Irkutsk
Ulan-Ude

Blagoveshchensk
Chita
Yakutsk

Birobidzhan
Vladivostok
Khabarovsk

Magadan
Yuzhno-Sakhalinsk

Anadyr
Petropavlovsk-
Kamchatsky
Moscow

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Sakhalin Oblast: results - 2015, trends - 2016

East Russia continues the cycle of analytical publications devoted to the results of the past year and the analysis of the situation in the current year in the socio-economic and political spheres of life in the regions of the Far East and Eastern Siberia

The past year has become a very special one for the Sakhalin Oblast, which has become the focus of attention in connection with a high-profile corruption case that led to the resignation of Governor Alexander Khoroshavin and a further radical "purge" of the regional elite. But no less important is the fact that the positive regional agenda quickly replaced the negative, although the anti-corruption campaign in the region continues, and all new high-profile persons are becoming “victims” of criminal cases. Nevertheless, the energetic activity of the new head of the region, Oleg Kozhemyako, and his successful lobbying of the interests of Sakhalin contributed to the beginning of a new stage in the political history of the region, which is now associated with great expectations.

Sakhalin Oblast: results - 2015, trends - 2016

Rostislav Turovsky

Doctor of Political Sciences, Professor of HSE, Scientific Editor East Russia
It should be noted that, taking corruption aside, the financial and economic situation in Sakhalin developed successfully under the previous governor, which was primarily due to the advancement of oil and gas projects. At the end of 2014, the Sakhalin Region, according to the official government assessment, entered the top twenty regions with the most effective executive power. Ironically, these results were announced already under Oleg Kozhemyako, and the region received a financial grant as an incentive. However, there is no doubt that Sakhalin will be among the “winners” in 2015 as well.

The main question for Sakhalin is how to spend correctly?

The results of last year as a whole confirmed the favorable trends determined by the work of the fuel and energy complex as the main driver of the regional economy. In particular, the region distinguished itself by a noticeable increase in industrial production - by 13,8%. Fixed capital investments continued to grow (by 14,4% in January-November 2015), while Sakhalin has remained one of the main recipients of investment in the Far East for many years. Although, at the same time, the volume of construction work last year fell seriously - by 13%, which may be a sign of an unstable and wave-like situation with the preparation and launch of certain large facilities (for example, the construction of one of the largest facilities, Sakhalin GRES-2, is lagging behind from the original plans). The island village demonstrates positive dynamics. Over the past three years, the volume of agricultural production has grown by 1,3 times. In 2015, the volume of products from all categories of farms amounted to about 11,1 billion rubles in current prices, which amounted to 111,7% by 2014.

The regional budget continues to be the main source of pride for Sakhalin: the region is still achieving fantastic results in the financial sphere, although it seems that it reached an already high level a few years ago. In terms of the revenue side of its consolidated budget, Sakhalin far exceeds all regions of the Far East (last year the region received 223,4 billion rubles). Within the country, its budget is already the seventh in terms of income, it is comparable to the Sverdlovsk region and is slightly inferior to the Krasnodar Territory and Tatarstan (in terms of its own revenues, which reached 218,2 billion rubles, Sakhalin is in fourth place in Russia). Considering the small population, this provides extremely high budgetary provision indicators by Russian standards. For Oleg Kozhemyako, who left the Amur Region with its critical financial situation, the transition to Sakhalin was, of course, a huge “gift of fate”.

Last year showed a tendency for further growth of budgetary indicators, moreover, at the expense of the region's own revenues. Income growth was 43,7%, while own tax and non-tax revenues grew by 48,4%. These rates were the best in Russia. The main dynamics were provided, as before, by the profit tax (an increase of 85,2%), the share of which in the consolidated budget is now 71,2%. Moreover, the growth was literally in all significant taxes, even income taxes (by 12,2%, the best growth rates in the Far East and fourth in Russia). Revenues from the tax on the extraction of minerals and from the use of state property more than doubled, from taxes on total income - by 20,4%, from the tax on corporate property - by 18%, etc. Except that the growth in excise taxes turned out to be nominal (by 2,6%).

