Moscow Encourages Beijing to Invest in the North Caucasus

By Valery Dzutsev

From June 8-9, the Russian company OJSC “North Caucasus Resort” and a delegation from the Shanghai Cooperation Organization (SCO) visited ski tourism sites in China. Chinese Dalian Wanda Group and North Caucasus Resort OJSC signed a preliminary agreement about possible Chinese investments into the North Caucasus tourism cluster totaling up to $3 billion. In addition, the state tourism agencies of Russia and China signed a separate agreement, aimed at increasing the tourism flow between the two countries by 30 percent. Chinese investment is predestined mostly for Dagestan, where there are prospects for a free economic zone opening, Sochi and Arkhyz in Karachaevo-Cherkessia (http://kommersant.ru/doc/1940516).

Potential investors from China clearly selected the most prospective sites in the North Caucasus. Sochi is booming following multibillion financial injections by the Russian government in preparation for the Olympics in 2014. Arkhyz in Karachaevo-Cherkessia is not only located in one of the more stable republics of the North Caucasus, but it also has a relatively developed infrastructure as well. In Dagestan, if Russia allows Beijing to develop a free economic zone there, prospects for Chinese imports will abound, given Dagestan’s coastline along the Caspian Sea, and its vicinity to Iran, Azerbaijan and Central Asia.

However, stringent visa rules in Russia, coupled with additional restrictions on foreigners’ movements in the North Caucasus are so hard to cope with that tourists will not come to the region, warned international tourism experts at the Saint Petersburg International Economic Forum that took place on June 21-23. President Vladimir Putin recognized the systemic issues caused by the inaccessibility of Russia for foreign travelers.  For example, the board chair of the North Caucasus Resort OJSC, Ahmed Bilalov derided current Russian visa rules, stating that: “as of today Russia is one of the least accessible countries in the world from the standpoint of visa and immigration rules. To the foreigners who travel to Russia, many procedures look like rudiments of the cold war, absurd and humiliating” (http://www.ncrc.ru/r/news/index.php?id_4=628).

Tourism development in the North Caucasus and isolation imposed on the region by Moscow, as well as the wider problem of Russian visas, clearly comes into contradiction. Outsourcing development of the North Caucasus resorts to the Chinese investors may seem to be a shrewd solution to the Russian government, since the Chinese government is unlikely to raise human rights issues with Russia or infiltrate the North Caucasus with pro-democracy ideas.  However, if Moscow opens up the region to Chinese businesses, they will hardly be able to keep it closed to everyone else.  But to make this change happen will require a major shift in Russian policy in the North Caucasus, signs of which we yet have to see.