Tuesday, March 31, 2009

Window on Eurasia: Economic Crisis Increases Tensions between Moscow and Regions

Paul Goble

Tallinn, March 31 – By the end of this year, only Moscow and St. Petersburg will remain as “donor” regions, sending more money to the central treasury than they receive back. And the others, both traditional recipient regions and those that have newly fallen into that category are in many cases seeking money from Moscow.
On the one hand, this decrease in the number of donor regions means that many of their residents are increasingly resentful for having to carry so many of the others. And on the other, the increase in the number of regions needing such funding has heightened tensions not only between them and Moscow but among them as well.
Up to now, these funding problems have not had significant political consequences given Moscow’s control of the appointment process, but if the crisis deepens and competition for scarce government money increase, the chance that these budgetary struggles will lead to more openly political ones will certainly increase.
Yesterday, Viktor Basargin, Russia’s regional development minister, noted that as a result of the budget crisis, the number of donor regions had declined from 11 at the end of last year and was if current projections hold set to fall to only the two capitals by the end of this year
Up to now, Moscow has been able to cover the budgetary shortfalls in most regions, and in some cases, enhanced federal subsidies have even allowed a few of them to increase spending on what would otherwise be unfunded liabilities, a trend that he said had angered officials in the central government and that cannot be allowed to continue.
Indeed, according to regional affairs minister, “the relative well-being of the recipients of funds from the federal budget and the problems of the donor regions mean that the New Testament injunction that ‘the last shall be first’” is being realized in the Russian Federation at the present time.
When the number of donor and recipient regions was more equal and when the center was getting more funds from the export of oil and gas, these differences and the tensions they inevitably generate were much less acute than they are now and the danger is that these differences and tensions will only continue to grow.
Such tensions, some commentators have suggested this week are especially serious in places where the center has promised funds for special projects and then not come through in order to pay for regularly budgeted items. In the Far East, currently not a single special project was now receiving the funding Moscow had promised (www.chaskor.ru/p.php?id=4869).
Sacrificing such special projects may be the only way the government has to spread the burden, but it means that some of the goals that Moscow had hoped to achieve such as lowering outmigration or increasing the birthrate or integrating the Far East with European Russia are not being met. Indeed, the trends in all these cases are moving in the opposite direction.
In the coming months, these budgetary battles are likely to heat up and spill over into the public domain, especially if populist leaders like Moscow Mayor Yury Luzhkov decide to go public, placing the blame for regional problems on the central government or arguing that each region needs to take more responsibility for itself.
That could power public protests in particularly hard hit regions if at any point the central Russian government decides or is forced to cut back more than it has. And all this could spark if not a challenge to the current authorities at least renew discussions on budgetary federalism and on the need to better guarantee that those who need help get it.

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