It is not surprising that under these conditions the center continued to cut transfers, almost completely transferring Sakhalin to self-sufficiency. The share of transfers in the regional budget is only 2%, while Sakhalin has not received subsidies for equalizing budgetary provision for a long time. The center last year cut Sakhalin's revenues by about half from subsidies that make up the largest portion of its transfers. However, this does not create any problems now. The level of subvention receipts, which represent the center's obligations in respect of all regions, remained practically the same (an increase of 3,4%).

It is not surprising that Sakhalin is one of the rare Russian regions without any debt problems. There is no public debt in the region at all, and there are only municipal debts (by the way, the third largest in the Far Eastern Federal District after the Primorsky and Khabarovsk Territories). Moreover, over the past year, the municipal debt in the region has also significantly decreased - by about a quarter (only two regions - the Yamalo-Nenets Autonomous Okrug and Mari El - were more actively reducing their municipal debt). The total debt burden on the consolidated budget (the ratio of municipal debt to own revenues of the consolidated budget) is at an extremely low level (1,1%), and the situation is better only in the Tyumen region, as well as in Sevastopol, where there are no debts at all.

As a result, Sakhalin is faced with a slightly strange, but in fact a serious problem - how to properly spend such large financial resources. From this point of view, the past year has become another experiment. The region, in fact, tried to spend its funds, and its expenses increased by 60,65% (the best dynamics of expenses, far exceeding all other regions). Thus, the typical and largest budget surplus in Russia by the end of the year was nevertheless reduced to a relative minimum, remaining, however, the maximum for the regions of Russia.

Sakhalin's position is such that it no longer needs to spend on the social sphere in even larger amounts, the costs are already high. Therefore, it remains to increase expenditures on economic items, which was done. The most impressive growth in spending on agriculture and fisheries, exceeding seven times. Against this background, the authorities of the region constantly spoke about the priority of this area and the need to achieve food security and self-sufficiency. True, this did not give immediate results in the form of an increase in agricultural production. The share of these expenses in the regional budget exceeded 10%. The region began to spend even more funds on housing and communal services (by 15,7%), which is the largest item of budget expenditures. But the cost of roads increased, on the contrary, slightly - by 4,9% (by the way, they were significantly increased under Alexander Khoroshavin).

As for the social sphere, there are no radical solutions to be observed. Since the region has even more money, spending on social policy has increased by 25,9%, which may mean more benefits and subsidies for the population (the best dynamics in the Far East and the second in Russia). But in the main social spheres - education and health care, the natural limit has been reached, and the level of salaries is considered sufficient. As a result, spending on health care did not increase at all (nominal growth of 0,8%), and education was added 6,7% (which, nevertheless, was among the best indicators of growth rates in Russia). Expenditures on physical education and sports have been reduced altogether - by 11,3%. Perhaps Sakhalin should have invested more in social infrastructure, but they did not.



ASEZs and the fishing industry are "branded" areas of regional government

In general, Sakhalin remains in a rather contradictory position, when it is still impossible to call it a prosperous region. Rather, there is a habitual state in which economic success is not accompanied by an equally dynamic increase in the welfare of its inhabitants. Above, we talked about the growth of income tax revenues, which indirectly indicates a favorable situation with wages. But the actual level of real money income of the population did not change over the year (decrease by 0,8%). Retail trade fell 3% altogether. All this once again emphasizes that the wealth of Sakhalin is concentrated in the hands of a number of understandable players in the person of FIGs and authorities, but a significant part of the population is not their beneficiaries. The regional authorities have ensured, of course, the required level of salaries in the public sector, but they are more keen on economic projects.

At the same time, the activities of the regional authorities in the economic sphere and the promotion of the interests of the region in the center are quite capable of reviving and strengthening those areas that remain neglected and secondary. This approach can create a reserve for the future, contributing to the diversification of the regional economy and the growth of the well-being of its various sectors. Increased attention is paid, as can be seen in the budgetary policy, agriculture and fisheries. It is worth remembering that the governor himself comes from the fishing business.

