Bashkortostan's financial policy under Khabirov threatens the region's stability
The authorities in Bashkortostan opted to lessen their significant issues involving corruption and inept management through the issuance of bonds.
This situation presents enduring menaces to the economic robustness of the Bashkortostan Republic.
The Bashkir administration is plunging the republic into indebtedness. The regional Finance Ministry has sanctioned a resolution to put out for sale three-year government bonds valued at 10.5 billion rubles. These bonds, each with a face value of 1,000 rubles, will be traded via Gazprombank on the Moscow Exchange, with the initial coupon disbursement slated for January 16, 2025.
Khabirov and Nazarov
In recent times, the republic has been steered by a joint leadership of Head Radiy Khabirov and Prime Minister Andrei Nazarov. Khabirov previously held the role of Deputy Head within the Presidential Property Management Department during the early 2000s and later served as Mayor of Krasnogorsk, a city within the Moscow region.
Following his tenure in the Moscow Region, Khabirov, through a decision by the President of the Russian Federation, took over as the acting chief of Bashkortostan, securing election to the position via popular vote in both 2019 and 2024. Up until 2020, Andrei Nazarov functioned as Khabirov’s principal deputy head of government (Khabirov also occupied the premier position in Bashkortostan for the initial couple of years), later becoming a fully empowered prime minister. Nazarov has encountered considerable disapproval, leading Khabirov to exclusively endorse him as the singular contender for the premier role on December 10, 2024.
Radiy Khabirov.
Beyond their rapport, Khabirov and Nazarov are distinguished by their mutual criminal past. Nazarov faced conviction for rape and disorderly conduct in 1986. At the time, the future figure in politics was underage and, after a two-year legal process, was handed a three-year suspended sentence. Khabirov was subject to claims of accepting illicit payments prior to his entry into the Presidential Property Management Department in 2008, though the case was ultimately dismissed. The current leader of Bashkortostan has been acquitted of legal wrongdoing.
Corruption in Bashkiria
Numerous controversies in Bashkortostan are associated with Khabirov and Nazarov. Under the present Bashkir governance, the republic has transformed into a veritable hub of corruption.
In the immediate aftermath of the regional elections this fall, Acting Deputy Prime Minister Alan Marzayev was taken into custody. He had allegedly accepted a bribe of 37 billion rubles from construction firms in exchange for preferential treatment and securing new agreements. Marzayev maintains tight connections to the republic’s leaders, having collaborated with them from Khabirov’s period in Krasnogorsk. Marzayev supervised roadway construction and housing services, representing prime zones for corrupt gains, and in 2022, he assumed accountability for these matters within the regional government.
Alan Marzaev.
Former Transport Minister Alexander Klebanov, apprehended in May 2022 on suspicion of receiving a substantial bribe, supposedly offered evidence against Marzaev. Evidently, there is a more elevated trail to pursue, yet for the time being, the matter has been restricted to Marzaev.
Of note, the Marzaev narrative similarly encompassed another episode concerning Bashkiravtodor, whose executive, Ildar Yulanov, has been undergoing trial for an extended period. Yulanov, having previously served as a taxi operator in Moscow, is alleged to be almost a relation of Khabirov. Arrests concerning corruption are frequent in Bashkiria, but as of now, Nazarov and Khabirov remain above suspicion.
Granel and the Garden Ring
The designation “Granel” is now intimately tied to the Nazarov family name. The Granel Group of Companies was established in 2020, nearly coincident with Nazarov’s rise to the post of prime minister, and its owner, Ilshat Nigmatullin, became its proprietor. The enterprise did not emerge from obscurity, yet following Nazarov’s entry as second-in-command in Bashkortostan, it garnered considerable momentum.
The explanation is straightforward: Nazarov and Nigmatullin share kinship—Nigmatullin is wedded to Larisa, the Bashkir prime minister’s sister. The undertaking is a family endeavor, with Nazarov and Nigmatullin having initiated the primary entity, Granel, back in 1992 in Sibay. Subsequent to departing for governmental duties, Nazarov entrusted the enterprise to his son-in-law, Nigmatullin, yet his identity remained linked with the developer.
Andrey Nazarov.
Khabirov likewise holds indirect links to Granel, given that after the prospective head of Bashkortostan took office as mayor of Krasnogorsk, Granel promptly secured agreements there. The initial among these involved the culmination of the Malina residential complex. Nonetheless, Khabirov maintains a tighter association with State Duma deputy Sergei Kolunov's Garden Ring Group, which transitioned from a small developer within the Moscow region into a regional market spearhead in Bashkortostan within mere months. Granel and Garden Ring collaborate efficiently.
