How Moscow's Preoccupation With Sochi Tourism May Hurt Stability in the North Caucasus

"It's like Switzerland, only without the roads."
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Visitors brave heavy snowfalls as they attend a bobsleigh test event at the "Sanki" sliding center in Rosa Khutor, a venue for the Sochi 2014 Winter Olympics near Sochi on February 17, 2013. (Kai Pfaffenbach/Reuters)

Last year in London a curious gala dinner was hosted by Northern Caucasus Resorts, a Russian government-backed group. Building upon Russian city Sochi's hosting of the 2014 Winter Olympics, the night's event was aimed at attracting international investors to lavish tourism projects in the surrounding North Caucasus region. But before the keynote presentation, a lengthy show took place, with various performers dancing Lezginka, a traditional Caucasus routine in which men wear a sword at their side and, stepping quickly, imitate eagles in an effort to woo the aloof female participants.

The performers were later joined on stage by Islam Nazaraliev, Deputy Director General of Northern Caucasus Resorts, who momentarily partook in the dance, extending his arms stiffly like wings. Nazaraliev then began his attempt to convince the audience to have faith in Russia's $30 billion (980 billion roubles) plan to construct luxury ski resorts throughout the restive region.

Yet it seems to be a case of life imitating art as, just like the seemingly indifferent female dancers, outsiders have been unimpressed with Russia's bold attempts to demonstrate its ability to transform an impoverished area defined by militancy into a hotbed of tourism. Launched in 2010, progress on the tourism effort has been stilted. Incongruously, the one factor expected to boost Northern Caucasus Resorts, the Sochi Olympics, has spurred power struggles that are hampering both the tourism project and broader political stability in the region.

Northern Caucasus Resorts claims its new developments, once constructed, will accommodate 10 million tourists a year. The Russian state has initially contributed 60 billion roubles ($2 billion) to the North Caucasus developments, with outside financiers expected to make up the remainder. The state also provides guarantees to investors for "non-commercial risks" covering up to 70 percent of borrowed capital. Early on it attracted a commitment from the French firm Caisse des Dépôts et Consignations of up to $13 billion, although its spokesman, Laurent Vigier, recently admitted that the project "is not an easy idea".

Nazaraliev's London presentation, which mirrored a Northern Caucasus Resorts seminar held at Davos this year, emphasized the natural beauty of the area, with pictures displaying lush green forests and snowy mountain tops that he labeled "the highest and most unexplored peaks in Europe." While true, Nazaraliev could have saved time if he repeated Chechnya's deputy tourism minister, who once said the region is "like Switzerland, only without the roads".

The large-scale investment in the North Caucasus is a well-intended approach by the Russian government to boost social stability. Creating thousands of jobs in a region where the majority of militants are aged between 18 and 22 will hypothetically lead disenchanted youth away from radicalization. In 2011, then-President Dmitri Medvedev described Northern Caucasus Resorts as an endeavor to "show how we can beat poverty and terrorism with tourism." The project aims to piggy-back on the anticipated spectacle of the Sochi Olympics, which aims to accentuate all that is attractive in Russia's southwest corner, while concealing anything undesirable. But to ensure everything in the region looks nicely polished, the Kremlin has taken considerable action.

In January 2010, Medvedev created the North Caucasus Federal District, effectively carving out the 9.5 million population of the North Caucasus from the Southern Federal District, in which Sochi remains. The move was viewed by some as an attempt to superficially ease security concerns by creating an imaginary barrier between prosperous areas such as Sochi and restive North Caucasus republics like Chechnya and Dagestan. Sochi is about 200 miles from Chechnya and a further 50 miles from Dagestan. Russian author and The Moscow Times contributor Yulia Latynina summarized the futility of the gesture. "What is the deeply ill system doing [now]? The answer is very simple: it is simulating administration," she wrote.

The move conveniently isolates the North Caucasus' militancy statistics from the rest of the Southern region. Violence in the North Caucasus remains unsettlingly high. The Caucasian Knot, an independent monitor of events in the region, reports that 96 terrorist attacks were carried out in the North Caucasus Federal District in 2012, with 700 people killed in violent clashes. 124 people were killed in similar incidents during the first quarter of 2013.

The Northern Caucasus Resorts project was established later in 2010 with a mandate to develop in six sites throughout the North Caucasus and Southern Federal Districts. Ties to the Sochi Olympics were evidenced by Akhmed Bilalov's appointment to positions as Chairman of Northern Caucasus Resorts and Deputy Head of the Russian Olympic Committee. But blending the two roles perhaps wasn't the best idea -- President Vladimir Putin admonished Bilalov on Russian television before firing him from his positions in February due to delays and overspending on Olympic facilities.

The public nature of the Bilalov affair appeared to be an attempt by Putin to demonstrate his authority over the Sochi Olympics while portraying himself as a leader unsympathetic to ineptitude. The dismissal had the added consequence of throwing the corporate structure of Northern Caucasus Resorts into turmoil, further damaging its appeal to outside investors. That may be Putin's intention. The tourism project is viewed as Medvedev's creation, and its downfall would be a vehicle for Putin to reassert his political dominance over the former president.

Nonetheless, the establishment of an entity such as North Caucasus Resorts with an independent leadership indigenous to the region is not an approach to stability that Putin was comfortable with.

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Ronan Keenan is a Boston-based freelance writer who has written for the World Policy Institute, the Global Policy Journal, and other publications.

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