The activity of Oleg Kozhemyako and the experience of interaction with federal structures, acquired while he was a governor in the Amur Region and the Koryak Autonomous Okrug, allowed Sakhalin to become one of the most visible and successful partners of the federal center and the Far Eastern bloc of the Russian government. One of the interesting decisions was the transfer of the Sakhalin Region Development Corporation to the Federal Fund for the Development of the Far East, which made it possible to raise the capitalization of the latter to 80 billion rubles. For its part, Sakhalin counts on the Fund's support for its projects and, possibly, on expanding their number. However, it should be remembered that the federal authorities are not ready to "pamper" the region with their financial support and suggest spending funds from the regional budget on projects. In other words, Sakhalin lobbyism can be effective in terms of making decisions in favor of Sakhalin by the center, but it cannot turn into massive infusions of federal funds into Sakhalin.

The policy of the regional authorities, aimed at stimulating promising, but lagging industries, is clearly manifested in the history of the territories of advanced development. For some time, Sakhalin was not at all considered a region in need of TOP. As a result, they were still approved by the government. Moreover, their specialization is precisely in line with the above-mentioned policy of the governor. ASEZ "Yuzhnaya" has an agricultural specialization. ASEZ "Mountain Air" is designed to revitalize tourism, and its central object is the local ski resort. In addition, Sakhalin residents count on the creation of free ports on the territory of the region, similar to Vladivostok (for example, in Kholmsk, Nevelsk, Korsakov), but this issue is being resolved slowly and has not been worked out in terms of the legislative framework.

The fishing industry has become a special and, one might say, "corporate" direction of the work of the regional authorities. It also noted the close interaction of the region with the center, along with the high influence of Oleg Kozhemyako, who heads the working group of the State Council on the development of the fisheries sector. Coordination of issues with the Federal Agency for Fishery, the Ministry of Agriculture and other authorities continued, since it has not yet come to making final decisions, for example, on the principles of distribution of fish quotas (we are talking about initiatives regarding "investment quotas" and "keel quotas", as well as the catch fish mainly on their own or leased ships: all this is intended to weaken the position of the so-called "fish rentiers"). In the meantime, the governor was engaged in reforming the fish industry directly in the region: a fish exchange began to work here, and the “Affordable Fish” project was being implemented, aimed at providing the population with fish products. It is not surprising that Sakhalin is included in the federal project of the fishing cluster, although there it will inevitably compete with Primorye and Kamchatka.



A vivid example of a situation where the main expenses fall on the regional budget, while the center approves and formalizes decisions, is the new federal target program for the socio-economic development of the Kuril Islands (in addition, the region will spend more than 10 billion rubles on the Mountain Air TOP one and a half billion for the Yuzhnaya ASEZ). This program was approved by the government and is designed to 2016-25 years. Moreover, in the first two years, 87% of budget financing is provided by the region, i.e. federal, this program is more in name. Infusions from the center are postponed for 2018-th and subsequent years. In the total volume of the program, the region provides 32 billion rubles, and the center - 28 billion (non-budgetary sources account for only 9 billion, i.e. the Kurils are still on the budget). At the same time, the stake on direct government funding of the Kuriles was also manifested in the fact that no special regimes like the TOP were created on the islands, although this was discussed. Although, at the same time, the program provides for the growth of private investment in the Kuril Islands by one and a half times as a target indicator. In general, it is quite traditional, relying on infrastructure and already emerging and obvious industries - fish and mining.

One way or another, but for the regional authorities the Kurils are becoming one of the main directions of their work. In this regard, their desire to take the FTP implementation process under full control is noticeable. At the same time, many questions arise about the implementation of the old program, which creates conditions for squeezing out the business and municipal authorities associated with it. In particular, the regional prosecutor's office revealed violations in the implementation of the previous federal target program, a criminal case was opened against the head of the Kuril city district N. Golyuk, etc.

Meanwhile, when selecting priority investment projects, the region is betting on stimulating the lagging and problematic mining industry - coal. It was the coal project that received support from the Far East Development Fund. We are talking about modernizing the transport infrastructure of the Solntsevskoye field and the port in Shakhtersk. Perhaps this will improve the situation in the depressed part of the region, where there was an increase in social discontent earlier. In addition, it is interesting that Sakhalin decided to implement a municipal solid waste (MSW) utilization project on its territory and also achieved its inclusion in the list of projects with federal co-financing. This project is being implemented by Eco-Sistema, and from 900 million rubles to 270 million should be provided by the Far East Development Fund (the Fund will spend 2,8 billion rubles on a larger coal project). Considering that waste processing plants cause a negative reaction of the population in many regions, in Sakhalin special emphasis is placed on the environmental component of this project. The strong lobbying positions of Sakhalin are evidenced by the fact that there is no large volume of solid waste in the region, but the project is being implemented here.

