Daniel Linotte, Senior Economic Adviser, OSCE Secretariat (Vienna, Austria)

Megumi Yoshii, Expert/Consultant, OSCE Secretariat (Vienna, Austria)


Following the March 2003 Referendum that, according to officials, underscores the strong willingness of Chechen people to remain part of the Russian Federation, priority must be given to the reconstruction of a sustainable economy and stable society in Chechnia. Taking into account the extent of destruction, social disintegration and psychological despair, the task seems tremendous, or even daunting when observing past performances in the region. Nevertheless, the organization of the referendum indicates the determination of Russian authorities to take a step that could ultimately bring the conflict to halt. The Russian Federation has also elaborated a plan for rebuilding Chechnias economic and social spheres. A successful implementation of the plan requires efforts that go beyond mere acquisition of materials and rebuilding of houses and infrastructuresinstitutional development is also a priority, relating to many dimensions, e.g. the quality of governance, social norms and values, human rights and democratic rules.

In the first part we briefly review the situation in Chechnia in a broad term, including political developments, social and economic conditions, as well as the environmental situation. Moreover, we refer to the economics of conflicts and draw lessons for Chechnia. The second part presents the Federal Program and governmental actions for reconstructing the region, and the assistance provided by the international community. We also underline key challenges and risks that should be addressed in order to avoid further disillusions in the reconstruction and subsequent negative behaviors.

1. Background

1.1. Political and Military Developments

History of turmoil. The resistance of Chechens against Russians began two centuries ago, when the Tsarist Empire expanded southward. The endeavor by Imam Shamil to build an Islamic State was finally shunned in 1858. In the turmoil after the 1917 October Revolution, Chechnia regained a short-lived independence. During World War II, Stalin, who was born in neighboring and mostly Christian Georgia, ordered the deportation of all Chechens to Central Asia and Siberia, claiming their collaboration with Nazi Germany. The return of the Chechens was legitimized only in 1957, when Khrushchev restored the Chechen-Ingush Autonomous Socialist Republic.

Collapse of the Soviet Union and declaration of independence. Following the collapse of the Soviet Union in 1991, Dzhokhar Dudaev, elected president of Chechnia declared independence from Moscow. President Yeltsin reacted by sending a few hundreds of Ministry of Interior servicemen, which ended with a humiliating result for Russia. During the three years that followed, armed groups in Chechnia increased their power. The region became de facto a heaven for criminal and mafia groups, partly reflecting clan-structures. In a lawless context, the counterfeiting of foreign currencies and securities became a profitable activity, undermining economies outside Chechnia, etc.2

International and geopolitical context. The independence of Chechnia might also have been stimulated by its strategic location, along the trans-Caucasian corridor, linking the West with the energy resource rich Caspian Sea region. Moreover, the lack of rule and order in Georgia rendered the Chechen Southern border more porous, facilitating trafficking and related activities.

The first war. In November 1994, following an ultimatum that was rejected by the Chechen government, then President Yeltsin ordered the first assault on Grozny, which marked the beginning of a brutal war. Monitors from the OSCE described the resulting situation as unimaginable catastrophe.3 The human cost of the first war is estimated to have reached 100,000 civilian lives on the Chechen sidethat would represent about 10% of the population. Unable to contain rebels, and confronted with successive and costly hostage crises, Russia accepted a peace deal in August 1996, which promised Chechnia a substantial autonomy, without independence. General Aslan Maskhadov was elected President, receiving recognition from Moscow. A peace agreement was also concluded in May 1997. However, local conditions in Chechnia did not seem to improve much. Warlords imposed their rules on a region characterized by rampant crime and permanent violence. President Maskhadov was apparently unable to create a stable state with a competent administration and effective policing, imposing minimum rule of law.

The second war. In August 1999, with foreign mercenaries, Chechen fighters entered the neighboring Russian Republic of Daghestan with the aim of founding an independent Islamic state4. It was met by a swift reaction of Russian Authorities and the rebellion was pushed down within weeks. In the summer, several explosions killed hundreds in Russia. The Kremlin blamed Chechnia, justifying additional military campaigns. Yeltsin resigned in December 1999 and Putin took the post immediately. That second war meant new heavy losses for the Chechen population, which also fled to adjacent territories where they are now living under precarious conditions.

