Chechnya: "Life Is Horrible"

There's little progress in reviving its economy

It's hard to find a city more devastated, deserted, and dangerous than Grozny, capital of Russia's breakaway republic of Chechnya. Razed three times over the course of two wars fought between Russian federal forces and Chechen rebels since 1994, it's littered with land mines and ruins. Thousands of residents have fled, and those that remain live in half-destroyed apartment complexes, tending cows and other animals that wander around grounds planted with signs warning of active mines. Every few blocks, there are checkpoints manned by baby-faced Russian soldiers wearing black, fingerless gloves, the better to get a grip on their Kalashnikovs in case snipers attack. The city's name is disturbingly accurate: Grozny is Russian for menacing. (Ivan the Terrible is called Ivan Grozny in Russian.) "Life is horrible," says Amina Tatayeva, 47, who works on economic development for the regional administration.

President Vladimir V. Putin wants to reintegrate this shattered land into Russia. The Kremlin is pumping as much as $500 million in aid to the region. Putin even is calling for a referendum in Chechnya as early as March to vote on a new constitution for the republic that would certify its status as a permanent part of the Russian Federation. He also wants to end Chechnya's role as a redoubt for rebels and Islamic militants. That's especially urgent after the hostage crisis triggered by Chechen rebels in Moscow less than two months ago.

One sure way to dull the appeal of the rebel message is to revive economic life. Indeed, it should be better by now. After all, large-scale combat operations ended in Chechnya two years ago and Russian troops control nearly all of the republic's territory.

Yet Putin's grand objective of moving Chechnya into the political and economic mainstream of Russia remains elusive. Locals still tend to resist Moscow's rule. Much of their resentment is driven by Russian so-called "zachistki" or "cleansing" operations in which raids on villages in search of rebels have sometimes been accompanied by raping and murdering of innocents.

The never-ending conflict is exacting a malignant toll on the Chechen people. Estimates of civilian deaths during Boris N. Yeltsin's first Chechen war, from 1994-96, range from 30,000 to 80,000, and there are no good estimates for civilian casualties in the current war under Putin. Another 70,000 Chechens are refugees. Federal officials assess the tab for Chechnya's reconstruction at $2.7 billion, a number that seems too small given Grozny's near total ruin. Yet Mikhail Babich, Moscow's newly appointed Prime Minister of Chechnya, insists that "reconstruction is in progress." Two water pumping stations in Grozny were restored this year, officials say.

The big question is how much of the aid will be productively spent. Embezzlement schemes are flourishing. According to the Audit Chamber, a watchdog group that reports to the Parliament, contractors engaged to rebuild housing often submit inflated bills for their work. Ill-gotten gains are shared by corrupt bureaucrats and builders, leaving Grozny lined with apartment buildings listed as restored but that in fact are uninhabitable.

Chechnya also suffers by being cut off from the market economy that is taking root in the rest of Russia. A 50-year-old bread factory outside Grozny remains under rigid government control, with the price of a loaf fixed at five Russian rubles, or about 15 cents. A state radio station limps along with subsidies, but has no paid advertising. "What's to advertise--the war?" asks station director Anzor Davletukayev.

It need not be this way. In early Soviet times, Grozny was second only to Baku as an oil refiner. But now, the refineries barely work, according to Rosneft, the Russian state-owned oil company that holds licenses to develop Chechnya's oil reserves, estimated at 257 million barrels. Rosneft has its hands full extinguishing fires at sabotaged wells.

Not everything in Chechnya lies in disrepair. In Grozny, some 1,000 Russian soldiers reside at a refurbished base with a generator that assures they have ample heat, hot water, and electricity. The soldiers collect twice the regular rate of pay plus a monthly bonus of $645 for participation in active military operations. At a log-cabin Russian Orthodox chapel on the base, the troops can say their usual prayers--and perhaps add one for their deliverance from a land of nightmares.

By Paul Starobin in Grozny

Before it's here, it's on the Bloomberg Terminal.