Fuel and energy complex as a pillar of the regional economy

The fuel and energy complex, meanwhile, still remains the backbone of the regional economy, and the main perspective depends on it. The achieved level is very good, but here just not everything is clear with the future development, and it is possible that the region is approaching the ceiling of its growth. During the year, issues related to the launch of new capacities for the production of liquefied natural gas (LNG) were not resolved. The expansion of the existing LNG plant of Sakhalin Energy (ie, Gazprom and Shell) is linked to the need to prepare a raw material base, which is based on the resources of the Yuzhno-Kirinskoye field, the development of which is planned to begin in 2021. The new project of the LNG plant "Rosneft" stalled against the background of the conflict between "Gazprom" and "Rosneft". In the litigation process, Rosneft, which demands access to the Trans-Sakhalin gas pipeline (operated by Sakhalin Energy), has been successful, but rather tactical. The Supreme Court upheld the position of Rosneft, but at the same time the volume of gas that can be pumped through this pipe is insufficient to supply the LNG plant. In addition, Sakhalin Energy is trying to challenge this decision. For its part, Rosneft has repeatedly made it clear that its new LNG plant may not be opened on Sakhalin, but on the other side of the Tatar Strait, in the Khabarovsk Territory, where the De-Kastri oil terminal is located.



Overall, the prospects for Rosneft in Sakhalin, which is one of the key regions for the company, have become less clear. Although the company has new, but not large projects. For example, it received a license for the South Katangliyskoye field. But in addition to the controversial issue of the LNG plant, the uncertainty about work within the Sakhalin-1 project has grown. For example, the American partner of Rosneft, ExxonMobil, continued to put forward demands against the state for the refund of about $ 500 million in taxes paid under the project at a profit tax rate of 35%, while in Russia since 2009 the rate was reduced to 20% ... For his part, I. Sechin, without renouncing, of course, the partnership with the United States, actively, but without much success, offered expansion of participation in the Sakhalin-1 project to Japanese business.

At the same time, Gazprom seemed to feel confident on Sakhalin, although it got involved in a legal battle with Rosneft. But in any case, his LNG project, which has been in operation for a long time, has a more reliable, albeit slower, prospect than the Rosneft project. It is important for the region to launch from 2016 a five-year gasification program, which will be carried out by Gazprom using gas produced at the Sakhalin-2 and Sakhalin-3 projects. Already in 2016, the volume of supplies should grow by 13% and reach 708,12 million cubic meters. The cost of the entire program is estimated at 15,4 billion rubles.

In addition, the RusHydro project for the construction of the Sakhalin TPP-2, which is important for the region, is progressing gradually, although with a delay. At the same time, a compromise decision was made, on which the regional authorities insisted, to keep the operating coal power plant in the village of Vostok in operation. More controversial, of course, was the ambitious story about the construction of an energy bridge from Sakhalin to Japan. Neither proper economic elaboration nor agreement on the Japanese side was found here. Therefore, in the end, no movement occurred.

The active administrative elite is gaining a credit of trust

In general, the change of governor undoubtedly led to an increase in the political influence of Sakhalin, which he lacked under Alexander Khoroshavin. Sakhalin began to attract more attention from the federal leadership, and visits by major officials (including Dmitry Medvedev) increased. The decision of Oleg Kozhemyako to appoint Dmitry Mezentsev, a well-known and high-status figure from the St. Petersburg elite, who recently worked as the Secretary General of the Shanghai Cooperation Organization (SCO), was also symptomatic. Dmitry Mezentsev's replacement of Zhanna Ivanova, a local politician who also got into his own corruption scandal, also clearly defines the tendencies of the political development of Sakhalin.