The March 2003 referendum. According to Russian officials, 85% of the Chechen adult population participated in the referendum and 98% of the voters accepted the new Constitution for Chechnia, though NGOs and foreign sources are less optimistic.5 The first article of the Chechen Constitution states that the territory of the Chechen Republic shall be united and indivisible and shall be an inalienable part of the territory of the Russian Federation, which entails the obligation for Russian federal authorities to rebuild Chechnia and to support local people. The presidential elections held in Chechnia on 5 October is one of the steps toward fulfilling this obligation.

Recent terrorism. Suicide terrorism is a new feature of the hostility landscape in Chechnia. As the recent cases show, it targets not only official buildings or the military, but also the ordinary people. It seems to be undertaken by people put in deep desperation by the loss of their family in the fighting, and/or because of repression. Considering the death toll of the two wars, these events require adequate responses that foster basic human rights and improve social conditions.

A long and painful process. Terror acts also indicate that innovative/creative political behaviors might be required to go beyond official statements and distorted perception of the reality, and start a genuine peace process, involving all interested parties. In that respect, the conditions of the amnesty granted to fighters who surrender weapons should perhaps be made less stringent to indicate that concessions can be made, and that they can also be forgiven under specific circumstances. One thing is clear: a political process in Chechnia is a long and torturous affair. But without good will on both sides it will be impossible to cut the knot.6

1.2. Economic and Social Situation

Population changes and displacements. Nearly one half of mid-1990s Chechnias 1.1 million people has been killed or displaced. There are about 140,000 internally displaced persons (IDPs) in Chechnia itself and a smaller number in the neighboring regions, mainly in Ingushetia. During the course of 2002, thousands of IDPs who had fled to Ingushetia returned to Chechnia. Those who are unwilling to go back to their land claim the lack of shelters, jobs and security. It should also be mentioned that most non-Chechen residents left the region for security reasons; in some cases they were directly threatened.

Table 1

Population in Chechnia and Ingushetia



Residents 660,000 (785,670)

IDPs 140,000 (141,583)


Residents 350,000

IDPs 110,000


Source: OCHA, U.N. Consolidated Inter-Agency Appeal 2003 for Chechnia and Neighboring Republics, November 2002.

Note: Figures in brackets are provided by the Danish Refugees Council.

Housing and living conditions. Most houses in Chechnia have neither been destroyed nor even damaged during hostilities. For instance, in the most populous area, namely the foothills, a recent survey conducted in 2002/3 by the Danish Refugees Council (DRC) indicates that there was no damage to 78% of the houses and another 15% report insignificant damages. Nevertheless, IDPs shelters are often inadequate and health risks are high because of poor nutrition and hygiene conditions; and thus, tuberculosis, hepatitis A and HIV are real issues; access to drinkable water being arguably the most significant one. In Grozny, the capital of Chechnia, 80% of households have no direct access to drinkable water, although 99% have gas that is essential for cooking and heating.

Table 2

Distribution of the Households According to Living Standards (%)


Very poor 7.2

Poor 56.5

Average 32.6

Above average 3.4

Wealthy 0.4


Source: Danish Refugees Council.

Note: Based on 2,560 surveyed households.

Employment and incomes. According to the DRC survey, only 7% of respondents have a permanent job. Overall, unemployment may reach 80%. The average income for households is RUR 2,251 (or about US$ 70) per month. Taking into account family size, that should, on average, represent about US$ 15 per month for each family member. According to the survey, more than 50% of the population is seen as poor (see Table 2), with very poor households representing 7% of surveyed households. For poor people, non-cash income (food and non-food) may represent up to two-thirds of the total income, that is to say an access to land is often essential for the survival of vulnerable groups.

Widespread poverty. According to Russian experts, the poverty line would correspond to about RUR 1,900 (or US$ 63) per month for an individual. Thus, most households in Chechnia, even so-called wealthy ones, should be seen as poor. When comparing Chechen statistics with figures provided for the Russian Federation as a whole, living standards of Chechens are far below those of Russians, indicating the economic consequences of war, and it also underlines the necessity of economic support to Chechnia. In order to be more conclusive, additional information on the second or black economy is needed.

