A Chinese policeman in Siberia

 How does the government plan to save Siberia and Far East?  06/13/2012, 07:03

Dmitry Gvozdev

Eugene Ksenchuk
systems analyst
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A Chinese policeman in Siberia
Photography by Sergey Kovalyov, illustrated by Ilya Chernyakov

Sergey Shoygu, the head of the Ministry of Civil Defense and Emergency Response of the Russian Federation voiced the idea of establishment Siberia and Far East Development State Corporation in January 2012. The draft law came quickly, in three months, and provoked a huge response in mass-media. Correspondents of Sib.fm talked to Yuriy Voronov, the leading research officer of Institute of Economics and Industrial Engineering of the Siberian Branch of the Russian Academy of Sciences, about past, present and future of Siberia economic development.

Yuriy Petrovich, in your opinion, what are the goals of establishment Siberia and Far East Development State Corporation?

This question has its own history. I came up with idea that it would be more convenient for Chinese to deal with one structure, than giving many governors vodka to drink, at the scientific conference in Chinese city of Harbin in 2006. Besides, giving it to those people, who don’t have resources and don’t decide anything. At the same time, addressing all the issues to Moscow is an absolutely unpractical thing. Aleksandr Granberg, academician, economist, deceased nowadays, who was present in the lecture room, picked up this idea and brought it to Moscow, to the structures engaged in regional State Corporations projects. Its first real achievement was South Yakutia Development State Company. It was established in 2007 as Local Mining Enterprises Voluntary Association, which financed all necessary infrastructures from the common budget.

Yuriy Voronov, CEO of «Korpus» the consulting company, was born in 1942 in Volgograd region

I started examining Kamchatka joint stock company (KJSC) — a State Corporation, which functioned since 1928 until 1945, in 2008. It is some kind of a role model for me now, because back there, in 1926, according to the documentation, Chukotka and Kamchatka people really appealed to the Japanese and the Americans, in fact, requesting to occupy them. During the period of work of the KJSC population of those territories have quadrupled, enterprises were built, the fleet, which was transporting people from continent and vice-versa until 2011, was organized. Nowadays, in fact, it is in disorder again.

Materials concerning the Corporation are kept in Tomsk, where they were taken in 1945, in waiting for Japanese attack on Kamchatka. What was that? It was some sort of Special Economic Zone in the size of Europe, where, besides peninsula, Chukotka was included. People’s Commissariat for Internal Affairs of the RSFSR ruled there and its goal was to save those territories for Russia.

Similar State Corporation establishment problem in Siberia is, first of all, the problem of keeping Siberia as part of Russia.

There are no other options. They are but, in fact, they are rather tragic: with the current level of investment and attitude to the Siberia development strategies we observe continuously growing risk that those territories will break away from the country.

Over the past 20 years, the population of Siberia has decreased by 2.2 million, and investment volumes fell by 2.4 times

After the Yakutskaya one, the North Caucasus Development State Corporation was established in 2010 in Russia, a model of which is used in the establishment of similar Eastern Siberia and Far East Development Corporation.

How does it work?

There is one founder — Vneshekonombank, Bank for Development and Foreign Economic Affairs and all federal funds fall under its tough control. The nearest goal in this case is clear — to eliminate stealing. It is expected that if you ran the money through a bank, then going through their standard procedures of control, you can avoid big losses.

Those amounts, defined in connection with a new corporation, simply unprecedented. Thus, Rosautodor, Federal Road Agency of the Ministry of Transport of the Russian Federation, the largest State Corporation, has the registered capital of four trillion rubles. It plans to spend from 20 to 30 trillion rubles on Siberia development. Without that money Siberia and Far East will be lost.

Andrey Kokoshin, academician, secretary of social sciences of the Russian Academy of Science, was one of the first, who spoke about this grievous prospect at Baikal forum in 2011. He spoke about three scenarios of how events in Siberia would develop: «from inertia to stagnation», «fall into the abyss», and the third one — «new opportunities», which he defined as «unreal combination of complex development resource potential, human capital and engineering industry with active usage of knowledge and technologies». I would like to add some realistic scenarios: China’s military occupation of Siberia or its conversion to international organizations area of responsibility, which is being implemented nowadays.

