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Yakutia in 2016: a gradual advance

Rostislav Turovsky on the development of the eastern regions of Russia

The past year was quite successful for Yakutia. The region continued to implement new raw and infrastructural projects, creating a perspective for the future. The financial and budgetary situation was very good. Directly in 2016 in the region there were no ceremonies to launch any deposits or industrial enterprises. However, the work did not stop, and in almost all its directions the trends became optimistic.

Yakutia in 2016: a gradual advance

Rostislav Turovsky

Doctor of Political Sciences, Professor of HSE, Scientific Editor East Russia
Raw material budget

Of particular importance for Yakutia are currently infrastructure projects, among which the newly constructed gas pipeline "The Power of Siberia" stands out. Not surprisingly, Yakutia showed an excellent growth in investments last year - almost by 25% (for January-September 2016). Significantly increased the volume of construction work - by 17,8%. According to these indicators, Yakutia was among the Russian leaders, which, of course, created grounds for optimism.

True, current indicators of socio-economic development are more likely to indicate stagnation. For example, the industry in Yakutia grew in 2016 only by 1,6%. Agriculture remained at about the same level (minimum decline by 0,3%). The presence of problems was indicated by high rates of unemployment, especially typical for rural areas of the republic. In terms of unemployment, Yakutia was the leader in the Far East (with 7,5% in October-December 2016). A small but still recession was observed in terms of the real money incomes of the population - they fell by 2,7% in January-November 2016 (although this is far from the worst result in the Far East). The strength of the population, however, remains, as evidenced by the preservation of the previous retail turnover (minimum drop of 0,6%). Nevertheless, the social well-being of the residents of Yakutia can hardly be called positive, and the authorities will need to pay special attention to this problem.

At the same time, in the financial sphere, Yakutia felt itself to be a completely prosperous region, thanks, of course, to its raw materials sector. It was not the first time when the republic’s budget turned out to be the largest in the Far East: as a result of 2016, revenues reached 196,2 billion rubles. However, in terms of its own tax and non-tax revenues (132,2 billion rubles), the republic still lagged behind Sakhalin, but bypassed it due to large volumes of federal transfers. Yakutia gradually increased its financial independence. Her own revenues grew by 9,7% and made up 67,4% of her total budget revenues (which grew by 5,2%). Excellent growth was demonstrated by income from income tax - by 29,2%. Income tax receipts grew more modest, but also significantly - by 9,4%. The mineral extraction tax (mainly diamonds) remained important for the republic, but revenues from it fell sharply (by 21,4%).

Improving the financial and budgetary situation in Yakutia logically leads to a decrease in federal transfers, although their volumes remain very large. Last year, the region received 3,9% less federal transfers than before. Yakutia reduced receipts from subsidies to equalize the budgetary provision (by 9,7%), very sharply reduced subsidies (by 30,7%). Only for subventions, the decrease in revenues was not so significant (by 4,3%).

Not a bad situation with budget revenues, apparently, does not create incentives for any adjustments in the financial policies of regional authorities. The peculiarity of Yakutia is that the republic seems to live in "good old" times, allowing itself, for example, not just to increase debts, but also to provide large-scale government guarantees and issue government securities. Many Russian regions do not do this at all during the crisis. As a result, the state debt of the republic reached 44,9 billion rubles, and Yakutia remains the absolute leader of the Far Eastern Federal District. The volume of government securities issued by the region is 15,25 billion rubles, and state guarantees - 10,7 billion rubles. Because of this in the republic and "hangs" so much debt burden. Following the results of 2016, the state debt of Yakutia only increased - by 17,25%. As in many other regions, there was a sharp decline in the volume of bank loans, but the republic took a lot of money from the federal government. Municipal entities of Yakutia also have a large and growing debt burden (2,5 billion rubles, an increase of 19,8%), and following the example of the republican government, some municipalities take on additional obligations in the form of municipal guarantees.

Trends in the region’s expenditure policy have become not entirely clear. Yakutia did not particularly strive to save money and increased expenses to a greater extent than income - by 6,8%. As a result, at the end of the year, the budget deficit increased. Attention is drawn to the sharp increase in housing and communal services costs - by 26,9% (their share in expenditures approached 20%). On the one hand, high housing and utility costs in the northern region can be justified. But on the other hand, such large fluctuations from year to year are hardly an indicator of a balanced spending policy in this area. It is worth recalling that the State Unitary Enterprise "Housing and Public Utilities of Yakutia" experienced hard times last year - it accumulated wage arrears, and the government of the republic had to make personnel changes. The republican authorities have also increased expenditures on agriculture, an area whose work is also criticized (Yakutia is distinguished by high expenditures on the countryside, and last year increased them by another 4,9%). Attention is drawn to a very noticeable increase in expenditures on general state issues (by 9,6%), which also distinguishes Yakutia against the background of other regions of the Far Eastern Federal District. In the meantime, the already small expenses on the road sector (underdeveloped in the region for objective reasons) were cut even more - by 3,5%.