The poverty trap. Poor and very poor people seem to borrow more and more for surviving; in other words, they are falling into a so-called debt trapthey have to borrow to repay old liabilities. That will inevitably have a negative impact on their future welfare, unless something is done to alleviate their debt burden. Such a difficult situation may lead to psychological despair and facilitate grass-root conditions for criminal activities.

Illicit activities. Under harsh living conditions, survival may cost illicit activities, including illegal oil extraction for producing gasoline, which would scarcely meet professional standards. Railway tracks are also dismantled and sold as scrap metal. Moreover, violent crime (e.g. kidnapping and racketing) and corruption are sources of income for some groups. Even those who are engaged in humanitarian work are targeted. Since 1995, 55 Russian and expatriate aid workers have been abducted in the region, and 10 more have lost their lives.

Safety nets. As Table 3 shows, for many households, pensions paid by the federal government seem to form a substantial source of incomes. Unemployment and child benefits also help.

Table 3

Chechen Households Sources of Cash and Non-cash Income by Wealth Category, monthly


Very poor







All income


Total, RUR

1 824

1 985

2 584

3 356

4 312

2 251

Structure (%)

























Selected cash income sources, RUR






2 266,7

2 346,5











1 126

2 017

3 247

3 745

1 485


Size (#)







For comparisonSelected figures for the Russian Federation, RUR, March 2003

Personal income per capita

Average monthly wage

Official monthly subsistence level

Share of Population below subsistence

4 727

5 124

1 893 (December, 2002 .)


Source: Danish Refugees Council (2003) and Russian Economic Trends, May 2003.

The local oil industry. Oil extraction and refining are traditional economic activities in Chechnia. The oil district of Grozny was, next to Baku, the most important Russian oil area before the (Soviet) revolution.7 Oil extraction in Chechnia peaked during Soviet times, with 154,000 barrels per day in 1932. The industry was severely damaged during the two recent wars. Its revival could represent a major source of incomes and jobs for the local population even if, according to the Radio Free Europe, Moscow took control over it.8 In fact, the Chechen Oil Company is 100% owned by the Russian company Rosneft. Oil proceeds already contribute to the restoration of public services and infrastructures. Rosneft ownership may also facilitate an access to third markets. Nevertheless, involving local interests in the oil industry could lead to political bonuses for all parties.

1.1. The State of the Environment

Environmental wasteland. Considerable amounts of oil spills, radioactive waste and air pollution have turned about one third of Chechnia into a land of ecological calamity. About one third of agricultural land is soaked with oil waste, while rivers are polluted with oil products. Air is also highly contaminated.

Oil pollution. Oil related pollution had already started under the Soviet era. By the time of its collapse, two million tons of oil are estimated to have leaked into the ground, due largely to poor industrial methods.9 After the declaration of independence in 1991, Chechen warlords started their engagement with illegal extraction business for financing their activities. They would build refineries, which hardly meet professional standards, producing much larger amount of bi-products to be dumped into nearby rivers. Russian military assaults in Chechnia have added to the problem. During the war campaigns, oil wells and reservoirs were targeted, with the aim of cutting fuels and financial resources of Chechen warlords. Some estimate that more than one million tons of oil and oil products have leaked from the refineries since the beginning of the war. Russian military operations also caused a significant damage to woodlands, giving a serious blow to the ecological balance.10

Radio active waste. Chechnia has numerous nuclear waste sites built during Soviet times, and the wars in Chechnia worsened the condition. More than sixty of radio active sites around Grozny were reportedly bombed.11 In addition, disappearance of significant amount of radioactive material has been recognized. More than twenty of waste sites in Chechnia have been found unguarded; and in May 1995, about a half of 900 cubic meters of nuclear materials, stored at a site north to Grozny, was acknowledged to have disappeared since the beginning of the war.12 Nuclear waste sites badly damaged during the wars urgently need restoration and/or a removal; however, mines spread over the land hinder such activities.

Mine problem. Wars in Chechnia are often described as mine wars, as both sides have planted an enormous number of landmines, and Chechnia is arguably one of the most landmine-polluted zones in the world.13 In 2001, the Russian side admitted that Russia had planted more than 500,000 landmines in Chechnia.14 Given an easy access to and abundance of components, landmines have been widely used also by Chechen rebels, who would even recruit and pay children to plant landmines and other explosives, targeting civilians whom they recognize as cooperative with the Russian administration.15

Although no concrete number of victims is available, mine casualties in Chechnia were estimated in 2001 to have reached about 14,000; and in 2002, another 1,153 mine victims were reportedly killed or injured. Apart from such a grave human cost, mine problems have added to other thorny issues, e.g. devastating economic situations, further deteriorating living conditions which were difficult anyway.

