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Cablegate: Novosibirsk - Stability Above All Else

VZCZCXRO7166
RR RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHMO #3068/01 2901323
ZNR UUUUU ZZH
R 161323Z OCT 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 0404
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHVK/AMCONSUL VLADIVOSTOK 2973
RUEHYG/AMCONSUL YEKATERINBURG 3335
RUEHLN/AMCONSUL ST PETERSBURG 5091

UNCLAS SECTION 01 OF 03 MOSCOW 003068

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PINR SOCI ECON RS
SUBJECT: Novosibirsk - Stability Above All Else

MOSCOW 00003068 001.2 OF 003


Summary
-------

1. (SBU) Political stability is the watchword in the Siberian city
of Novosibirsk, even more so as financial crisis threatens the rapid
economic growth that had been the justification for a narrowing of
the political landscape. Officials from the city and regional
administration emphasized the "cooperative" spirit among the four
Kremlin-sanctioned parties in dealing with challenges. Others
outside the political system have more or less made their peace with
the highly centralized, essentially one-party framework and are
devoted to working within the system to try and bring about change.
End summary.

The Official View
-----------------

2. (SBU) Deputy Mayor Valeriy Fedorov underscored to us the
political stability in the city, which, he professed, was promoted
by a pragmatic and cooperative approach between the administration
and the city Duma. He claimed that the two sides discussed issues
rationally and came to the "proper" decisions with little friction.
Even with upcoming mayoral elections, Fedorov had little concern
about the campaign -- noting he did not expect any "extremism" to
appear. As a point of reference, he hinted at the superiority of
the managed democracy in Russia to what he saw as the distractions
of the U.S. presidential campaign and the "chaos" of the Ukrainian
system.

3. (SBU) Vladimir Panarin, the chair of the regional
administration's committee for societal-political relations,
likewise described Novosibirsk as a model of political stability, a
marked improvement over the more chaotic 1990s. Panarin was on
message with his relatively upbeat assessment of the regional
situation even as he admitted some businesses were feeling the
credit crunch. Panarin and Feodorov both discussed new policies,
such as the provisioning of cheap capital for building firms, as
ways to mitigate the economic fallout, and they appeared confident
that they would ride out the storm.

4. (SBU) Panarin, Fedorov, and Ambassador Viktor Salmoilenko --the
Ministry of Foreign Affairs representative to the Siberian Federal
District -- all sounded a note of disappointment in the lack of U.S.
engagement in the region. Salmoilenko went through a long monologue
about the various life-changing technologies being created in
Novosibirsk laboratories and factories and questioned why U.S. firms
were not more engaged in the region. He was a strong advocate of
foreign firms building production facilities in Russia, but was not
swayed by the argument that specific polices like the Yukos affair,
Putin's Mechel comments, and the problems faced by Western
businessmen at TNK-BP had highlighted the risks of doing business in
Russia. Fedorov lamented that the "sister-city" relationship with
Minneapolis/St. Paul had not really developed and compared it
negatively to Novosibirsk's close ties to Japan's Sapporo.

Political Hegemony
------------------

5. (SBU) Our contacts from outside the government shared the
official assessment of regional political stability and credited it
to the positive relationship between and capable leadership of the
two main players: Governor (and former city mayor) Viktor
Tolokonskiy and Novosibirsk Mayor Vladimir Gorodetsk. For example,
Vera Prokhina of the Parliamentary and Self-Government Center (a
liberal NGO supported in part by IRI funding) described Gorodetsk as
competent, albeit not "political," and called Tolokhonskiy a good
man, but weakened by his emphasis on loyalty over competence when
staffing his administration.

6. (SBU) Governor Tolokonskiy is native to Novosibirsk region and
the regional political elite consider him "one of ours" -- a
situation that contrasts with the insertion of "outsiders" by Moscow
in nearby Siberian regions like Krasnoyarsk and Irkutsk. As such,
Tolokonskiy did not enjoy the same level of personal association
with the federal leadership as his fellow Siberian governors and
indeed had labored to strengthen his relationship with Moscow. Part
of his problem was historical; he did not join United Russia until
2006 and had alienated some in Putin's Kremlin by gaming the
electoral system in the 2003 gubernatorial election -- in which he
helped the opposition to gain a greater stake in the legislature at
the expense of United Russia as a means to strengthen his position.


7. (SBU) Conflict with the Siberian Federal District "Polpred"
Anatoliy Kvashnin had further complicated Tolokonskiy's approach to
Moscow. Maksim Aykashev of the regional newspaper
Vedomosti-Novosibirsk noted that Tolokonskiy had sparred with
Kvashnin, when the latter backed a rival candidate for governor in

MOSCOW 00003068 002.2 OF 003


2007. Nonetheless, Putin re-nominated Tolokonskiy to the
governorship in 2007 and he was approved easily by the regional
parliament. At present, with an "appropriate" turn-out for United
Russia and President Medvedev during last year's Duma and
Presidential races, Tolokonskiy appears to have mended his fences
and enjoys a better relationship with the federal elite.

