Summary

Russia has the 11th-largest economy in the world. But as is the case in many places, its wealth is not evenly distributed throughout the country.

It is also the case that in many countries, underdeveloped areas with high rates of poverty tend to experience more unrest and political instability than developed ones. By identifying the regions of a country with the weakest economies, therefore, it is possible to also discover which areas might pose the largest security threat. This Deep Dive attempts to do just that for Russia. In this report, we identify the poorest regions in the country using a scoring system that employs four economic indicators to measure the level of poverty throughout the country. We then looked at whether these regions have existing political and ethnic tensions that may flare up if economic conditions worsen. We are not forecasting that these regions will destabilize; rather, we are identifying the regions in which unrest could break out if, say, an economic downturn further lowers the standards of living. These conclusions could have broader implications: Internal instability could impact Russia’s capacity to defend its interests abroad in places like Ukraine and Syria and could force Russia into compromises with its adversaries.

Methodology

To measure the level of poverty in all 85 Russian regions, we looked at four metrics – average income, average spending, inflation and unemployment – and assigned a score to each region based on the results. For unemployment and inflation, a high value reflects poor economic conditions. For average income and average spending, a low value reflects poor economic conditions. The regions that fell in the highest/lowest 25 percent of the country (depending on the indicator) were given one point and those that fell in the highest/lowest 5 percent were given two points. The regions with the highest scores are the ones that are struggling the most economically.

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Seven regions stood out the most and, therefore, will be examined further below: the Jewish Autonomous Region in the Far East; Altai, Buryatia and Tuva in Siberia; Ingushetia and Kabardino-Balkaria in the North Caucasus; and Sebastopol in Crimea. Notably, all of them are in Russia’s periphery.

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Jewish Autonomous Region

Located in Russia’s Far East federal district, the Jewish Autonomous Region has a population of nearly 65,000, roughly 0.1 percent of Russia’s total population. It has no history of violence or unrest and was officially established in 1934 as a “homeland” for Jews from within and without the Soviet Union. The Soviet Union wanted to encourage the establishment of settlements in remote areas of the Far East, which serves as a buffer against China – but to really protect Russia against any Chinese aggression, the area needed to be populated in larger numbers than it had been. Some Jewish settlers moved to the region, but they were by far outnumbered by ethnic Russian and Ukrainian migrants. Today, only 1 percent of the region’s population is Jewish.

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The Jewish Autonomous Region has one of the most hospitable climates in the Far East and is one of its wealthiest regions in terms of minerals. It holds deposits of more than 20 different kinds of minerals, including iron, manganese, tin, gold and graphite. Still, the region’s economy is weak. Due to its remote location, it has historically attracted little industrial activity. It has few processing plants for raw materials, so a vast majority of the minerals mined there are processed in other Russian regions.

Living conditions are also poor. Regional governor Alexander Levintal said in a 2017 interview with The Guardian that the mass emigration of Jews from the region to Israel in the 1990s had a detrimental impact on the region’s standard of living. According to Levintal, the region’s health care system is still reeling from the departure of roughly 70 doctors to Israel.

Although the region has shoddy internet connectivity and transportation links, it has managed to attract more foreign direct investment in recent years. The region received $39.61 million in FDI in 2015, $82.93 million in 2016 and $200.29 in 2017. Investment is largely driven by Russia’s efforts to enhance trade with China. Both countries have invested in a new bridge, set to be completed late this year, linking the Jewish Autonomous Region with Heilongjiang province in China across the Amur River. (The Jewish Autonomous Region is connected to the Pacific Ocean through this river.) Moscow is hoping that the bridge, over which the Tongjiang-Nizhneleninskoye rail line passes, will attract new investment to the region. Russian company Amurprom is set to build a new soy processing plant there, and Chinese investors are constructing a logistics complex to process, store and transport goods between Russia and China. According to the region’s governor, 5 million tons of cargo will be transported across the bridge per year after the first stage of development, and then 20 million tons per year thereafter.

For now, Chinese investment in the region isn’t a concern for Russia, partly because the amount of investment there is still small compared to other regions. (Neighboring Amur region, for example, received $971.43 million in total FDI in 2017.) Russia’s priority is still to secure its eastern border by encouraging settlement and economic development in the Far East, but so far, it hasn’t succeeded. The recent investments in this area are merely a new attempt at a long-standing imperative.

