February 1999

Federalism in Russia: How Is It Working?

Conference Report: 9-10 December, 1998

This conference was sponsored by the National Intelligence Council and the Bureau of Intelligence and Research of the US Department of State.  John Battilega of the Science Applications International Corporation served as rapporteur.  Additional copies of this conference summary can be obtained from the office of National Intelligence Officer for Russia and Eurasia, which can be reached at (703) 482-6297.

Federalism in Russia: How Is It Working?

Conference Highlights

On 9-10 December 1998 the National Intelligence Council and the State Department Bureau of Intelligence and Research jointly sponsored a conference that examined the current state of federalism in Russia. The conference consisted of 22 presentations from experts outside the government, interspersed with general discussion between the experts and government attendees. The agenda focused separately on global experiences with federalism, current institutional arrangements between the center and the regions, current political interactions between the center and the regions, and Russian regional views on federalism. The final session featured a competitive analysis of the case for and against disintegration. John Battilega of the Science Applications International Corporation served as rapporteur.

Conference participants did not endeavor to produce a coordinated summary of findings. Nevertheless, most participants seemed in agreement on some major issues. In addition, during the presentation and discussions, there emerged a number of points that seem particularly salient in evaluating the state of federalism in Russia. These highlights summarize those areas of agreements and especially noteworthy points, but, except as noted, should not be considered as necessarily representing the views of the conference as a whole or the conference organizers.

Contents

Conference Highlights

Section One: Opening Remarks

Section Two: Federalism in Practice: A Comparative Approach

Section Three: How Russian Federalism Is Working in Practice

Section Four: Russian Regional Views on Federalism

Section Five: How Real Is the Danger of Disintegration?

Appendixes

A.      Conference Agenda

B.       Speaker Biographies

C.       The Prospect for Disintegration Is Significant

D.       The Prospect of Disintegration Is Low

Section One

Opening Remarks

John Gannon, Chairman, National Intelligence Council

This conference is the latest in a series sponsored jointly by the National Intelligence Council and the State Department Bureau of Intelligence and Research. It is especially timely. Whither Russia and the future of Russia as a federalist state are everyday topics and encompass a complex set of issues. It is important to consider the issues in their entirety and to consider alternative outcomes. It is important to understand both the process by which federalism is forming in Russia, and it is equally important to understand why and how that process may fail.

This conference draws together a set of experts on the major underlying factors to discuss and dialogue in order to promote a greater understanding of the issues and of potential outcomes. The conference begins by addressing the general topic of federalism as it is practiced globally in order to develop a better foundation for understanding the circumstances of Russian federalism. The second session focuses on how Russian federalism seems to be actually working in practice. The third session examines the political interaction between the center and the regions, followed by a fourth session focused on Russian regional views on federalism. The final session features a competitive analysis to explore and discuss the possibilities of further disintegration.

It is our intent that the conference feature discussions and insights from all participants and a critical examination of the many complex issues associated with Russian federalism in the context of the Russian transition. For that, we are fortunate to have in attendance, both from within and outside the government, experts on all facets of this situation. The conference report that will summarize the deliberations will be extremely useful to both policymakers and analysts.

Section Two

Federalism in Practice: A Comparative Approach

George Kolt, National Intelligence Council (Chair)

When considering Russia today, two major questions concerning its future often come up. The first, and splashiest, is whether Russia is going to break up. The second question, and in my view the more important one, is the underlying question about how regionalism in Russia is actually working today. In this conference we will put the emphasis on that second question and, from that basis, explore the first question in our last session via competitive analysis of the alternatives.

To set the stage for the detailed examination of regionalism in Russia, the first session puts the Russian situation in the more general context of global federalism. Experts will address the experience of other countries that are dealing with the problems of establishing viable center-region relations. The first speaker will present a structural examination of federalism as it has evolved globally; subsequent speakers will address center-region relations in Germany, China, Nigeria, and Brazil. Our commentary will draw on these examinations to highlight some of the challenges facing Russia.

Douglas Verney, University of Pennsylvania: Issues of Federalism

Federalism is a form of government that differs from unitary forms of government in terms of the distribution of power between central and subnational entities, the separation of powers within the government, and the division of legislative powers between national and regional representatives. Federalism is a very familiar American concept, having been first invented in Philadelphia in the 18th century. In the United States, federalism is more than a form of government--it is a full concept of operations found abroad only in Switzerland.

There are lesser forms of federalism in other countries, and those forms can be divided into parliamentary federalism (for example, Canada), and presidential federalism (for instance, the Latin American countries). A true federation has both a distribution of political power specified in the constitution and a direct relationship between political power and the individual citizen. A new form of federalism--executive federalism--is also emerging in which major constitutional issues are decided by executives instead of by legislatures. Other emerging features include constitutionally specified representatives of local governments and three tiers of representation. Russia currently does not fit well into any existing category, with the Russian form of federalism still developing as a part of the Russian transition.

Carl Lankowski, American Institute for Contemporary German Studies: Federalism in Germany

Federalism is working well in Germany, probably because of several important historical characteristics that preceded the founding of the Federal Republic in 1949--a socially and culturally homogeneous population, a tradition of federalism going back several centuries, a strong sense of nationalism, and institutional experience with federal processes. World War II attenuated strong regionalism and resulted in a social leveling stemming from massive movement of the German population. The war experience also provided strong incentives for the creation of a system of checks and balances to prevent dictatorship in the future.

Constitutionally, Germany is a parliamentary state that has fusion between the functions of the executive and legislative branches, and a cooperative and interwoven distribution of executive, legislative, and judicial powers among three levels of government. There is a fixed revenue-sharing system specified in the Constitution and a true multiparty system that makes gridlock a distinct possibility on contentious issues. At the same time, the size and scope of German entitlement programs has led to executive federalism on some issues. The 1990 reunification created financial strain because of the large resource requirements of the former East Germany, and the membership of Germany in the European Union may create additional federalist issues, since some of the provisions of the EU actually contradict specifications of the German Constitution.

