Putin has Left Russia’s Regions with Neither Money nor Freedom of Action, Zubarevich Says

Paul Goble

            Staunton, January 2 – Moscow’s “extraordinarily cynical policy” toward the regions and republics of the Russian Federation, Natalya Zubarevich says, involves reducing help to most federal subjects, taking money from the richer to help Moscow meet its budget deficit, and transferring funds where “the political risks” of not helping appear greatest.

            But what the Kremlin is not offering, the director of regional programs at Moscow’s Independent Institute for Social Policy argues, is something an increasing number of regions seek but that Moscow won’t give: in the absence of money, they want greater flexibility and freedom of action (vedomosti.ru/opinion/articles/2016/12/29/671648-deneg-net).

            And that sets the stage not only for greater conflicts between the center and the regions but also for stagnation rather than growth in ever more parts of the country, something that the leaders in Moscow do not yet appear to appreciate or display any willingness to take steps to address.

            There has been some good economic news over the last year, Zubarevich says. Agriculture has shown real growth, and the collapse of industry has slowed or stopped, although in processing it has continued. But despite the efforts of the regime to suggest otherwise, there is far more bad news than good.

            Real incomes of the population, consumption and investment have all continued to fall, trends that mean that “the main victims of the crisis are the population of Russia and its future,” the economist says. The regions which are now responsible for most social spending have been cutting back on social spending, something that may leave Russia without a future.

            Thirty-nine of Russia’s federal subjects ran a budget deficit in the first nine months of last year, and when the results come in for the year as a whole, Zubarevich says, that number will be much higher given that the regions have to go into debt to pay their obligations to their state employees. In some places, this has already reached crisis proportions.

            And Moscow is making their situation worse: During the first three quarters of 2016, Moscow cut transfer payments by eight percent compared to the year ago, and 69 of the federal subjects received less than they had in 2015. Even those identified as “geopolitical priorities” saw cuts: central assistance to Sevastopol fell by 50 percent and to occupied Crime by seven.

            There were a few that remained “in favor,” the economist continues. Kaliningrad saw its transfer payments rise by 3.4 times, Ingushetia by 31 percent, and Chukotka by 25 percent.  And Chechnya after Ramzan Kadyrov protested against any cuts at all saw federal subsidies fall by only one percent.

             Many regional leaders are angry but few protested because “such are the rules of the game” in Putin’s Russia, she says.  However, there is increasing awareness in the regions that no one in Moscow cares how things are going in this or that region; those at the center are worried only about covering the federal deficit – and they are quite prepared to take more from the regions where they can.

            The regions are struggling to adapt to “the worsening economic conditions and the reduction of federal assistance,” and they vary widely as to the strategies they have adopted, Zubarevich says. As a result, “federalism in Russia” has been reduced to the wide variety of means they have come up with to adapt to Moscow’s will.

            The city of Moscow, for example, has shifted money from social needs to making the city more attractive, a strategy that inevitably will lead to a further degradation of “human capital” in the city. Others, like Mordvinia, which is an extreme case, have kept spending up, hoping against hope that Moscow will come to their rescue before everything collapses.

            This “quasi-federalism in the spending policies of the regions is helping them to survive,” Zubarevich says; “but it is not stimulating development.” What it is doing is stimulating new questions form the leaders of the regions and republics: “If there is no money,” they are asking, “perhaps they can be given freedom of action?”

            And in political terms that question takes the following form: could the power vertical Putin has invested so much in creating nonetheless be softened so that the regions could live up to their responsibilities to the population?  Up to now, “the answer of the federal authorities is clear” and it is a firm “no.”

            All must march in the direction Moscow orders, and the wealthier regions must share.  That may work for a time, Zubarevich says; but as things get worse in 2017, it is quite likely that it will become obvious to all that it is not only soldiers who are tired of drill; the regions and republics of Russia are tired as well.