VOLGOGRAD: POLITICIANS CALM BEFORE ECONOMIC STORM,

C O N F I D E N T I A L MOSCOW 003743

SIPDIS

E.O. 12958: DECL: 12/23/2018
TAGS: PGOV PREL KDEM PHUM ECON RS
SUBJECT: VOLGOGRAD: POLITICIANS CALM BEFORE ECONOMIC STORM,
MARCH ELECTIONS

REF: MOSCOW 497

Classified By: Political Minister-Counselor Alice G. Wells
for reasons 1.4 (b) and (d).


1. (C) Summary: A December 17-19 visit to Volgograd revealed
politicians and observers focused on maintaining political
stability amid the deepening economic crisis. One Regional
Duma Deputy predicted the crisis will last for up to two more
years, with regional production slipping by as much as 33
percent in 2009. Nonetheless, these same politicians cited a
zero unemployment rate, job-creation plans, and funding from
Moscow as factors that will maintain political and social
calm. Some even argued that the crisis may fulfill
long-sought goals of rebuilding the region's shambolic
infrastructure. Rosy predictions did not extend to March
regional elections, however, with United Russia regional
leaders forecasting that the Communists would benefit
slightly at the polls. Long-time governor Nikolay Maksyuta,
whose term expires in December 2009, is widely expected not
to receive a fourth term from the Kremlin, potentially
opening a plum gubernatorial position for the defunct
Agrarian Party. End Summary.

Politicians Predict Political Stability Amid Crisis
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2. (C) According to city and regional politicians, the
deepening economic crisis poses a danger to regional
industry, but no real threat to political and social order.
In a December 18 meeting, United Russia Regional Duma Deputy
Vitaliy Shestakov predicted that although "2009 will not be
like 1998" and a default is highly unlikely, "there will be
one and a half to two years of difficulties" in the region.
When pressed on production levels, Shestakov acknowledged
that overall regional production might slip by as much as
30-33 percent from 2008 to 2009. Further complicating
matters, he added, will be an inflation rate that has already
reached 17 percent in the region's urban areas and 30 percent
in rural areas. Despite such downbeat numbers, Shestakov
maintained ruling party optimism by assuring us that
Volgograd residents would stand by United Russia, with only
small electoral defections in the March elections (see para
6).


3. (C) Acting City Duma Chairman Aleksandr Mordvintsev, in a
December 18 conversation, also focused on United Russia's
buzzwords of "political stability." Although construction
and private investment are slowing, Mordvintsev predicted
that federal and regional budgets would step in to soften the
blow. Assessing political fallout and public perception of
the crisis, Mordvintsev admitted that the government had not
explained the full economic situation to the general
population because the government's priority was "to not
cause panic," which he deemed successful since "there have
not been any lines outside of banks" in Volgograd.


4. (C) Volgograd First Deputy Mayor Sergey Sokolov offered an
even sunnier perspective in a December 17 meeting, insisting
that "there are only minor economic problems here in
Volgograd." Sokolov proudly boasted that "Volgograd is a
donor region" that annually allocates funds to poorer
regions. Gesturing grandly to the under-renovation City
Administration building where the meeting was being held, he
assured, "You see, there is still much money here in
Volgograd to continue working, to pay for everything."
Political stability, he added, will "continue as normal."

March Elections: United Russia Pragmatic on Prospects
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5. (C) Surprisingly, United Russia leaders in Volgograd were
not optimistic about their party's prospects in the upcoming
March 1 regional parliamentary elections. 38 seats will be
at stake, with 22 chosen from party lists and 16 from
single-mandate voting. Regional Deputy Shestakov, noting
that elections "will be difficult with the economic
situation," predicted that United Russia would win 55 percent
of the vote, while Acting City Duma Chairman Mordvintsev
predicted just 50 percent - down from 60 percent in the last
local election. Mordvintsev conjectured that the Communists
would pick up the slack and increase their result to 25
percent, with LDPR and Just Russia splitting the remainder.
Just Russia regional leader Sergey Klimenkov predicted
implausibly in a December 18 meeting that his party would win
20 percent by poaching votes from the Communists.
"Everything will depend on the economic situation," United
Russia's Mordvintsev declared with a shrug. Shestakov
confirmed that United Russia's troika of candidates heading
its March ballot will be Olympic silver medalist Nataliya
Lebedeva, First Deputy Governor Vladimir Kabanov, and

Regional Office Secretary Vitaly Likachev.


