VZCZCXRO2469
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHMO #3071/01 3561132
ZNR UUUUU ZZH
R 221132Z DEC 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 6042
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 03 MOSCOW 013071 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/RUS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL KDEM PINR RS
SUBJECT: NIZHNIY NOVGOROD: VERTICAL CONTROL INSUFFICIENT? 
 
REF: A. (A) MOSCOW 12901 
     ¶B. (B) MOSCOW 12916 
 
¶1. (SBU) SUMMARY.  With President Putin's appointment of 
Governor Valeriy Shantsev in August 2005, a United Russia 
political elite with strong business interests now firmly 
controls Nizhniy Novgorod and its region.  The establishment 
of the regional branch of the second Kremlin-sponsored party, 
"A Just Russia (SR)" in Nizhniy has been delayed by 
infighting among its new leadership (ref A).  Despite its 
historical significance as a military research and scientific 
center, some foreign investment, and its current position as 
the capital of the Volga Federal District (VFD), Emboff found 
during a December trip that economic development and job 
growth are anemic.  The region tightly oversees investment 
projects and corruption is allegedly rife.  The region has 
received extensive National Project funds for healthcare. 
The demographic crisis concerns the political establishment. 
END SUMMARY. 
 
--------------------------------- 
UNITED RUSSIA: ONLY GAME IN TOWN? 
--------------------------------- 
 
¶2. (SBU) Regional Governor Valeriy Shantsev had little 
familiarity with the Nizhniy Novgorod region before becoming 
governor in August 2005.  Shantsev was a Communist Party 
(KPRF) member who switched to United Russia before being 
appointed by President Putin.  He succeeded Gennadiy 
Khodyrev, a KPRF member who ran for governor, reportedly 
against the will of the Kremlin, and won 60 percent of the 
vote in 2001. 
 
¶3. (U)  Legislative Assembly elections in March 2006 saw 
United Russia (YR) win 44 percent of the vote. KPRF won 18 
percent of the vote, the Party of Pensioners 17 percent, and 
LDPR 6 percent. 
 
¶4. (SBU) In a December 14 meeting, United Russia Regional 
Faction Leader Aleksandr Vaynberg bragged that no other party 
would be able to compete with United Russia for the 
foreseeable future.  KPRF Regional Deputy Vladislav Yegorov 
was less impressed with United Russia's governing skills, 
labeling YR regional deputies "submissive." 
 
---------------------------------- 
KPRF: CLAIMS GROWING URBAN SUPPORT 
---------------------------------- 
 
¶5. (SBU)  Countering Vaynberg's assertion that the KPRF, 
which "still waved posters of Stalin," was in decline, 
Yegorov said that in the March elections, the KPRF had a 
strong showing in urban areas, winning approximately 25 
percent of the vote in Nizhniy Novgorod, Dzerzhinsk, and 
Sarov (formerly Arzamas-16).  He buttressed his claims of 
increasing KPRF support by underscoring that the 18 percent 
vote in March 2006 was 5 percent higher than KPRF's 13 
percent showing in the 2003 State Duma election. 
 
------------------------------------ 
A JUST RUSSIA: TRYING TO GET STARTED 
------------------------------------ 
 
¶6. (SBU)  Nizhniy's regional branch of A Just Russia has 
still not been established, reportedly because of infighting 
within the leadership.  Both Vaynberg and Yegorov were 
dubious about A Just Russia's chances of melding its three 
constituent parties into an effective coalition.  Deputy 
Chair of the Party of Life's (one of the three constituent 
parties of A Just Russia) regional committee Svetlana 
Cheromina, however, attributed the disarray to time 
constraints and predicted it would be resolved by the end of 
the year. Alluding to the fact that the leaders of all three 
parties merging into A Just Russia were strong personalities 
with powerful business interests, she suggested that power 
might be shared by instituting a rotating leadership. 
Nonetheless, she was sure that A Just Russia would win seats 
in the next Duma election. 
 
--------------------------------- 
YABLOKO: WAITING FOR THEIR MOMENT 
--------------------------------- 
 
¶7. (SBU) With no likely representation in the regional or 
State Duma in the near future, Mikhail Yevdokimov, the 
Nizhniy representative of the liberal democratic party 
Yabloko despaired at voter apathy and expressed amazement at 
the GOR's "paranoia." (NOTE: Emboff's meeting occurred the 
day after United Civic Front Garry Kasparov's Moscow office 
 
MOSCOW 00013071  002 OF 003 
 
 
had been raided by plain clothes security officers (ref B).) 
Saying that democratic forces had been unprepared in 1991 and 
"missed their chance", Yevdokimov confidently asserted that 
there would be another opportunity in the future.  He 
unenthusiastically agreed with KPRF's Yegorov that in the 
meantime "right" and "left" forces could work together in 
areas of mutual interest. 
 
