives) - http://www.isn.ethz.ch/news/rrr/ TraCCC in the News - http://www.american.edu/traccc/tracccinthenews.html REGIONAL PERSPECTIVES THE YUKOS AFFAIR: A VIEW FROM TOMSK. In December, the federal government auctioned off one of Yukos's key assets, effectively destroying the company. Since 2003, when Yukos head Mikhail Khodorkovsky was arrested, the campaign against Yukos has had a large impact on the regions where the company's business activities were concentrated. In 2004, the Tomsk oblast authorities had their own share of troubles with the Yukos affair since the company played a major role in the region's economy. Tomskneft, a fully owned Yukos subsidiary, provided one third of the oblast budget's revenues. The region's second most important industrial center, Strezhevoi, with a population of more than 40,000, is fully dependent on oil production. The situation of Tomskneft affects every aspect of its economic and social life. Until the Kremlin launched its attack, Yukos was steadily expanding its involvement in the economy of the oblast and the city of Tomsk. The company controls 50 percent of the gas stations in the capital and practically 100 percent of the stations in the rest of the oblast. The firms also was making substantial investments in energy production, transportation, and other sectors. At least once it provided the oblast administration with an emergency loan when there was a budget shortfall. Yukos was also funding a range of education, scientific, cultural, and social projects. From 1997 through 2004, when Yukos was part of regional life, both the company and the oblast leaders progressed through a long learning curve. Governor Viktor Kress recalls one of his first encounters with Khodorkovsky, who, looking at a regional map in the governor's office, flatly stated that he only cared about his business and, apart from paying taxes, the life of the oblast was not his concern. But Khodorkovsky's views evolved. By 2003, Yukos was sponsoring dozens of socially-oriented events and programs, from equipping village schools with computer classes, to building a youth center, to setting up a fund for small business credit support. Massive funding went to Tomsk Polytechnic University, financing everything from scholarships to creating an international degree program. In 2003, Yukos' contribution to social programs was 250 million rubles. For its part, the oblast administration was able to overcome the suspicions of this powerful economic player, which had business interests that stretched far beyond Tomsk and unpredictable political ambitions, and engage the "oligarchs" in a constructive win-win relationship, identifying grounds of mutual benefit rather than searching for means of "asymmetrical warfare." When the pressure on Yukos began to build in 2003, oblast officials sought to stay out of the conflict as long as politically possible. In early September 2003, the oblast procurator's office discarded a July request from the general procurator to file a case against Tomskneft for alleged tax evasion in 1999. Tomskneft and the former Menatep Bank provided proof that they had paid the necessary taxes and oblast prosecutor Yuri Sukhopluev did not find grounds for bringing charges. In early October 2003, he was forced to step down, and his Moscow-appointed successor initiated a criminal investigation against the Yukos-owned Tomskneft as soon as he was appointed. (Sukhopluev moved on to become one of the governor's deputies). In summer 2004, in the course of the main assault on Yukos, the federal government froze the stock and bank accounts of Yukos subsidiaries, including Tomskneft. In September 2004, the oblast for the first time reported that Tomskneft had stopped paying its taxes. However, anxiety increased throughout the year, as production declined and uncertainty disrupted the normal course of life in the north of the region. Up to late 2004, Kress took a public stand moderately sympathetic to the plight of Yukos. However, as a seasoned politician, he never came close to crossing the line by engaging in principled dissent. In early December 2004, after a long-scheduled working meeting with President Putin, Kress announced his decision to join the pro-Kremlin United Russia political party. Whatever his potential human sympathy toward Khodorkovsky and the apparent frustration his team feels about the demise of the hard-won partnership with a major regional taxpayer and investor, the oblast leadership has acted on pragmatic calculations. In September-December, Tomsk sent envoys to Moscow to ask for compensation for the loss of revenues, reasoning that the federal government should transfer to the oblast some part of the funds received from Yukos in debt settlement. On 1 December 2004 Vice Governor Vladimir Yemeshev said the regional administration hoped that, if Yukos were to be sold at auction, Tomskneft would "go into one pair of hands" and "maximally painlessly." Overall, the oblast administration has always staked its future on "enlightened" loyalty to the center. Apart from Yukos-related problems, the latest changes in budgetary relations between the center and the regions further curtailed revenue sources remaining at the regional level. From 2002 to 2005 the share of the regional tax revenues retained by the oblast shrank from 41.4 percent to 30 percent. For the Tomsk Oblast budget in 2005 this means a gap of about 1.3 billion rubles, about 10 percent of the total budget. Facing this combination of losses, the oblast is building a strategy designed to address immediate problems and stabilize its long- term prospects. The November 2004 auction of 11 small oilfield development sites, in which 7 were sold for the unexpectedly large price of nearly a half billion rubles, brought immediate and benefits to oblast finances and may have a long term pay off as well. In addition, the oblast has been negotiating the involvement of such major players as TNK-BP, Lukoil, Gazprom and ChevronTexaco in oil exploration in the north-east part of the region, where large deposits may be found. By bringing these companies in, the oblast leadership hopes to diversify the oil industry in the oblast. Another priority is to induce Gazprom to process more of the gas that it extracts in Tomsk, thereby expanding, among other things, the regional tax base. Gazprom is the one remaining monopolist working in the region and, since it has close ties to the federal government, is nowhere near as likely as Yukos to disappear. In the long term, Kress and his team would like to shift the oblast economy from resource extraction to knowledge-intensive innovation. Nevertheless, in 2005 the oblast is going to be struggling hard to overcome the difficulties that sprang up in 2004. With the fate of Tomskneft uncertain, a major source of economic and social instability remains, with the potential to subvert many regional plans. - Alla Kassianova in Tomsk RUSSIAN BORDER ABKHAZIA ELECTS NEW LEADER. On 12 January, Abkhazia elected Sergei Bagapsh president in a race in which he ran on the same ticket as his former rival Raul Khajimba, who will now be vice president. Turnout was 58 percent, with about 68,000 of the 123,000 eligible voters participating. The first round of the elections, in which Bagapsh apparently won by a handful of votes, were annulled because of numerous violations on both sides. Khajimba, who represented the interests of current Abkhaz president Vyacheslav Ardzinba and had close ties to Moscow, competed against Bagapsh, who sharply criticized the policies of the authorities and proposed a different path of development. In contrast to the recent standoff in Ukraine, the situation in Abkhazia was extremely explosive. Every adult male in the separatist region is a member of the reserve and has weapons at home given him by the republic's Defense Ministry. In these conditions, the political standoff threatened to turn into an armed confrontation, further destabilizing an already shaky situation. An armed conflict would inevitably spill over into other regions of the Caucasus. This threat was particularly palpable because in the mountainous regions of the republic there is a strong clan tradition. Any member of a tribe must defend the interests of other members of his clan. The system of clan relations penetrates all of the North Caucasus regardless of administrative or international borders. Residents of many regions in southern Russia would be drawn into any conflict in Abkhazia. The situation was so precarious that the authorities in Krasnodar Krai, which borders Abkhazia, closed the border and began making preparations to receive refugees. The border closing put Abkhazia on the verge of an economic crisis. The regions of Southern Russia, particularly Krasnodar Krai are the main source of food and energy for republic which seeks independence from Georgia. In one day, prices on bread and gasoline went up 2-3 times. Also threatened was the ability of the population to export citrus fruit to the northern regions of Russia. The threat of the crisis forced the erstwhile opponents to forget about their previous differences and start negotiating, leading them to create a mixture of democratic institutions and clan traditions.
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