The plan to finance Chechen reconstruction is horribly inefficient

Duma deputy and member of the United Russia faction Mikhail Babich headed the Chechen government from November 2002 to February 2003. In an interview with Expert, he shared his views on the current situation in the republic and on the peculiarities of the system of rule that has evolved there.

- In four years, Chechnya has had four different prime ministers. What in your opinion is the reason behind this rapid turnover?
- The more independent a figure Akhmad Kadyrov became and the more security and law enforcement agencies emerged that were controlled by and answered only to him, the more his attitude changed toward the federal center and the tasks that the head of government was supposed to perform.
- So, who was Kadyrov fighting against when he dismissed these prime ministers?
- Kadyrov was not fight against someone; he was fighting for something. He fought for his own independence, for complete control, including over money coming in from Moscow and the republic’s economic resources. Economic freedom for him, as for any head of a federal subject, was the basis of the system of rule he created. Many people who are not well acquainted with the situation in the republic mistakenly connect the tragedy with some kind of political process. This is not quite the case. It happened primarily because Kadyrov tried to take full control of economic resources. The Chechen clans and gangs could not let this happen, and they didn’t. This is the primary reason, and only then come the political and religious aspects. We need to comprehend this in order to plan further policy in the republic. We have to understand that the next president chosen from among local politicians, whoever he may be, will automatically face the exact same situation as Akhmad Kadyrov.
- But Kadyrov’s attempts to take control of the republic’s cash flow were completely logical because up to that point Moscow’s plan to finance the republic was horribly inefficient.
- First of all, this money was to a great extent not under his control, and this was in effect what was being fought over. The Federal Target Program to Rebuild the Chechen Republic for 2003 totaled three and a half billion rubles. The total resources that came into the republic through various investment programs equaled around twenty five billion rubles, not counting the additional funds earmarked to compensate Chechens for lost housing, and that was another fourteen billion. The difference between three and a half and twenty five billion came from reconstruction programs funded by Grozneftegaz, RAO EES Rossiya, by natural resource monopolies, social services ministries, and extra-budgetary funding. This money passed the republican government by.
Secondly, there was an intermediate link, namely the Directorate to Rebuild the Chechen Republic. The government set-up worked such that seventy percent of the three and a half billion rubles was disbursed via the Directorate. Ilyasov, Kadyrov, and I all had the same attitude toward the Directorate. The Directorate played its role in the initial stage, and then the function of placing state orders should have been passed on to the republican government. But regarding who in the government should be responsible for this money, that’s where we couldn’t come to an agreement. In other words, the president of the republic wanted his guy at the Ministry of Finance, which meant the prime minister became a figurehead. This is why there was such fast turnover of officials.
 Akhmad Kadyrov was a talented man and a quick study, who was able to take in and react to any extraordinary situation. And in many ways he took full advantage of this as he took over the means of power little by little. When I arrived, he was already an established leader with his own view of the state of the republic, with his own interests and demands, with his own circle of followers.
- In the last two years, has anything changed fundamentally in the way Chechnya is funded?
- Nothing in particular has changed in the financial system, with the exception of the fact that the federal center lost its last means of control. We lost them in the form of the administration that only formally provided information to the federal center, but was actually ruled by Kadyrov and his men. We lost it from the point of view of the secret services, because the processes are mostly controlled by the Chechen police. Show me even one federal official who would go out to those places where construction was supposedly underway to check if housing had really been destroyed and if it was really being rebuilt using the money Chechen families got for it. In my stint as prime minister we began to conduct a full inventory of what had been rebuilt on paper and what we actually had. This upset a lot of people in the republic and some in Moscow. No one expected that approach. We began to actually travel around, look at things, and count them. And what we saw was deeply disturbing.
There are two points of view: Chechnya is the Chechens’ problem and Chechnya is Russia’s problem. I believe in the second of these, as Chechnya is first and foremost a part of Russia. This means that all processes, including managing reconstruction, should be under the control of the existing federal agencies. Chechen oil is produced, exported, and sold. The income from that oil should enter and be accounted for in the federal budget and within the framework of reconstruction programs being implemented in the republic. Similarly, oil needs to move via the state budget system and established programs, and not simply be up for sale.

Interview by Oleg Khrabry