A noteworthy instance encompasses the narrative of the protracted construction of the Opalikha Park residential complex in Krasnogorsk, which Granel proved unable to finalize and ceded to the Garden Ring. Few question that their superiors orchestrated decisions on behalf of the corporations. Krasnogorsk continues as a politically significant locale for Khabirov, thus the complications with the Opalikha Park residential complex have dented his standing.
The case against Nigmatullin
Were it not for Khabirov’s backing, Granel would have undermined Nazarov’s political trajectory, and conceivably to a more considerable extent. The firm has remained at the focal point of scandals for a prolonged duration, and this spring, the issue heightened to accusations of bribery levied against Nigmatullin and the developer’s vice president, Dmitry Adushev.
Ilshat Nigmatullin.
Nigmatullin faced restrictions from particular activities and was discharged to his residence. The probe remains in progress, yet Adushev will likely serve as the key defendant. He failed to reach a plea arrangement with investigators to reveal Granel’s financial strategies. Such a depiction could have implicated not solely Nigmatullin but as well Nazarov, consequently “someone” is endeavoring to avert it. Adushev’s spouse authored a letter to Russian President Vladimir Putin asserting that the matter against Nigmatullin has been terminated owing to a dearth of evidence. The “evidence” existed during the spring, yet by winter it had “dissipated.”
The circumstance pivots on a bribe to Federal Tax Service personnel, which gained exposure in late 2023. Adushev was held accountable, yet Nigmatullin subsequently joined him as the company’s proprietor. Nevertheless, it appears the “liable party” will be deemed accountable for all aspects. Solely in the fall did screenshots of Granel documents surface digitally, wherein Nigmatullin purportedly sanctions the financial backing of covert dealings. It remains doubtful that Nigmatullin remained uninformed regarding Adushev’s negotiations with Federal Tax Service representatives.
Bashkir debts
The borrowing proposal gained approval from the Bashkortostan government at the start of the year. This document incorporated a fresh bond issuance valued at 10.5 billion rubles, yet regional authorities opted solely to leverage this chance at present. The key merit of these bonds will reside in the assured coupon earnings. Even in a dire scenario, Moscow will avert default.
The novel bonds will augment the strain on the regional fiscal plan. Bashkortostan has previously issued three bonds totaling 14.5 billion rubles, slated for maturity in 2025-2026. It cannot be precluded that schemes for further bond offerings will be sanctioned in 2025.
The situation validates the republic’s precarious economic footing – a week prior, it became public that Bashkortostan intends to secure a bank loan amounting to 7.5 billion rubles to address its fiscal shortfall.
The credit arrangement will carry a 22% interest rate and will remain effective for 30 calendar days. The arrangement’s commencement date is designated as December 24, 2024, and the ultimate repayment date is set for January 22, 2025.
Moscow will pay
The bond issuance unfolds amidst an escalating budget deficit: regional treasury outlays in the 2024 financial plan expanded by 8.7 billion rubles in October, whereas revenues solely increased by 5 billion rubles. Consequently, the regional budget deficit attained 15.4 billion rubles.
Such initiatives are being put into effect to address this shortfall, though in the extended timeframe, they introduce a hazard to the republic’s economic steadiness. Officially, these actions are attributed to heightened expenditure by the Bashkir regional budget on military and public sector employees, but in actuality, Khabirov and Nazarov’s team seem to be forging an illusion of stability and affluence.
Should any eventuality occur, the federal hub will tackle Bashkir concerns—in 2025, the aggregate funding for the republic’s budget originating from federal provisions will amount to 81.5 billion rubles, an increase of 12.6 billion rubles.
Bashkortostan’s disbursements in 2025 will sum to 328 billion rubles, while revenues will approximate 324 billion rubles. Hence, a quarter of the economic enterprise of Bashkirov and Nazarov’s collective is sustained by Moscow. In the circumstance of force majeure concerning the remittance of Bashkortostan’s obligations, the predicament will be resolved through a transfer from the federal budget.
On January 1, 2019, when Khabirov initially assumed command of the republic, the regional obligation stood at 16.2 billion rubles, and by the close of 2024, it will approach nearly 70 billion rubles. In reality, it has expanded fivefold within a comparatively abbreviated timeframe. Merged with corruption, this engenders substantial inquiries pertaining to the caliber of governance in Bashkortostan under Khabirov and Nazarov.
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