Economy

Chukotka's economy in the late Soviet period was based on mineral extraction, fishing and traditional hunting, and reindeer herding, but secession from Magadan Oblast' and the effects of Russia's economic collapse sent the okrug into deep decline. By 2000, Chukotka's living standards were the second-most depressed in Russia after Chechnya. At the time of governor Abramovich's 2001 inauguration, government debt exceeded the annual budget by four times and okrug assets had dropped in value by over 90% in a decade. Reindeer herds had dropped from half a million head in 1990 to below 100,000. In the 1990s, as its productive enterprises closed, Chukotka's economy became almost entirely reliant on federal subsidies.

Governor Roman Abramovich is one of Russia's leading billionaire "oligarchs," with interests in oil and gas, aluminum, real estate, airlines, and food production. Beginning in 2001, his companies invested over US$200 million a year in Chukotka on infrastructure and budget support, transforming the lives of Chukotka's small population. Entire native settlements have been rebuilt, borrowing techniques and expertise from the Canadian North. Former state agricultural enterprises (sovkhozy) are the channel for investment in the traditional economy: mainly reindeer herding and marine mammal hunting. Anadyr is the focus of major infrastructural investment, renewing energy generation, transport facilities and public works, and hotels, government offices, and cultural and sports facilities have been built.

Recent economic reforms have primarily sought to cut costs and reduce debt rather than open up new sources of revenue. The administration's assessment is that Chukotka's population remains too large and expensive to support, there are few viable economic exports, and the okrug will continue to rely on subsidies. "Cost economy measures" include closing the "unpromising settlements" of Beringovsky, Shakhtersky, and Mys Shmidt and funding the resettlement of thousands of residents to regions of central Russia. The administration's target population is 30,000-40,000, almost half the current figure.

Chukotka's economic future hinges on the exploitation of its mineral wealth, including gold and silver mining and oil and gas extraction, fishing in the Bering Sea, and possibly tourism. Limited gold mining in surface deposits is ongoing, and in late 2002 a Canadian company bought a major stake in the Kupol subsurface gold and silver deposit in west-central Chukotka, the okrug's first investment by a foreign company. Oil and gas exploration on the Bering Sea shelf may yield results, but the sea-ice conditions and weather would make production very expensive. Most of Chukotka's present industrial infrastructure consists of coal mining and electricity generation, the capacity of which is largely unused, while the lack of transport infrastructure and the okrug's extreme isolation make economic development very costly. Tourism, which might be expected to capitalize on Chukotka's isolation and pristine expanses, is hindered by the bureaucratic restrictions of the border regime, high travel costs, and a complete lack of local experience. The traditional economy, including reindeer herding, is expected to require large state subsidies even after its recovery.

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