Joseph Fewsmith, Boston University: Federalism in China

China does not have a federalist system of government--it has no constitutional division of power. At the same time, issues of center-regional relations go back several thousand years. In 1978, China started to deliberately decentralize to promote economic development and political unity. China’s economic decentralization appealed to several favorable characteristics that differentiate China from the Russian situation: China’s economy had been decentralized to varying degrees since 1957, China’s centralized economic plan covered only about 600 products (vice about 20,000 Soviet products), and China had a large rural sector with an underutilized labor force.

Decentralization has been a major factor in China’s economic growth over the last decade. Some believe that this has created a de facto federalism that, once formalized, will lead to future Chinese democratization. Others believe that decentralization has created pressures that could lead to fragmentation. The Communist Party has provided a unifying force to date that has kept center-regional relations under control. At the same time, the Chinese leadership is aware of the pressures and potentials and is taking steps to try and restore greater control over the regions, although it is difficult to renege on powers once delegated. The more decentralized economic system has also created problems. Local control over the banking system has resulted in local investment priorities and more effective collection of local than of national taxes. Some have suggested that China will eventually formally institutionalize a federal system. This seems unlikely, given China’s long history of political power. At the same time, a better and more institutionalized relationship between the center and the provinces could lead to a de facto federalist system that might help China resolve problems with Tibet, and perhaps even Taiwan.

John Paden, George Mason University: Federalism in Nigeria

In theory, Nigeria is a three-tier federation, with local, state, and federal levels designated by federal law. Nigeria has seen itself as a federal structure since its transition from colonialism in 1960, although it has undergone periods of parliamentary and presidential federalism, followed by military centralized rule, and, most recently, efforts to transition to a civilian rule. Nigeria as a nation is an extremely complex structure, being comprised of 250 to 400 ethnolinguistic communities distributed throughout 36 states but grouped into six natural geocultural zones that are increasingly becoming a key element in the federal structure. The country is about half Muslim and half Christian and has an oil economy. Nigeria does not yet have an approved constitution. With six geocultural zones, it is difficult to ensure power-sharing in a democratic system in which the dominant geographic groups from the northern states can form coalitions with selected others. Current plans, however, are for a rotational principle that rotates six key executive/legislative offices among the zones for a five-year tenure.

Revenue-sharing difficulties revolve around three points: the relative proportions of federally collected revenues that should be assigned to the center; the appropriate formulae for distributing the central revenues among the states and localities; and the percentage of federally collected revenue that should be returned to the oil-producing states and communities. The most difficult challenge of transition from military to civilian rule may well be the shift from centralization to decentralization. Federalism may erode into a confederalism that in turn may lead to pressures for partition or secession. Fortunately, the focus on horizontal federalism across the 36 states and/or six geocultural zones has resulted in a general political culture of acceptance of the idea of equality of units in terms of access to political power. Nigeria, as Russia, is committed to federalism, but without the practical experience of devolution required to avoid the dangers of succession. At the same time, Nigeria has several indigenous traditions that, in effect, were profederalist models and a British pragmatic concept of experimentation.

David Samuels, University of Minnesota: Federalism in Brazil

Brazil and Russia have much in common. They both are large countries, have rich/poor disparities, and have current problems with organized crime. Both countries have been unable to solve severe macroeconomic and fiscal problems, have lagged in aggressive political and economic reform, have strong presidential institutions with difficulties enacting legislative change, and have a fragmented party system.

In Brazil many of the difficulties stem from several key elements of the federalist system that constrain presidential initiative and contribute to policy gridlock: a symmetric bicameralism in which the strong Brazilian senate forces the president to explicitly consider a regional balance of partisan forces, severe malaportionment and regional disparities in the legislature, a Constitution (the second longest in the world) that embeds many policies and procedures that other countries treat via ordinary law, a very high share of fiscal resources that remain with the subnational governments, very strong gubernatorial positions coupled with strong propensities for political leaders to seek gubernatorial vice national careers, and an extremely poor nationalized party system. This form of federalism has seriously constrained reform efforts by the national government. Given the strength of state interests within the national congress, the balance of forces in terms of intergovernmental relations in Brazil is unlikely to change in the near future.

Blair Ruble, Kennan Institute for Advanced Russian Studies, Commentator

Currently, in non-US countries, the issues of federalism are focused on real, and big, political issues that determine the relationship of the individual to the state. The important thing to contemplate is how to interpret global experiences with federalism in terms of the situation in Russia, to consider what has to happen for federalism to work in Russia, and to think about what will happen if it does not. There is a great deal of ambiguity in the Russian situation.

Historically, Russia has been a "tribute" state, with a strong impulse toward centralization. Moscow dominates Russia in a way that no other central government dominates its regions, and the party lists guarantee that Muscovites will get elected. The president has too much power, and it will be important to obtain a functioning system of checks and balances in the face of a strong impulse toward centralization. Indicators of countervailing forces in Russia will include competitive elections, a functioning central state that can distribute revenue, and a functioning court and legal system to define and enforce a process for dealing with conflict. Russia is not yet a federalist state, but it is evolving to become one.

General Discussion

In many of the countries discussed, there was a historical foundation for federalism and social prerequisites, with entities that freely bound themselves together. This is not the Russian experience. In Russia all regions view federalism as a zero-sum game, and many regions do not want to get together and compromise. One expert argued that the regions really want to stay a part of Russia and asked rhetorically where the funds would come from to support a separated region, given the very poor climate for foreign investment. In other countries, factors that have caused regions to bind together include a common perception of an external military threat, civil wars that have not resolved internal problems, and an expanding internal market. Most recently, the computer revolution, with information readily available, has been a countervailing factor to recentralization (for example, China and India). Taxation systems and how they evolve will be an extremely important indicator.