In financing the social sphere, too, there was a discrepancy. Significantly decreased health care costs - by 10,3%. Recall that while in Yakutsk just was not able to complete the construction of the perinatal center. However, spending on social policy increased by 6,9%. Slightly increased Yakutia and spending on education (the largest item of budget spending) - by 2,3%. In general, based on the results of the analysis of expenditure policy, there is no feeling that all these differently directed trends were associated with a single strategy. As already mentioned, the republic did not feel financial problems and acted fairly freely.

Clarifying hydrocarbon prospects

The main prospect for the Yakut economy was still formed by the fuel and energy complex. In the oil industry, the situation around the Srednebotuobinskoye field was clarified: 29,9% of the shares of OOO Taas-Yuryakh Oil and Gas Production were sold to a consortium of Indian companies (Oil India Limited, Indian Oil Corporation Limited and Bharat PetroResources Limited), with which Rosneft has recently worked closely. This gives grounds to predict Indian investments in the oil sector of Yakutia. For their part, the authorities of the republic intend to support the oil industry by providing tax and profit incentives (they are likely to receive "Taas-Yuryakh Neftegazodobycha"). In addition, the Irkutsk Oil Company (INC) is expanding on the territory of Yakutia. The failure, however, ended with the first attempt to find an investor for the Borulakh oil and gas sector. The contest was unexpectedly won by a small Udmurt company called UDS-Energy, which bypassed Rosneft, but it could not fulfill the conditions, and as a result, the license remained with the state.

Preparations for the launch of the Chayandinskoye field are continuing in the gas industry, but, above all, the construction of the "Siberia Power" gas pipeline is underway. For their part, the republican authorities are trying to agree on the future gasification of Yakutia by negotiating with A. Miller. At the same time, the issue of power supply of the pipeline is being solved: for this purpose, the largest power transmission line of the Far East Chernyshevsky-Mirny-Lensk-Peleduy will be modernized in 2017, which already provides power to the ESPO, as well as local consumers (the project is being handled by the Far Eastern Energy Management Company) .

While Gazprom is gradually developing work in Yakutia, the former leader of its gas industry - the Suma Group (represented by the Yakutsk Fuel and Energy Company, YATEK) is looking for opportunities to maintain its niche. It is obvious that Sum will not export its gas to China via the "Force of Siberia", and recently the company starts to rely on gas processing on the spot. Its actions have already been crowned with successes and deserved the support of Prime Minister D.Medvedev, who gave a solemn start to the work of the unit for the comprehensive preparation of the gas of YATEK. A much larger project could be the construction of a gas chemical complex. Although it should be noted that in Yakutia they talked about the creation of gas chemistry more than once, but these initiatives encountered, in addition to financial constraints, the discontent of the local population, which in the country is traditionally suspicious of any environmentally dangerous projects. It is possible that part of the Suma gas assets will be simply sold out: for example, there were reports of a possible sale of Myrninsky section of Skyland Petroleum Limited (an Australian company connected with Chinese capital).

In the coal industry, too, we can talk about a phased exit to new horizons. First, the situation around the Mechel Group improves, which gradually solves problems with its debts. As a result, one of the main creditors - Gazprombank received 49% stake in Elgaugol, and Mechel achieved debt restructuring. Cooperation with Chinese partners is strengthened: Mechel signed a memorandum with Jidong Cement. In the main work area of ​​the company near Neryungri, an open mining method is expected. With 2017, Mechel expects to begin production at the Jebariki-Khaya deposit, where mining began.

Secondly, coal mining becomes the main specialization of the TOP of "South Yakutia", established in 2016 and became the second TOP in the republic. The main participant in this TOP is the Kolmar Group, which is involved in, inter alia, the project of the Denisovskoye deposit (at the Denisovskii GOK with 2017, the construction of the East Denisovskaya mine starts). In addition, Colmar is increasing production at the Inaglinskoye field. All this creates prerequisites for expanding coal production in Yakutia: coal will be exported, most likely through the port of Vanino in the Khabarovsk Territory. It is not ruled out that the SUEK "South Yakutia" will include the coal company SUEK with its Kabaktinskoye field.

