VZCZCXRO8085
PP RUEHLN RUEHVK RUEHYG
DE RUEHMO #3076/01 2911207
ZNR UUUUU ZZH
P 171207Z OCT 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 0415
INFO RUEHSI/AMEMBASSY TBILISI 3895
RUEHKV/AMEMBASSY KYIV 0297
RUEHYG/AMCONSUL YEKATERINBURG 3340
RUEHVK/AMCONSUL VLADIVOSTOK 2978
RUEHLN/AMCONSUL ST PETERSBURG 5096

UNCLAS SECTION 01 OF 05 MOSCOW 003076 
 
STATE F FOR THE DIRECTOR OF FOREIGN ASSISTANCE, EUR/ACE 
AIDAC STATE FOR AID/E&E ASSISTANT ADMINISTRATOR MENARCHIK; AID/E&E 
FOR BREWER, ROBINSON; AID/DCHA FOR HESS AND KVITASHVILI 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: EAID PREL KDEM RS GG
SUBJECT: USAID Team Examines Situation on the Ground in North 
Caucasus, Ongoing Program Needs 
 
Sensitive but unclassified, not for internet distribution. 
 
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SUMMARY 
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1.(SBU) From September 29 to October 3, USAID staff including USAID 
Deputy Assistant Administrator for the Bureau for Democracy, 
Conflict and Humanitarian Assistance traveled to North Ossetia and 
Kabardino-Balkaria: to assess any outstanding humanitarian needs as 
a result of the recent conflict in South Ossetia and to lay initial 
groundwork for an assessment of the possible future direction of 
USAID's current North Caucasus Program which is focused on 
stabilization and conflict mitigation.  The team held roundtables in 
Vladikavkaz (9/30) and in Nalchik (10/2) to interface with USAID 
partners, other local Russian NGOs, and local government officials. 
The team also visited community revitalization projects and met with 
local officials in mixed Ingush/Ossetian communities in the 
Prigorodny Raion of North Ossetia, where USAID projects have formed 
public councils to solve community problems, supported 
reconstruction efforts, and provided resources, equipment, and jobs 
to develop the local economy.  Prigorodny witnessed ethnic conflict 
between the Ingush and Ossetians in the early-1990s and is home to a 
significant number of South Ossetians from the 1992-93 conflict with 
Georgia. 
 
2.(SBU) The Children's Fund of North Ossetia, the Caucasus Refugee 
Council, and other organizations affirmed a continued need for 
substantial international support to South Ossetia in light of 
depleted housing stocks, the approach of winter, the rising cost of 
construction materials due to increased demand, and the ongoing 
handover of reconstruction efforts to South Ossetian authorities not 
well-prepared to take on this responsibility.  While the residual 
dislocation of refugees in North Ossetia from the recent conflict is 
minimal (estimates range from 1,000-5,000), the authorities noted 
that the refugees are often staying in areas inhabited by the waves 
of refugees from the earlier conflicts in South Ossetia in the 
early-90s.  Infrastructure is incapable of supporting even the 
current population.  The head of the North Ossetian Department of 
External Affairs noted that Moscow's instruction to support South 
Ossetian development is also placing budgetary and administrative 
burdens on North Ossetia at a time when it faces its own economic 
and security challenges.  End Summary. 
 
--------------------------------------------- --- 
BACKGROUND ON USAID ACTIVITIES IN NORTH CAUCASUS 
--------------------------------------------- --- 
 
3.(SBU) USAID's development assistance efforts in Russia seek to 
advance critical U.S. interests and help Russia become a stable, 
democratic, and reliable partner with the United States in 
addressing global issues.  Its program in the North Caucasus (NC), 
begun nearly four years ago, is a critical component of this 
overarching assistance goal, and one of the most sensitive and 
operationally-challenging parts of the USAID/Russia portfolio. 
Assisting in the stabilization and reconstruction of the NC is vital 
to the overall stability of the entire Caucasus region if we are to 
reduce the potential for a spread of violence partly attributed to 
home-grown extremism on the one hand, and deepening youth 
frustration on the other. 
 