Health and the environment. Population trends in Chechnia are improving. According to the Chechen Ministry of Health, the number of births now reaches its pre-war level with a total of 1,548 in the first six months of 2003. This is interpreted as a result of an improvement of living conditions of the population. However, there are persisting high mortality rates and pathologies of newly-born children. This is explained as the effects of military actions, a grave ecological situation and a poorly developed medical basis. Illegal oil refineries are also a matter of particular concern. Hundreds of refineries directly influence the health of the population, that of pregnant women in particular. In total, more than 6,000 disabled children are registered in Chechnia at present.16

1.2. The Economics of Conflict and Chechnia

Causes of civil wars. Most often, it is believed that rebellion is a protest caused by grievance. Evidence indicates that greed is often mixed with grievance. Rebel leaders may compromise when being offered a share of the cake, most often receipts from the extraction and exports of raw material and minerals. Often, countries with a high share of GDP and exports consisting of primary commodities are more conflict-prone than countries that have a diversified economic base. Other important factors include low average incomes, slow growth, and large and wealthy diasporas. The success or failure of insurgent forces depends on their capacity to raise funds that is often linked with illicit activities. Pure grievance indicators, i.e. inequality, political repression and the lack of democracy, ethnic and religious divisions do not mean much for explaining civil wars.17

Implications for Chechnia. As greed is seen as a key factor of conflict, there could be a focus on the sharing of oil revenues in the case of Chechnia; and economic diversification is also a matter of priority. Moreover, low incomes and poor economic conditions are likely to nurture violence. In the case of Chechnia, the economics of conflicts would imply that much more must be done to ensure a quick and sustainable recovery of the economy, with a focus on vulnerable groups, including the youth and widows, as well as former rebels.

2. Assistance to Chechnia

2.1. An Early Plan

The FEWER Plan. Following round-table meetings organized in Chechnia, in December 2000, the Forum on Early Warning and Early Response (FEWER) published a Chechnia Post Conflict Reconstruction Plan as a guide for donors and implementing agencies. That document was co-authored by the Institute of Ethnology and Anthropology of the Russian Academy of Sciences, Peace Mission to the Northern Caucasus and Non-Violence International. Three critical responses are raised in the document: (1) the need for coordinating the reconstruction process; (2) the need for enforcing the rule of law and protecting human rights; and (3) the importance of a political process.

Economic objectives. The long-term economic objectives include the establishment and implementation of a strategy and vision for the reconstruction and further development of Chechnia, e.g. the restoration of infrastructure, social services and human resources, and the creation of growth-conducive economic conditions.

For achieving these objectives, a set of recommendations is also proposed. It includes:

  1. the stabilization of peoples lives with normalization projects;
  2. the provision of support for job creation and education opportunities;
  3. the reintegration of IDPs in safety conditions;
  4. the development of small and medium enterprises;
  5. agricultural initiatives;
  6. easing the movement of people and goods;
  7. establishing and implementing a business friendly legal framework, etc.

2.2. The Federal Program

Importance. In January 2001, the Russian government approved a program for the reconstruction of Chechnia, i.e. the Program on Restoring the Economy and the Social Sector of the Chechen Republic. Considering figures at least, the reconstruction efforts for Chechnia from the government of the Russian Federation look significant. In 2000, the federal government already allocated RUR 7.5 billion (US$ 267 million); and in 2001, it allocated another RUR 11.4 billion (US$ 390 million). The corresponding figure was RUR 4,487 (US$ 142 million) in 2002. In 2003, the Russian government is to allocate RUR 5.175 billion (US$ 163.7 million).

A special effort has been made to ensure the payment of pensions, wages in the public sector, child and unemployment benefits. To help IDPs return, funds have also been allocated for the reconstruction of housing and utilities. The government also claims progress in the rehabilitation of road infrastructure, the farming sector, healthcare and educational facilities. At the same time, the government recognizes that money transfers to Chechnia have been slower than planned. There have also been reports of misuse of federal funds in Chechnia.

