Majority of Russian Regions on Brink of Bankruptcy and More are Headed in That Direction

Paul Goble

            Staunton, November 9 – Moscow’s decision to declare Ingushetia bankrupt and take direct financial control of that North Caucasus republic is likely to be followed by similar moves elsewhere because a majority of Russian regions are on the brink of bankruptcy and the situation promises only to deteriorate in the coming months.

            Sergey Kalashnikov, the first deputy chairman of the Duma committee on economic policy, says that under Russian law, Moscow can declare a region bankrupt and assume direct financial administration of it when the income of the region makes up only 85 percent of its expenditures (newdaynews.ru/moscow/707923.html).

            At present, the parliamentarian says, “about 20 regions are in such a situation” and thus immediate candidates for following Ingushetia. "Of the rest, at a minimum, half are on the brink of such indicators and as a result, two-thirds are in a critical or pre-critical situation.” Only the capitals and the oil and gas producing regions are in relatively good shape.

            This situation, which is only growing worse, is systemic in that the budget is based on the principle that the regions give money to Moscow and Moscow returns only part of it. The subjects themselves “do not have any money.” And when Moscow runs short as well, the problems at the regional level as now multiply quickly.

            These arrangements were established in the 1990s to rein in the regions and keep their leaders “on a short leash, Kalashnikov says. But now the result is that “the majority of regions do not have the conditions necessary for effective economic development” or even to meet their basic social obligations.

            The coronavirus pandemic, he continues, has made the situation still worse, and now mayors and governors “stand before a dilemma: either to provide heat” to residents for the approaching winter “or to raise the pay” of those who work for them. It is clear that people are going to freeze.

            That likelihood, Kalashnikov concludes, will trigger social conflicts, both because people will be enraged by this arrangement and because some will flee particularly hard hit regions and come to the cities where they will add to the burdens of the metropolis and increase tensions between long-time residents and new arrivals.