Altai, Buryatia and Tuva

Altai, Buryatia and Tuva are located in Siberia on the Russian border with Mongolia. They are all mountainous and poorly connected to the rest of the country. Altai, which also shares a border with China and Kazakhstan, is particularly isolated and has no rail connection to the rest of Russia. As part of Russia’s fertile crescent, all three regions’ economies feature agriculture (mainly crops, but sheep and cattle rearing is also common is Tuva). Timber and natural resource extraction are also important sources of revenue. Buryatia is by far the richest in terms of natural resources, containing 48 percent of Russia’s zinc deposits, 24 percent of lead, 37 percent of molybdenum and 27 percent of tungsten, as well as substantial gold deposits. Buryatia is therefore the most valuable of the three regions to the central government.

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In Tuva, the ethnic Russian population has been declining while the number of ethnic Tuvans, a Turkic-speaking people with Mongol influences, has been rising – which may pose problems for Moscow in the future. In 1959, ethnic Russians constituted 40 percent of the population in the region. In 2010, that figure was only about 16.3 percent. Some 82 percent was ethnic Tuvan.

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These demographic trends have caused some tension. In 2016, a newly formed civil society group representing Russian speakers in Tuva wrote an open letter to the Kremlin expressing concern over the lack of ethnic Russian representatives in local government and the teaching of Russian as a foreign language in schools. (Tuva has two official languages: Russian and Tuvan.) The letter received no response from the Kremlin and was criticized by the regional government, but it indicates that there has been some resistance from the ethnic Russian population to the demographic changes.

The federal government likely didn’t respond because the demographics in Tuva do not pose an imminent threat to Moscow, at least not right now. It’s possible that if this trend continues, Russia could see separatist claims emanating from this region, which only joined the Soviet Union in 1944. (Between 1921 and 1944, it was an independent state, though officially recognized only by the Soviet Union and Mongolia.) There is currently strong support in Tuva for the central government: In the presidential election in March, Vladimir Putin received 91.98 percent of the votes in Tuva, where the turnout was 93.66 percent. In addition, Defense Minister Sergey Shoigu hails from this region.

The central government also enjoys strong support in Altai and Buryatia. In Buryatia, 73.72 percent of the population voted for Putin in the 2018 election, compared to 66.2 percent in 2012. In Altai, 70.62 percent voted for Putin in 2018, compared to 66.87 percent in 2012. These three Siberian regions, therefore, are not an immediate security risk for Moscow, which has more pressing concerns in Crimea and the North Caucasus.

Sevastopol

The location of a strategic naval base for Russia’s Black Sea Fleet, Sevastopol is a port city that has been under Russian administration since 2014, when Russia took control of the Crimean Peninsula. The European Union has imposed restrictions on economic relations with Crimea and Sevastopol – which were extended in June 2018 until June 2019. These measures include an import ban on goods from Crimea and Sevastopol and restrictions on investments by European companies. EU exports of certain goods and technologies – including those related to transport, telecommunications, energy, oil production and refining, and extractive technologies for other natural resources – are also banned.

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For now, Crimea can’t independently sustain its economy. Subsidies from Moscow currently account for 67 percent of Crimea’s budget revenue and 61 percent of Sevastopol’s. Of the 30.4 billion rubles ($483.2 million) in investment the city received in 2017, about 76 percent came from the federal government. Effectively, Sevastopol, and the rest of the peninsula, is living off Moscow.

The government’s investments have had some positive effects. In 2016, Sevastopol’s economy grew by nearly 7 percent. The average unemployment rate fell from 8.7 percent in November 2016 to 4.1 percent in the same period of 2017. Yet, Sevastopol is still one of the poorest areas administered by Russia. Secretary of the Russian Security Council and former FSB director Nikolai Patrushev has warned many times, most recently this month, about the possible destabilization of Crimea, mainly at the hands of Ukrainian nationalists and Tatar activists. This suggests the region’s political position is still tenuous. To secure its control over the peninsula in the long term, Moscow needs to support economic development there, since economic hardship can foster dissent.

Ingushetia and Kabardino-Balkaria

Located in the North Caucasus, Ingushetia and Kabardino-Balkaria are the areas that are most concerning for Moscow. Poverty and underdevelopment have made both regions ideal recruiting grounds for separatist factions and Islamist groups. Ingushetia has one of the highest unemployment rates in Russia at 27.9 percent and the highest number of people living under the minimum income standard calculated by the government for each region. Kabardino-Balkaria’s unemployment rate is also high at almost 12 percent. The populations of both regions are among the youngest and best connected to the internet in the country.