So far, the Russian transition has shown that, unless there is a legitimate enforcement mechanism, taxation and legal structures will not work. One individual also pointed out that functioning courts and laws have historically arisen over a long period of time from stable political systems. It was also suggested that any federal system is in a continuous process of evolution, and so Russia should be viewed in that context.

Section Three

How Russian Federalism Is Working in Practice

Jack Sontag, US Department of State (Chair)

This session will examine current Russian federalism and discuss how it seems to be working in practice. The presentations concentrate on Russian institutional relationships, their current structures, and the possibilities for the next generation of evolutions. The first part of the session focuses on institutional arrangements between the center and the regions; the second part examines their political interactions.

Part One

Institutional Arrangements Between the Center and the Regions

David Triesman, University of California at Los Angeles: Financial Arrangements

Over the last several years, the Russian Government has experienced a decline in federal tax revenues. In 1992 the federal tax revenue was about 18 percent of GDP; in 1997 it had dropped to 10.4 percent. During this same period, the revenue distribution to the regions exhibited a pattern of decentralization, followed by slight recentralization, and then more decentralization. In 1992 about 40 percent of the federal revenue was returned to the regions, increasing to 55 percent in 1993, dropping to 50 percent in 1995, and increasing again to 55 percent in 1997. In 1993-94 the regions were making greater cries for sovereignty, and the center was responding to the pressures.

It is important to note that agreements between the center and the regions have stabilized the revenue flow in the larger regions (for example, Sakhalin, Bashkortostan, and Tatarstan), but revenues have been falling in the smaller regions. The federal tax share from 1995 to 1997 was falling the fastest in Yamalo-Nenetsk AO, Lipetsk, Taymyr AO, Karelia, Khantiy-Mansiysk AO, Vologda, Magadan, Murmansk, Vladimir, and Irkutsk. These, for the most part, are northern regions. The center is trying to use fiscal policy to affect the regions politically and has in place a treasury system to transfer the funds; this is getting harder to do, however, because the center is collecting decreasing amounts of revenues. Another basic problem is how to get the profitable regions to subsidize the unprofitable regions. The drop in global oil prices is also factor, since this affects basic revenue flows into the oil-rich regions.

Peter Stavrakis, University of Vermont: Big Business and Banking

The recent financial crisis has resulted in the closure of over 1,600 banks, at least temporarily. 141B rubles are required for bailout, which the government does not have. By the time this situation is eventually sorted out, about half the banks will be permanently closed. Because of Russian banking accounting practices involving double and triple bookkeeping, it is difficult for the government to determine which are the strategically important banks. At the same time, the state has a strong incentive to do so and an opportunity to recapture control of the banking industry from the oligarchs.

In the regions, many banks are in better shape than in Moscow, since they participated less in the national pyramid schemes and stayed focused more on the local productive economy. The regional governors also recognize the banks as key financial instruments and are working to develop separate bases for financing, especially by more direct foreign investment. Moscow at the same time is working to prevent direct foreign financing of the regional banks. The new Director of the Russian Central Bank, Viktor Gerashchenko, is using his position to centralize Moscow’s control over financial institutions. This is also a major objective of the Agency for Restructuring Credit Institutions, created specifically to manage reforms in the financial sector.

Dale Herspring, Kansas State University: Military Relations

The situation in the Russian military has been deteriorating rapidly. Discipline has collapsed, pay is three years in arrears, equipment is antiquated, the budget is funding only 40 percent of what is needed, morale and readiness are at an alltime low, the officers and NCO’s are leaving in droves, and the general officers have become politicized. Military reform plans are meaningless because there are no funds to carry out the needed changes. It is interesting to think about the possibilities of a military coup to restore control in Russia, but for it to be successful would require an effort without resistance. With any significant opposition in Moscow, civil war is likely. This is because the military no longer has any of the characteristics associated with a well-structured military institution--it is no longer cohesive, and it lacks stability and predictability. At the same time, regional authorities are trying to court the military, and troops are dependent on the regions for food and fuel supplies. So far, the military does not appear to be acting autonomously from central authorities, but the situation is clearly moving in this direction. It seems unlikely that the military would initiate regional devolution; however, it may well split along regional lines under pressure. If the military collapses, hungry soldiers may also gravitate either toward the mafia or to criminal gangs. In fact, criminal activities on the part of both soldiers and officers has reached epidemic proportions.

It is becoming increasingly difficult to think of the military as a single institution. Instead, it is a body that is gravitating toward several militaries, with the most probable outcome being a form of military-supported warlordism from the regions. At the same time, it is important to remember that the military is a key part of Russian society and, as such, reflects conditions in society at large. The breakdown of central control within the military may not be currently as advanced as in the rest of society, but it is moving in that direction. The more Russia moves toward chaos and collapse, the more it will be reflected in the military, and the more it will raise the specter of civil war or further disintegration. The military is no longer a bulwark of Russian society, and a key question is whether the military will become a major part of the problems of the Russian transition rather than an element of the solution.

Timothy Frye, Ohio State University: Judicial System and Police Functions

A survey was conducted in 1996 to assess the degree to which the racket in Russia was actually functioning as a substitute for the judicial system and police functions. The survey was conducted in three citiesMoscow, Ul’yanovsk, and Smolensk. The term "racket," for the purposes of the survey, could range from organized crime to local economic associations or other organizations not associated with the local police or judicial system. The survey targeted shopkeepers and other similar enterprise owners.

The findings indicated a positive relationship between predatory regulation and contact with the racket, with the racket functioning as a substitute for the local police function, but less so for the court system. One conclusion is that, given the tax share they actually receive, local governments do have not incentives to provide the necessary services to shopkeepers; at the same time, economic liberalism is working because the shopkeepers are turning to the racket to satisfy their economic demands.

