Monday, June 25, 2012

Moscow Encourages Beijing to Invest in the North Caucasus

By Valery Dzutsev

From June 8-9, the Russian company OJSC “North Caucasus Resort” and a delegation from the Shanghai Cooperation Organization (SCO) visited ski tourism sites in China. Chinese Dalian Wanda Group and North Caucasus Resort OJSC signed a preliminary agreement about possible Chinese investments into the North Caucasus tourism cluster totaling up to $3 billion. In addition, the state tourism agencies of Russia and China signed a separate agreement, aimed at increasing the tourism flow between the two countries by 30 percent. Chinese investment is predestined mostly for Dagestan, where there are prospects for a free economic zone opening, Sochi and Arkhyz in Karachaevo-Cherkessia (

Potential investors from China clearly selected the most prospective sites in the North Caucasus. Sochi is booming following multibillion financial injections by the Russian government in preparation for the Olympics in 2014. Arkhyz in Karachaevo-Cherkessia is not only located in one of the more stable republics of the North Caucasus, but it also has a relatively developed infrastructure as well. In Dagestan, if Russia allows Beijing to develop a free economic zone there, prospects for Chinese imports will abound, given Dagestan’s coastline along the Caspian Sea, and its vicinity to Iran, Azerbaijan and Central Asia.

However, stringent visa rules in Russia, coupled with additional restrictions on foreigners’ movements in the North Caucasus are so hard to cope with that tourists will not come to the region, warned international tourism experts at the Saint Petersburg International Economic Forum that took place on June 21-23. President Vladimir Putin recognized the systemic issues caused by the inaccessibility of Russia for foreign travelers.  For example, the board chair of the North Caucasus Resort OJSC, Ahmed Bilalov derided current Russian visa rules, stating that: “as of today Russia is one of the least accessible countries in the world from the standpoint of visa and immigration rules. To the foreigners who travel to Russia, many procedures look like rudiments of the cold war, absurd and humiliating” (

Tourism development in the North Caucasus and isolation imposed on the region by Moscow, as well as the wider problem of Russian visas, clearly comes into contradiction. Outsourcing development of the North Caucasus resorts to the Chinese investors may seem to be a shrewd solution to the Russian government, since the Chinese government is unlikely to raise human rights issues with Russia or infiltrate the North Caucasus with pro-democracy ideas.  However, if Moscow opens up the region to Chinese businesses, they will hardly be able to keep it closed to everyone else.  But to make this change happen will require a major shift in Russian policy in the North Caucasus, signs of which we yet have to see.

Wednesday, June 6, 2012

Iran’s Rising Influence in Dagestan

By Valery Dzutsev

Well-known Dagestani journalist and analyst Akhmednabi Akhednabiev published a surprise article on the creeping influence of Iran in Dagestan. Akhmednabiev alleged that the members of the Iranian delegation from Gilyan province, who visited the republic earlier in the April 2012, bribed local officials with “tens of millions dollars” to allow the Iranians to build a large Shia mosque in the republic. The Iranians also carved out several other important concessions, such as a right for free distribution of Shia literature. “Anyone who passes through the Azeri-Iranian border today may notice ornate announcements in Russian in large script: “We are inviting young people from Russia and CIS countries for study in religious centers in Iran. Board, meals and a stipend are provided,” the expert said and decried the absence of a government reaction to Shia proselytizing (, June 3).

Dagestan’s population is majority Sunni Muslim, but it has a Shia minority that is mainly spread out in the south of the republic among ethnic Azeris who traditionally live in the city of Derbent. Though little noticed, economic cooperation between Dagestan and Iran was worth $180 million in 2011, and plans are underway to expand trade further. In April 2012, Magomedsalam Magomedov accepted an invitation from Gilyan province’s governor to visit the Iranian province at his earliest opportunity. Gilyan and Dagestan both enjoy access to the Caspian Sea via large ports on their respective territories (, April 12).

