Caucasus Report

Azerbaijan and Daghestan are at loggerheads over the use of water from the Samur River that in its lower reaches marks the border between Azerbaijan and the Russian Federation. Daghestan’s Ecology and Natural Resources Ministry alleged earlier this week that Azerbaijan is channeling off far more water than it is entitled to under the terms of the border treaty signed four years ago; the Azerbaijani joint stock company responsible for irrigation and water resources denies this.

Meanwhile, thousands of residents of Daghestan’s Magerramkent border district are concerned that the reduction in the volume of water in the lower reaches of the river is negatively affecting the region’s fragile ecosystem, thereby posing a direct threat to their livelihood, which depends on the sale of agricultural produce. In 2013, Daghestan’s Ministry of Water Resources estimated that some 4,500 hectares of land remain unirrigated most years because of the water shortfall.

The use of the river’s water, and the volume each littoral polity is entitled to divert for its own use, is codified in the interstate treaty of September 3, 2010, on the border between Azerbaijan and Russia. Under the terms of that treaty, 30.5 percent of the total volume is designated the environmental norm; the remainder is to be shared equally by the two sides. The flow is currently 14.5 cubic meters per second, of which Azerbaijan and Daghestan are each entitled to 5 cubic meters. But according to Daghestan’s First Deputy Ecology and Natural Resources Minister Marat Aliomarov, Azerbaijan is taking an additional 3 cubic meters.

An unnamed Azerbaijani expert, however, offered a different explanation. He said the reason why the flow of the river is so low at its lower reaches is that because of this summer’s drought, the initial volume has fallen from the usual 60 cubic meters per second to 14.5 cubic meters.

Local villagers have been complaining for several years that the water table in the region is falling. Last fall, they convened a series of mass protests against plans by the republican government to drill artesian wells to pipe drinking water to the coastal town of Derbent, which has a population of 120,000. Those plans were suspended in the wake of a session of Daghestan’s Public Chamber in February at which Magerramkent residents outlined their concerns, including the threat to the survival of the region’s unique tropical liana forest. Federal agencies and the Union of Hydrologists of Russia were co-opted to assess the likely impact of the project and propose alternative options for supplying Derbent with water.

Last month, the administrative heads of five Magerramkent villages appealed to Russian Prime Minister Dmitry Medvedev (who as Russian president signed the 2010 border treaty) and Daghestani Prime Minister Abdusamad Gamidov to ensure that the river water is shared equally in order to preclude “a conflict situation.”

The dispute over water from the Samur is, furthermore, just one aspect of the long-standing clash of economic, and possibly also geopolitical, interests between Daghestan and Azerbaijan. The two largest ethnic groups in southern Daghestan are the Azerbaijanis and the Lezgins. The latter are a northeastern Caucasian ethnos who claim to be the descendants of the ancient kingdom of Caucasian Albania that fell to Arab conquerors in the 8th century. Their historic homeland is split between Russia and Azerbaijan. Estimates of the number of Lezgins in Azerbaijan vary widely. According to official data, they number only 178,000, while unofficial estimates range from 400,000 to 850,000 (of a total population of 9.42 million).

They have long been regarded with suspicion in light of demands voiced in the 1990s by some Lezgins in Daghestan for the unification of their ethnic group in a separate republic. Several hundred of them were forced to leave their homes in Azerbaijan and relocate to Daghestan following the signing of the 2010 border treaty.

Today, many of Daghestan’s Lezgins are convinced that Baku has ambitious plans to expand its presence and influence in southern Daghestan, and that the Daghestani leadership either approves of that expansion or is reluctant, or even powerless, to counter it. Azerbaijan’s Ata Holding has put up 1 billion rubles ($27 million) toward the cost of renovating infrastructure and building new sports facilities in Derbent in the run-up to the planned celebrations in 2015 of the 2000th anniversary of its foundation. Some Azerbaijani scholars even claim that Derbent is an Azerbaijani town.

Meanwhile, the administrative head of Derbent Raion, Azerbaijani Kurban Kurbanov, continues to defy pressure from the Daghestani leadership to resign that post.

After six months of protests and controversy, Republic of Daghestan head Ramazan Abdulatipov has been constrained to abandon his stated intention of privatizing (reportedly at a knockdown price) one of the region’s flagship enterprises and largest tax-payers, the Kizlyar Brandy Distillery. On August 28, Russian Prime Minister Dmitry Medvedev signed a decree transferring the distillery to federal ownership, meaning that Moscow, not Makhachkala, will take the decision on its fate at some point in the next two years.