General Discussion

The discussion centered around two main topics: the importance of credible institutional arrangements and the Russian military. One expert argued that legal, legitimate, and functioning institutions have to be there for federalism to work. At the same time, the institutional arrangements that Russia inherited from the Soviet Union are decayed, and it is difficult to make the necessary transition to federalism. Another expert commented that institutionalization also depends on expectations, and there is a strong disconnect between current expectations in Russia and what the state can actually accomplish. There is a continuing disintegration of authority. It is important to have respected institutions--for example, the armed forces and the reserve banks--but these are not currently there.

The military discussion focused on the degree to which the armed forces may be shifting allegiance. Russia has no experience with localized military, but the regional authorities are clearly using general officers for local political purposes. At the same time, although the military is under great stress, the military leaders are not confused about where their allegiance lies--it is to Moscow. There is only limited anecdotal evidence to support a military devolution toward warlordism.

Part Two

Political Interaction Between the Center and the Regions

Nikolay Petrov, Carnegie Endowment for International Peace: Federal Power in the Regions

Russia currently exhibits more a character of competitive feudalism than competitive federalism. All federal structures are dependent on the regions. The disintegration that is under way is due, not to separatist desires, but because the center is not adequately taking care of regional needs. The governors are playing a decisive role in center-regional relations, but they are very diverse in terms of their views.

The regions are faced with a very complicated set of problems and are facing the end of the Yel’tsin regime without a clear idea of what comes next. At the same time, Primakov has indicated that he will start to pay more attention to the needs of the regions. There appear to be two possibilities for Russia: either the country will disintegrate in a soft way or delegation of authority to the regions will be greater.

Darrell Slider, University of South Florida: Regional Influence on National Politics

Russia’s 89 regions have played an active role in shaping the existing system of federal relations. The principal institutional framework for this influence is the upper house of the national assembly, the Federation Council. Although this institution could provide a mechanism for checks and balances between the center and the regions, in fact, so far the Federation Council has most often acted to disrupt the development of a normal federation by seeking to retain and expand regional powers far beyond that envisioned in any federal system. Moreover, the members of the Federation Council have purposely created gridlock in the legislative process in order to stall legislation that would encroach on their considerable powers.

In the absence of federal legislation, regions are allowed to pass their own laws on any given policy area. The goal pursued by most regional leaders is to preserve the current informal system that distributes power and resources on the basis of individual lobbying of central government officials. Given the extent to which regional lobbying defines the institutions of Russian federalism and the mindset of its principal actors, the most likely outcome will be a continuation of a bilateral negotiating game between regions and the center. Thus the prospects for the emergence of a genuine, effective federal system are remote for the foreseeable future.

General Discussion

Federations with national parties have fewer problems, and those have not yet developed in Russia. It takes time to form effective national parties (for instance, the United States had such a problem in its early days). There also need to be institutions and activities that promote cross-regional coalitions--for example, repeated presidential elections. One expert pointed out that some of the problems of center-regional relations in Russia look a lot like what is happening in Europe between the EU nations or between the subnational entities and the host countries. At the same time, another expert remarked that West European countries, by comparison, generally do not have presidents or strong parties, but they do have more law focused on the people’s interests and a functioning court system to enforce that law. Finally, there was a call for taking the long view on what is happening in Russia, considering a range of options and understanding how those options might come about and what they would probably mean in practice.

Section Four

Russian Regional Views on Federalism

Peter Clement, Central Intelligence Agency (Chair)

The topic of regional views on federalism is currently of great interest. It is important to better understand how the regions view federalism, their relationships to the center, and their relationships to each other. Seven presenters will examine these issues in nine different regions.

Marjorie Mandelstam Balzer, Georgetown University: Republic of Sakha (Yakutia)

Leaders of the Sakha Republic are searching for negotiated compromises with Moscow authorities that would represent an asymmetric federalism. Leaders and citizens feel let down by the lack of support from the center, for example, during the major Lena River flood of 1998. Recent economic crisis has exacerbated already serious problems with the nonfulfillment of the 1995 Bilateral Treaty. People see a direct correlation between their lack of salaries and the manipulation by the center of gold and diamond deals with foreign companies, particularly De Beers. The Sakha heads of Almaz-Rossiya view their company as stimulating long-term investments in the republic and also the Federation as a whole. In political terms, Sakha President Nikolayev initially had a personal, patron-client friendship with President Yel’tsin, but that has declined. Nikolayev is popular and populist, a legally elected president. He can ill afford to be an "ethnic entrepreneur," stirring Sakha nationalism in a republic where the Sakha are only about 40 percent of the population. A few opposition movements, or proto-parties, are forming--active in the Sakha parliament, the Il Tumen, and in preparation for upcoming presidential elections. My Yakutiany (We Yakutians) and Novaia Yakutia (New Yakutia) are each focused on creating a sense of multiethnic loyalty to the republic as a whole, not to just the titular ethnic group. Identity in the republic is multileveled: to local communities, to the international North (Northern Forum), to Asia (Japan and Korea), and to other Turkic republics (Tatarstan, Bashkortostan, and Turkey).

Within Rossiya, Sakha prefer far more than two unpalatable choices, recentralization or disintegration. Asking neither for their own army nor for their own currency, they expect to keep their internal borders. Novaya Yakutia politicians explain they could contribute more taxes to the federation if they were allowed to develop the republic’s mineral wealth. They call for mutual respect, beyond the politics of federal paternalism and Soviet legacies.

Ildus Ilishev, US Institute of Peace: Republic of Bashkortostan

The Soviet state was founded as a supranational entity. Federalism was viewed as a transitional form that would, within a short period of time, transform the traditional cultural, language, and religious identities of several scores of nations into a single and uniform Communist identity. Currently, the main questions are what foundations the renewed statehood will be built upon and whether new forms and principles can be developed for numerous ethnic groups to coexist. Bashkortostan, with 4 million people, is rich in natural resources and is second in industrial potential in the Ural economic area. In 1919, Bashkortostan was the only republic founded on the basis of a bilateral treaty. The republic negotiated a bilaterial treaty with the Russian Federation in 1994. The treaty provides for the maximum development of self-government in all elements of power. The role for the center is largely restricted to securing the unity and integrity of society, with regional governments entitled to own their material resources and to decide independently on all matters within their jurisdiction. To Bashkortostan, a treaty is a confirmation of a special legal status, sovereignty, and recognition of the right to independently solve issues related to local property, budget, legislation, judiciary system, and foreign trade.