600 billion dollars are to be invested in Siberia and Far East by 2030, says academician Kokoshin

What do you mean under the international organizations control?

A good example is elimination of Russia’s sovereignty over its forests through participation in international forest convention, which was signed by us at the turn of 2009-2010. According to this convention it will be forbidden to cut down all that according to the documents was not planted by man in Russia by 2050. There will be the satellite control system and certification of all forest industry sectors. This process has been partly started in European part of the country.

Recently, absolutely unexpectedly for the Institute of Economics of the Siberian Branch of the Russian Academy of Sciences by means of Ministry of Regional Development of the Russian Federation and group of involved «pocket» companies, included in the project without a competition, Baikal region development strategy was developed. It was a pretty unexpected event which raised many questions in scientific circles, for example, who has initiated it in the first place, why were Siberian scientists not allowed participating in the project? There can be only one explanation — the only gem of the region, Baikal, is to be handed over to China because Russia can’t solve the problem of its protection by itself.

As for me, for example, it is absolutely clear that the meaning of existence of Baikal Pulp and Paper Plant is only one — international troops will land there for protection of water resources of the planet. The plant is unprofitable, 400 people work there, never the less it continues polluting Baikal.

Why pollute Baikal? For occupation of those territories, there is no other point.

I said in 2006 in China: «Guys, you don’t need Siberia, you need a partner, who could govern the territory and who you will be able to work with directly».

71% of country area is situated East of the Urals, but 20% of population live there

When Andrey Kokoshin spoke of the destiny of Eastern Siberia, he didn’t define the borders of this macro region. And everyone kept their heads down, considering Eastern Siberia, out of habit, as Baikal region plus Far East. However, when Sergey Shoygu suggested establishment of «East» on January 21, 2012, everything was put in its place, by definition borders of the project: «from Western borders of Krasnoyarsk region to Kamchatka». When he spoke about it, he had been intended to become the head of this structure. Now, with appointment of Shoygu to the Moscow governor position, it is most likely that the Corporation will be headed by Igor Shuvalov, the First Deputy Prime Minister of the Russian Federation, despite the fact that a huge serious discreditable campaign is waged against him in the USA. A person of such a position will be at least concerned about his own prestige. It would be more advantageous for the Americans to have their own person on this position, though.

In other words you consider that the USA has so much control over us that they can suggest their own heads to be appointed for regional projects?

I recall the following. I sent the Judas kiss to October revolution in 1987. In November issue of the «Eco» journal an article called «Financial bankruptcy of prerevolutionary Russia» was published, which in fact said that the revolution of 1917 was not the red one back then, but an orange one, made with American money. And if we say that the Americans has so much control over us, it needs to be traced this in the past, not in the modern history. I answered your question in such a way, may be not directly.

According to those documents, which were published, the State Corporation project doesn’t involve a part of Western Siberia territory.

Yes, exactly. Nowadays the territory of Eastern Siberia and Far East is defined, which will get its own Development State Corporation, the strategy of Baikal region development was worked out, where Buryatiya and Irkutsk region were included.

We have left the very «South Siberia», which is, in fact, adrift.

Moscow budget revenue for 2012 is expected at 1, 46 trillion rubles rate, Novosibirsk — 31 billion rubles

It is six regions of Federation, a million of square kilometers and almost 12 million of people — in other words an average European country by population: Altay region, Altay Republic, Kemerovo, Novosibirsk, Omsk and Tomsk regions. We have this country that isn’t going to leave Russia, and its inhabitants are mostly the Russians. However this country has three resources, in order to regulate producing of which a national sovereignty is unnecessary: it is crop, coal and ferrous metals. All three products are sold on the stock exchange, that’s why the world market will regulate industrial sphere here, but not the government in power.

And the decisions on selling goods abroad are to be made in accordance with the world’s conjuncture. For example, if a harvest is good, but it is needed to be preserved in order not to bring down the world’s prices or to destroy the crops, because they are not needed now in accordance with the world’s market. And the same goes to a coal mining. Such issues are to be addressed within the framework of world’s economy, but not a national one.

