Chechnya May Get Tax-Free Status

The scheme would grant businesses registered in Chechnya exemptions from many federal taxes and import and export duties.

An offshore zone already exists in Ingushetia, on Chechnyas western border, where the local economy has benefited from tax-free status.

But the system has been censured by the International Monetary Fund which seeks to wean the government from granting ad hoc tax exemptions to a wide range of petitioners.

Chernomyrdin has presented the scheme as a way of giving Chechnya an economic incentive to remain in the Russian Federation at a time when the federal budget is too strained to provide direct subsidies.

The plan will give Moscow a means of legitimising a more pressing need: to create a barrier between Chechnya where the federal governments power is practically non-existent and a criminal economic zone has emerged in full force and the rest of the country.