Saturday, February 10, 2018

‘Regional Economic Separatism’ Returning to Russian Federation, Anti-Monopoly Service Says

Paul Goble

            Staunton, February 10 – One of the greatest difficulties Moscow faced in the 1990s was the decision by many regional governments to give advantages to industries on their own territories by erecting barriers of various kinds to the import and sale of goods produced elsewhere.

            Vladimir Putin as part of his drive to create a common legal space and his erection of ‘the power vertical’ largely eliminated this phenomenon in the early 2000s. But now, Russia’s Anti-Monopoly Service warns that “regional economic separatism” is returning as local elites seek to do what they can to cope with the economic crisis and cutbacks in subsidies from Moscow.

            In a report on this declaration today, Yulya Starostina of the RBC news agency says that in their drive to somehow find money for their budgets, regional elites have concluded that they have no choice but to “defend their suppliers from competition coming from other regions (

            That was the conclusion the Federal Anti-Monopoly Service reached in report presented to a recent session of the State Council for the Development of Competition in the Regions, a copy of which Starostina says, RBC has in its possession.

            “In spite of the Constitution which calls for ‘the unity of an economic space and the free movement of goods and services,” the report says, “in a number of regions protectionism has appeared,” something that represents “a threat to the economic integrity and national security of the state.”

            After the economic separatism of the 1990s was overcome, the service’s report continues, “over the last several years” as a result of the economic crisis, “manifestations of regional economic ‘separatism’ have become ever more characteristic conditions in the conduct of business in some subjects of the Russian Federation.”

            The report defines “economic separatism” as “an extreme and widespread form of regional protectionism when local powers support ‘their’ own producers and oppose the entrance into [their] markets of other participants,” now largely in order to try to get money for their local budgets, something local firms have to pay but outsiders don’t.

            “This leads to a distortion of competition and a worsening of the business milieu,” the service report says.  And it stresses that these “negative tendencies” are typical not only in the alcohol trade “but for other branches of the Russian economy and especially in the agricultural sector.”

            Among the most widespread forms of this “regional separatism,” the report continues, are oral and even written prohibitions on the importation of goods from other regions.  Sometimes food examiners are used to achieve that end, with officials in Volgograd oblast, for example, invoking animal infections to ban the import of pork from Samara.

            In addition, it says that there are violations of the law “when regional authorities without justification refuse to offer subsidies to participants in the market who are registered on the territory of another oblast” or give local producers special tax and fee incentives.  The first has happened in Saratov; the second in Orenburg, the report says.

            Natalya Zubarevich of the Moscow Independent Institute of Social Policy says that all the regions have an interest in getting as much tax money as they can, especially since most of it goes to the center and doesn’t come back.  But she says that in her view, “it is incorrect to apply the term ‘separatism’” to this phenomenon.

            Most regions are in debt and many face current budget deficits largely because of Moscow’s policies. “Don’t call this separatism; Call it the right rules of the game in existing circumstances” and remember as well that “it wasn’t the regions which created these rules of the game.”

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