CHITA: CONDEMNED LAND SEEKS FUTURE AS GATEWAY TO

C O N F I D E N T I A L SECTION 01 OF 04 MOSCOW 012900

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/06/2016
TAGS: PREL PGOV ECON ETRD PINR KN RS
SUBJECT: CHITA: CONDEMNED LAND SEEKS FUTURE AS GATEWAY TO
CHINA

Classified By: Pol/Min Alice G. Wells. Reasons 1,4 (B/D)


1. (C) Summary. Squeezed between China and the rest of
Siberia and challenged with an oppressively harsh climate,
Chita Oblast has historically served as a place of exile and
remains one of Russia's poorest regions. The break-up of the
Soviet Union led to the collapse of the region's livestock
and dairy farming, closure of military bases, and widespread
looting of mineral extraction businesses -- depressing
further the region's already low living standards. Although
Chita has so far not gained from Russia's economic growth,
there are glimmers of hope. Prospective unification with the
Aginsk Buryat Autonomous Area and construction of new rail
lines to transport the region's large deposits of minerals
and gold hold out prospects for growth. Rail and road
connections between the capital, Chita, and the border town
of Zabaikalsk serve as the main transport corridor between
Russia and China. China's booming economy has created envy
among oblast residents, who hope that their region can become
a prosperous gateway to China and beyond. End summary.
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Survival Mentality: A Special Breed
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2. (C) Nikolay Korylyov, Deputy Head of the Chita Regional
Department for Foreign Economic Relations, considered the
imperative of "survival" the most important element in any
Chita resident's psychology. Despite the complicated ethnic
composition of the region (over 120 groups),conditions in a
harsh and distant landscape have forced residents to
cooperate. Except for a few recent isolated cases, there has
been no notable ethnic discord, he said. Difficult natural
conditions -- a short summer growing season and winter
temperatures routinely dropping to minus 30-50 degrees
(centigrade) -- coupled with chronic neglect by Moscow has
created a "special" mentality, he added. Marina Meteleva, a
journalist with the largest-circulation regional daily
"Zabaikalskiy Rabochiy," claimed that the Center always had a
"just in case" attitude toward the Oblast: just in case this
faraway border region fell into the hands of enemies, the
Center did not want to lose any important industries, so none
were located here.
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From Decembrists to Khodorkovskiy
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3. (C) Moscow's lack of concern for the region's economy has
historically been coupled with the practice of sending people
here whom the government would like to forget. Eighty-five
Decembrists, who angered Tsar Nicholas I by planning an
uprising to transform Russia and free her from serfdom, were
exiled to Chita in 1825, and left behind a legacy of culture,
education and the beautifully planned mini-St. Petersburg,
that is the city of Chita. Nicknamed by "Zabaikalskiy
Rabochiy"'s chief editor Aleksandr Barinov, as "our
Decembrist," Yukos Oil's Mikhail Khodorkovskiy is now serving
a nine-year term in the Krasnokamensk prison, located 25
miles from Zabaikalsk.
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Moscow Spoils Where China Helps
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4. (C) All our interlocutors agreed that the biggest
frustration for the region was the limited means available to
promote development, despite Chita's location in an area rich
in natural resources. The Oblast budget is meager and Chita
is heavily dependent on subsidies from Moscow. Although
almost every element in Mendeleev's table could be found
somewhere in the Oblast, profits go to Moscow, stripping the
area of a much-needed incentive to develop its economic
potential. The same is true of customs revenue from
rapidly-increasing trade with China. Chita has two Chinese
clothing markets and two produce markets populated by a
mixture of Chinese and Russian vendors (and a few Koreans
from Northeast China.) A quick survey of the markets showed
that some Chinese vendors came from as far as Fujian
Province. In addition, over two million people cross the
Zabaikalsk-Manzhouli (China) border each year and up to
16,000 Chinese job seekers legally come to the Oblast each
year to work, mostly in the construction industry. Interfax
Chita's Aleksandr Karpenko summarized the Chinese presence in
Chita as "China feeds us, clothes us, and houses us. We
cannot survive without the Chinese."
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Charming City, But Where Are the Jobs?
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5. (C) Despite the sharply expanding trade with China,
little seems to have changed in Chita itself. Although we
doubt the city will see an influx of tourists anytime soon to
pump up the local economy, the town fathers make an effort to
cultivate the romantic aura surrounding its exile history,
spotlighting the impeccably preserved church (now a museum)
that the Decembrists built. Chita's politics are stuck in a
time warp of their own. United Russia (YR) controls 20 of
the Oblast Duma's 42 seats. The remainder are apportioned
among the Communists (7),the Liberal Democratic Party of
Russia (3),and the Agrarian Party (3). The recently-formed,
"second" pro-Kremlin party, "Just Russia," is still in its
formative stages, while Yabloko is barely present. Marina
Meteleva described "Just Russia" to us as an opposition party
that could not be taken seriously. Yabloko's Igor Linnic
claimed that citizens are too "apolitical" to be interested
in his party, which he described as a "group of intellectuals
oriented toward European democracy."