6. (C) Non-Duma parties have zero prospects in the March
elections, according to United Russia leaders and other
observers. General Director of the Volgograd office of the
national daily Kommersant Dmitriy Grushevskiy declared that
the elections "will not be free," due to onerous restrictions
on opposition party registration and media access. Regional
Deputy Shestakov noted that the Patriots of Russia Party may
appear on the ballot, but in general all "non-Duma parties
are not popular." (Note: Yabloko's admission to us on
December 19 that it has only 340 members in the entire region
backed up Shestakov's assessment.) Also, although some
regional parliaments recently voted to reduce the number of
members in their Dumas, Shestakov confirmed that Volgograd
region will not follow suit.

Political Stability Pinned on Employment, Job Creation
-------------- --------------


7. (C) Despite dire economic indicators, local leaders
insisted that political and social stability would be ensured
by low unemployment. Indeed, city and regional leaders
denied that unemployment even exists in Volgograd.
"Unemployment will not be a problem," remarked Regional
Deputy Shestakov, noting that "there are thousands of job
vacancies still throughout the region." Deputy Mayor Sokolov
echoed this optimism, pinning the number of job vacancies at
17,000. Neither Shestakov nor Sokolov could account for how
vastly decreased production will buttress existing
employment, but they both proposed jobs programs should
unemployment rise. Sokolov suggested creating jobs through
massive infrastructure projects, "just like your new
President Obama will do in America with repairing roads."
Shestakov suggested creating jobs in the region's rural
areas, concluding that "if people are working then they will
not worry." Contradicting government claims of zero
unemployment, Kommersant's Grushevskiy estimated the region's
unemployment rate at 4 percent.

Governor May Lose Job to Agrarian
--------------


8. (C) Three-term governor Nikolay Maksyuta has been a
moderately popular presence in Volgograd, where he governed
as a Communist until his switch to United Russia in 2004
(reftel: Maksyuta's switch was only superficial, since he
maintained his KPRF membership.) However, citing Maksyuta as
a dinosaur out of step with the Kremlin, several United
Russia leaders predicted President Medvedev will not
re-nominate him when his third term expires in December 2009.
Shestakov confirmed that Maksyuta wants to continue as
governor, but Shestakov, Mordvintsev, and Sokolov predicted
this term would be his last. Kommersant's Grushevskiy called
Maksyuta "weak" and pointed to Agrarian Party leader Vladimir
Plotnikov as the front-runner to replace Maksyuta -- a
prediction that Regional Deputy Shestakov said is "a good
possibility." Also in the running will be Lyudmila
Bogdarenko (head of a local insurance company and also from
the defunct Agrarian Party) and Just Russia's Oleg Mikheev.
(Note: The Agrarians voted to join United Russia in November
2008, so the governorship may be a sop to the regional
Agrarians.)

Infrastructure: Extensive Funding on the Way
--------------


9. (C) Several local leaders cited shambolic infrastructure
as an additional drag on the region's economy. Deputy Mayor
Sokolov summarized that the region needs at least 10-12 new
major roads and a new bridge across the Volga. Aleksandr
Mordvintsev explained that the bridge is being built with 90
billion rubles of federal and regional money, while the city
will pay for additional roads and trams. Further needs
include a 26 km highway, of which 12 km has been completed.
According to Mordvintsev, PM Putin has promised other
additional federal funding for regional infrastructure. One
other major building project, funded by city and federal
budgets and aimed at maintaining the regional capital's
demographics, will be a new pre-natal center opening next
year, free to patients who cannot afford its services.

Comment
--------------


10. (C) The determinedly upbeat analysis we heard will be put
to the test in the next few months as Russia's economic
crisis hits home. The acknowledgment by Volgograd leaders
that the region hopes to maintain employment levels even
while production slips illustrates the unwillingness to allow
a languishing economy to creep into the political sphere,

where voters might be tempted to vote against United Russia
in the March elections. Faith in federal funding continues
to buoy confidence that stability can be bought with jobs and
public insistence that all will be well. Should economic
difficulties lead to political instability before the March
elections, that hoped-for federal intervention may arrive --
although in the form of more assertive party discipline, even
tighter media and internet controls, and a new governor to
enforce stability.
RUBIN