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5. By Way of Conclusion

Issues pertaining to the borders located in the northern part of Europe have drawn the EU and Russia into a set of negotiations, albeit not into a dialogue between equal partners who share a joint framework of thinking. The reasons for this are many-fold. The Union’s Russia-policies are not very developed, and the EU has only recently been compelled to encounter more concretely the needs of Russia. As to the Union’s border-policies, the universalising tendencies tend to have an upper hand, and region-specific measures are usually seen as breaking with such policies, thereby endangering the EU’s credibility and ability to design and implement more general, all-encompassive policies. Deviations from general norms and an approval of fuzziness at the outer edges would also challenge the Union’s rather stiff structure of pillars that are primarily based on a clear-cut division between those who are ‘in’ the Union and those who remain ‘out’.


Hence, also the policies pursued in Northern Europe tend to boil down to a redrawing dividing lines, and this despite preaching the opposite. The integration project has gained aspects – if seen from a Russian perspective – of exclusion. It provides features of a self-other hierarchy. Being pressed, the Union is prepared to negotiate to correct such impressions and accept compromises, albeit within rather strict limits. The rules of the game are, in fact, not open for discussion with the Union aspiring for the position of a unified and coherent actor. Once different logics and conceptualisations clash, the EU does not opt for discussion between equal partners but basically insists on the application of its own existing departures – understood as the only conceivable basis for commonly agreed norms. There is no seeking (except in the context of the Northern Dimension) for the views of outsiders, nor is there any forwarding from the EU’s core of proposals and ideas designed to meet the needs of the specific issues or regional concerns at hand. Russia is, for its part, not that well equipped to comprehend the EU’s logic in the first place and hence misinterpretations easily occur. Deviations from the modern, realist and geopolitical logic calling for rather strict, statist borders is generally viewed with suspicion. Deviations are seen as bringing about fragmentation, this spelling danger. Yet it appears that it has, for the most part, been Russia that has occasionally experimented postmodern, regionalised ideas, being thus able to appeal to the Union’s own rhetorics about openness, freedoms, de-bordering and region-building. The various proposals pertaining to the Kaliningrad puzzle demonstrate this quite clearly as does the idea of skipping visas in the EU-Russia relationship, although it also becomes obvious that the strategy has so far been met with rather little success. The reaching out and appealing to the EU’s rhetorics on inclusiveness, openness and horizontal approaches has not helped either. The construction of fuzzy borderlands in view of Russia has not appealed to the EU and the offensive play by utilizing the margins in an innovative manner has not – at least not yet – paid off.
The lack of success could reside in Russia’s own uncertainty about whether the postmodern approaches are really what are called for. Russia has been able to launch proposals without fearing that its seriousness will eventually be put to a test as the EU has quite clearly been unable to capitalize on these proposals. This inability pertains, in one of its aspects, to what Browning calls the EU’s ‘internal/external security paradox, i.e. a constellation that calls for the reproduction of modernist understandings of subjectivity, central to which is the notion that subjects require clearly demarcated territorial spaces and borders over which they exercise sovereign control. The conflation of identity, territory and sovereignty embedded in the paradox also tends to lead to the reification of selfhood to the negative characterisation of those outside the borders of the EU as potential threats to the Union’s security. Borders are comprehended as lines of differentiation and exclusion. This approach turns problematic if applied in rather regionalised context furnished with networking and a variety of overlapping spaces, and that is what the essence of Northern Europe is increasingly about. Russia is by no means a champion of such a trend but has at least occasionally been able to tune in to such development. This has, however, not undermined the rather hierarchical nature of the discourse, and one may hence assume further clashes are likely, albeit in a relatively mild manner.