8. (SBU) Both Tolokonskiy and Gorodetsk are card-carrying members of
United Russia, the regional political hegemon with little real
competition from the other parties. The "liberal" parties have only
a token representation in the region and, reportedly, no electoral
support. Indeed, the scientific and intellectual elite of
Novosibirsk's Academic City that one might see as a base for
liberalism strongly supported the Communists, harkening back to a
time when they received impressive compensation and adulation from
the Soviet elite. Professor Aleksey Osipov of the regional Public
Chamber noted that the mercurial Vladimir Zhirinovskiy's party, the
Liberal-Democratic Party of Russia, had done extraordinarily well in
the past, taking a majority position in the city legislature in the
late 1990s. Yet, as economic conditions improved, the tendency to
support opposition parties has diminished, leaving United Russia as
the predominant power for at least the near term.

9. (SBU) A lack of competition from outside players has helped to
reinforce Tolokonskiy's stature. Novosibirsk boasts few natural
resources and thus has not been of great interest to the powerful
Moscow-based financial-industrial groups that continue to shape
political life in more well-endowed Krasnoyarsk, Irkutsk, and
Kemorovo regions. The region had been ravaged by conflict between
local criminal groups in the 1990s, according to
journalist-turned-PR specialist Zaynal Tarkhov, but the governor had
carried out a campaign to break their hold, with some members sent
to prison and the others absorbed into the elite.

Manageable Conflict
-------------------

10. (SBU) Whatever political maneuvering that happens in Novosibirsk
is happening behind the scenes within the United Russia elite. As
an example, Tarkhova noted tensions within the city elite over
administration plans to move to a "party-list" system of elections
for the city legislature. At stake is a pot of money, divided among
the current single-mandate delegates, for use in resolving
particular issues -- essentially a "slush fund" for delegates to
disperse as needed among their electorate. Legislators to the
regional assembly had once enjoyed their own funding pools, but lost
access to the money once the region went to a party-list system.
Now, according to Tarkhova, control over even this small pot of
money allows city delegates more influence than their supposedly
more influential compatriots on the regional legislature.
Naturally, the current members of the city legislature oppose the
plans.

11. (SBU) The other possible source of political intrigue is the
upcoming Novosibirsk city mayoral elections in March 2009, but
already there seems little chance for real political competition.
Tarkhova and Aykashev argued about which regional businessmen within
United Russia might have considered a bid for the office, but they
agreed that the public bid of support for Gorodetsk by the party's
political committee in early October signaled that there would be
only one "real" candidate for the post. Prokina agreed, noting that
she had heard of certain businessmen who had made noises about
running for mayor until they heard of potential "investigations" by
the fire inspectors and tax police, which deterred them from going
forward. Promises of a "calm" election process appear to foreshadow
yet another set piece of managed democracy.

Clouds on the Horizon
---------------------

12. (SBU) There is a fine line between stability and stagnation; the
growing financial crisis could be the test of Novosibirsk's
political vitality. Already the credit crunch has had a negative
impact on some regional business. Contacts reported that the
building industry has seized up because of a lack of credit, an
assertion that explains the stilled gantry cranes that stood
becalmed over the city. Elena Dugelnaya, the proprietor of a chain
of optical shops and chair of the regional Delovaya Rossiya branch,
described how her plans to open a new franchise in Krasnoyarsk had
run aground because of a lack of credit. Whereas it had previously
taken a week to get a loan, she had been rejected by two banks and
was still in a three-month long negotiation with a third. Dugelnaya
noted that problems with credit had started far earlier than the
recent stock market drop, but had deepened sharply in past weeks.
Tarkhova and Aykashev noted that consumers had begun to suffer as
well, as car loans and mortgages dried up. They also claimed that
people were pulling money out of the banks, including entrepreneurs
and businessmen.

MOSCOW 00003068 003.2 OF 003

13. (SBU) The economic crisis has political relevance, if only
because the regional (and city) administration has promoted economic
expansion and the building boom as evidence of a successful policy
line. Typical of official boasting, Salmoilenko heralded the
region's record of 10 percent GDP growth over the past year and took
pride in the strong sales by Novosibirsk companies of machinery and
equipment to other regions. Were the regional government to fail in
mitigating the regional financial crisis, it could lose some of its
legitimacy among the business elite and population. Already,
Tarkhov quoted her sources in the mayor's office as describing
"panic" among the city elite, without a full understanding as to
why.

14. (SBU) Novosibirsk could be the poster child for the
Medvedev/Putin tandem vision for an "innovation economy." Instead
of an economy based on resource extraction, the region boasts
intellectual capital and business acumen as its most valuable asset
-- and it has leveraged that to help bolster growth. At the same
time, high commodity prices and demand from the extractive
industries for Novosibirsk region's equipment and machinery has been
one of the strongest drivers. Moreover, the speculative real estate
market, fueled by rapidly rising prices and a building boom, has
also contributed to Novosibirsk's fortunes -- with the full support
of the government. Now that the financial crisis threatens those two
drivers, the regional elite will face the full responsibility for
the slowdown, without any opposition force to share the blame.
After years of relative ease, the Novosibirsk elite has a much more
difficult set of decisions to make which could, potentially, shake
up political stability.

BEYRLE

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