VZCZCXRO7166
RR RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHMO #3068/01 2901323
ZNR UUUUU ZZH
R 161323Z OCT 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 0404
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHVK/AMCONSUL VLADIVOSTOK 2973
RUEHYG/AMCONSUL YEKATERINBURG 3335
RUEHLN/AMCONSUL ST PETERSBURG 5091

UNCLAS SECTION 01 OF 03 MOSCOW 003068 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PINR SOCI ECON RS
SUBJECT: Novosibirsk - Stability Above All Else 
 
MOSCOW 00003068  001.2 OF 003 
 
 
Summary 
------- 
 
¶1. (SBU) Political stability is the watchword in the Siberian city 
of Novosibirsk, even more so as financial crisis threatens the rapid 
economic growth that had been the justification for a narrowing of 
the political landscape.  Officials from the city and regional 
administration emphasized the "cooperative" spirit among the four 
Kremlin-sanctioned parties in dealing with challenges.  Others 
outside the political system have more or less made their peace with 
the highly centralized, essentially one-party framework and are 
devoted to working within the system to try and bring about change. 
End summary. 
 
The Official View 
----------------- 
 
¶2. (SBU) Deputy Mayor Valeriy Fedorov underscored to us the 
political stability in the city, which, he professed, was promoted 
by a pragmatic and cooperative approach between the administration 
and the city Duma. He claimed that the two sides discussed issues 
rationally and came to the "proper" decisions with little friction. 
Even with upcoming mayoral elections, Fedorov had little concern 
about the campaign -- noting he did not expect any "extremism" to 
appear.  As a point of reference, he hinted at the superiority of 
the managed democracy in Russia to what he saw as the distractions 
of the U.S. presidential campaign and the "chaos" of the Ukrainian 
system. 
 
¶3. (SBU) Vladimir Panarin, the chair of the regional 
administration's committee for societal-political relations, 
likewise described Novosibirsk as a model of political stability, a 
marked improvement over the more chaotic 1990s.  Panarin was on 
message with his relatively upbeat assessment of the regional 
situation even as he admitted some businesses were feeling the 
credit crunch.  Panarin and Feodorov both discussed new policies, 
such as the provisioning of cheap capital for building firms, as 
ways to mitigate the economic fallout, and they appeared confident 
that they would ride out the storm. 
 
¶4. (SBU) Panarin, Fedorov, and Ambassador Viktor Salmoilenko --the 
Ministry of Foreign Affairs representative to the Siberian Federal 
District -- all sounded a note of disappointment in the lack of U.S. 
engagement in the region.  Salmoilenko went through a long monologue 
about the various life-changing technologies being created in 
Novosibirsk laboratories and factories and questioned why U.S. firms 
were not more engaged in the region.  He was a strong advocate of 
foreign firms building production facilities in Russia, but was not 
swayed by the argument that specific polices like the Yukos affair, 
Putin's Mechel comments, and the problems faced by Western 
businessmen at TNK-BP had highlighted the risks of doing business in 
Russia.  Fedorov lamented that the "sister-city" relationship with 
Minneapolis/St. Paul had not really developed and compared it 
negatively to Novosibirsk's close ties to Japan's Sapporo. 
 
Political Hegemony 
------------------ 
 
¶5. (SBU) Our contacts from outside the government shared the 
official assessment of regional political stability and credited it 
to the positive relationship between and capable leadership of the 
two main players: Governor (and former city mayor) Viktor 
Tolokonskiy and Novosibirsk Mayor Vladimir Gorodetsk.  For example, 
Vera Prokhina of the Parliamentary and Self-Government Center (a 
liberal NGO supported in part by IRI funding) described Gorodetsk as 
competent, albeit not "political," and called Tolokhonskiy a good 
man, but weakened by his emphasis on loyalty over competence when 
staffing his administration. 
 
¶6. (SBU) Governor Tolokonskiy is native to Novosibirsk region and 
the regional political elite consider him "one of ours" -- a 
situation that contrasts with the insertion of "outsiders" by Moscow 
in nearby Siberian regions like Krasnoyarsk and Irkutsk.  As such, 
Tolokonskiy did not enjoy the same level of personal association 
with the federal leadership as his fellow Siberian governors and 
indeed had labored to strengthen his relationship with Moscow.  Part 
of his problem was historical; he did not join United Russia until 
2006 and had alienated some in Putin's Kremlin by gaming the 
electoral system in the 2003 gubernatorial election -- in which he 
helped the opposition to gain a greater stake in the legislature at 
the expense of United Russia as a means to strengthen his position. 
 
 
¶7. (SBU) Conflict with the Siberian Federal District "Polpred" 
Anatoliy Kvashnin had further complicated Tolokonskiy's approach to 
Moscow.  Maksim Aykashev of the regional newspaper 
Vedomosti-Novosibirsk noted that Tolokonskiy had sparred with 
Kvashnin, when the latter backed a rival candidate for governor in 
 
MOSCOW 00003068  002.2 OF 003 
 
 
¶2007.  Nonetheless, Putin re-nominated Tolokonskiy to the 
governorship in 2007 and he was approved easily by the regional 
parliament.  At present, with an "appropriate" turn-out for United 
Russia and President Medvedev during last year's Duma and 
Presidential races, Tolokonskiy appears to have mended his fences 
and enjoys a better relationship with the federal elite. 
 
