VZCZCXRO6029
RR RUEHDBU RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHMO #2006/01 2180742
ZNR UUUUU ZZH
R 060742Z AUG 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 4452
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 MOSCOW 002006 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV PREL PINR RS
SUBJECT: MOSCOW'S CRISIS SITUATION DETERIORATES FURTHER 
 
REF: MOSCOW 155 
 
¶1. (SBU)  Summary:  In January 2009, Moscow officials claimed 
that the global economic crisis had not affected the average 
Muscovite to the same degree as the capital's more affluent 
residents.  Roughly six months later, the situation has 
deteriorated, but Moscow officials continue to maintain their 
optimism.  Opposition leaders are bracing for the situation 
to worsen in the fall.  End Summary. 
 
¶2. (SBU)  In a July 20 press briefing, Marina Ogloblina from 
the Moscow City government's Department of Economic and 
Political Development outlined the problems facing Moscow 
with regard to the financial crisis.  She stressed that 
industrial production stabilized in May and June, and stated 
that the banking crisis will not affect industry in Moscow. 
Ogloblina then argued that construction would be the key for 
Moscow in terms of bolstering employment opportunities, as 
"every job at a construction site provides seven jobs in 
other industries."  She highlighted that the Mayor's Office 
has been actively involved in creating solutions, such as 
when it recently simplified the procedure for preparing 
investment projects and implemented measures to stimulate 
industrial production and consumer demand in an effort to 
mitigate the crisis.  Ogloblina stated, "we are generally 
optimistic," and maintained that officials in Moscow do not 
fear a second wave of the crisis.  However, she revealed that 
Moscow has temporarily halted long-term planning until it can 
balance the budget. 
 
Moscow City Budget Woes 
----------------------- 
 
¶3. (SBU)  The Moscow City Government radically revised the 
Moscow City budget in 2009.  Acting Head of the Moscow City 
Government's Department for External Economic and 
International Relations Vadim Danilin told us July 23 that 
the Moscow Duma cut the 2009 budget by 25 percent in light of 
the crisis; the reduced 2009 budget is now roughly USD 39 
billion.  As a means of comparison, the 2006 Moscow City 
budget was USD 28 billion, the 2007 budget was USD 26 
billion, and the 2008 budget peaked at USD 52 billion. 
According to Danilin, the 2009 budget is allocated as follows: 
 
- half to social programs (families, students, pensions, 
health, culture, education, and the disabled); 
- one quarter to municipal services (water, electricity, 
heat, trash collection, and road maintenance); and 
- the remaining quarter to city investment program (new 
investments, constructing the "Moscow City" complex, and 
other projects). 
 
¶4. (SBU)  According to Danilin, the 2009 cuts did not have an 
adverse impact on the social programs, but instead came out 
of the city's investment program.  On June 17 ITAR-TASS 
reported that Chairman of the City Finance Department Yury 
Korostelev said the city also reduced spending on municipal 
services.  According to Korostelev, there was a 41 percent 
decline in revenues in the first four months of the year, 
which resulted in the need to revise the budget.  He revealed 
that revising the city budget would likely increase the city 
deficit threefold.  Danilin admitted that due to the economic 
crisis, this year the Moscow Duma will begin to look at the 
2010 budget in November 2009 instead of early in the fall 
during the typical review period. 
 
Unemployment and Business Difficulties 
-------------------------------------- 
 
¶5. (SBU)  The unemployed population in Moscow is gradually 
growing.  According to Ogloblina, official unemployment has 
increased from 0.35 percent to 0.87 percent (56,700 people), 
but is still extremely low.  She elaborated by saying that 
some of the unemployment was being addressed by the Moscow 
Job Bank, which has 100,000 high-paying jobs, although they 
require special education and training.  Ogloblina 
highlighted that 24,000 Muscovites have recently received job 
retraining, and people are generally able to find work.  It 
should be noted that she did not mention the Cherkizovsky 
market closure or job losses in the construction industry. 
 
¶6. (SBU)  Some businesses in Moscow are struggling.  On July 
27, Sergei Mitrokhin, Chairman of the Yabloko opposition 
party and Moscow City Duma Deputy, expressed concern that 
there are fewer jobs in Moscow now than in January and he 
told us that the main problem is that enterprises are 
closing.  Julia Khomchenko, a journalist at Vremya Novostey, 
confirmed July 20 that a greater number of small businesses 
have been closing.  In July, Moscow Mayor Yury Luzhkov 
 
MOSCOW 00002006  002 OF 002 
 
 
himself enjoined companies to pay their staff.  Mariya-Luiza 
Tirmaste, a journalist at Kommersant, told us July 28 that 
some top and mid-level salaries have been cut, but not to a 
critical level.  She maintained that the situation is 
serious, but not yet unbearable.  According to Tirmaste, some 
opposition groups are telling people that they should brace 
themselves for the economy to deteriorate further in the 
fall. 
 
Comment 
------- 
 
¶7. (SBU)  While Moscow's economy has contracted, it has not 
been to the point of creating significant social unrest. 
Moscow's authorities are trying to use their powers to ensure 
that the sting of the crisis is not too painful. 
RUBIN