Even though the best theoretical federalism for Russia is a constitutional federalism, a treaty-based federalism reflects current realities and is the only possibility for the compromises necessary to reflect individual differences between the regions. Treaty-based federalism will work until active secession becomes imminent, which is not the current case: the majority of the people in Russia want to live in Russia--their home. Baskortostan is making efforts to build a federation that would meet the interests of scores of different nations and peoples, ethnic groups, and communities within the new Russia. In fact, the Russian Federation is already functioning as an asymmetrical federation, and the only way to keep the Federation together is to ensure a constitutional recognition of its asymmetric composition.

Elise Giuliano, University of Chicago: Republic of Tatarstan

The Tatarstan formulation of federalism is "strong center, strong regions." As the ethnic homeland to Russia’s largest non-Russian ethnic population, Tatarstan was the first republic to lead a serious nationalist challenge to the integrity of Russia. In 1994 it was the first republic to sign a power-sharing treaty with Moscow, which became a template for center-regional agreements throughout the Federation. After 1994, Tatarstan changed its focus from increasing its political autonomy to increasing its economic autonomy, and especially to attracting investment. It passed a law allowing foreign ownership of land and tax breaks for joint ventures with foreign partners. Tatarstan has concluded trade agreements or joint ventures with 80 countries and is one of the few Russian regions that has entered the international arms market as an independent entity outside of Russian participation. Tatarstan has also been deliberately establishing relations with the newly independent states and with the other regions within Russia. At the same time, Tatarstan would like the structure of the Russian Federation to remain just as it is and vehemently opposes a change in status or a redrawing of boundaries for any regions, including its own. Its recent political interactions with the center demonstrate steady attempts to increase or maintain its autonomy, tempered by a commitment to stay a constituent member of the Federation.

Tatarstan continues to set trends in its economic and political relations with the center and with foreign countries by taking on responsibilities without waiting for Moscow’s permission. Tatarstan has positioned itself as a model for the other regions, and, via its actions, is defining what it means to be a successful region, creating expectations for both itself and for the other regions. Moscow is paying attention. Currently, Tatarstan has issued very strong statements concerning the possible unification of Russia and Belarus. President Shamiev has stated that, if Belarus unifies with Russia, he would take this opportunity to renegotiate the status of Tatarstan so that the republic would have equal status with Belarus. Tatarstan, therefore, continues to lead the challenge that the regions and republics represent to the federal center.

Dmitry Gorenburg, Harvard University: Republic of Khakasiya

Khakasiya, with a population of 600,000, of which 11 percent are ethnic Khakass, was organized in 1930 as an autonomous oblast that was a part of Krasnoyarsk. It is a wealthy region, rich in natural resources. It contains the largest hydroelectric dam and a major aluminum plant in Russia. Khakasiya became a separate republic in 1991, leading to a period of tension with Krasnoyarsk. Because of conflicts with the central government, Khakasiya did not begin to negotiate a bilateral treaty with Moscow until 1996, eventually signing it in 1997. Its nationalist movement has never been very strong, even though in 1998 the government announced that all schools would teach the Khakass language. Khaksiya has always seen itself as a constituent part of Russia: its Constitution does not even mention the republic as a state within Russia, instead referring to itself as a subject of the Russian Federation.

One key impact of Khakasiya on the structure of federalism came from its precipitation, as a result of the registration of Aleksey Lebed as a candidate for governor, of a decision as to whether the federal government had authority over local election laws. Lebed did not meet the seven-year residency requirement. In June 1997, the RF Constitutional Court ruled that local residency requirements over one year were unconstitutional, setting the stage for the eventual Lebed victory. The relationship between Khakasiya and Krasnoyarsk has smoothed since the election of the Lebed brothers as governors of the two regions. Khakasiya also has taken active part in cooperative agreements among Turkic republics, although limited by not being Muslim. At the same time, Aleksey Lebed recently instigated a tax revolt against Moscow, declaring after the financial crisis in August 1998 that Khakasiya would cease transferring funds to the federal budget. Khakasiyan attitudes suggest that the formal disintegration of Russia is not likely but also that a continued process, and eventual institutionalization, of decentralization is needed as a road to stability.

NikolayPetrov, Carnegie Endowment for International Peace: Krasnoyarsk

Krasnoyarsk is an extremely important Russian region. It is the second-largest region in Russia, is four times the size of France, is 3,000 kilometers long ranging from the Arctic to the southern border, and forms a wide belt dividing eastern and western Russia. The region is well known and well represented in Moscow and is a former major military-industrial base. Aleksandr Lebed was elected governor under an election organized under federal law to remove the residency requirements. There is a spectrum of political parties represented in the region, but none sufficiently coherent to provide organized opposition to Lebed. Local laws on government and on impeachment provide controls on Lebed’s power.

The size of the region also presents internal governing problems. For example, the mineral-rich revenue-generating northern city of Norilsk is combined with many lesser towns up to 1,500 miles southward under a single Duma representative in Moscow. Lebed’s activities inside the region are focused on trying to introduce new mechanisms designed to make Krasnoyarsk a model for all of Russia. Externally, Lebed’s political party has a few active and influential political supporters in each of the other Russian regions, all promoting the possibilities for regional cooperation.