Sectorial distribution. As indicated in Table 4, in 2002, RUR 1.8 billion (about US$ 57 million) went for housing and utilities, about RUR 600 million (US$ 19 million) for the agro-industrial sector, RUR 250 million (US$ 7.9 million) for electricity, RUR 216 million (US$ 6.8 million) for public health, and RUR 120 million (about US$ 3.8 million) for education.

Table 4

Federal Support to the Reconstruction of Chechnia, 2000-2003


RUR (million)

US$ (million)


Federal funds



7 500




11 400




4 447




5 175



Main sectors in 2002


Housing & Utilities

1 800



Agro-industrial sector








Public Health









4 487



Extra-budgetary sources and economic agents, 2002

Pension Fund

1 600







Oil revenues




Economic agents





5 372



Grand total 2002

10 547



Source: Government of the Russian Federation and Radio Free Europe.

* Calculated from RUR figures.

Additional funding. Funds come also from extra-budgetary sources such as the Pension Fund of the Russian Federation (RUR 1.6 billion; US$ 50.6 million) and liquidated arrears of previous years (RUR 800 million; US$ 25.3 million). In addition, the export sales of oil produced in Chechnia are a new source of extra-budgetary revenues used to develop the social sphere (RUR 232 million, or about US$ 7.3 million, in 2001). The third extra-budgetary source are economic agents (RAO Unified Energy Systems of Russia, OAO Gazprom gas concern, and the Russian Ministry of Railways), who are setting aside RUR 2.74 billion (about US$ 86.7 million) for the restoration of electrical energy, gas supply, oil industry and transport facilities.

Infrastructures. The Russian Ministry of Energy has also carried out considerable work on the gas transport system of the republic (RUR 130 million, or about US$ 4.1 million, in 2001). There is an agreement with Unified Energy Systems of Russia to construct a power plant in Argun for RUR 400 million (about US$ 12.7 million). 544 kilometers of high-voltage power transmission lines have been built. A total of nearly RUR 1 billion (about US$ 31.6 million) has been spent on the reconstruction of electricity generating facilities. Twenty oil wells are operating. Regarding the restoration of the transport system, more than 100 bus routes are now open and the railway system is operating, etc.

Job creation. Apart from the provision of housing for IDPs and infrastructures, the economic recovery of Chechnia should contribute to the return of people, with an emphasis on job creation. Since October 2001 twenty employment centers have been in operation and more than 60,000 new jobs created.

Tax collection. Over the first seven months of 2002, the amount of tax and non-tax receipts rose 3.7 times to RUR 1.4 billion (about US$ 44.3 million) in comparison to the previous year. Moreover, the federal share of receipts in Chechnia for the past seven months constituted RUR 785.3 million (about US$ 24.9 million) a ten-fold rise and that of the republic RUR 626.5 million or about US$ 19.8 million (a two-fold rise). Thus, according to some official sources, receipts in the Chechen Republic in 2002 became comparable to those in other regions of the Northern Caucasus.

Restoration of public services. In the public health system, there are fifty-seven hospitals (4,800 beds), thirty-two polyclinics, forty-six dispensaries and 175 medical assistant-obstetrician stations. Grozny has nine hospitals and sixteen polyclinics. Under the federal programs for combating tuberculosis, diabetes and other diseases, the necessary drugs have been supplied to Chechnia. The republics medical college and its branches provided training to local junior medical personnel. In 2001, 51,000 children from Chechnia received sanatorium-and-health-resort treatment. In 2002 this number was expected to rise to 70,000, and for these purposes, the Russian government has voted for allocating RUR 150 million (about US$ 4.7 million) in compulsory social insurance funds. There are 455 general education schools operating in Chechnia (356 in rural areas), including twenty-seven evening schools, ninety-six consultation centers and five boarding schools. Chechnia has three institutions of higher learning and nineteen specialized secondary educational establishments. In addition, telephone communication has been restored. A digital fiber-optic line has also been laid between main cities.

Impact. According to Russian sources, the first stage of Chechnias reconstruction was already completed at the beginning of 2002. Future steps should concentrate on the rehabilitation of the banking system, privatization reform and establishing property rights for farming land. These are complicated tasks, because many have been displaced, disappeared or died. Appropriate relocation of IDPs is also of a pressing necessity for the Russian federal authorities.