6, (C) Yuriy Kon, a YR oblast Duma member, seconded other
interlocutors' belief that Moscow understood Russia only up
to the Ural Mountains. To resuscitate the economy, he argued
that Chita needed to find a way to process rather than just
export raw materials to China. Aleksandr Shchvetsov, First
Secretary of the Communist Party, contemptuously termed YR a

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"party of industrialists and bureaucrats." He blamed the
Putin government for engaging with China without first
clarifying Russia' geopolitical and economic interests. His
party base draws from those who join because of a perceived
lack of social justice in the society.


7. (C) For residents looking for employment, the China trade
is both a source of hope and frustration. Vasily Glazkov,
who serves as an administrator in the border town of
Zabaikalsk, gloomily reminisced about the days when residents
of Manzhouli on the Chinese side of the border crossed to
Russia in search of food and employment. The tide turned
rapidly when the Soviet Union collapsed, he said. In the
economic chaos that followed, oblast residents sold
everything from scrap metal to timber to China. Once
prosperous metal processing factories now lay in ruins.
Anything of value had been stripped and shipped to China.
Journalist Meteleva lamented that every 20 minutes a
trainload of timber, mostly illegally harvested, left
Zabaikalsk for Manzhouli. Nataliya Kovalyona of the Dauria
Ecological Center, worried that the famous Russian taiga was
steadily disappearing.
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Chita-Zabaikalsk: 304 miles of Hardship
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8. (C) To get a closer look at what changes the cross-border
trade was spurring in the oblast, we took the daily train
from Chita to the Chinese border some 304 miles away. The
twelve-hour trip is a very slow ride. (It takes only 6-8
hours by car over a two-lane road). Relatively well-to-do
Russians and Chinese pay the equivalent of USD 50 for a berth
in a four-person compartment with a simple dinner and tea.
The monotonous view of the immense steppe is broken only by a
handful of poor villages, small herds of animals, and
numerous deserted military garrisons, which were pillaged
after they were shut down. (Note: Border disputes between
the USSR and PRC led to a heavy military presence up to the
early nineties. End Note.) The region's farmers have
suffered most from the collapse of the Soviet Union. "The
farmers have nothing to do, so they drink," said Olga
Kobzistaya of the Oblast Duma's Press Service. Nikolay, a
forty-year old taxi driver, told us that as a young boy, he
saw large herds of sheep and cows on the steppe. A uranium
miner we ran into had bounced from Uzbekistan to Kazakhstan,
then to Krasnokamensk as the region's uranium mines closed
one after another. His father, after working 35 years in
underground uranium mines, received a pension of a little
under USD 100 each month. His hands shook and he was deaf in
one ear. Nikolay described perestroika as "the worst thing
that ever happened." He dreamt of Russia with a
Turkmenbashi-like leader. Putin, he said, was the world's
"biggest thief."
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Bright Lights of Manzhouli and Wasteland of Zabaikalsk
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9. (C) Reaching the border, even the relative optimism felt
in Chita seems very far away. Zaibaikalsk, a city of 12,000,
is located opposite the booming Chinese city of Manzhouli,
which has a population of 90,000 (200,000 if the population
of neighboring industrial city Heila is added, according to
local officials). While residents hope to tap into the
border trade, these efforts have been stymied by failed

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negotiations for a free economic zone, which we were told
fell apart because of rigid Russian laws. Russians noted
that about five miles away in Manzhouli, on the Chinese side,
a large shopping center had already been built on spec within
the projected free economic zone and the city featured a
"Matyushika Square," which had memorials dedicated to Russian
heroes such as Peter the Great and Yuriy Gagarin to welcome
Russian visitors. In contrast, Zabaikalsk's border area is a
desolate no-man's land with few buildings, and even those
have been built and are operated by the Chinese. The only
places to eat are flyblown pirogiy stands; clean toilets and
supermarkets are virtually non-existent .