4.(SBU) The NC continues to face a number of very complex 
socio-economic challenges, including high rates of poverty, 
unemployment, displaced populations, and deep and multi-layered 
corruption.  According to multiple individuals with regular access 
inside Chechnya (including up through Shatoi and Itum Kale) with 
whom USAIDOFFS spoke, Chechnya seems to be stabilizing, despite the 
often deadly feuding between clans competing for access to resources 
and hence power, while Ingushetia is an increasingly Islamicized 
powderkeg with a new mosque and Islamic University courtesy of 
financial support from Ramzan Kadyrov.(N.B.:  according to our well 
placed interlocutors, young people from Chechnya and Ingushetia are 
"leaving for the mountains", in larger numbers than accounted for in 
the recent past.) The Elbruz raion of Kabardino-Balkaria also 
appears to be a "hot zone" owing to the number of "boiviki" 
(fighters) who live in the foothills leading up to the mountains. 
Ethnic, religious and clan issues are deeply entrenched, and a 
"military economy" - characterized by the Russian military's 
complicity with local militants, dealing weapons, trading narcotics 
and trafficking in persons - may be thriving. One interlocutor 
indicated that in Ingushetia, the FSB is "out of control" and that 
the trends are all negative given increased criminality, increased 
clan competition, increased (violent) political competition and 
 
MOSCOW 00003076  002 OF 005 
 
 
increased activities on the part of the jamaat (comment:  it's not 
clear if it's the Ingush jamaat or the larger united Caucasian 
jamaat with Ingush representation. End comment.) The NC region is 
poorly integrated into the Russian Federation, and governance bodies 
lack capacity at all levels.  Nevertheless, there are opportunities 
to work effectively in the region, including a relatively improved 
security environment, Chechen efforts to rebuild, and the desire of 
the Russian government to support programs that will limit conflict 
from spreading to neighboring regions. 
 
5.(SBU) Current projects in the region, which primarily came from an 
open-ended Request for Application (RFA) issued in 2006, include 
conflict mitigation, job creation, local governance and policy 
reform, civil society, community development, infrastructure, 
tolerance-building, health, social services, psycho-social 
rehabilitation, combating terrorism, and anti-corruption.  Many 
projects focus on at-risk groups and youth.  USAID's geographic 
focus is in four key regions - Chechnya, Ingushetia, North Ossetia 
and Dagestan - as well as the five neighboring regions of 
Krasnodarsky Krai, Adygeya Republic, Karacheyevo-Cherkassia 
Republic, Stavropolsky Kray, and Kabardino-Balkarskaya Republic, 
with a total population of about 7 million.  USAID's key partners 
include with programs in the North Caucasus include: the 
International Rescue Committee (IRC), World Vision, Keystone, IREX, 
the Children's Fund of North Ossetia (CFNO), Russian Microfinance 
Center, UNICEF, ACDI/VOCA, the Southern Regional Resource Center 
(SRRC), the Center for Fiscal Policy (CFP), the Center for 
International Private Enterprise (CIPE), the Institute for Urban 
Economics, "Faith, Hope, Love" (FHL), the International Federation 
of the Red Cross (IFRC), and the Fund for Sustainable Development 
(FSD). 
 
-------------------------------- 
THE SITUATION IN SOUTH OSSETIA 
AS SEEN FROM NORTH OF THE BORDER 
-------------------------------- 
 
6.(SBU) Despite initial restrictions in movement in North Ossetia 
and a wave of approximately 37,000 refugees from South Ossetia, in 
North Ossetia little evidence remains of their presence.  According 
to the head of the UNHCR Office in Vladikavkaz (Mary-Jane 
Meierdiercks-Popovic) on September 30, all but approximately 
1000-2000 of the refugees have returned to South Ossetia (Note: 
Other sources state the number of those remaining as high as 5,000). 
 UNHCR, NGOs, and the Ministry of Emergency Situations (EMERCOM) 
predict that that number may grow by as much as 1,000 as winter 
approaches given the slow pace of reconstruction efforts in South 
Ossetia.  UNHCR anticipates that the needs will be modest during 
that period for those staying in North Ossetia and that 
approximately 90% are Russian citizens. 
 