Misuse of federal money. Federal money certainly helps the Chechen population. However, the Federal Security Service and the Audit Chamber have uncovered evidence that RUR 700 million (US$ 23.3 million) allocated for Chechnia was misspent. The funds were intended to pay for restructuring the social-welfare infrastructure of the republic, where more of such incidents have taken place. For this reason, the Audit Chamber decided to create a unit to monitor continuously how state funds are spent in Chechnia.18

1.1. Foreign Assistance

Diversity of organizations. Foreign assistance to Chechnia is provided by many agents, including international organizations and NGOs. Apart from the International Committee of the Red Cross (ICRC) and the Red Crescent, U.N. institutions in Chechnia include: United Nations Development Program (UNDP), United Nations High Commission for Refugees (UNHCR), United Nations International Childrens Emergency Fund (UNICEF), World Food Program (WFP), World Health Organization (WHO) and U.N. Office for the Coordination of Humanitarian Affairs (OCHA). International NGOs are also working with the Chechen population.

Table 5

U.N. Agencies Requirements in 2003 (000 US$)









Human rights, law


3 148


3 148



15 718


15 718

Shelters, etc.


2 019


2 019





2 391


3 356

Water, sanitation



1 008


1 407



3 253


3 253

Mine action







Economic recovery and infrastructure






1 431

1 431


1 914


1 914


2 694

5 567

5 851

15 718

2 471

1 431

33 731

Source: OCHA, U.N. Consolidated Inter-Agency Appeal 2003 for Chechnia and Neighboring Republics, November 2002.

The coordination of aid. The presence of many actors requires coordination, for which OCHA acts as the focal point. The resulting Consolidated Appeals Process (CAP) aims at forging a coherent strategy among all donors for the delivery of assistance to Chechnia.

Information sharing. One of the most important elements of the coordination of aid is the exchange and sharing of information among donors and suppliers of assistance services and goods. To this end, a website has been created, which contains news, documents, maps, a library and a database about Chechnia, providing biweekly information on humanitarian work in the Northern Caucasus. Also, it publishes biannual briefing kits.

UN priorities and activities. The 2002 Consolidated Appeal identified the protection of human rights of the civilian population in Chechnia as the U.N.s first strategic goal.19 Considering the requirement of the U.N. Agencies 2003 Consolidated Appeal, food represents almost 50% of funds requested. Other important items include health, education and human rights as well as security. Economic recovery as such represents about 2.5% of the total requirements.

Table 6

Main NGO Agencies Requirements in 2003 (000 US$)






Mercy Corps




1 000




1 050


5 000




5 290

Shelters, etc.

2 000

1 121



1 250


5 557




1 200



2 721

Water, sanitation











1 117


Mine action

1 000


1 000

Economic recovery

1 000






2 500


10 000

1 541

1 050

2 000

2 150

1 617

21 227

Source: OCHA, U.N. Consolidated Inter-Agency Appeal 2003 for Chechnia and Neighboring Republics, November 2002.

Note: Total figures include minor NGOs.

The International Committee of the Red Cross. ICRC is a major supplier of humanitarian assistance to the Northern Caucasus (Chechnia, Daghestan and Ingushetia). The 2003 Plan of Action includes economic security (food and non-food), water hygiene and housing for both residents and displaced persons, as well as medical and orthopedic assistance. Preventive measures have been organized for raising mine awareness in children, detainees are visited, etc. US$ 26 million are requested for supporting ICRC activities in the Northern Caucasus.

EU support to Chechnia. Since late 1999, the EU has earmarked 110 million euros for Chechnia. The last allocation for humanitarian aid, amounting to 16.5 million euros, was approved in June 2003. Some view Chechnia as a classic case of throwing money at a problem, which means that the EU does not want to get involved. Nevertheless, the EU also points to the lack of support from Russian authorities. A recent document of the European Commission says that neither rebel attacks nor human rights violation have stopped after the referendum, and overall, the social and economic situation does not show much improvement. The document also hints at the possible misuse of federal money allocated to Chechnia.20

NGOs/Danish Refugees Council. Foreign NGOs that are present in the Northern Caucasus are requesting more than US$ 20 million to support their activities in Chechnia in 2003, which represents about the two-thirds of the demand made by U.N. institutions. They also give priority to food, shelters, health and education. DRC is the main NGO operating in the Northern Caucasus with financial requirement amounting to US$ 10 million. The main activities of DRC concentrate on shelters and food supply. DRC shall allocate US$ 1 million for economic rehabilitation activities in Chechnia, Ingushetia and Daghestan. The basic goal is to support income-generating activities that may help people to become more autonomous, and eventually reduce their dependence on aid. DRC also support entrepreneurs and SME development with micro-loans and specific training.