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IN SEARCH FOR INTERNATIONAL ROLES: VOLGA FEDERAL DISTRICT

THE CASE STUDIES OF NIZHNY NOVGOROD, TATARSTAN AND ORENBURG REGIONS
Andrey S.Makarychev

Linguistic University of Nizhny Novgorod

Introduction

The basic challenge of modernization for Russia is that of the country’s structural integration into the world, both politically and economically. Russia’s adaptation to and accommodation with the globally dominant norms, rules and institutions will take a long time, experience ebbs and flows and cannot be expected to produce quick results. Russia’s search for her place in the world community will take the form of gradual and evidently controversial adjustment to a rapidly changing external environment. These changes stem from the much-discussed globalization

Why is it so important to raise the issue of globalization for Russia and her regions? Despite the underdevelopment of Russia’s version of globalization, the international community in general and specific foreign countries in particular do have their impact on internal developments in Russia. Sometimes the effects of globalization are not visible enough, but they cannot be disregarded. In spite of his inward-oriented rhetoric, President Putin’s federal reform launched in May 2000 to some extent was inspired by developments outside Russia. These were the foreign investors who were confused by the tug-of-war between the federal center and the regions, and who called for a reshuffle of the federal system in Russia to avoid conflicts between federal and regional laws and get rid of regional autarchy. What is also telling is that Putin intends to implement his federal reform in accordance with formal democratic procedures, keeping in mind Western sensitivity to these issues.

The shift of power from the center to the regional actors was the major development in Russian politics in the beginning of the 1990s. Yet the Russian regions are not equal players on the international scene. Not all of them are capable of playing meaningful roles internationally, and these roles can be quite different for each one.

Three groups of constituent parts of the Federation ought to be considered as the most important Russian subnational actors in the international arena. The first group comprises those regions with a strong export potential (industrial regions or those rich in mineral resources1387). The second group is composed of ethnically non-Russian republics. The third group includes borderland regions.

Only regions belonging to either of these groups: a) might have sufficient resources for challenging the federal foreign policy and designing its own long-term strategic routes in the world; and b) demand more powers in foreign-related issues. Their strategies contrast with those of inward-oriented (“introvert”1388) regions seeking more protectionism from the central government and more state control over import and export operations.

The purpose of this paper is to show that globalization in Russia develops in a peculiar environment, which is different from that in the West. In this paper the discourse about Russia’s way to globalization will be placed into the Russian domestic context. The aim will be to demonstrate that:

- first, subnational territorial units in Russia are gradually becoming international actors;

- second, globalization of Russia’s regions is a very uneven and competitive process;

- third, this unevenness and competitiveness might bring both new opportunities and challenges for Russia.

More specifically, the ambition of this paper is to analyze those different models of trans-border cooperation in which Volga Federal District (VFD) is engaged. These patterns largely coincide with the search for international profiles of three subjects of federation that are located in the VFD: a) Nizhny Novgorod oblast, which is a good example of industrial region located in Russia’s heartland; b) Tatarstan whose international capital is very much related to ethnicity and cultural and religious revival; c) Orenburg oblast which is an illustrative example of border region located at the edges of civilizations.
1. FEDERAL DISTRICTS AND THEIR INTERNATIONAL CREDENTIALS

In May 2000, with Putin as the new Russian President, the old idea of reshuffling the whole system of Russian regionalism obtained a more concrete design: according to the Presidential decree seven federal districts were created, each one to be run by a Presidential envoy. Though Putin himself calls these measures an administrative reform within the Presidential apparatus, it is quite clear that the consequences of these steps ought to have a major impact on the state of the Russian federation1389. In case the new “viceroys” will eventually use the existing resources to control the districts, they might strengthen their political weight and become even more important actors than the states of the federation, both domestically and internationally.

There were several goals of creating federal districts:


  • greater centralization and unification;

  • undermining regional clan systems based on partonage and patrimonialism;

  • elimination of inter-regional conflicts.

Presidential representatives were given good chances to restructure the territorial fabric of the society, but the hurdles are here as well. One of the problems is that the area of their responsibilities seems to be too broad - from supervision of the parties in the regions to “inventory” of specific industries. Vladimir Putin however has ostensibly stated that his representatives are supposed not to administer the federal organs in the regions but only to coordinate their activities.

The division of Russia in seven administrative districts created a new framework for international cooperation. However, engaging newly created federal districts into the web of international cooperation is an uneasy task since they are not yet well established political institutions. Their future is still ill defined. Districts are still in search for their international identities.