7.(SBU) By the accounts of international aid agencies and NGOs, 
EMERCOM's response to the crisis was swift, effective, and 
substantial in meeting immediate humanitarian needs in South Ossetia 
and in North Ossetia.  EMERCOM coordinated the relief effort for the 
Russian government, setting up a task force in Tskhinvali and 
Vladikavkaz to coordinate response efforts and providing nearly 3000 
staff; hundreds of pieces of emergency response equipment including 
trucks, helicopters, and aircraft; and 11,500 metric tons of 
humanitarian aid (Source: EMERCOM Report of 9/24/2008).  EMERCOM 
Minister Sergei Shoigu stated that operations in South Ossetia to 
mitigate the humanitarian crisis were completed on September 15, to 
be followed by a period of large-scale construction, infrastructure 
repair, and peace keeping. The bulk of the responsibility for 
reconstruction efforts has been passed back to the South Ossetian 
authorities and on October 4 South Ossetian President Eduard Kokoiti 
signed a declaration establishing a South Ossetian EMERCOM.  The 
Russian construction agency SpecStroy continues to provide materials 
and labor to continue the construction efforts, but the 
infrastructure in South Ossetia was in a state of disrepair before 
the conflict and will need a substantial investment of resources and 
time to address basic community needs.  (Note: EMERCOM in North 
Ossetia canceled our scheduled meeting two days before our visit). 
(N.B.: Both UN and NGOs reps indicated that while no requests for 
assistance had been received officially, specific kinds of 
assistance, such as limited amounts of food and emergency blankets, 
when offered, was welcomed.) 
 
 
8.(SBU) On October 1, representatives from NGOs that have visited 
South Ossetia, including the Caucasus Business and Development 
Network and the Caucasus Refugee Council (CRC) told us that 
substantial reconstruction work remains to be done in South Ossetia. 
 
MOSCOW 00003076  003 OF 005 
 
 
 Separately, EMERCOM reported on September 24 that 2522 residential 
buildings had been destroyed in South Ossetia, 1121 of which were 
beyond repair.  EMERCOM reported that 29 educational institutions, 
17 healthcare facilities, 68 km of gas lines, 160 km of water lines 
and 458 km of electrical lines were also damaged.  Currently, 51 of 
55 schools are reported operational.  UNHCR told us that they expect 
the report for the UN SecGen from the visit of UNHCR High 
Commissioner Antonio Guterres to South Ossetia to be released 
shortly. 
 
9.(SBU) The number of NGOs and international groups providing aid to 
South Ossetia remains small.  UNHCR reported that only the 
International Committee of the Red Cross was operational in South 
Ossetia, with approximately 50 staff equipping a trauma unit and 
providing insulin supplies and food stuffs.  On September 30, the 
deputy head of the CFNO told us of their plans to open an office in 
South Ossetia in October to coordinate the delivery of humanitarian 
aid.  CFNO helped to place children in temporary foster care in 
North Ossetia and in Moscow, provided educational supplies, and 
basic clothing.  CFNO is a key partner with USAID in rehabilitating 
community infrastructure in mixed Ingush/Ossetian communities in the 
Prigorodny Raion and other parts of North Ossetia and has close 
relations with the Republican Government in North Ossetia.  The CRC 
also plans to undertake some operations in South Ossetia and was 
seeking international sources of funding to support its efforts. 
 
10.(SBU) Ossetian NGO groups and the government of North Ossetia 
stated that the process of integrating South Ossetia into Russia 
will likely be swift (this, despite the fact that South Ossetia has 
been recognized as "independent" and not a part of the Russian 
Federation).  The CRC said that by necessity strong economic links 
are developing, combined with strong cross-border family ties.  The 
government of North Ossetia has also been tasked with helping 
develop the governmental institutions in South Ossetia and Prime 
Minister Putin has set aside 10 billion rubles (USD 400 million) for 
South Ossetia.  Comment: When asked, a South Ossetian with whom we 
spoke indicated South Ossetians wanted independence while North 
Ossetians want the South integrated within Northern Ossetia.  None 
of our interlocutors spoke of a greater independent Ossetia, but 
clearly that was on some people's minds. End comment. 
 