1.1. Further Actions

Some reference figures. Referring to Table 7, the subsistence gap is about US$ 40 per person per month. Our estimate of expected supports indicates that aid to Chechnia could eventually match the subsistence gap. Thus, on average, Chechen individuals should receive US$ 40 per month. However, most of external support is not for subsistence per se. In other words, there still seems to be much room for humanitarian assistance in the face of widespread corruption and crime leading to the misuse of funds.

The figures provided in Table 7 also underscore that foreign aid contributes significantly to the improvement of living standards in Chechnia.

Table 7

Summing Up Expected Supports to Chechnia in 2003


US$ million %

Main sources

Federal Program 317.3 74

Of which

Budget 167.3 39

Extra-budgetary, etc. 150* 35

Foreign Aid 110.9 26

Of which

IOs 33.7 8

ICRC 26 6

NGOs 21.2 5

EU 30* 7

Total 428.2 100

Per capita figures, monthly average (US$):

  1. reference: population in Chechnia (800,000) 45

  1. + IDPs outside Chechnia (910,000) 39

  1. IDPs only (250,000) 143

For comparison (US$):

- Monthly subsistence gap,** per capita 43


Sources: See tables 1 and 3-6.

* Estimates.

** Subsistence gap = official subsistence level actual income.

Defining priorities. Humanitarian aid is a priority for improving the living conditions in Chechnia and the neighboring territories. At the same time, there is an urgent need for further activities and funding for promoting private businesses, for residents in Chechnia and IDPs. Such businesses can be small in size (e.g. bakeries, hairdressing salons and car repairs); they may also become more ambitious over time and take up construction and furniture supplies, etc. The re-start and development of the domestic oil industry can promote a new economic base. Also, basic social and economic infrastructures must not be forgotten.

Facilitating foreign aid. As we have shown, foreign support is useful, even essential for the provision of humanitarian aid, e.g. food supply, health and education services. Meanwhile, the local and federal authorities are requested for more efforts for facilitating the delivery of assistance. Foreign aid agencies are still confronted with administrative, legal, logistical and communication difficulties when working with and in Chechnia. Quite often, obstacles are raised by local authorities in contradiction with previous agreements. Improving the situation may require new adequate Letters of Understanding between recipients and donors and their full enforcement. Of course, there are legitimate security concerns that must be taken into account when authorizing activities in Chechnia.

Building consensus and platform approach. All parties involved and directly affected by the situation in Chechnia and adjacent territories must be part of an open dialog on what is needed and how to better use assistance. A platform approach is required in order to permanently link officials (from the Russian Federation, the regions and the municipalities), foreign donors, civil society at large and the business community. The participation of IDPs and residents in Chechnia is also essential for building a consensus on the way.

Fighting corruption. Generally, Russia is perceived as a very corrupted state. According to Transparency International, Russia ranked 71 on a list of 102 countries in 2002, although, some improvement has been observed.21 On a regular basis, President Putin repeats the importance of addressing corruption and involving civil society in public matters. In Chechnia, the fight against corruption is complicated by poor economic conditions; nevertheless, the recent dismissal of the mayor of Grozny and local regional governors shows the will of the Federal Government to improve the situation and make public administration more transparent and accountable.

Terrorism. Chechnia and other regions of the Russian Federation are still witnessing blind terrorism. In Chechnia alone, violent and military actions are undertaken on a daily basis, disrupting economic activities and undermining reconstruction efforts. Suicide attacks cost many innocent lives and destroy infrastructures and buildings. Addressing terrorism is a complex and difficult task that can hardly have a concrete success in a short term. Much psychology is required to reintegrate former fighters and relatives of those who have been killed or disappeared during hostilities and military operations.