The Dagestani author raises fears that Iran has long-standing strategic goals in the republic. Akhednabiev even contends that a possible Russian-Iranian scheme exists to suppress foreign Sunni organizations while backing the Shia organizations in Dagestan. It is indeed unlikely that Iran’s activities in the North Caucasus were not explicitly sanctioned by Moscow. However, it would be hard to imagine that Moscow decided to use Iranian Shiism to counterbalance militant Sunni Islam in the North Caucasus. Most likely, the reason Moscow has allowed Iranian officials to visit the region is linked to Russia’s foreign policy goals and its ongoing maneuvers involving the West and Iran. At the same time the suspicions of the Dagestani analyst, or those standing behind him, indicate some potential for conflict to emerge between different Islamic teachings in the republic.

Tuesday, June 5, 2012

Terrorist Bombings in Ukraine Resolved, but Are Likely to Continue to Grow

By Taras Kuzio

Four perpetrators of the April 27 bombings in Dnipropetrovsk that wounded 30 people were arrested on June 1. They had demanded $4.5 million to prevent a repetition of their attacks (see Security Service [SBU] surveillance and arrest here:

The timing of the bombings immediately came under suspicion. It was suggested they were an attempt to distract public attention from imprisoned opposition leader Yulia Tymoshenko after bruises on her body, allegedly inflicted by prison guards, were widely publicized in Ukraine and internationally. A mass opposition protest had also been planned in Dnipropetrovsk on April 27.

Prime Minister Nikolai Azarov rebuked the opposition’s theories, claiming the Dnipropetrovsk bombings were undertaken by those interested in destabilizing Ukraine, who had a “the worse things get, the better for us” attitude and wanted to blame the authorities. These forces are seeking “chaos and instability, which we, together with you, witnessed a few years ago,” Azarov claimed, in a swipe at political instability under former President Viktor Yushchenko (Ukrayinska Pravda, April 27). “The worse things get, the better for us” was also an apt description of the rationale behind the Party of Regions’ tactics of blocking the Tymoshenko government’s 2008-2009 anti-crisis policies in parliament.

Ukrainian authorities had sought to arrest the terrorists before the Euro 2012 soccer championships – co-hosted this summer by Ukraine and Poland – began on June 8. The European Union of Football Associations (EUFA) had raised the issue of transferring the championship from Ukraine if the bombings were a harbinger of further insecurity to fans travelling to Ukraine. “If the situation becomes more insecure then the championship will not take place [in Ukraine],” EUFA spokesman Martin Kallen said (Ukrayinska Pravda, April 30). Germany and Italy had offered to co-host Euro 2012 (with Poland) if it was moved from Ukraine.

Terrorist bombings have grown since Yanukovych was elected president two years ago. Batkivshchina deputy Serhiy Pashynsky pointed out, “Before Yanukovych came to power, this country had been absolutely free from terrorism” (Kyiv Post, April 28). IHS Global Insight added, “Ukraine has seen a number of small terrorist attacks in recent years but nothing major was carried out by any unknown militant group” (

The following is a list of the main terrorist incidents:

June 28, 2010: a bomb exploded outside the doors of a Church belonging to the Ukrainian Orthodox Church (Moscow Patriarch) in Zaporizhzhia. Nine were wounded and an 80-year-old nun was killed.

September 30, 2010: a Lexus-brand automobile belonging to the leader of the regional branch of the Front for Change party was blown up without causing serious injuries to its passengers.

October 22, 2010: three bombs went off in Kirovohrad outside the oblast prosecutor-general’s office, appeals court and Interior Ministry on the eve of a visit by President Yanukovych (see EDM, October 26, 2010).

January 20, 2011: two explosions rocked the city of Makiyivka, Donetsk oblast after a demand for money by organized crime members was not met.

October 21, 2011: an explosion occurred inside the Silpo supermarket in Zaporzhzhia following a demand for 5 million euros.

November 16, 2011: a bomb explosion occurred in Dnipropetrovsk, killing a young businessman.

March, 20, 2012: in Kyiv, the deputy head of the Soyuz Bank and founder of the scandal-ridden Rodovid Bank, Serhiy Dyadechko, was the target of an assassination attempt but survived. Rodovid was one of the biggest bank collapses in Eastern Europe and Eurasia, with losses of up to 35 billion hryvnia (nearly $4.5 billion) that had to be covered by the Ukrainian state when the bank was recapitalized.