The planned privatization encountered one obstacle after another. Not only did the distillery’s 300+ work-force take to the streets to protest and formally appeal to Russian President Vladimir Putin; they also filed a formal complaint against Abdulatipov with the Russian Prosecutor-General’s Office after he asserted in an interview with the internet portal Kavpolit.com that for the past two decades distillery employees have systematically stolen part of the output.

Meanwhile, the republican Prosecutor –General’s office challenged the legality of the parliament’s December 2013 decision to privatize the distillery and secured from a Makhachkala district court a ruling that the Agriculture Ministry’s dismissal in April of the distillery’s director since 2008, Yevgeny Druzhinin, was in violation of labor law. Druzhinin had said late last year that he enjoys Abdulatipov’s “full support.”

And Umakhan Umakhanov, a State Duma deputy from Daghestan whom at least one observer regards as a possible successor to Abdulatipov, asked the federal prosecutor’s office to rule on whether the proposed privatization is legal.

Located in the lowlands of northern Daghestan, the Kizlyar Brandy Distillery was founded in 1885 and until very recently its output was prized as being of the highest quality. Its employees, like the population of the town of Kizlyar, are overwhelmingly Russians or Cossacks. (It was the heads of two local Cossack regiments, Vladimir Starchak and Nikolai Spirin, who solicited Umakhanov’s help in the campaign to thwart the planned privatization.)

Abdulatipov first expounded his vision of the distillery’s future at a press conference in Moscow in early February, several weeks after the National Assembly had approved a list of enterprises up for privatization in the next few years in which it was included. He advocated transforming the distillery into a joint-stock company by September 2014, and then privatizing it, mentioning a minimum price of 4 billion rubles ($112.2 million).

Abdulatipov also said Magomed Sadulayev, whom he described as one of Daghestan’s leading experts on viticulture, had been named to the newly created post of general director of the Kizlyar distillery to oversee the privatization process. Abdulatipov apparently failed to mention on that occasion that Sadulayev is the owner and general director of the Derbent Sparkling Wines Plant, the republic’s second-largest producer of alcoholic beverages. Analysts in Daghestan swiftly inferred that Sadulayev was the likely purchaser of the Kizlyar distillery which, they say, is worth a minimum of 10 billion rubles, possibly 20 billion. But in light of the controversy surrounding the planned privatization, Sadulayev declined the post.

Abdulatipov for his part was apparently not prepared for the backlash his announcement triggered. Having agreed, and then failed, to meet with the workforce to discuss the situation, he then changed tack, offering new and not entirely convincing explanations why the distillery should be privatized. He claimed that the distillery failed in 2013 to pay 1 billion rubles to the local and republican budget; that it had “stopped planting its own vineyards”; and that it had purchased substandard spirits at a cost of 1.5 billion rubles.

In fact, as Daghestan’s Deputy Agriculture Minister Gaydar Shuaybov has pointed out, the distillery’s current legal status as a state-owned unitary enterprise (GUP) precludes applying for government subsidies to plant vineyards to replace those destroyed 25 years ago at the time of then Soviet leader Mikhail Gorbachev’s anti-alcohol campaign -- a campaign which, according to Druzhinin, inflicted “irreparable damage” on Daghestan’s viticulture sector.

Once the distillery is transformed into a joint-stock company, Shuaybov explained, it will be eligible for such subsidies. Meanwhile, it is obliged to purchase either grapes or grape-based alcohol from elsewhere in Daghestan. Abdulatipov claimed that in 2012 the distillery purchased surrogate alcohol of dubious quality from construction material enterprises in Kabardino-Balkaria that had no access to vineyards.

At the same time, Shuaybov echoed Abdulatipov’s complaints about the distillery’s performance. He said that over the past three years, as a result of what he termed the management’s lack of professionalism, the quality of the product has declined, along with the profits. One Daghestani expert, however, claims that the distillery posted a profit in 2012 of half a billion rubles ($13.5 million), making it the third most profitable enterprise in the entire North Caucasus.

Abdulatipov finally told the newspaper “Novoye delo” last month that it had been decided to hand over ownership of the distillery to the federal government in order the remove any grounds for speculation about the legality of the planned privatization that could reflect negatively on himself, because “I value the trust of the president and the people.” Whether that decision was in fact taken because of the republican prosecutor’s intervention or, as seems more probable, under pressure from Moscow to yield to the demands of Kizlyar’s predominantly Russian and Cossack population, is not clear.