In spite of this uncertainty, Presidential representatives have already undertaken certain steps to obtain some international credentials. All presidential representatives – being members of the Security Council of the Russian Federation – are heavily involved in resolving a plethora of international and security-related issues like protecting external borders, reviving military industries, undertaking counter-terrorist measures, upgrading transportation and communication networks, etc. The most telling example is Sergey Kirienko, the head of the Volga Federal District, who established a network of connections with international institutions to foster investments, credits and chemical disarmament programs.

The impact of the federal districts on Russia’s external relations might be traced in the following ways. First, it is hoped that presidential representatives would have to make heads of the subjects of federation more law-obedient in a whole spectrum of issues related to foreign economic relations. Secondly, since the concept of the federal districts is aimed at concentration of resources, the weakest subjects of the federation will be marginalized and will have to leave the sphere of active international relations. Thirdly, there might be more interdependency between the subjects of the federation constituting a single federal district in a number of specific areas like transportation networks, border security, migration policy, etc. In some cases “the larger regions” seek to contribute to peace enforcing and soothe the whole bunch of security-related matters. Fourtly, the concept of cultural integration is being put forward. Sergey Kirienko, for example, noted that the territorial area of responsibility of Russia’s leaders, both national and subnational, is defined not by administrative borders but rather by cultural factors (he refers to the “area within which people think and speak Russian”1390).

Volga Federal District, like six other districts established in May 2000, is a part of peculiar “administrative market” being formed in Russia. On the one hand, the federal district is an instrument for conducting coherent federal policies at sub-national level. For example, Sergey Kirienko has suggested that mechanisms comparable to enterprises’ bankruptcy and introducing crisis managers have to be applied to the subjects of federation in case of their financial insolvency and mismanagement1391.

On the other hand, the district-building process is a mix of administrative (vertical) and networking (horizontal) strategies. This might be illustrated, for example, by the changing roles of the Volga Customs Board, one of key institutions in charge of VFD regions’ foreign economic contacts. On the one hand, like all other district-level institutions, the Board is an instrument for achieving greater centralization and unification of customs operations. On the other hand, it has to find out the ways to cooperate with individual exporters and importers, customs brokers, and other actors which stay beyond administrative market. The same goes for transportation upgrading projects in VFD: apart from mobilizing administrative resources, they clearly require regular horizontal interaction with a wide range of actors relatively independent of the regional governments like car producers, catering services, media, etc1392.

Three regions chosen as case studies for this paper are differently positioned within VFD in economic and social terms. This could be visualized in the table beneath1393:





Territory, hundred thousands square km

Population, thousands

Housing, square meters per capita

Number of cars per 100 families

Number of ambulances and hospitals, per 10000 inhabitants

Crimes committed per 100000 inhabitants

Energy consumption per capita, kiloWatt/hour

Volga Federal District

1038

31839,5

18,7

113,4

223,2

1828

5437

Nizhny Novgorod Oblast

76,9

3632,9

19,9

105

226,3

2057

5727

Tatarstan

68

3776,8

18,6

108,2

220,9

1860

6208

Orenburg Oblast

124

2212,7

18,1

132,6

234

1863

6486

In the next three chapters we shall see how differently these three regions try to position themselves internationally.


2. N1ZHNY NOVGOROD OBLAST

Nizhny Novgorod Oblast (NNO) belongs to the group of industrial regions with significant export potential. This is the region with well-developed armaments and heavy industries, and significant commercial and trade potential1394. Its administration relies on cooperation with foreign partners seeing this as the most profitable way of earning money for replenishing the region’s budget.

NNO was a closed area till 1991 due to heavy militarization of its industry in the Soviet times. The whole decade of 1990s was the period of gradual adjustment of the regional elites and institutions to the international environment. NNO started to reclaim its historical reputation as the commercial “pocket of Russia”.
2.1. Bridging the gap between administrative and networking strategies

NNO has always had far-reaching international ambitions (Nizhny Novgorod Fair historically was an important international trade point; nowadays the NNO government has launched a project of turning the region into one of leading Eastern European cultural centers1395). This case study is to show that it is impossible to achieve international goals and reach world standards by relying on purely administrative measures. Globalization is basically about networking between equal partners horizontally associated by mutual interests.

