Россия 2020 – Сценарии развития страны. Проект Московского Центра Карнеги


Center-Periphery Relations

The following executive summary examines the current state of federalism in Russia and its likely evolution over the next ten years. The central argument is that Putin’s efforts to centralize power have given the federal government greater control over regional politicians, but have not set the goal of stimulating beneficial regional economic development. The federal focus remains on continuing to exploit oil and gas rents. The key constraint on federal power is corruption and Putin’s reforms have done nothing to solve this problem. Corruption will define future developments as the federal government has little actual control over the regional bureaucracy. While the most likely future for Russia’s center-periphery relations is continuing centralization as the central government fine tunes its methods of control, the enduring high levels of corruption increase the likelihood of a series of catastrophic infrastructure breakdowns and/or environmental catastrophes, that combined with growing dissatisfaction with the incumbent authorities, could lead to a breakdown of the status quo system.

1. Current situation

Centralized power

What happens in the Russian regions is typically a function of what is going on in Moscow. If the central elite is relatively unified, there is little room for the regional elites to maneuver. However, if there is a split among the elite in Moscow, the regional elites can play central leaders against each other and exert greater influence on policy-making processes. Until relatively recently, there has been a consensus around the “Putinist” system that united the central elites.

After one decade of the operation of this system, political power in 2010 is centralized in Moscow in the hands of an authoritarian regime that seeks to control all of Russia’s key political institutions. Russia’s government has concentrated power in the national executive, particularly in the prime minister’s office. Most crucially, the leadership works hard to eliminate any form of uncertainty in Russian political life, particularly in elections, the media, and the courts. It has also cleansed the political field of any viable opposition.

In exerting its power, the federal government relies heavily on the price of oil. Since 2000 rising energy prices have provided the central leaders with the resources necessary to provide patronage for the governors. Maintaining the existing system is a costly undertaking since the top leaders use the country’s energy income to co-opt the federal and regional elites and maintain an increasing standard of living for the population.

Russian center-periphery relations are embedded in this broader context. Since Putin came to power at the end of 1999, the federal state has gained extensive control over regional politicians and policy-making processes. In the following sections, we lay out its methods of control and the limits to these controls. This analysis of the base line of the current system then makes it possible to think about possible future developments.

Mechanisms of Control

The federal authorities have an extensive set of tools that they can use to control the regions. These include:

  • Elimination of regional representation at the federal level. During his tenure as president, Putin consistently reduced the ability of regional interests to gain representation at the federal level.
  • Gubernatorial appointments. At the regional level, a key feature of the Putin-era reforms was replacing direct gubernatorial elections with presidential appointments. Expert analysis suggests that while the appointment of governors has simplified Russia’s political system and made it easier to control the regional executives, it has not improved actual management of the regions. In particular, the new system does not seem to contribute to economic growth outside the capitals of Moscow and St. Petersburg.
  • United Russia as a Dominant Party. The United Russia party serves as a mechanism for Moscow to exercise control over the regions. The party controls access to state resources, distributes key public offices, supplies goods and services to leaders, elites, and voters, helps ambitious politicians rise to more important offices, and resolves disputes among elites.
  • Eliminating and/or coopting the opposition. The result of all these policies is the lack of a viable opposition with access to the political system through which people can articulate and consolidate their policy desires. The absence of an effective opposition makes it difficult for the population to conceive of a realistic alternative to the current authorities.
  • Information gathering and management. The current regime is defined by its need to gather and manage information. At the federal level, Putin wields a monopoly on information in order to keep the oligarchs in line. Similarly, Russia’s federal leadership must have accurate data on the preferences of the population throughout Russia in order to ensure that its policies and performance in delivering public goods and services are sufficient to prevent an outbreak of unrest. Given the controlled nature of Russian elections and the limited nature of political discussion in the broadcast and print media, the authorities have to rely on the bureaucracy, special police, polling agencies, and free media sources. Much of this information is gathered for the purpose of controlling regional politicians, often through the use of blackmail.
  • Control over Taxing and Budgetary Powers. The federal authorities have traditionally maintained extensive control over the country’s ability to collect taxes and redistribute this income for centrally-defined purposes.
  • Ambitious, high-profile projects. In addition to the numerous controls listed above, the federal government has invested heavily in a number of ambitious projects seeking to boost Russian prestige abroad and, by reflection, among the residents of the country. The most obvious is the Olympic games to be held in Sochi in 2014 and the 2012 Asia-Pacific Economic Cooperation (APEC) summit in Vladivostok.
  • Use of Repressive Force. Finally, the federal government uses a wide range of repressive techniques in order to ensure that it stays in power. These include condoning an atmosphere in which there is essentially no accountability for murdering opposition activists and the use of police brutality against protesters.