Temporary bank administrator Serhiy Shcherbyn was sentenced for the Rodovid failure even though he joined after the bank went bankrupt. Former Rodovid bank president and Olympic champion, Serhiy Bubka, and bank founder Denys Horbunenko, who lives in London, have never been questioned. The key witness in the case, Hennadiy Piskun, suspiciously fell out of a 7th floor Donetsk apartment window on October 29, 2011, while allegedly attempting to fix the air conditioning unit. Piskun’s death has never been properly investigated. The head of the bank’s legal department, Olekshandr Ivakhnenko, “slipped in the bath” and received serious head injuries.

April 15, 2012: oligarch Hennadiy Akselrod was assassinated in Dnipropetrovsk. An attempt to blow him up with another local oligarch, Hennadiy Korban, on September 17, 2010, only wounded them.

Terrorist bombings are a reflection of growing criminality in Ukraine (see EDM, February 17). First deputy head of the Parliamentary Committee on Fighting Organized Crime and Corruption, Hennadiy Moskal, who was Deputy Interior Minister under currently-imprisoned former Interior Minister Yuriy Lutsenko, claims organized crime gangs are operating more freely than under previous Ukrainian presidents. Moskal said, “Some oblasts are fully controlled by crime bosses and criminal groups...and today, it is complete paradise for them as they have complete freedom” ( Moskal revealed that in Ukraine there are entire regions (he named as examples Sumy, Zaporizhzhia, and Mykolayiv) where organized crime bosses control governors, mayors and local council leaders.

Moskal said “this has never happened before in the 20 years of independence of Ukraine. [...] There is no political will amongst the higher leadership of the government to fight organized crime and corruption.”

Political consultant Oleh Medvedev explains how Ukraine’s business elite was formed primarily from two social groups – organized crime gangsters and former Komsomol (Communist Youth League) activists. This translated into the “hard gangster style of Donetsk, and the softer style of the Dnipropetrovsk Komsomol.” The “Dnipropetrovsk mafia” had run Soviet Ukraine and the USSR under Leonid Brezhnev but, with the election of Yanukovych in 2010, the “Donetsk mafia” took control of Ukraine for the first time in its history (

Medvedev writes: “The first [Donetsk group], were brutal and feral street children from mining town suburbs who rose to the top without any regard for rules or the remnants of Soviet morality under the sound of the crossfire of Kalashnikovs. The second [Dnipropetrovsk group], came from intelligent families that became cultured working inside the [Communist] Party. Their origin and education meant they did not dispose of their competitors by blowing them up inside soccer stadiums. It is no surprise which of these two subcultures won out in Ukraine.”

Medvedvev explains the relevance of this for today: “Now they are not only successfully dividing up amongst themselves the remains of state-owned property in the style of the 1990s, but are also dealing with former business rivals and current political rivals in the same manner.” As Sergei Zhuk points out in his masterful Rock and Roll in the Rocket City: The West, Identity, and Ideology in Soviet Dniepropetrovsk, 1960-1985 (Johns Hopkins University Press 2010) Tymoshenko’s origins are in the Dnipropetrovsk Komsomol, within which she emerged as a businesswoman in the 1980s.

Terrorist attacks are likely to continue and grow for two reasons:

The first, as analyzed above, is because of the growing power of organized crime and increased corporate raiding. The second is because of the political opposition (see EDM, November 18, 2011). Our Ukraine-Peoples’ Self Defense deputy Yaroslav Kendzior’s threat to blow up parliament if the draft law on languages was again debated is a sign of how divisive policies are inflaming regional divisions to the point of violence (Ukrayinska Pravda, May 29). On May 24, when parliament first debated the draft language law that makes Russian a de facto state language, there was a riot and bloodshed in parliament (see video and photos at;

Former US President John F. Kennedy’s warning is apt for Ukraine: “Those who make peaceful revolution impossible will make violent revolution inevitable.”