--------------------------------------------- -- 
THE OPERATING ENVIRONMENT IN THE NORTH CAUCASUS, 
RELATIONS WITH LOCAL GOVERNMENT 
--------------------------------------------- -- 
 
11.(SBU) According to UN Department of Safety and Security (UNDSS) 
specialists and USAID partner organizations, the security 
environment in the NC republics of Dagestan, Chechnya, Ingushetia, 
North Ossetia, Kabardino-Balkaria, and Karachay-Cherkessia remains 
dynamic and challenging for aid organizations.  Dagestan, Chechnya, 
Ingushetia, and the five southern districts of Stavropol Krai remain 
pegged by UNDSS as Security Level IV (Insecure), which according to 
UN policy requires armed escorts with no overnighting for 
international staff.  Most of North Ossetia, Kabardino-Balkaria, and 
Karachay-Cherkessia are Level III (Transitional), although a request 
to downgrade to Phase II is in New York for consideration.  In 2008 
the modest improvements in the security environment in Chechnya have 
been accompanied by a steep decline in the security environment in 
Ingushetia and Dagestan.  USAID partner IRC closed offices in 
Ingushetia following the shelling of a UNDSS post in 2007 and 
threats to the security of some members of their local staff, along 
with the UN.  Ambush attacks occur several times each week on 
Ingushetian government officials and members of the security forces. 
 While North Ossetia has remained relatively quiet aside from a high 
level of economic crime, during our visit on October 1, the head of 
the criminal investigation unit of the North Ossetian police and his 
20-year old son were killed in Vladikavkaz when their vehicle came 
under small arms fire.  UNDSS and the CRC noted an increase in the 
availability of arms due the formation of Ossetian militias that 
volunteered to fight against Georgian forces.  UNHCR commented that 
this trend combined with the increase in numbers of civilians with 
exposure to combat may have a negative impact on stability in North 
Ossetia.  That said, AIDOFFS noticed a more relaxed security 
presence than over the last 4 years (Kvitashvili has traveled 
repeatedly to the North Caucasus over the past four years), with 
little to no visible military presence and no road blocks or 
security checkpoints along roads traveled.  Perhaps due to Bayram 
(the end of Ramadan), the streets of Vladikavkaz and Nalchik were 
full of pedestrians until late at night. 
 
12.(SBU) In addition to security precautions, the travel 
restrictions imposed by Russian authorities have generally expanded 
 
MOSCOW 00003076  004 OF 005 
 
 
due to the introduction of the Russian Anti-terrorism Law which 
permits the Federal Security Service to restrict access to large 
areas on short notice.  Similarly for the duration of the conflict 
in South Ossetia, movement of internationals in North Ossetia was 
restricted to the two cities, Vladikavkaz and Beslan, along Route 
¶155.  UN staff reported that Russian officials did not want 
international staff observing troop movements along the border. 
When asked about the movements of Russian forces in advance of 
August 7, staff reported that it was difficult to discern whether 
the movements were associated with the large Russian military 
exercise or a tactical troop buildup.  Programmatically the 
difficulty for certain USAID partners including WV to receive travel 
permission from the North Ossetian Department of External Affairs 
has complicated project implementation efforts. 
 
