The Road Less Traveled

Tatarstan approached the market economy in its own way - slowly - yet the republic has succeeded in attracting foreign investment and developing trade.

Visitors to Kazan in the early 1990s well remember the House of Tea. Not only was it one of the few storefronts with a bilingual sign (Russian and Tatar), but it was virtually the only place to get a bite to eat on Ulitsa Baumana - Kazan's then poorly paved main drag, which was eerily empty after 7 p.m.

Times have changed.

View of Kazan's Kremlin, located on the banks

of the Volga River. Today Ulitsa Baumana is a happening pedestrian lane - Kazan's well-polished version of Moscow's Arbat, complete with designer boutiques. Besides the Dom Chaya - still a favorite hangout for those who like to drink not tea, but vodka - an excellent pizzeria, several pleasant cafes and a McDonald's beckon hungry tourists and locals.

Kazan, the capital of Tatarstan, has eagerly shed its dowdy Soviet frock and given itself a make over. But despite pronouncements about embracing capitalism, in many ways, economic policy in Tatarstan more closely resembles that of the Soviet Union.

The difference between Tatarstan and the rest of Russia goes beyond the two state languages and the separate Tatarstan flag. The republic, which in the Soviet era had hopes of breaking off from Russia and joining the Soviet Union on equal footing, won an unprecedented amount of autonomy from Moscow after the break-up of the Soviet Union, giving it wide-ranging controls in the economic sphere.

Throughout the early 1990s, Tatarstan President Mintimer Shaimiyev followed a policy of a "soft entry into the market," keeping price controls on basic goods and more government regulation than in the rest of Russia.

Tatarstan's officials have done privatization "their way" - in other words, slowly. Local electricity provider Tatenergo remains completely state-owned. And only now is Tatarstan getting ready to privatize its telephone network. Maybe that explains why half the calls I made in Kazan were cut off.

The republic's government has acted as a guardian to some of the biggest companies. The KamAZ truck maker, the biggest employer in Tatarstan's second major city, Naberezhniye Chelny, was taken under the government's wing for restructuring after the company defaulted on loans.

Tatarstan authorities have recently won themselves full control over bankruptcy proceedings in the republic. This will make it easier to retain local control over the region's main industries, as the government will now be able to prevent takeovers by Moscow banks.

Still, with its rich reserves of oil and highly developed industrial potential, Tatarstan has succeeded in marketing itself to investors. Through 1998, the republic received a total of $1.3 billion in foreign investment, ranking second among Russian regions in per capita investment.

Glossy web sites run by the government and the local chamber of commerce lure investors with lists of the region's impressive natural resources and industrial capabilities. Kazan boasts a modern, four-star hotel - Safar - where rooms go for $150 a night.

Even at the decidedly down-market Hotel Tatarstan, a Soviet structure across the square from Ulitsa Baumana, foreign interest in Tatarstan can be seen. An Iranian group mills about in the lobby . - on their way to a trade exhibition. The man speaking English on the telephone turns out to be Canadian. He is working on a project at the local helicopter factory - and, as he puts it, "learning about the Russian bullshit."

Indeed, the peculiarities of doing business in Russia are just as present in Tatarstan as in any other region. But the republic's officials try to distance themselves from that image as much as possible. The official web site accents Tatarstan's statehood, quoting extensively from its constitution and even separately listing its currency. (Surprise! It's the Russian ruble!)

But like it or not, Tatarstan is inextricably linked to Russia in the economic sphere. In fact, that's one of the reasons it won't ever secede completely.

"We have a large trade volume on the Russian market," says Rafail Khakimov, Shaimiyev's political adviser and one of the masterminds of Tatarstan's autonomy arrangement. "How many helicopters do we need? Two or three. It's the same with KamAZ. We only need a few. All the others we sell."

While politically Tatarstan is worlds away from Moscow, economically it is closer than many regions. The Far East trades more with other countries than other regions of Russia, but Tatarstan, located on the Volga in the Russian heartland, does most of its business domestically.

"If Russia, with its enormous wealth and enormous potential, flourishes," said Farid Mukhamet-shin, speaker of Tatarstan's State Council, "you won't see any calls for independence."