The Russian federal government continues with its move to assert control over the regions, and to spread United Russia’s influence throughout the country, to make the Party once again the unifying National Idea of Russia.

We see two criminal investigations initiated in the last three weeks against recalcitrant governors and the regional financial structures that finance them. In Khakasia, governor Alexei Lebed refused to fire a senator whom Sergei Mironov of the Federation Council wanted fired. He’s now being investigated by federal authorities for “vacations abroad at the expense of unspecified institutions of higher education”, which is about as serious an offence as you can find in Russia.

In Bashkyrtastan, meanwhile, the interior ministry has (according to Vedomosti) just opened an investigation into the senior managers of Bashneftekhim, part of the Bashneft holding group which is the main pillar supporting the local administration of president Rakhimov. The group may end up being bought by oil companies close to Putin, according to Vedomosti’s source.

In the Nenets Autonomous Okrug, an investigation was initiated in May into Governor Alexei Barinov, the last democratically elected governor in Russia, for allegedly taking a $700,000 bribe a few years back. Again, oil companies close to Putin were involved – state-owned Rosneft is in a battle with LUKoil over the region’s oil reserves.

Alexander Khloponin, the United Russia-loyal governor of Krasnoyarsk Krai, told me on my recent visit to Krasnoyarsk that these investigations “were federal structures upholding the law, not the president picking who stays and who goes”. That sounds like all the ministers and oligarchs who said the Yukos investigation was “just the law”– everyone sins in Russian politics, the question is whether you pay obeisance to the Kremlin while you sin.

In the Sakha Republic, meanwhile, the federal government continues its moves to consolidate control of Alrosa, the diamond monopoly, which is the central pillar supporting the local administration of Yegor Borissov.

It may look bleak for independent-minded governors, but it’s hasn’t all been one-way for the centralizing centre. Ramzan Kadyrov, for example, last week managed to persuade president Putin to halve the number of interior ministry troops in Chechnya by 2008, which is a remarkable concession considering how young and relatively untested he is.

Tatarstan, meanwhile, is in the process of negotiating a new treaty on its relations with the centre – the first treaty since 1994, when Yeltsin made good on his promise to give the region “all the sovereignty it could swallow”.

Reports have suggested the new treaty could curb Tatarstan’s powers. But, on a recent visit to Kazan, president Mintimer Shamiev’s economic advisor, Marat Safiullin, told me he hoped the new treaty would actually give the republic more control over its affairs.

He pointed to the region’s economic success (GDP was up over 20% last year in the region) and said: “We need to be free to do our reforms. We want to create joint ministries – merging the federal and regional ministries into one. After federal administrative reform, it’s very difficult to coordinate and improve planning. We’re saying ‘Give us the opportunity to control federal structures on our territory’”.

Mainly, these proposed changes would be in the economic sphere – so the region has more power over unemployment policy, over company registration, land ownership and external financing (the republic is limited, like all regions, to borrowing only up to 15% of its budget). But the republic also wants the power to give additional finance to its ministry of interior and police force.

Safiullin says he hopes the new agreement will be signed by September or October.

If the republic does win the concessions it hopes, it would show an interesting new trend in federal-regional relations: the centre rewarding successful regions with more responsibility over their affairs.

Thus, Chechnya is being rewarded for its success in quelling terrorist attacks on the mainland (however brutally it has done so), with greater autonomy over its security.

And Tatarstan is being rewarded for success in its economic reform policies, with greater power to continue those polices.

According to some regional politicians, president Putin is looking to alter the financial relationship between the centre and the regions in a similar way. At the moment, politicians from the 12 ‘donor’ regions – the ones who actually give money to the centre, such as Krasnodar, Krasnoyarsk, Tatarstan, Samara, St Petersburg etc – frequently complain that the present system is outdated, and that they are being punished for their success.

Aleksander Remezkov, deputy governor of the wealthy Krasnodar Krai, says: “The more we make profits here, the less we receive from the federal government. It’s not right, in my opinion. It reduces our incentive to increase profits locally.”

Marat Safiullin agrees: “We’ve done several important investment programmes over the last few years, such a programme to construct cheap apartments for our population. Now the federal government is undertaking a similar programme, but it won’t give us any money for it, just the regions which have done nothing. It’s rewarding laziness.”

Safiullin thinks the situation could be about to change. “There was a meeting of the GosSoviet in July, with the president and the heads of all the regions. Our president, Mintimer Shamiev, was one of those who complained about the present situation. President Putin agreed, and said the principal of financing federal programmes should change. There will be more free and open competition for federal funds, so the region with the best proposals will win funds, rather than the poorer regions, or regions with better connections to particular federal ministries.”

This sort of open competition for federal funds is already taking place as of June this year, with regions submitting proposals for federal support from the new ‘investment fund’ to the ministry of economy. The regions have to get their proposals analysed and ‘approved’ by a western investment bank or accountancy firm, and the ministry of economy in turn hires a western investment bank to work with it to assess the proposal. It is an attempt to make relations between the centre and regions more open, results-oriented, and less Byzantine and personalized.

It’s a good idea – setting up a framework within which regions can compete for federal resources, or for greater economic freedom over their affairs.

The question is how well the system works in practice. How open and competitive is the selection process, in practice? Are the western banks really independent guides or simply ‘window-dressing’– after all, it’s in their interest to approve projects, no matter how foolish and profligate, because they will get paid to finance them.

How reliable are the assessments of future profit which regions are producing in their pitches? Krasnoyarsk, for example, claims the PPP project in the Angara region, for which it successfully bid for federal funds in July, will generate around $15 billion in investment, and a 45% rate-of-return for the government. That seems ambitious.

Are such enormous projects really chosen on the basis of their profitability ratios, or because of personal relations? To what extent are federal funds still allocated to garner political loyalty from potentially rebellious regions (such as Tatarstan, which has also been a big winner of federal support under the new schemes)?

What happens to the poorer regions who can’t afford expensive consultants and flashy presentations? Will they be left behind, spurned by the ministry of economy because they don’t have the market know-how?

Finally, to what extent is the economic success of regions like Tatarstan or Krasnoyarsk, which enables them to hire expensive investment consultants, really down to ‘progressive’ economic reforms, or is it simply because these regions have the most natural resources?

Nonetheless, there are interesting developments taking place in regional politics, and not all of them indicate Soviet-style centralization.

Julian Evans, a British freelance journalist based in Moscow.

August 16, 2006