Russia: The Chechen Economic War Threat

Chechen militants posted a letter on a rebel Web site Aug. 21 claiming they had carried out an attack that caused the breach in the Sayano-Shushenskaya Dam. The breach resulted in at least 26 deaths, left 49 missing and has plunged several cities in Siberia into an electricity crisis. The Web posting claimed that the militants, who referred to themselves as the Battalion Martyrs, managed to "plant an anti-tank grenade with a timer, which caused a blast much stronger than they [the Battalion] expected." The Battalion Martyrs claim to be part of a group under one of the last Chechen leaders, Doku Umarov, who has maintained a low profile except for the occasional Web posting. The Kremlin has denied the Chechen claim of responsibility for the dam breach. The Aug. 17 dam breach has been big news in Russia, with Russian Prime Minister Vladimir Putin visiting the site Aug. 21. The Chechen group's claim of responsibility could spark a heavy reaction from Moscow — which probably is precisely why the group made the claim. If the incident actually resulted from a Chechen attack, the militant group pulled off quite a feat. STRATFOR has cataloged the difficulty of attacking massive structures like dams using conventional explosives. Multiple STRATFOR sources inside Russia involved in the response to the dam incident maintain that the breach did not result from an attack, but rather from a malfunctioning transformer that had been acting up for days. One of the transformer's mishaps caused an explosion in one of the generating units during the repairs, resulting in the breach. Either way, the group's threat to wage an economic war against Russia will garner the Kremlin's immediate focus. Chechen militants have yet to show interest in economic targets. Instead, Chechen militant attacks outside their immediate region have tended toward high profile or high-casualty targets. Most notably among these were the 2004 Beslan school siege, twin airline bombings in 2004 and the 2002 Moscow theater siege. Such attacks represented attempts to interfere with citizens' daily lives, and the targeting of children, planes and theatergoers and were effective in sending shockwaves across Russia. Still, the effect on the consumer market in Russia of potential economic attacks would pale in comparison with more developed states. Russian consumer spending is approximately 37 percent of gross domestic product (GDP), compared to the United States, where consumer spending accounts for up to 70 percent of GDP. And the Russian people are used to economic hardship. Outside the energy sector, which accounts for 80 percent of Russian exports, the Russian economy is disjointed. But attacks on energy would pose a critical economic threat to Russia, the largest natural gas exporter and second-largest oil exporter in the world. The Chechen Web post claimed that the militant group would focus on attacking oil and natural gas pipelines, power plants, and electricity lines. Russian energy assets are very large, concentrated in a few locations and relatively easy targets to hit — making the militants' task easier. The Russian cities of Samara and Novorossiysk are the two locations that would be the easiest for the Chechens to hit. Attacks on those cities would inflict the most damage and hence elicit the strongest Kremlin response. Samara, which is just 720 miles from Chechnya, is one of the top industrial centers in Russia with large refining centers that have a capacity of approximately 320,000 barrels per day (bpd). Targeting its refining centers would be difficult, but the pipelines leading to such centers are vulnerable. Novorossiysk, which is only 375 miles from Chechnya, is the busiest oil port on the Black Sea, where 840,000 bpd of oil is shipped to Europe and beyond. Novorossiysk's storage tanks and pipelines — which run across the Caucasus, carrying crude from Azerbaijan and Kazakhstan as well as Russia — could become a focus. Such an attack would bring international attention because it would undoubtedly affect global oil supplies and prices and would hit one of the Kremlin's most prized political, economic and financial tools. This would bring the Kremlin's focus sharply back on Chechnya, which has turned over most control in the republic to its regional government. Such a response would be severe, to say the least.