Crime. Local criminality in Chechnia is another obstacle to cooperation and normal economic activities in the region. Abduction is frequent and targets many agents, including those who are delivering humanitarian and medical aid to the people, including IDPs.22

Human rights. Restoring democratic rules and institutions cannot be seen as an ultimate goal. It must lead to imposing the rule of law and protecting the rights of citizens. Persistent efforts are still needed to eliminate all abuses against Chechens and other nationals in the region. President Putin time and again insists on complying with the International Convention on Human Rights.

Tentative Conclusions

  • Quality of governance in Chechnia was already extremely low even during the peacetime the region could enjoy in the early 1990s. Governance in the region is still characterized by very weak institutions and widespread corruption; rampant crime and terrorism still worsen that bleak picture. One must assume that these features will remain strong for some years at least, and therefore, should be taken into account when designing the content and the scope of assistance for economic recovery. In other words, challenges are enormous.
  • Moreover, the devastated state of the environment is deteriorating living conditions in Chechnia further, needing an appropriate response.
  • Demining deserves a priority, as mines spread in the region have been, and will be causing great human cost, besides hindering the use of its land.
  • Unquestionably, economic and social conditions in Chechnia are disastrous. Additional support must be put in place in order to guarantee the minimum level of living standards. In that respect, living standards of the Russian Federation as a whole may serve as reference for determining budgets and transfers. That would definitely express solidarity within the Federation.
  • Further efforts are needed in order to secure the effective allocation of funds. Support to Chechnia should reach where targeted, so as to serve the goals. Misuse of funds has been denounced and it must be recognized as a serious crime, even a major threat to security.
  • Over time, Chechnia should deserve more attention from international financial institutions. In this regard, the World Bank Group and the EBRD could envision to play a catalyzing role.
  • The successful reconstruction of Chechnia could ultimately lead to a full reconciliation among the peoples of the Russian Federation, and should definitely prevent tensions from rising. This is indeed a long-term task for which political dialog could be essential.
  • After all, the Russian Federation is a huge country characterized by a unique multi-ethnical, cultural and religious diversity, where mutual tolerance and respect are essential for peace and prosperity.

1 The views are those of the authors only and do not necessarily reflect an OSCE official position.
2 See: The World Bank, Quotation of the Month: Criminal Financial Dealing Dramatically Increased in Russia, Transition Letter, November and December 1995.
3 The First Bloody Battle, The BBC News, 16 March, 2000.
4 Daghestan is a home to more than 30 ethnic groups with different languages and religions.
5 Considering participation in the referendum, a low figure of 30% is reported by Gwenn Roche, Guerre et normalisation en Tchetchenie, Le Monde Diplomatique, June 2003.
6 B. Nemtsov, War in Chechnia: Stopping Terror Requires Real Peace Talks, International Herald Tribune, Friday, July 11, 2003.
7 Robert E. Ebel, The History and Politics of Chechen Oil, web article.
8 RFE/RL Security Watch, 23 October, 2000.
9 See: S. Blagov, Environmental Disaster in the Making, Asia Times, 4 August, 2002.
10 See: S. Lambroschini , Chechnia: War Worsens Environmental woes, Radio Free Europe, April 2000.
11 See: S. Blagov, op. cit.
12 Ibidem. See also: A. Ivanov, J. Perera, Environment: Radioactive Waste Claiming Casualties in Chechnia, web article.
13 Said by Olara Otunnu, the United Nations special representative for children and armed conflict, on his June 2002 trip to Russia.
14 This figure admitted by a Russian official in April 2001. In July 2002, a Chechen official claimed the total of mines planted by Russia amounted to 3 million during the second war.
15 Press briefing by the special representative for children and armed conflict, Olara Otunnu.
16 Itar-Tass, 14 July, 2003.
17 See: P. Collier, Economic Causes of Civil Conflict and their Implication for Policy, World Bank, June 15, 2000.
18 Radio Free Europe.
19 OCHA/Russian Federation, 2002 Activity Report, March 2003.
20 See: A. Lobjakas, Russia: EU Officials Say Moscow Not Living Up To International Obligations In Chechnia, RFE/RL, 18 June, 2003.
21 Russia ranked 82 among 90 countries surveyed in 2000, and 76 among 85 countries surveyed in 1998.
22 A Dutch head of the Médecins Sans Frontières field office in Daghestan has been kidnapped since August 2002, being the second MSF worker in the region to be abducted.

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