¶8. (SBU) Both Tolokonskiy and Gorodetsk are card-carrying members of 
United Russia, the regional political hegemon with little real 
competition from the other parties.  The "liberal" parties have only 
a token representation in the region and, reportedly, no electoral 
support.  Indeed, the scientific and intellectual elite of 
Novosibirsk's Academic City that one might see as a base for 
liberalism strongly supported the Communists, harkening back to a 
time when they received impressive compensation and adulation from 
the Soviet elite.  Professor Aleksey Osipov of the regional Public 
Chamber noted that the mercurial Vladimir Zhirinovskiy's party, the 
Liberal-Democratic Party of Russia, had done extraordinarily well in 
the past, taking a majority position in the city legislature in the 
late 1990s.  Yet, as economic conditions improved, the tendency to 
support opposition parties has diminished, leaving United Russia as 
the predominant power for at least the near term. 
 
¶9. (SBU) A lack of competition from outside players has helped to 
reinforce Tolokonskiy's stature.  Novosibirsk boasts few natural 
resources and thus has not been of great interest to the powerful 
Moscow-based financial-industrial groups that continue to shape 
political life in more well-endowed Krasnoyarsk, Irkutsk, and 
Kemorovo regions.  The region had been ravaged by conflict between 
local criminal groups in the 1990s, according to 
journalist-turned-PR specialist Zaynal Tarkhov, but the governor had 
carried out a campaign to break their hold, with some members sent 
to prison and the others absorbed into the elite. 
 
Manageable Conflict 
------------------- 
 
¶10. (SBU) Whatever political maneuvering that happens in Novosibirsk 
is happening behind the scenes within the United Russia elite.  As 
an example, Tarkhova noted tensions within the city elite over 
administration plans to move to a "party-list" system of elections 
for the city legislature.  At stake is a pot of money, divided among 
the current single-mandate delegates, for use in resolving 
particular issues -- essentially a "slush fund" for delegates to 
disperse as needed among their electorate.  Legislators to the 
regional assembly had once enjoyed their own funding pools, but lost 
access to the money once the region went to a party-list system. 
Now, according to Tarkhova, control over even this small pot of 
money allows city delegates more influence than their supposedly 
more influential compatriots on the regional legislature. 
Naturally, the current members of the city legislature oppose the 
plans. 
 
¶11. (SBU) The other possible source of political intrigue is the 
upcoming Novosibirsk city mayoral elections in March 2009, but 
already there seems little chance for real political competition. 
Tarkhova and Aykashev argued about which regional businessmen within 
United Russia might have considered a bid for the office, but they 
agreed that the public bid of support for Gorodetsk by the party's 
political committee in early October signaled that there would be 
only one "real" candidate for the post.  Prokina agreed, noting that 
she had heard of certain businessmen who had made noises about 
running for mayor until they heard of potential "investigations" by 
the fire inspectors and tax police, which deterred them from going 
forward.  Promises of a "calm" election process appear to foreshadow 
yet another set piece of managed democracy. 
 
Clouds on the Horizon 
--------------------- 
 
¶12. (SBU) There is a fine line between stability and stagnation; the 
growing financial crisis could be the test of Novosibirsk's 
political vitality. Already the credit crunch has had a negative 
impact on some regional business.  Contacts reported that the 
building industry has seized up because of a lack of credit, an 
assertion that explains the stilled gantry cranes that stood 
becalmed over the city.  Elena Dugelnaya, the proprietor of a chain 
of optical shops and chair of the regional Delovaya Rossiya branch, 
described how her plans to open a new franchise in Krasnoyarsk had 
run aground because of a lack of credit.  Whereas it had previously 
taken a week to get a loan, she had been rejected by two banks and 
was still in a three-month long negotiation with a third.  Dugelnaya 
noted that problems with credit had started far earlier than the 
recent stock market drop, but had deepened sharply in past weeks. 
Tarkhova and Aykashev noted that consumers had begun to suffer as 
well, as car loans and mortgages dried up.  They also claimed that 
people were pulling money out of the banks, including entrepreneurs 
and businessmen. 
 
MOSCOW 00003068  003.2 OF 003 
 
 
 
¶13. (SBU) The economic crisis has political relevance, if only 
because the regional (and city) administration has promoted economic 
expansion and the building boom as evidence of a successful policy 
line.  Typical of official boasting, Salmoilenko heralded the 
region's record of 10 percent GDP growth over the past year and took 
pride in the strong sales by Novosibirsk companies of machinery and 
equipment to other regions. Were the regional government to fail in 
mitigating the regional financial crisis, it could lose some of its 
legitimacy among the business elite and population.  Already, 
Tarkhov quoted her sources in the mayor's office as describing 
"panic" among the city elite, without a full understanding as to 
why. 
 
¶14. (SBU) Novosibirsk could be the poster child for the 
Medvedev/Putin tandem vision for an "innovation economy."  Instead 
of an economy based on resource extraction, the region boasts 
intellectual capital and business acumen as its most valuable asset 
-- and it has leveraged that to help bolster growth.  At the same 
time, high commodity prices and demand from the extractive 
industries for Novosibirsk region's equipment and machinery has been 
one of the strongest drivers.  Moreover, the speculative real estate 
market, fueled by rapidly rising prices and a building boom, has 
also contributed to Novosibirsk's fortunes -- with the full support 
of the government. Now that the financial crisis threatens those two 
drivers, the regional elite will face the full responsibility for 
the slowdown, without any opposition force to share the blame. 
After years of relative ease, the Novosibirsk elite has a much more 
difficult set of decisions to make which could, potentially, shake 
up political stability. 
 
BEYRLE