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Ingushetia and Kabardino-Balkaria depend heavily on government subsidies. Ingushetia is among the top 10 recipients of funding from Moscow. But as is the case in Sevastopol, money transfers from the federal government haven’t been enough to solve the regions’ underlying socio-economic problems. Both regions have valuable natural resources, including oil and gas in Ingushetia near Malgobek and molybdenum and tungsten in Kabardino-Balkaria near Tyrnyauz in the Baksan River valley. Rich deposits of gold, chromium and nickel can also be found in the Malka River valley. But like the Siberian regions, Ingushetia and Kabardino-Balkaria have yet to see a significant economic boost from these natural resources.

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In addition, both regions have experienced ethnic tension and resistance to central government control. In Kabardino-Balkaria, there has long been a divide between the Balkars, a Turkic ethnic group, and the Kabardins. The Balkars have a history of separatist activity. In 1944, most Balkars were deported to Kazakhstan and Kyrgyzstan after the Soviet government accused them of being Nazi sympathizers. It wasn’t until the late 1950s that they were allowed to return. In 1992, the Balkars voted to secede from Kabardino-Balkaria, wanting to form their own region and to be better represented in Moscow. Valery Kokov, who was leader of the region from 1990 until 2005, eventually succeeded in suppressing the Balkar and Kabardin nationalist movements. And in recent years, there have been few signs of separatist activity on the scale of the 1990s.

Since conflict broke out in nearby Chechnya in the 1990s, Kabardino-Balkaria has been a target for Islamist groups. In 2005, terrorists raided several buildings linked to Russian security forces in Nalchik, the regional capital. More than 100 people, including at least 14 civilians, were killed during the fighting, which lasted more than two days. In 2011, Islamist insurgents conducted several attacks, including at a ski resort area where three Russian tourists were fatally shot. According to the Investigative Committee of the Russian Federation, 97 people, including 42 Russian security officers and 24 guerrilla fighters, were killed in the republic in 2010.

Spillover from the Chechen wars also affected Ingushetia, which remains one of the most unstable regions in Russia. During the wars, Ingush volunteers fought alongside Chechen insurgents against Moscow. In 2004, Chechen and Ingush militants raided more than a dozen government buildings in Nazran, the region’s largest city. At least 92 people were killed, including at least 47 police officers.

But rebellion in this region is nothing new. Ingush rebels resisted both the monarchists and the communists during the Russian civil war. From 1944 to 1977, Ingush insurgents led a bloody campaign against the federal government after ethnic Ingush were deported during World War II to Kazakhstan and other parts of Central Asia. More recently, Ingush volunteers have joined Kiev’s fight against Russia-backed separatists in eastern Ukraine.

With the rise of the Islamic State, Islamist militancy has become a bigger concern in the Caucasus. In 2016, Russian officials estimated that some 3,500 Russian citizens, many from the North Caucasus, had left Russia to join the fighting in Syria and Iraq. Some sources suggest that the actual number may exceed 5,000. Now that the Islamic State has lost most of its territory, Russian citizens who fought alongside IS will likely try to return to Russia and could pose a new security threat in the North Caucasus.

For Moscow, any instability in this region is troubling because the North Caucasus acts as a critical buffer against Turkey and Iran. It’s essential for Moscow, therefore, to keep a lid on separatism, Islamist insurgency and ethnic tensions in the region. It’s willing to fight to maintain control here, as it demonstrated during the Chechen wars, which occurred at a time when Russia was much weaker than it is today. The biggest upcoming challenge in the North Caucasus will be managing the return of militants from the Middle East.

Conclusion

All the regions identified as the poorest and, therefore, most susceptible to instability are along Russia’s periphery. Moscow needs to maintain control of these areas for strategic depth. It has focused its limited resources on those regions that are most precarious in the short term: Sevastopol and the two republics in the North Caucasus, Ingushetia and Kabardino-Balkaria. In Sevastopol, Moscow’s main strategy has been to invest massively in the city and in Crimea, with the aim of securing control over the peninsula in the long-term. In the Caucasus, too, Moscow has provided substantial subsidies but has also tried to dismantle the terrorist networks that could use poor economic conditions to their advantage, to recruit new members and inspire hopes of an Islamic caliphate on Russia soil. Moscow has so far managed to contain the insurgents there, but now the big question is how it will handle the return of fighters from the Middle East who gained both ideological fervor and fighting experience, including against Russia’s own forces, from their time defending the caliphate in Syria and Iraq.