Wait a minute. Are you saying that regional economy management from the capital model becoming more and more insufficient? And a perspective trend is a closer cooperation of border areas of different countries?

Yes and here are some examples. In North-Western China a mass virgin lands development is being carried out now, far more global, than we had one. Moreover, there is the so called Fifth Economical Zone of China, where three provinces and two autonomous districts are included, the population in which is 89 million people. Eastern Kazakhstan also has its own grain farms. Is there any sense in considering those territories as the national sovereignty? Roughly speaking, if you have the world’s breadbasket, which feeds almost entire Eastern continent, is it necessary to compete, when you can simply coordinate your actions?

There should be united China-Kazakhstan-Russia machine operator’s units, which will be gradually maintaining common rural areas.

The surface of a tablet is made of indium and gallium metals, mining of which is environmentally dangerous

Where is the threat to sovereignty here? There is none! We will work at their place, they will work at ours — it’s not a national problem. The same goes to a coal mining. We have three deaths to a million tons of coal in mines. The Chinese have five, the world figure in this regards is one. The task is simple for everyone: a maximum move to the open mining, leaving mines. Is a single country capable of solving such a complex question? Of course, not — only in cooperation with international community.

The largest Bachkar iron ore deposit in the world is situated in Tomsk region, but its development is hampered because of its location under swamps. For effective development and processing a Neighbor Regions Industrialists Union is simply needed to be established, which could provide a development by supplying it with infrastructure. And the center of this production can only be the Novosibirsk region. Every time, when we discuss this question agents from Tomsk come and intercept — as Tomsk people want to get funds for building a branch parallel to Trans Siberian railway from the Federation under this very thing.

Bakchar problem consists of the fact that there are no such technologies in Russia, which could allow processing a bog iron — a blast furnace won’t work here. Will metallurgists of the world stand the fact that we have the largest iron ore deposit in the world and cannot determine who is going to process it?

In my opinion, instead of one State Corporation in Siberia, there has to be three of them. Sector-based grain, coal and metallurgical ones.

Only in this case strategic investors will come, who invests not in the territories, but in a sector interesting to them. And the main problem of South Siberia development is the problem of normal integration of the region into the world’s economy.

However, there is an impression that State Corporation projects are being implemented absolutely opposite way than your conceptions...

Lots of people see in those projects a ground for stealing. Nowadays administration situation, when decisions are made by those, who are impartially excluded from the economical process, of course isn’t normal. That’s why they have to open companies for their wives, children, to use corruption schemes. Yes, probably, such a process will take place. I maintain the position of a cat here, who doesn’t bark, when cannot reach something, in contrast with a dog. In other words such problems are not interesting to me.

As I said, already existing Territorial State Corporations are solving not those problems which will be solved in future — nowadays they are trying to moderate the stealing process somehow. Let us say, the Federal Road Agency of the Ministry of Transport of the Russian Federation keeps the same coefficient of carrying off the money at the rate of 17%. In other words only 17 kopecks of one ruble are put into the asphalt.

What a striking fact. Is there any danger that the State Corporations project has purely authoritarian model, but not an economic one, which you support: subordination personally to the president, the simplified procedure to bypass the existing legislation?

Discounts of «East» may include a zero tax rate on profit, property of the organization and land

This Corporation is being established for investment flows control and what will happen next — we don’t know yet. In any case, it’s better than if near my house there was a Chinese policeman standing, what couldn’t be excluded either.

Anyway, Siberia now needs huge investments — only upgrade of the aluminum industry requires a couple billion rubles. First of all, our aluminum is made according to the worldwide banned environmentally unfriendly technology. Secondly, for example, «Rusal» brings its materials for processing from Australia. Here the company also has some small mining, but, for you to know, the Achinsk Alumina Refinery Plant existed for 20 years only on paper, as well as Tobolsk oil refinery plant. Raw materials for aluminum producing were brought from Karelia to Siberia, but it was reported that it had been mined in Achinsk.

The same goes to the subway in Novosibirsk: for 20 years a marble factory had been working here, which was not listed anywhere. Nevertheless it had been working and that’s why the city has the subway now.