10. (C) Russian customs agent Marina, aged 43, told us she
shops and vacations regularly in Manzhouli. Marina is one of
the 500 customs agents now posted to the border region, a
number up sharply from the eight agents present when the
border reopened in 1988. Over seventy percent of Russian
exports and imports to China transit Zabaikalsk and indeed
the Chita-Zabaikalsk connection is the main Russian corridor
to China and beyond. Marina told us that on each of her
trips across the border, she treats herself to good Chinese
food, a massage, and a facial, items that are unavailable in
Zabaikalsk. In 2005, she managed to buy a USD 800 travel
package (more than her monthly salary) for a 10-day stay in
Hainan Island in southern China. Noting that Manzhouli is
chock-a-block with freshly-constructed western-style
buildings, she told us that Manzhouli was everything
Zabaikalsk wasn't.
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Can We All Get Along?
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11. (C) While dismal economic conditions and disappointment
over the lack of economic opportunities from the booming
cross-border trade create a sour mood in Chita, the oblast
has so far managed to avoid the ethnic tensions that have
plagued other parts of Russia. In addition to the most
numerous minority group, the Buryats, there are up to 120
other groups represented in the oblast. Some of our
interlocutors reflected on the varied ethnic mix in Chita,
the lack of conflict among residents, and the permeability of
borders. For example:

--Yuriy Kon (56) is an oblast Duma member. Kon's father, a
native of North Kyungsang Province, Korea, was sent to
Sakhalin during the Japanese occupation of Korea. He left
his wife, a son, and a daughter behind. After the Korean
War, Kon was not able to return to Korea. He remained in
Sakhalin and married a Japanese woman, Yuriy's mother. The
family later moved to Chita. Yuriy married a Russian-Finnish
woman and has a son and a daughter. His stepbrother (now
deceased),then a member of the Korean Parliament, in
searching for his father located Kon in Chita. The two
families were reunited two years after his father's death in

2000.

--Mrs. Kim (56) is a vendor in one of the two Chita Chinese
clothing markets. Her father, a native of South Kyungsang
Province, Korea, fled to the Chinese northeast during the
Japanese occupation. Like Kon's father, he also could not
return home following the end of the Korean war. After
making a few futile attempts to relocate to South Korea, Mrs.
Kim moved north, to Chita, where she sells sweaters and makes
USD 300-400 a month. She plans to return to her family in
Yanbian when she has saved enough money.
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A Ray of Hope: from Oblast (Region) to Kray (Territory)
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12. (C) Despite the economic stagnation we saw, Stepan
Zhiryakov, Director of Highland Gold Mining's Chita branch (a
joint venture of Russia, Canada and the U.K.) was optimistic
about the oblast's future. According to Zhiryakov, the most
promising project to be undertaken by the Center will be a
new railway to connect Margutsek to Budyuzhan along the
Chinese border. The projected rail line would connect twenty
mineral deposit sites, stimulating the reopening of closed
mines. There are also plans to construct a new railway to
China between Kariymskoye to Zabaikalsk. Chita residents are
also counting on an administrative changes to spur economic
prospects. Like other regions -- Perm, Kransoyarsk, and
Irkutsk -- which have successfully merged their oblast
governmental structures with a neighboring autonomous area,
Governor Ravil Geniatulin (an ethnic Tatar) is promoting the
unification of the oblast and the Aginsk Buryat Autonomous
Area. The goal of the merger is to draw more resources from
the Center. The status of "kray" is more prestigious than
oblast and should lead to more significant economic support

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from Moscow. A referendum on unification will be held on
March 1, 2007.
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Comment
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13. (C) Never a favorite region of Russia's rulers, the
oblast still struggles. It is well situated to serve as the
main gateway to China, and it is rich in natural resources.
It lacks, however, the infrastructure necessary to capitalize
on that potential and the Center's support. The ruined
agricultural system has created a wave of social problems,
prominently alcoholism, in the villages and lack of liquidity
has meant that many factories and housing compounds have
deteriorated beyond repair. Neighboring China is both a
potential economic lever and a constant reminder of what
could be if the right policies are put in place.
BURNS