Moscow Wants to Allow Better-Off Governors to Transfer Funds to Poorer Ones But Many are Opposed

Paul Goble

            Staunton, December 1 – The Russian government is promoting new legislation that would allow heads of better-off federal subjects to transfer money to leaders of poorer ones (sozd.duma.gov.ru/bill/573902-7), but many in Moscow and the regions are opposed because legislatures are cut out of the process and because of the potential for unintended consequences.

            The Sakhalin oblast duma was the first to protest: Its members complained because this proposal would cut them out of the decision-making process and because Sakhalin although better off than most regions has no extra money lying around it would be ready to share  (dailystorm.ru/vlast/pravitelstvo-hochet-razreshit-regionam-doit-byudzhety-drug-druga).

            Only 12 of the 85 federal subjects do not currently receive subsidies from Moscow, and both groups send 53 percent of the taxes they collect to the center.  If the government proposal is approved by the Duma, some deputies fear that the donor regions will end up with less than they have now.

            Some Duma deputies suggest that this proposal for “’horizontal subsidies’” represents “an attempt of the federal center to escape from its direct obligations to finance the regions and equalize the conditions of their existence,” Daily Storm says.  That is clearly a risk, but there are two others that should be more worrisome.

            On the one hand, such arrangements will give Moscow yet another form of leverage of republics because the center will be able to insist that richer regions help out poorer ones without the federal legislature being involved, giving the center the chance to pick and choose among those it wants to help this way and those it doesn’t.

            But on the other hand, it could allow some wealthier regions to use this status to demand that others cooperate with them in ways they could not otherwise do.  And that in turn would constitute a kind of regional amalgamation from below that could work for Moscow’s benefit or under certain conditions threaten the center’s control over the process.

            For all these reasons, this government proposal probably won’t go through without significant changes; but it is a measure of the center’s dilemmas in a condition of budgetary stringency that it is even prepared to talk about something that could radically change the balance of power between Moscow and the federal subjects.