The effort of
the Russian authorities
to rebuild Chechnya's ravaged infrastructure was challenged last Thursday by Chechen President Ramzan Kadyrov, who claimed the province was not getting sufficient funding to cover massive reconstruction costs.

According to Kadyrov, the concept of Chechnya's socio-economic development in 2008-2011 earmarked 104 billion rubles (over $4 billion) in expenditure to cover what he called "the most necessary expenses."

"These figures were backed up by calculations, but the Ministry for Economic Development and Trade slashed the budget to 64 billion rubles ($2.5 billion) and we are note able to restore Chechnya with that money," Kadyrov told the Chechen government's meeting in Grozny.

The meeting was also attended by Russia's Audit Chamber head Sergei Stepashin who traveled to the Chechen capital to verify the results of an audit into Chechnya's spending of federal funds, allocated for reconstruction.

In his emphatic address Kadyrov complained about "non-existent industry, entirely wrecked economy" and sky-high unemployment, which currently stands at 76 percent.

"We need to create jobs, and we don't know what to say to people in a situation like this," Kadyrov said, suggesting that Minister for Economic Development and Trade German Gref take over the provincial government.

"Let Gref come and work in Chechnya, talk to people, then he will know more about the situation here," the Chechen president said.

Kadyrov highlighted the importance of resolving the issue of unemployment, which is currently - having put security woes behind - the most critical for the local population. If not resolved, it could lead to a "social explosion."

"The government is restoring housing, but if we fail to create jobs even  homes of gold won't help, people need to have a meal at least once a day," said Kadyrov. "For the time being people keep silent, today they understand us and support all our steps. They organize themselves to work on subbotniki, spend day and night at construction sites, but we need to provide them with steady income. If we don't, they'll be throwing stones at us tomorrow." 

The Chechen leader also criticized Russia's federal officials who fail, he argued, to deliver on orders given by President Vladimir Putin, who is keen to speed up reconstruction in the province.

"So far, these officials have failed to act upon the president's 38 orders related to the Chechen republic," he noted.

Replying to Kadyrov's remarks, Stepashin said he was ready to brief the Kremlin about the Chechen leader's position and asked Kadyrov to supply calculations used to budget the province's socio-economic development in 2008-2011.

 "Russia is switching to a new type of budget planning, which covers three-year periods. Funds are allocated for concrete programs and channeled to those projects that will produce a concrete result," Stepashin said.

Upon his arrival in Grozny, Stepashin, Kadyrov and members of the Chechen government visited the capital's Hypodrome district, where at a special ceremony they unveiled a fully restored residential area.

Stepashin praised Chechen builders for performing a "true miracle", countering the common chorus about Chechnya's intransparent spending of reconstruction funds.

"Today, I can see with my own eyes that the funds here are spent effectively and according to purpose. The Chechen Republic is not a ‘black hole' as many politicians claim," he said.

Since the beginning of the year, more than 2,000 construction workers restored 16 residential buildings in the Hypodrome area, a kindergarten and a polyclinic. They also built a mosque and a recreation park, Kadyrov's press service said. Over the same period the builders restored 1 million square meters of housing and plan to restore as much by the end of 2007.

The Chechen government heavily relies on federal funding, though part of the reconstruction is financed locally, both by the government and by some of the local majors, such as Grozneft oil firm and monopolist utility companies.

The issue of misappropriation of federal funds allocated for Chechnya's reconstruction goes back to the end of Russia's first military campaign in the province, when former President Boris Yeltsin's government launched the postwar rebuilding effort.

Then, Moscow was financing the effort through a dozen authorized banks, which allocated funds as they saw fit. The system had many drawbacks, including messy paperwork, unpaid contractors and handover problems.

All this was distorting the real situation - according to the books, most of Grozny's devastated buildings were repaired, but in real life there were still plenty of ruins and demolished dwellings throughout the city. Soon, Chechnya became synonymous with the waste of money as substantial funds got lost with little hope of tracking them down.

This changed in May 2001, when - confronted with the same task after getting involved in the second military campaign in Chechnya - the Kremlin decided to run things differently, setting up a special directorate to oversee the spending of allocated funds.

The new agency, officially entitled "Directorate for Construction and Repair Work in Chechnya" had indeed managed to exercise tighter control over federal funds' spending, provide cleaner reporting and execute projects.

At the same time, it irked local officials who wanted the agency to be run from Grozny, giving the Chechen government larger powers in controlling and distributing funds. Grozny's appeals to Moscow bore fruit four years later as the directorate changed hands in August 2005 coming under direct control of the Chechen government. 

By Bojan Soc