Administrative strategies sometimes lack due transparency and competitiveness. For example, there were many alarming signs that Moscow – Nizhny Novgorod highway is mismanaged by NNO authorities, which represents a threat to implementation of international transport corridor project1396. Also important is that there is much room for non-state actors’ contribution to the success of each of the projects (investors, providers of retail services, travel agencies, communication companies, etc.). Hence, the basic challenge for project implementation is due coordination – basically non-administrative, interest-driven - between multiple actors each having their stakes in upgrading transportation facilities.

Financial and business institutions are pioneers of horizontal networking in the region. These are basically networking actors that foster liberal agenda and institutional pluralism in NNO, and thus are in the vanguard of region’s global moves. Foreign investments predominantly go to those sectors which are based on networking principles and are relatively free of excessive administrative regulations. To foster domestic cooperative links between small and medium enterprises, “Partniorstvo” (“Partnership”) association was established1397. Internationally, NBD Bank is a part of a number of cooperative projects to include overseas partners such as World Bank and European Bank for Reconstruction and Development1398. Nizhny Novgorod Commodities & Currency Exchange has initiated “Investment in Russia” project with special focus on Volga Federal District territories1399. Insurance companies (both local and Moscow-based) also develop business networks in NNO using a variety of means like e-trade, Internet advertising, etc1400.

Yet in such industrially resourceful regions as NNO horizontal networking has to be coupled with effective administrative strategies. Close interconnectedness of administrative and non-administrative tools might be well illustrated by the project of establishing Free Customs Zone (FCZ) “Russia’s Pocket” in the region. It pop up in summer 2001, when the government of NNO has drafted FCZ concept and applied for federal center support in issues of taxation and passing appropriate legislation1401. However, purely administrative channels are not sufficient for effective management of this ambitious project. Apparently, it is not enough to invest budget funds to those sectors that have to take the lead in region’s development. What is necessary is to find appropriate business partners that might be interested in upgrading communication and transportation infrastructure, environment, urban architecture, tourist facilities, and other components of business friendly climate1402.

The same goes for extending to NNO the trans-European transport corridor running from Berlin through Minsk to Moscow and further eastward. Closely related is the federal program “Roads of 21st Century” in which NNO – due to its location at the crossroads of “North-South” and “East-West” transportation axes - plays one of key roles. Basically, these projects are based on administrative background, since these are public authorities that are in charge of investing into upgrading the transport infrastructure, including airports, highways and river ports1403. This is responsibility of the regional authorities to find adequate solutions to those critical problems that might undermine the project – for example, restructuring huge debts of Gorky Railroad, or finding the most appropriate areas of industrial cooperation with failing economies of Belarus (within the framework of trans-European transport corridor) and Central Asia countries (keeping an eye on potential “North-South” transportation project which is still under consideration).

There are other proves of potential linkage between administrative (vertical) and non-administrative (horizontal) strategies. As soon as Nizhny Novgorod became the main city of VFD, regional authorities came up with the idea of “exploiting the resource of the capital city”. The point is however that Sergey Obozov, the former head of NNO government, treated this resource in predominantly administrative ways: with its new political role as the “capital” of the district, Nizhny Novgorod attracts more attention from the part of the President, and more ministers come here with official visits1404. Meanwhile, there is a competing concept of Nizhny Novgorod development – that one of turning it from the administrative “district capital” to the “business capital” with market friendly climate, entrepreneural culture and business sensitive policy making.

Basically these were Russian investors – major financial industrial groups like “Sibal”, “Interros”, “Severstal”, “LUKOil” – that became major networking partners of NNO administration1405. Each of these FIGs has purchased major industrial enterprises like GAZ, Pavlovo Bus plant, “Krasnoe Sormovo” shipyards, and other industrially meaningful plants. In petrochemical industry the new holding is being formed with a far reaching strategy of competing with leading international producers. As a precondition for entering the world markets, the holding is oriented to keep high world standards in accounting, consulting, and share holders rights1406. Inevitably, creation of such companies will make the regional authorities to rethink much of its old-fashioned strategies of industrial development. NNO administration has introduced the practice of signing cooperation agreements with major investors (“Sibur-Neftekhim” and others1407), which is a good testimony of emerging horizontal cooperation strategies in the region.