Svetlana Tsalik, Stanford University: Sverdlovsk and Novosibirsk

Sverdlovsk and Novosibirsk Oblasts offer a good litmus test of developments in Russian federalism. Both were pillars of the Soviet military industrial complex and with the end of the Cold War have suffered above-average rates of decline in production. Both are centers of learning, are financial capitals of their macroregions, and have current governors that were dismissed by Yel’tsin after the events of October 1993 for defying Moscow. In the past, the two regions have been leaders in their respective macro-regions--the Urals and Siberia. Moreover, in both regions, the ousted governors were reelected not only as governors but also as heads of their respective regional economic associations. Despite strong similarities in the structure of their economies and in their political histories, the two regions have had markedly different rates of success in getting Moscow to respond to their needs. Principal grievances fall into four categories: center debt to the regional defense sector; center debt to the overall regional budget; devolution of expenditures to the regions (especially for higher education, hospitals, pharmaceuticals, and culture) without corresponding transfer of tax funds; and the appointment of federal officials in the region.

The principal differences in achieving successful resolution of grievances are due not to structural factors within the regions but rather to significant differences in the leadership style of their respective governors. Rossel, in Sverdlovsk, has been able to demonstrate his loyalty to Yel’tsin and has been rewarded not only with fiscal concessions but also with leeway to bypass federal law. Mukha, in Novosibirsk, has not demonstrated strong support for Yel’tsin and, as a result, Moscow has turned a deaf ear to Novosibirsk’s grievances. In the aftermath of the recent financial crisis, it is also clear that the relationship between the center and the regions should not be viewed as a zero-sum one. In fact, when Moscow gets weaker, the regions weaken too. In the current context, since the central government is unable to fulfill its budget obligations to the regions, Moscow may prefer letting them fend for themselves, even if they bend federal law to do it, rather than facing outrage and social protests if Moscow tried to strongly enforce the law.

Mikhail Alexseev, Appalachian State University: Primor’ye

Westernization through the Pacific gateway has been a historical aspiration of political elites in the Russian Far East. Communist rule was historically a major obstacle. Since the collapse of the Soviet Union, key political actors have had high economic incentives for integration with the Pacific Rim economies at the expense of economic ties to Moscow. Internationalization promised larger incomes from raw material exports, higher transit fees, more foreign investment, and modernization. At the same time, remaining under Moscow’s rule entailed higher electricity, transportation, and export-import tariffs; unpaid wages; power shortages; a defense burden; environmental damage; and redtape.

In spite of these apparent advantages for separation, Primor’ye’s regionalists have failed to develop enduring concepts of political institutions that are distinct and separate from those in the rest of Russia through which local elites could rule the region independently from Moscow. The Far Eastern Republic Freedom Party has enjoyed only marginal public support, and competition among major Russian political parties in Primor’ye has not focused on separatism. Without a political ideology of his own, Governor Nazdratenko’s strategy toward Moscow has been one of tough bargaining to secure economic interests for his key constituency in Primor’ye, made up primarily of industrialists and ex-party apparatchiks. Nazdratenko’s threats that lack of funding in Moscow would result in a mass proindependence movement in Primor’ye have failed to materialize, despite opportunities arising from the hard-hitting economic crisis. Unless new conditions give rise to new elites with a different perception of Primor’ye’s economic incentives and regional identity, an independent Maritime Republic will be a hybrid between a specter and a mirage. This situation also suggests more broadly for Russia that, absent a separatist political ideology in a region, political strategies are more likely to devolve into bargaining with the center over better terms of staying in power within existing institutions.

Robert Orttung, East West Institute: Saratov and Nizhniy Novgorod

The current governors of Saratov and Nizhniy Novgorod represent two very different case studies in attitudes toward Russian federalism. In Saratov, Governor Ayatskov, one of the most prominent regional leaders, supports a strong center. He does not advocate enlarging the regions, nor does he favor an asymmetric form of federalism. Personal motivations form a strong part of his rationale: he openly aspires to be prime minister of the Russian Federation. He did sign a power-sharing agreement with Moscow on 4 July 1997, while at the same time being generally critical of such treaties because they exacerbate inequalities. Although he resents granting privileges to individual republics, at the same time he also does not always follow the lead of the center in terms of his actions within the Saratov Oblast. He is not popular with many other governors of the Greater Volga region, who resent his efforts to try and make Saratov the capital of the region.

In Nizhniy Novgorod, Ivan Sklyarov succeeded Boris Nemtsov in 1997. Nemtsov had transformed the region into a showcase of reform. Sklyarov considers himself a social democrat who rules in the style of Moscow mayor Yuriy Luzhkov, with whom he has generally maintained close ties and explicitly backs. He is a popular governor and works well with the other regions. He avoids controversial comments on the federation structure but advocates devolving federal power to allow the regions to better coordinate local actions of police, tax police, and bankruptcy agencies. He also ignores federal laws when it is expedient to do so.

Section Five

How Real Is the Danger of Disintegration?

George Kolt, National Intelligence Council (Chair)

The last session before the general discussion will explore whether the danger of disintegration is real or not. This will be done by the analytic method of competitive analysis. Without assigning probabilities of disintegration, one paper, presented by Alexandr Nemets, will take the position that disintegration is likely. A second paper, by Thomas Graham, will present the view that disintegration is unlikely. In both cases, the presenters have been asked for analytic purposes to interpret events in Russia from their respective competing points of view. Neither necessarily represents a forecast, but rather an interpretation that provides data for a general discussion of the topic.

Before the general discussion there will also be a special presentation by Andrey Fedorov from the Russian Council on Foreign and Defense Policy in Moscow. He will discuss the results of a recent special report on Russian federalism that will be the basic document for meetings to be held in February between the center and the regional governors.

