The Influence of National Policy on the Regions of Russia

In a Woodrow Wilson Center Director's Forum, Governor Mikhail Prusak of Russia's Novgorod Oblast' expressed his deep concern over the creation in the Russian Federation of seven federal districts intended to assist the federal government to strengthen its power over Russia's eighty-nine subjects.

During the 1990s, Russian regions seized a great deal of autonomy in setting their own economic and development policies. Prusak described how for over a decade his administration promoted the economic development of the region without help or hindrance from Moscow. Lacking natural resources that attracted investment to other Russian regions, Prusak focused on attracting foreign investment with tax incentives and progressive policies.

Shortly after his election, Russian President Vladimir Putin sought to reverse the devolution of power to the regions by creating seven federal districts to harmonize federal and regional laws and reassert federal authority. The reasons provided for establishing the districts -- promoting law and order, combating separatism, etc. -- seem reasonable, argued Prusak, but the actual result has been negative for the regional governments, as tax flows have been diverted to the new districts.

Prusak suggested that Putin's federal districts lump together diverse regions without regard to culture, history, or economic development, and recall the Soviet practice of shuffling borders at the whim of the central government. In fact, Prusak noted, the idea of dividing Russia into large districts originated with Yuri Andropov, who proposed converting Soviet Russia into 13 districts in the 1980s. Of special concern is that of Putin's seven federal districts, individuals with a military or KGB background head five.

Prusak expressed concern that over time the existence of the seven districts, and their control over regional funds, will return regional administrations to the Soviet-era strategy of seeking subsidies from the center rather than working for economic growth. The return to centralization will ensure the continued dominance of the five or six financial industrial groups (FIGs) that seized a great portion of Russian industry during the 1990s, and will have the effect of dampening the development of small businesses and enterprises in Russia that could compete with the FIGs.

Prusak concluded by declaring that President Putin enjoys unprecedented support from the Russian people, but that support does not translate into faith in his government or the heads of the seven federal districts. If Putin's drive to centralize power continues, in Prusak's estimation, faith in the government will erode even further.