It can’t exactly be told what would the Siberia Corporation be like, would it be honest in every way or not, would local economists be invited to work on it or not. The main thing is the fact that there are 11 million people per million square kilometers, who produce grain, metal and coal for the whole world. And it is impossible to solve their problems in the standard form. The fields irrigation problem is vital not only for South Siberia, but for China and Kazakhstan as well. For such problems decisions are to be made, which are satisfactory for all parties.

Aleksey Kudrin, former head of the Ministry of Finance of the RF, considers that establishment of State Corporations on Siberia and Far East will only slow down the development of those regions and the country as a whole

You mean that administrative boundaries are not vital anymore?

There is the conception of «Euro region», which describes the system of transboundary administration. The largest Euro region is the Big Danube, there are six countries and a separate administration, which receives financing from them and administrates the macro region. The administration watches over the river water consumption, its ecological status and then who and what is disposing into it. What is a national government here for?

The transboundary administration is a very interesting thing. Rivers and mountains, plains and seas are not even aware of boundaries among countries. So an effective management is work with integral natural systems, but not its pieces, «cut» by people. Do we have such examples?

Mikhail Yevdokimov, Altai region governor, tried to establish such a «Euro region» in Siberia in 2005. He suggested establishing a union among the region, Kazakhstan, China and Mongolia. However after Yevdokimov’s death the project died with him.

Our researches of such opportunities in Siberia suggest instituting «Euro regions» in terms of irrigation and unification of a part of agricultural equipment sector. And what is going on? Our people, buying a machine in China, throw away all the electronics from it and send it to the fields. Throw away the electronics because there is no one to maintain it. What does this electronics do? It automates a ridge sowing, when over each seed a pile of soil emerges, which hastens its growth and increases crop capacity by 30%. Such a technology is urgent for our farms, which are further North than Chinese one.

In Barnaul, for example, French companies are already helping vinaceous business develop. In Altai — where, vineyard is even impossible to imagine. Still it is a fact and European experts admitted that all plots have all characteristics of the lands in Cognac province.

So the reluctance to participate in international division of labor strongly damages Russia?

World economic community is afraid of the modern Russia because there were examples in history, when Russian’s participation has damaged it.

The Russian tsar had «crops baton» — cheep Altai crop, appearance of which in Europe ruined Western producers.

«Transneft» and «Gazprom» can use weapon to protect pipelines

We also had a magnificent agreement with Japan (in 1980-s of the 20th century), according to which we undertook to supply them with metallurgical coal of certain grade of purification. Then it became clear that there was no technology in Russia, which could clean coal from admixture of clay. And if we’re going to pay the fine for producing coal mismatching the agreement, we will have to supply it for free for the eternity.

And when it became clear, the first one to bother was the Japanese, but not the Russians: «What if someone thinks, that we cheated Russia on purpose, that we are pilferers?» And they have refused to enter into the agreement to save their reputation! So our party decided to sell the Japanese an energy coal instead of metallurgical one, and everything seemed to be resolved. However, when delivery began it became clear that coal, which was sold to the Japanese, supplied the entire energy sector of Housing of Far East, that’s why it has been decided to heat houses with metallurgical one. Its combustion temperature is 200 degrees higher than energetic one! Accidents began at the heating plants and the cities of Far East lived the whole heating season as on the powder keg waiting for emergency evacuation in case of heating plant explosion.

This example shows our current place in the world’s economy perfectly well. We are situated in such a position, where, if we miscalculate something, the first one to correct it will be our partner, but not us. So the problem of national idiocy in economy, most likely, will be vital for some time in Russia.

From the editors

Before publishing of the interview, Yuriy Voronov sent us a short message about the latest news on the subject under discussion:

After our conversation it turned out that the Corporation will be replaced by the Ministry on Far East, which will be situated in Khabarovsk. It is more resolute step to division into pieces of the right field of the country. The first similar step was taken on Skolkovo. For the first time there is a territory in which there are its own, special laws. Replacement of the Corporation by the Ministry leads to substantially bigger excretion of the territory of the country into a special jurisdiction.

 This publication has been translated by experts from "Monoton" translation agency.
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