The Prospect of Disintegration Is Significant

Alexandr Nemets, Science Applications International Corporation

(Abstract) The overall situation in Russia has deteriorated to the point that separation is becoming the only way of survival for many of the regions. By the beginning of 1998, already Russia has become a "half-broken country." From 1989 to 1998 human losses approached 14 million people, the number of children below the age of five had decreased almost two times, the medical service and educational systems were devastated, and the number of drug addicts had increased tenfold. The technological potential has been half destroyed, with the wiping out of modern industries and serious depletion of industrial capital funds. Only export-oriented raw materials producers have managed to survive. GDP and industrial outputs have decreased by a factor of 2, coupled with a very large foreign and internal debt. At least 40 percent of the population are living below the poverty line, the rule of crime has replaced the rule of law, and the central government has lost control of the situation in the country. In addition, wealth has become concentrated in several major cities of European Russia, and the peripheral regions, especially Eastern Siberia and the Russian Far East, have become objects of exploitation for the profit of Moscow’s political and economic elite.

This overall situation has created significant pressures and movements for separation, especially in the eastern regions of Russia. The recent financial events of March-August 1998 have virtually eliminated the chances for reversing the trends and have made disintegration of Russia unavoidable. The majority of the Russian people are ready for such a development. (The full text of this paper is contained in appendix C.)

The Prospect of Disintegration Is Low

Thomas Graham, Carnegie Endowment for International Peace

(Abstract) Ever since the demise of the Soviet Union, Russians and foreign observers have debated whether Russia itself would eventually break up. The debate has ebbed and flowed with the intensity of the political struggle in Moscow. There is a logic to this: disarray in Moscow has allowed the more ambitious regional leaders to seize more power locally while compelling the more timid to assume more responsibility as a matter of survival. The debate reemerged with renewed intensity in the wake of the financial meltdown, and ensuing economic and political turmoil, of this past August. Regional leaders acted unilaterally in setting price controls and forbidding the export of certain products, primarily foodstuffs, from their regions. Some spoke of creating local currencies or gold reserves. Yevgeniy Primakov, at the time of his confirmation as Prime Minister in September, warned that there was a growing danger of Russia’s splitting up and vowed to take tough steps to avert it. Whether he was exaggerating for political effect is an open question.

Be that as it may, a review of fundamental conditions and trends suggests that Russia is unlikely to break up in the next decade, even though the state will remain weak or grow weaker. There are numerous factors--economic, social, and political--that tend to unify the country, and there are no outside powers now prepared to exploit Russia’s strategic weakness for territorial aggrandizement, nor are any likely to emerge soon. The real issue is how power will be distributed within Russia and the implications of that distribution for Russia’s ability to govern itself effectively and to project power abroad. (The full text of this paper is contained in appendix D.)

A Recent Russian Study of Center-Regional Issues

Andrey Fedorov, Council on Foreign and Defense Policy (Moscow)

The current situation is difficult. The federalist model proposed in 1993 is not working. The process of signing treaties was motivated more by political than by economic factors. Some of the treaties were bad, and the amendments were bad. This situation could lead to a revision of all of the treaties and replacement with a more unified approach. The mode of ratification will be an important legal issue. Currently, there are also 123 cases of direct contradiction between the Constitution and local legislation. The mechanism for resolving these contradictions is itself unresolved. There is also a need for some form of reunification. Russia is not actually 89 pieces but approximately 20 or so with clearly distinguishing characteristics. It would be a good idea for economic reasons and would significantly simply federalist governance to recombine into a smaller number of regions. How to do this in practice without breaking up the country is unresolved. A majority of the governors are against such an action.

The current budget is also not the budget of a federalist state: every governor has "out of budget" funds that in some cases are larger than the budgeted amount. Only six regions tried to escape paying taxes to Moscow, and, even though some of the regions are bankrupt, they became that way because of local policies. There also is no real danger of widespread hunger: that is a misperception based on state statistics that do not reflect much unreported economic activity. There are some problems in the north, and in Moscow there currently is a problem with the meat supply. There are several strong factors working directly against the possibility of disintegration: the financial crisis of 17 August demonstrated to the regions that they cannot stand alone; there are no strong political forces for disintegration in the majority of the regions, the Communist Party is serving as a de facto unifying force; and there are no groups of governors ready to work for the disintegration of the country. The regions are not facing separatism, but economic isolation, in a situation in which they do not all have common financial backgrounds. In the Siberian regions, people are more afraid of the growing Chinese influence in the region than of disintegration of the country. It is possible that, in February or March, Moscow will be forced to devalue the ruble once again. The biggest overall problem is the health of Yel’tsin. If he dies, it will create more problems for federalism, since the regions will be divided between the candidates for the new president.

General Discussion

The theme was the set of factors working for or against separation. An issue cited as the principal catalyst for separation was the lack of a functioning center. One expert argued that the most serious issue was not political, but rather the collection and distribution of tax revenues. The coming presidential election is also a key factor since it will divide the governors and will make resolution of the important issues very difficult until a new president is elected. Even then, solutions will emerge quickly only if the president’s political party has a majority in the Duma. The economic issues are serious, but the key factor is political stability. The lack of viable economic alternatives was also discussed as a factor working against separation. Foreign economic alignments are not likely, nor is significant foreign investment. The army was also cited as a powerful unifying element, since it has clearly declared its allegiance to the center. There are also clear constituencies in the regions for staying in the Russian Federation. Another expert suggested that the risk for regions who should leave Russia today is much greater than the risk to Russia without the regions.

A major problem is the weakness of the state at both the national and the regional levels. At the same time, the regions are working with each other in many capacities, and most of the regions have established interregional offices, which actually make it easier to work with another region than to work directly with Moscow. There are no national concepts of reform emerging, and there is decreasing willingness of local leaders to accept the idea of nationwide reform. One expert argued that the eventual outcome will be a constitutional revision that will result in a more coherent federation, but definitely not a loose confederation. Another expert argued that Russia could either continue decline in the fashion argued by Mr. Nemets or, as an alternative, a young and lively president could be elected who leads a national political party to victory and turns Russia’s decline around. Others argued that further disintegration will not necessarily result in secession, but rather a looser form of center-regional relations and a form of federalism that will only emerge as a result of a much longer term process. Russia is forming a governmental structure at the same time it is shifting to a market economy and attempting to create new political, economic, and social systems. Russia has historically demonstrated tremendous resilience. The analogy to Sikorsky’s bumblebee was suggested, referring to a passage in which he argued that "By all laws of aeronautics, the bumblebee should not fly. But it keeps flying. Maybe the bumblebee does not know that."