Constraints on the Current System

While the federal government has extensive capacities to control the regions, it likewise faces enormous constraints in implementing its policies beyond Moscow. Some of the key factors limiting the exercise of state power, include:

  • Pervasive corruption. Russia’s leaders have long complained about corruption and have introduced a variety of programs ostensibly seeking to stamp it out. In practice, these plans have had little practical effect since they do not address the roots of the problem.
  • Principal-agent problems in controlling the governors. Even though the Russian president now appoints the governors, the regional executives do not necessarily have the same interests as their Moscow-based superiors. In a situation of asymmetrical information flows, the governors still have the ability to act autonomously despite the extensive resources available to federal officials.
  • Difficulty producing a new generation of leadership. In addition to maintaining control over current regional elites, central officials are having trouble identifying new ones.
  • Infrastructure disasters. Infrastructure breakdowns throughout Russia create periodic crises when such accidents occur. By themselves, such accidents do not call into question the legitimacy of the regime. But if there are enough of them and the authorities do not seem to respond in an adequate way, there could be political consequences.
  • On-going insurgent violence in the North Caucasus complicates consistent policies. The Russian government does not control its entire territory as it continues to fight an insurgency in the North Caucasus. This makes it difficult to impose a consistent policy across the country in such areas as holding jury trials.
  • Deterioration of Siberia and the Far East. Despite their rich supply of natural resources, Siberia and the Far East remain among the poorest regions of Russia.

2. On-Going Trends and Decisive Breakpoints

There are clear trends in Russia’s center-periphery relations that are likely to continue in a sustainable and linear fashion for the next decade. However, these trends also lead to potential breakpoints that are less predictable in advance. This section will examine each of these categories in turn.

Linear trends

On-going Corruption. Corruption is likely to continue to be a defining problem.

Tightening controls on the political system. A second on-going trend is the federal government’s tightening controls on the political system.

Efforts to promote economic reform without political change. Despite a clear federal desire to keep the federal system under tight political control, the federal authorities have demonstrated that they want to modernize Russia’s economy, making it work more efficiently and effectively. A central aspect of this effort has been the attempts to reduce natural gas subsidies to the population. Over the last decade, Russia has been slowly raising the prices that it charges to domestic households and factories, but these customers still pay far less than European energy customers.

Growing protests in the face of economic pain and political controls. In the wake of the global economic crisis, Russian consumers across the regions have been expressing growing unhappiness at the increased economic pain they have been feeling. These protests typically target higher taxes, bigger utility bills, general corruption, unemployment, a general drop in living standards in recent years. A small but vocal minority has been expressing discontent across a range of regional capitals.

Non-linear breaking points

In the short term, the most likely immediate source of problems for the regime is an incompetent response to a natural disaster or large-scale industrial accident. This scenario could develop in the following way: Due to corrupt oversight of infrastructure construction or maintenance, there is a catastrophic failure at a school, apartment house, dam or other facility, leading to numerous deaths.  If the federal government is unable to respond adequately to the problem, the result could be increased unrest in the regions questioning the legitimacy of the federal elites. Most likely one event of this nature would not trigger a legitimacy crisis, but several events in a short period could.

Such problems could also be caused by an environmental catastrophe that led to serious problems with the drinking water supply or severe air pollution in a major urban area. In many parts of the country, the environment is already under heavy stress, though currently there is not much evidence that more than a few activists care about these problems.

In the medium term, strains are likely to appear in the political system as the 2012 presidential elections approach, forcing Putin and Medvedev to lay out their future plans. An effort by Putin to return to the presidency potentially could provoke unrest among opponents who prefer a less politically-centralized system better designed to take into account regional interests through public political processes. There is currently little sign of such protests.

An embarrassing failure to prepare for the 2012 APEC meeting or the 2014 Sochi games could also call into question the regime’s legitimacy and competence.

Over the longer term, the absence of a coherent development policy could produce a set of regional leaders who are increasingly afraid to take any initiatives, leading toward political and economic stagnation. Such a system could exist for many decades since Russia will most likely benefit from high energy rents for the foreseeable future.

3. Russia-2020

In this section, we examine two possible scenarios for Russia’s future development. The first plots out current trends ten years into the future. The second focuses on an optimistic outcome for Russia.

Inertia scenario

Based on the current situation and the key trends continuing to move in the same general direction, Russia’s most likely future is political stagnation under a “Putinist” regime characterized by a managed (but largely inert) civil society, modest economic growth, and continued reliance on natural resource exports. Corruption will remain a defining feature of the system, with various government attempts to end the problem producing few concrete results.

There will be decreasing agreement among elite groups in the center about how to define Russia’s political system. The dominant groups will favor exerting political control as the most important objective of the system. A small but vocal minority of central elites will favor improving conditions for the development of small- and medium-sized business by waging a serious campaign against corruption and the practices associated with corporate raiding.