------------------------------------- 
INVESTMENT CLIMATE: REGION-CONTROLLED 
------------------------------------- 
 
¶8. (SBU)  Head of the Nizhniy Novgorod Region's International 
Cooperation Division Olga Guseva was upbeat about investment 
in Nizhniy.  She spoke in glowing terms about the efficiency 
of the committee charged with approving investment projects. 
 Presenting a glossy package outlining the region's 
legislative support and tax incentives, Guseva reported that 
an investor conference last summer had been greeted 
positively, although she declined to discuss particulars. 
(Intel has had a presence in the region since 1992, when it 
contracted software developers from Sarov.) 
 
¶9. (SBU) On a less cheery note, a brand-new IKEA was closed 
for two weeks this December due to alleged fire code 
violations.  Vadim Nosov, head of the Union of Retailers 
bluntly told us that it was because bribes had not been paid. 
 
¶10. (SBU) Interlocutors unanimously reported that loans are 
difficult to get without collateral and that rates are 
prohibitively high, thereby discouraging the development of 
business start-ups.  While niche market low-profile 
entrepreneurs operate with little support or interference 
from the local government, entrepreneurs in more competitive 
industries are more susceptible to abrupt playing field 
changes.  Nosov pointed to the decision to close small street 
kiosks by January 1, 2007, made at the behest of businesses 
with close ties to the local government, as evidence that 
Nizhniy was a riskier place for small businesses. 
 
---------------------------- 
FEDERAL MONEY FOR HEALTHCARE 
---------------------------- 
 
¶11. (SBU) In the healthcare sector, Sergei Krivatkin, a 
physician, marveled at the federal money that was pouring 
into the region.  Linking Moscow's largesse to Shantsev's 
appointment, Krivatkin noted that the monies were not only 
going into salaries for doctors and improving hospitals, but 
also for purchasing state-of-the-art medical equipment. 
KPRF's Yegorov predicted that the money would stop after the 
2008 presidential election. 
 
------------------ 
FEW DESIRABLE JOBS 
------------------ 
 
¶12. (U) Beyond the medical sector though, progress is less 
visible.  When VFD's Presidential Representative Sergei 
Kirienko was appointed head of Rosatom in November 2005, the 
press reported that Putin expected Kirienko to revitalize 
Russia's decaying nuclear power research sector, much of 
which is heavily centered in the Nizhniy Novgorod region.  In 
a December 13 meeting, Nataliya Gladkova, a Medical Professor 
and Russian Academy of Sciences research physicist, conceded 
that while she considered life in Nizhniy vastly improved, 
many young people, including her students at the Medical 
Academy, were leaving for Moscow or abroad.  While Putin had 
stressed increased investment in the science sector, funding 
had not yet increased. 
 
¶13. (SBU) Per Vaynberg, the demographic crisis was the 
region's main problem.  He suggested that improving the 
environment could increase the birth rate.  Other sources 
cited the lack of housing as a difficult issue in the region. 
 United Russia Regional Deputy Aleksandr Serikov of the 
Housing Problems Committee told us that it would take at 
least twenty years to meet the housing demand using current 
methods.  Valeriy, a taxi driver, complained that while there 
was plenty of housing available, no one could afford it. 
 
¶14. (SBU) University students fretted that jobs were very 
difficult to get after graduation, even with an 
"indispensable" second language.  While there is an 
unemployment rate of two percent in the region, Guseva 
clarified that many of the jobs were minimum wage.  Party of 
Life's Cheromina thought university students had unrealistic 
expectations. 
 
 
MOSCOW 00013071  003 OF 003 
 
 
--------------------------- 
YOUNG POLITICALLY APATHETIC 
--------------------------- 
 
¶15. (U) Students seem to be apolitical.  In a university 
outreach session, students backed Putin, but had little to 
say about United Russia.  The KPRF was a dinosaur and no one 
had heard of A Just Russia. A straw poll revealed that none 
of them had voted in the last election. 
 
------- 
COMMENT 
------- 
 
¶16. (SBU)  Despite its control of the regional government and 
cash injections from Moscow, United Russia's leadership has 
not yet achieved meaningful success in addressing several key 
issues in Nizhniy Novgorod.  Although there does not yet seem 
to be a credible challenger, A Just Russia and the KPRF could 
make inroads during the next election if United Russia 
continues to rely on its ties to Moscow instead of addressing 
local problems. 
RUSSELL