Clarity only with diamonds

The remaining projects of TOP "South Yakutia" are rather hypothetical. In essence, this TOP is designed to ensure the comprehensive development of the resource base of South Yakutia, where since Soviet times the rate has been paid to coal and partly to gold. Perhaps, iron ore will be added to them, but the timing of the launch of the Taiga Timber Company of Timir is constantly delayed. Moreover, the number of problems has only increased, and the state demonstrates its intention to return the subsidy granted to Timir, since the required work was not performed. Meanwhile, ALROSA is trying to get out of the project, leaving it to Evraz and selling its 49%, but it's not possible to find a buyer. The list of potential raw projects of South Yakutia remains very long (the extraction of apatite, mica, gold, oil and gas, etc.), but so far the coal mining business has not moved.
The project of the Aldan oil refinery, which is also seen as part of the TOP "South Yakutia", has an unclear prospect. This project is being promoted by the authorities of the republic together with Tuimaada-Neft, which is under its control, but, as in the case of the Amur Refinery, the issue of oil supplies through the ESPO is not being solved, and the source of raw materials is not clear (in this role the Irkutsk an oil company, which, however, is also more interested in exporting oil via the ESPO pipeline). Thus, the TOP "South Yakutia" is unlikely to implement all the numerous and ambitious plans, but at least, Colmar will be able to use it to increase coal production on more favorable terms. In any case, this TOP will overtake on its scale the previously created in Yakutsk TOR "Kangalassy", where the projects are not so large, and the timing of their implementation in some cases are transferred. Speaking about the Yakut energy sector, let's pay attention to delaying the launch of the Yakutsk SDPP-2: the facility will start operating in 2017, and for now only the test launch of the turbine has passed.

A more definite prospect of the work of the key economic entity of Yakutia, ALROSA, is becoming more specific. In recent years, there have been many speculations and speculations regarding the partial curtailment of its production. But the company, by all appearances, has become more confident in looking to the future. If the long-term outlook continues to cause contradictory forecasts, then in the coming years, at least up to 2019, ALROSA promises an increase in production. First of all, this is due to the start of production at the Verkhne-Munskoye field, which will be released in 2019 at the designed capacity. This project enjoys state support, and ALROSA received a subsidy for it to build a temporary road. At the old Aikhalsky GOK, ALROSA started working at the Zarya field. Thus, the retirement of old capacities can be compensated. The issue of controlling ALROSA remains more difficult, given the new privatization plans for part of its shareholding. As usual, the statement of this issue causes nervousness among the Yakut elite, who are afraid of losing their control over the most important company.

Prospects for Yakut gold mining are noticeably improving. Here, first of all, the actions of Nordgold A. Mordashov, who began construction of the mine at the Gross deposit, are interesting. The field is scheduled to be commissioned on 2018, and it will become the largest Russian asset to Nordgold. The authorities of Yakutia, for their part, continue to attempt to reanimate work on the launch of the Nezhdaninsky field, promising benefits to the new co-owners of the asset (Polyus and Polymetal). But with this project such clarity, as with the Gross deposit, did not arise.

The success of the attempt to restore tin mining in Yakutia, which in Soviet times was one of the specialties of the republic, is not ruled out. The authorities of the republic, which control the new field of the Tirekhty Stream, through their Republican Investment Company, are looking for partners in the person of Rostec and Chinese investors. “Rostec”, we recall, gradually expands its activities in Yakutia, engaged in the Tomtorskoe rare-earth metal deposit (together with the ICT group) and continuing its attempts to engage in small oil and gas production in the north of the republic in the Anabarsky district.

Considering the size of Yakutia, the solution of infrastructure problems is of great importance for it. But even here the issues are not quickly resolved, given the cost of projects and the importance of attracting either federal support or foreign investors, or better both. In particular, problems arose at the final stage of the construction of the Tommot-Nizhny Bestyah railroad, which turned into one of the long-term construction projects in the republic. It is likely that another contractor will finish the construction, and the completion of the project is now scheduled for the end of 2017. The issue of a road bridge across Lena in the Yakutsk region has not been found. New talks were held with the Chinese side, the bridge turned out to be among the priority Russian-Chinese projects, and, apparently, the federal government also looks to the help from China. However, real progress in the work on the project did not begin.

The federal authorities, however, were more active in arranging the Arctic infrastructure, the attention to which in recent years has sharply increased in connection with the strategic tasks of the state. The Ministry of Defense pays much attention to the construction and reconstruction of military facilities in the Arctic. The first visible result of this process was the modernization of Tiksi Airport, which has a dual purpose. For its part, the republic seeks to break through the financial support of the center for the entire network of its northern airports, such as Chokurdah and Zhigansk. At the same time, it seeks to restore order in its own aviation economy, deciding to join the airline "Polar Airlines" to the airline "Yakutia".