13.(SBU) During our October 1 meeting with the head of the 
Department of External Affairs Vladimir Tabolov, we discussed USAID 
program activities in North Ossetia and the region in the areas of 
community development, interethnic tolerance, agriculture, economic 
development, and education.  Tabolov, who clearly represents Moscow 
interests, spoke generally supportively of international aid efforts 
in North Ossetia focused on infrastructure support, agriculture, and 
economic development.  On the subject of education, he said that it 
was his republic's job to teach its children and that international 
groups should stay away from the subject.  Tabolov spoke positively 
of USAID's work with CFNO.  (Note: Prigorodny witnessed a brief 
interethnic war in 1992 between the Ingush and Ossetians that drove 
most of the Ingush out.  The settlements were then inhabited by 
South Ossetian refugees from Georgia before a 1995 Russian-mediated 
Ossetian-Ingush agreement induced the North Ossetian authorities to 
allow a limited number of Ingush families from four settlements in 
the Prigorodny Raion to return.) 
 
14.(SBU) On October 1 we visited two USAID projects implemented by 
World Vision in Prigorodny in the settlements of Kurtat and 
Dachnoye.  The communities are close to the border with Ingushetia. 
The projects there involve the establishment of public volunteer 
councils to identify problems in the community, the identification 
and selection of community projects, and the formation of teams from 
the community to carry out the work.  The communities have 
identified and undertaken work on several activities to date 
including the refurbishment of a community space around a mosque, 
the renovation of a community center, and facility improvements at 
the main school in Dachnoye.  While the projects themselves were 
very simple, the process brought Ossetian and Ingush community 
members together in a unique forum to make decisions.  In a 
community where Ingush and Ossetians do not formally gather 
socially, the mixed Ingush and Ossetian public council determined 
that the mosque was an important community project.  On October 2, 
we visited a CFNO project site in the Prigorodny settlement of 
Gizel, where CFNO has worked with a local bakery to provide 
equipment to improve production and increase the number of jobs in 
the economically depressed area.  Work is also underway to provide 
running water to housing units in Gizel to avoid the use of 
contaminated shallow dug wells. The head and deputy head of the 
Prigorodny Raion accompanied us on the site visits and conveyed 
strong support of USAID's continued work in the district. 
 
--------------------------------------------- -- 
OPPORTUNITIES AND CHALLENGES TO U.S. ASSISTANCE 
--------------------------------------------- -- 
 
15.(SBU) USAID held roundtables on September 30 in Vladikavkaz and 
on October 2 in Nalchik (Kabardino-Balkaria) to discuss broadly the 
impact of USAID programming, opportunities to refocus programming to 
areas of greater traction, and implementation challenges. 
Participants focused on several key themes, including: 
--maintaining a focus on youth as a source of positive change and 
the key risk group for conflict; 
--the enabling environment for creating and providing economic 
opportunity and education; 
--coordination of programs and information throughout the NGO 
community and donor organizations, and with local government; 
--the challenge of efficiently managing projects throughout the 
region given the travel restrictions and security precautions; and 
--the sustainability of development interventions and NGO capacity 
building in the region. 
The participation of a Republic Duma Deputy in Kabardino-Balkaria 
led to some heated questioning of U.S. interest in the region 
against the backdrop of recent events in Georgia.  At the same time, 
we observed an interest in work with USG partners given the 
magnitude of the social and economic challenges facing the region. 
 
 
MOSCOW 00003076  005 OF 005 
 
 
 
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COMMENT 
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16.(SBU) The immediate humanitarian crisis has passed, however, the 
region continues to face a deficit of resources, political will, and 
economic opportunities to improve stability and the economy.  The 
new burden of South Ossetia will only further draw down the region's 
limited economic and administrative resources.  USAID's upcoming 
assessment will help us identify what opportunities exist for our 
future programs under these conditions.  With the downward spiral of 
violence in Ingushetia, USG programs are well placed to reduce 
interethnic conflict, provide modest local improvements in economic 
opportunity, and engage at-risk youth but the challenges to making 
progress are immense and the needs in each republic unique.  USAID's 
ability to forge and maintain productive relationships with local 
officials will remain key to ensuring access for and the 
effectiveness of programs.  While local officials face some 
pressures to control and limit international engagement in the 
region, the positive disposition of some officials and at least the 
pragmatic inclinations of others will hopefully provide a stable if 
not particularly strong access point for our work in the region. 
 
BERYLE