To boost NNO investment potential, NNO government led by Sergey Obozov had to horizontally cooperate with a number of autonomous partners to include such NGOs as “Transformation Technologies”, “Institute of Commodities Market and Management”, “Expert Institute”, “Institute of Urban and Regional Development”, “Institute of Direct Investments”. In Obozov’s words, the role of the regional administrative structures is to accumulate resources of private sector for launching major cost-sharing projects co-sponsored by foreign and domestic investors. This is one of results of the strategy of foreign financial institutions to incite regional administrations to raise matching funds for collaborative projects1408.
2.2. Scope of the Problems of International Cooperation at the Regional Level

International contacts is one of those spheres where the NNO administration is being severely criticized. Thus, Boris Nemtsov, the vice speaker of the State Duma and former NNO governor, in February 2000 said that 2 million UDS of foreign investments – which constitute only 0,38% of all foreign monies invested in Russia – is a “shame” for regional administration.

There are still multiple reasons for critique.

2.2.1. The first set of problems is due to the gaps between local and foreign business and commercial standards. For example, there is only one law firm in Nizhny Novgorod specializing in international law1409. The same goes for facilities: there is only one hotel (strangely enough located far away from the down town) which corresponds to highest international standards.

2.2.2. The second problem deals with marketing and selling the merchandise produced by NNO enterprises in cooperation with foreign partners. The trouble here is that the use of foreign technologies and material raises the production price (especially after August 1998 financial crisis in Russia). Thus, Pavlovo bus plant (being one of beneficiaries of the European bonds) experiences dramatic difficulties with selling the buses assembled with “Volvo” parts.

Similarly, “Nizhegorod Motors” had to raise up to 70% the proportion of the assembling parts for new cars to be produced jointly with FIAT which means the lowering of prices up to 6 thousand USD, in comparison to initially planned 17 thousand USD1410. Relatively low prices already attributed to GAZ cars informal nickname “the death of Volkswagen”. Nonetheless GAZ problems are multiple: there is still 65 million USD debt to the EBRD, the dealers’ network is both corrupted and insolvent, and the license for duty-free customs storage was revoked as a retaliation for huge (USD 12 million and RUR 80 million) debts for the customs operations. Some predict “inevitable financial and technological collapse” of GAZ1411.

To lower expenditures and production costs, some enterprises with foreign capital have to reconsider its personnel policy. There were not yet mass scale lockouts or labour cuts, yet the issue of possible unemployment is being discussed in Nizhny Novgorod1412.

Dutch scholar Andre Mommen notes the lack of confidence of foreign investors in Russian production facilities and outlets and finds inadequate the tempo of modernization of Nizhny Novgorod industrial enterprises. In his view, dragging on with launching new GAZ – FIAT joint venture is a problem, because in the meantime Western firms already developed new models with lower emission norms, lower fuel consumption, etc. That cars will compete on price, not on quality. This proves that Russian regions trusting on this kind of outlets will live stormy weather again1413.

GAZ problems is a good illustration of close interdependence of domestic and international issues. To compete internationally, GAZ needs restructuring. Profitableness of “GAZ” is about 4%, which is a disaster in international terms1414. It was estimated that for the sake of efficiency from 20 to 30 thousand from 110 thousand of GAZ employees have to be dismissed1415. GAZ is also financially in charge of huge housing area and supporting facilities, which has to be transferred to the municipal budget. Both problems are of obvious social background.

Another problem is low quality standards of local production. For example, GAZ minibuses lack emergency exits and reinforced frame between the floor and the roof, which is a serious shortcoming for international markets1416. In result, “GAZ” is loosing competition and market. “GAZ”’s failure to become strong international actor have led to increasing expansion to NNO car-building market of major Russian companies - “Sibal”, “Alfa”, “Severstal”1417.

2.2.3. The third problem lays in the sphere of politization of financial and economic projects. This was the case in Autumn 1999 when former governor Ivan Skliarov trying to escape from accusations in mismanaging the Eurobonds presented this issue as a political one blaming his predecessor Boris Nemtsov and his colleague (also of Nizhny Novgorod origin) Sergey Kirienko who was the prime minister at the time of August 1998 financial crash.