Given the on-going imposition of political control through the power vertical, politicians and businessmen will focus on maximizing short-term interests. Although some companies will invest in technology and import innovative new production techniques from the West, most will seek to profit from existing infrastructure. There will be little effort to build better roads or expand the Internet deeper into the regions.

Despite a lack of strong guidance from the center, regional elites will not feel empowered to innovate at the local level. Instead, they will devote resources to maintaining order, largely by working with the existing business elites in the regions. These groups will effectively keep regional markets closed and prevent the expansion of competition that would bring down prices and increase the availability of goods for local consumers.

Even though there will be growing discontent with the incumbent elites, the population will generally remain politically apathetic with few efforts to engage in public life. Efforts by motivated individuals to encourage greater participation in political parties, social watchdog organizations and environmental groups will generally fall flat. Most individuals will be focused on improving their private economic situation rather than seeking to enact broader social progress.

Big business in the form of energy companies, metals producers, financial institutions and a few consumer goods producers and distributors will still be the main links knitting the economy and country together. Such companies will be increasingly important for ensuring greater Russian influence in Siberia and the Far East. Small business will continue to grow at a moderate pace, but will not expand enough to transform local economic or political systems. In particular, small companies will have great difficulty overcoming the vast distances between Russian cities and markets in order to effectively grow into larger firms.

Optimistic scenario

A more optimistic scenario for Russia’s development would result from a split within the federal elite, with those prioritizing economic modernization gaining the advantage over advocates of maintaining extensive political control, leading to a more democratic system. In this scenario, a post-Putin elite would arise to power and immediately implement a program that seeks to provide greater transparency to the political process, encourage public participation and gradually reduce the amount of corruption in political decision-making. The authorities would slowly start to enforce the laws in a non-biased way and the population would slowly start to gain respect for the country’s political institutions, imbuing them with greater legitimacy. Both politicians and business leaders would stop focusing exclusively on short-term gains, allowing more effective investment in infrastructure projects, such as roads and expanded Internet access.

Despite the greater promotion of economic development over political control, there would continue to be a lack of agreement among federal elites about how best to diversify the Russian economy. While those in favor of maintaining political control seek to keep the main focus on the energy industry, seeing it a reliable source of income that will make it possible to shore up their political power, advocates of greater diversification argue that the development of new industries and sectors of the economy will help pluralize the political system and support such innovations as a way to increase their political weight within the system. Efforts to raise energy prices to local customers will continue, forcing industries to use energy more efficiently, but the level of subsidies will still remain large.

With the greater uncertainty in the center, the regional elites would feel more empowered to adopt innovative policies to pursue regional interests. With less focus on political control, regional elites could return to the political process and start advocating for regional concerns.

The greater transparency and slow reduction in the level of corruption would open the field for the greater development of small business to complement the existing large companies already operating. The expansion of jobs throughout the rest of Russia will encourage residents of the North Caucasus to migrate to areas where there were more opportunities, thereby facilitating somewhat greater stability in the North Caucasus.

4. The Impact of External Shocks

Russia’s federalism policy is vulnerable to a wide variety of external shocks. In particular, the Russian political system depends heavily on international commodity prices (particularly for oil and natural gas), threats posed by the rise of China, the recognition of separatist regions in Georgia as independent countries, and comparisons by Russians living in border regions to the living standards of their neighbors.

5. Steps needed to optimize the trajectory

Russia could take several steps to optimize its future trajectory in terms of center-periphery relations. Such steps would only start processes that would take much more than 10 years to complete, but at least they would put Russia on a more optimistic path for the long term.

The first step would be to restore regional representation in the electoral process. Such a step would restore single-member districts for Duma elections and allow residents of each region to elect their own governors.

Similarly, the restoration of political space for an effective opposition at the federal and regional levels would help launch a process that could significantly reduce the level of corruption in Russia. The revival of the opposition will make it possible for the Russian system to recruit and promote new political leaders much more effectively than it can through administratively generating lists.

A revived opposition would create greater space for citizens’ groups to appear. Russians are largely apathetic under current conditions, in part because they feel that they can have no influence over events in the public sphere. However, they do become active at certain times and under some conditions. Associations of car drivers have been active when state policies have a clear negative effect on individual rights, for example by significantly raising import duties or banning certain kinds of imported cars. Coal miners have also been actively organizing to protect their rights in the political sphere. Environmental and urban planning issues also serve as mobilizing causes.

The state should removal the current controls over television broadcasters. While a wide variety of information is readily available to many Russians, most citizens get information from television broadcasts. The extensive state controls over national and regional television prevent a wide social discussion of the key issues facing Russian society.

Effective implementation of these steps will make it possible for society to slowly address the roots of corruption. Reduction of Russia’s extensive corruption will in turn further push the evolution of a much more representative federal system that will be more flexible in responding to popular concerns.

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