Oleg Kozhemyako's positions as the head of the region were legitimized through a successful governor's campaign. The new head of the region achieved the highest election result in the history of gubernatorial elections in Sakhalin, winning 67,8% of the vote. Although it cannot be said that Oleg Kozhemyako, completely new to the region, managed to easily and quickly win the support of Sakhalin residents. The elections took place in a low turnout (37,5%). The main rival of the governor, a well-known and experienced participant in many election campaigns, Svetlana Ivanova, representing the Communist Party of the Russian Federation, received a good result - 20,3%. At the same time, the elections were held in accordance with the Kremlin's guidelines; candidates from all parliamentary parties (including the strong representative of the Communist Party of the Russian Federation) and even Yabloko took part in them. And yet, Oleg Kozhemyako was able to turn the expectations of Sakhalin residents from the change of power in his favor.

At the same time, the topical issue of Sakhalin is the rotation of the elite, designed to consolidate the position of the new head of the region. After the scandal with Alexander Khoroshavin, the local elite is fragmented and demoralized, which makes it easier for Oleg Kozhemyako to do political work. For his part, the governor, having no support in the Sakhalin elite, made a bet on the formation of a completely new team, which, like himself, is a “Varangian”. The most notable process was the flow of personnel from the Amur Region, from the previous place of work of Oleg Kozhemyako as governor. At the same time, there are people with whom Oleg Kozhemyako has been working since the period when he headed the Koryak Autonomous Okrug. In particular, a reorganization of the executive branch took place in the region, as a result of which the governor ceased to directly head the regional government. The chairman of the government is Vera Shcherbina, a representative of Oleg Kozhemyako's personal team (she was also the first deputy chairman of the government in the Amur Region and was responsible for the financial block there).



At the same time, anti-corruption campaigns continue in the region, which are leading to new "losses". For example, the head of the regional Duma committee on state building, regulations and local self-government Sergei Zaritsky was arrested in the legislative branch.

Particular attention is paid to the rotation of the power elite and the strengthening of Oleg Kozhemyako's positions at the municipal level. It is interesting and characteristic that even people from the Amur Region are already getting there. Recently, another criminal case has received great resonance, in which Alexander Khoroshavin and his entourage are accused of receiving kickbacks in exchange for supporting the nomination of a number of deputies of the Yuzhno-Sakhalinsk City Duma. This has already led to the arrest and resignation of individual deputies and may ultimately result in early elections for the city's representative body.

Meanwhile, one of the harshest decisions of Oleg Kozhemyako was the dismissal of the mayor of such an important city as Korsakov, Lada Mudrova. Due to a corruption case that was initiated during the reign of Alexander Khoroshavin, the mayor of the "oil capital" of the Okha region, Alexander Shkrabalyuk, was removed from power (recall that the city was previously headed by Alexander Khoroshavin himself). The heads of the Kholmsky District, Aleksandrovsk-Sakhalinsky, and others resigned. Decisions, typical of the present times, were also adopted to abolish direct elections of municipal heads, for example, in Korsakov and Kholmsk. True, the post of mayor of Yuzhno-Sakhalinsk is still elective.

Thus, in the Sakhalin region, there is a change of local elites for "aliens", who, however, retain a credit of trust, as was shown by the successful election of Oleg Kozhemyako to the post of head of the region. The new team is acting very decisively and enjoys visible and effective support from the federal center. It is no coincidence that Oleg Kozhemyako is considered one of the most influential Russian governors, and acquired this influence even before the transition to Sakhalin. The effectiveness of the work of the regional authorities is undoubtedly fueled by the financial successes of the region, which is sharply different in this regard from the rest of the Far East, and from most regions of Russia. A reasonable decision was to try to diversify the Sakhalin economy, which turned out to be highly dependent on the oil and gas sector, including stimulating the agricultural sector, reorganizing the fishing industry, developing tourism, etc.

At the same time, the population of the region does not fully feel the financial well-being of Sakhalin, and the level of development of the social sphere leaves much to be desired. There is no complete clarity about the prospects for oil and gas projects, in the development of which there may be a slowdown. It is likely that Sakhalin is approaching the peak of its capabilities (although they are far from being exhausted), and the task of the authorities is to seize the opportunity to ensure its comprehensive and sustainable development.
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