Another, and even more telling example, was Ivan Skliarov’s decision to block the construction of four-star hotel in Nizhny Novgorod downtown arguing that archaeologists discovered at this site remnants of medieval tombs. The head of Russian Orthodox Church in NNO, as well as different nationalist groups, supported the governor’s demands, and the issue received high-profile coverage in the local media. Foreign investors were dissatisfied and insisted on continuing the construction under initially negotiated conditions, threatening to take the issue to the courts. Finally the governor failed to prove that the “force major” clause might be applicable to the issue, yet the contract was terminated and foreign investors left the region.

2.2.4. The fourth - and related - problem is foreign policy perceptions of the regional elites. Attitudes to the whole set of globalization issues are quite diverse among policy makers in NNO. On the one hand, NNO has already positioned itself (mainly due to Boris Nemtsov’s governorship in 1991-1997) as an international actor. Besides, the economic rationale pushes regional decision makers to get adjusted to the challenges of globalization by searching for foreign investments, offering new opportunities for international business and advertising the region’s possibilities internationally.

On the other hand, as local policy analyst Ivan Yudintsev suggests, NNO “is still surrounded by a kind of ideological barrier, a sort of psychological iron curtain”1418. Some foreign visitors concede that NNO “looks more isolated from the outside world than Moscow and St.Petersburg”1419.

A number of reasons might explain these troubles. First, in public speeches of NNO high administrators one can easily find lots of inadequate, outdated and sometimes messy perceptions of the realities of international relations. For example, in former vice governor Alexander Batyrev’s words, “Lithuania is leaning towards Russia and is ready to come back to Russia”1420.

Second, communist conservatism, nationalist feelings and reservations about the West are deeply rooted in the mentality of certain groups regional elites. This is how the current NNO governor Gennady Khodyrev exposed his attitudes to the United States: “Yes, we are much more clever than they are. We know ourselves what to do. Americans are miserable. They have a couple of bucks instead of eyes, and a piece of gold instead of the heart. What should we discuss together?”1421.

One can also see multiple misperceptions among the directors of state-owned enterprises with regard to the West. According to one of major Russia’s businessmen Kakha Bendukidze, “many industrialists here naively believe that they are going to compete with each other. Nowadays, in the era of proliferation of global companies, it is funny listen people speaking about exceptionality of a certain territory. I am always told here in Nizhny that the oblast administration needs to rule and control everything, but this is unreasonable”1422.

The same idea was shared by Russian economist Igor Lipsit lecturing in Nizhny Novgorod. In his words, from 60 to 65 percent of the directors of state-owned plants and factories treat investments as mere funding or as a credit. “These directors are eager to get these monies without changing the structure of the property, since they are reluctant to share their powers within their enterprises. This is the source of all conflicts emerging immediately when the investors try to participate in managing the property”1423.

Suspiciousness towards foreign business became evident in June 2000 in the aftermath of NTV Channel comments on deteriorating ecological problems in Dzerzhinsk, the second city of NNO in terms of population and the home to major chemistry producers1424. The mayor of Dzerzhinsk Sergey Trofimov explained negative TV coverage by the desire of foreign competitors to spoil the image of the city and to block further investments to its chemical industry. NNO administration has supported this interpretation and denounced “the information attack” sponsored from abroad1425. NNO media has also reproduced this reasoning to accuse foreign countries in industrial espionage and stealing secrets from Dzerzhinsk enterprises.

All this questions the assumption that regional elite operates as rational actor in building overseas communications with the international community. There is still much room for unjustified fears and isolationist sentiments in policy making circles of NNO, the fact that hampers region’s switch-over to globalization.

2.2.5. The fifth problem is crime. Among high-profile stories were the murder in 1996 of the director of Bor glass factory Vladimir Maximov and scandalous arrest in 2000 of the president of Nizhny Novgorod Association of Unesco clubs Olga Chechulina. Andrey Klimentiev, one of Nizhny Novgorod tycoons with business interests in Norway, was jailed in 1998 for fraud and extortion. GAZ dealers network is also highly criminalized, according to law enforcement reports of 1999-2000.




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