Internal changes

At the federal level, Yakutia continued to engage in familiar lobbying activities, although it cannot be said that it had any visible results. During the year, the head of the republic, E. Borisov, met with V.Putin, was in the Presidium of the State Council. However, more interesting processes took place in the republic itself, where the composition of the government was noticeably renewed. One of the reasons was the transfer of the former head of government, G. Danchikova, to the State Duma, where she was elected according to the list of United Russia. Some of the new officials faced the discontent of local elites, who traditionally are wary of "strangers". In particular, the appointment of the head of government E.Chekin, who had worked in the republic for only five years and held the post at the time of the last career takeoff, was only the deputy minister of economy of Yakutia, caused criticism. However, E. Borisov is confidently promoting young technocrats, some of whom have not lived or worked in the region before, into important government posts.

In general, the past year was marked by major rearrangements in the team of E. Borisov. For example, the post of the head of the administration of the government and the head of the republic was occupied by F.Borisov, whereas his predecessor, Yu.Kupriyanov, moved to the post of the republic's permanent representative in Moscow. The former permanent representative A. Struchkov returned to Yakutsk to the position of first vice-premier and minister of economy. To the level of the vice-premier, the former Minister of Sport M. Guliaev was promoted. There were a number of substitutions among the ministers of the republican government. Some of these replacements were associated with reputational problems: for example, the Minister of Agriculture A. Artemiev left after the scandal related to the illegal receipt of a diploma of higher education. Based on the results of the permutations, it can be concluded that E.Borisov has strengthened his influence on the composition and work of the republican government. This is probably what caused the dissatisfaction of the intra-elite opposition, which expressed claims about these or other personnel decisions. Incidentally, part of the Yakut elite expressed dissatisfaction with the appointment of the new republican prosecutor N. Pilipchuk, who transferred from the Amur Region.

A very interesting turn was acquired in Yakutia Duma campaign. Yakutia was among the regions where United Russia, in accordance with agreements with the Kremlin and other parties, refused to nominate its candidate in a single-member district. As a result, the main candidate was the State Duma deputy from "Fair Russia", a famous Yakutian politician and entrepreneur F. Tumusov. A part of the Yakut elite tried to hamper its success, putting forward the former minister of culture of the republic A.Borisov. But this candidate could not register. As a result, in the fight against candidates from the parties of the system opposition (where the main opponent was the candidate from the Rodina Party, the general director of Yakutskenergo O.Tarasov), F.Tumusov won and remained a deputy and also a major player in the Yakut political scene. However, "United Russia" managed to hold one deputy on the list - it was G.Danchikov. There were doubts about her chances, since Yakutia, a small number of voters, was assigned to one party group, which, by the way, was headed by E. Borisov. However, the party still had enough votes, and the Yakut group received one mandate.

At the same time, the nomination of F. Tumusov inevitably led to an increase in the voting for "Fair Russia". Yakutia took the third place in Russia in terms of voting for this party, giving it 15,2% of votes. As expected, this affected the outcome of United Russia, although it was not so bad (46,4%). Nevertheless, the Yakut United Russia party and the head of the republic were probably worried because the result of their party in the region directly depended on the receipt of one deputy mandate. The results of other games were weak. The Communist Party slightly surpassed the average Russian level, gaining 14,4% of the vote, and the result of the LDPR, as expected from the national republic, was the lowest in the Far Eastern Federal District (10,7%). Voter turnout slightly exceeded the national average, amounting to 48,1%. On the whole, the results of the Duma elections in Yakutia made it possible to satisfy the interests of both United Russia and Just Russia by creating a favorable balance for them. Attempts by the intra-elite opposition to intervene in this process were inevitable, but the results of the elections were not affected.

Thus, the vector of socio-economic and socio-political development of Yakutia in 2016 has not changed. A gradual implementation of a number of large raw (and related infrastructure) projects was carried out in the republic, literally in all directions, be it gas, oil, coal, diamonds or gold. But the crisis processes did not contribute to the rapid advance, in connection with which the work has slowed down, and the commissioning of a number of facilities has not yet taken place. Nevertheless, it can not be said that Yakutia was the victim of the financial crisis: its budget was still very good, and the authorities were quite confident in making financial decisions that did not indicate any embarrassment. Further perspectives are generally clear and are related to the continuation of the implementation of the projects started. Apparently, some of them are beyond reality and will not be realized, but even a few will be enough for the republic to remain a successful region.
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