Appendix A

Conference Agenda

Federalism in Russia: Is It Working?

Meridian International Center

1630 Crescent Place N.W.

Washington DC 20009

Wednesday, December 9--Thursday, December 10, 1998

Wednesday, December 9, 1998

8:30 a.m.

Registration and Coffee

9:00

Opening Remarks

John Gannon , Chairman, National Intelligence Council

9:20

Federalism in Practice: A Comparative Approach

What are the main characteristics of federalism? What are the main problems that arise in the development of federal systems? What political, economic, social,or other factors have contributed to success or failure in different countries? Are there common threads among them?

George Kolt , National Intelligence Council (Chair)

Blair Ruble , Kennan Institute for Advanced Russian Studies, Commentator

Issues of Federalism

Douglas Verney , University of Pennsylvania

Germany

Carl Lankowski , American Institute for Contemporary German Studies

China

Joseph Fewsmith , Boston University

Nigeria

John Paden , George Mason University

Brazil

David Samuels , University of Minnesota

12:00 p.m.

Lunch

1:15

How Russian Federalism Is Working in Practice

Jack Sontag , US Department of State (Chair)

Part One

Institutional Arrangements Between the Center and the Regions

Financial Arrangements

What are the main features of the Russian system of federal transfers and tax collection? What are its strengths and weaknesses, and how is it evolving? Are the regions gaining greater control over revenue generated on their territories? What levers do Moscow and the regions have to increase their control?

Daniel Treisman , University of California at Los Angeles.

Military

To what extent, if any, are civil-military relations in the regions changing as a result of the weakening center? Is national command and control over the military eroding? What are the prospects for the formation of de facto regional armies and/or warlords?

Dale Herspring , Kansas State University

Judicial System and Police Functions

To what extent are judicial officials, police, and security services loyal to Moscow as opposed to local officials? Does this differ by region?

Timothy Frye , Ohio State University

Big Business and Banking

What sort of role and influence do the financial oligarchs have in the regions? Has this role changed since August? Are the roles of the Central Bank and Moscow-based banks diminishing in the regions? What is the outlook for the near future?

Peter Stavrakis , University of Vermont

Break

Part Two

Political Interaction Between the Center and Regions

Federal Power in the Regions

How and to what extent is Moscow able to exert influence in the regions? What role are the presidential representatives playing? What sort of economic levers exist?

Nikolay Petrov , Carnegie Endowment for International Peace

Regional Influence on National Policies

How and to what extent are regional leaders--either individually or collectively--able to influence Russian domestic and foreign policies? What levers do they have? What role is the Federation Council playing?

Darrell Slider , University of South Florida

Thursday, December 10, 1998

8:30 a.m.

Coffee

9:00

Russian Regional Views on Federalism

What role are some republics and oblasts playing in the development of Russian federalism? Is there a common thread? How do they view the shape of the Russian Federation and their role in it? How are the republics and oblasts interacting with neighboring regions? Are regional associations acquiring any strength?

Peter Clement, Central Intelligence Agency (Chair)

Republic of Sakha (Yakutia)

Marjorie Mandelstam Balze r, Georgetown University

Republic of Bashkortostan

Ildus Ilishev , US Institute of Peace

Republic of Tatarstan

Elise Giuliano , University of Chicago

Republic of Khakasiya

Dmitry Gorenburg , Harvard University

Sverdlovsk and Novosibirsk

Svetlana Tsalik , Stanford University

Primor’e and Khabarovsk

Mikhail Alexseev , Appalachian State University

Saratov and Nizhniy Novgorod

Robert Orttung , EastWest Institute

12:00 p.m.

Lunch

1:00

How Real Is the Danger of Disintegration?

What are the main centripetal and centrifugal forces affecting the Russian Federation? What are the main indicators we would expect to see that would point to either the strengthening or disintegration of the Federation? Based on the mix of factors discussed at the conference, what sort of Russia do participants expect to emerge once a stable system takes hold? How long is the process likely to take? What are the implications?

George Kolt , National Intelligence Council (Chair)

The Prospect of Disintegration Is Significant

Alexander Nemets , Science Application International Corporation

The Prospect of Disintegration Is Low

Thomas Graham , Carnegie Endowment for International Peace

A Perspective From Moscow

Andrey Fedorov , Council on Foreign and Defense Policy (Moscow)

4:20

Concluding Remarks

Appendix B

Speaker Biographies

Mikhail Alexseev is Assistant Professor of Comparative Politics and Post-Soviet Studies at Appalachian State University, a member institution of the University of North Carolina. Previously he was a post doctoral research fellow at the Henry M. Jackson School of International Studies at the University of Washington. He also has been a guest lecturer at the US Air Force Special Operations School and a research scholar at the Kennan Institute for Advanced Russian Studies.

Marjorie Mandelstam Balzer is Research Professor at Georgetown University in the Sociology Department and the Center for Eurasian, Russian, and East European Studies (CERES). A sociocultural anthropologist, she is the editor of the journal Anthropology and Archeology of Eurasia. She has taught at Grinnell College, University of Illinois, and University of Pennsylvania and has held postdoctoral research appointments at Harvard, Columbia, and the Wilson Center’s Kennan Institute.

John Battilega is Corporate Vice President and Director of the Foreign Systems Research Center of Science Applications International Corporation. Since 1977 he has directed a research team focused on Russia/Eurasia. From 1992 to 1996 he also led teams of American specialists working in Russia on defense conversion. Dr. Battilega has been a senior consultant to the Intelligence Community and the Office of the Secretary of Defense for more than 20 years. He recently directed a study for the National Intelligence Council that analyzed alternative stable futures for Russia in the 21st century.

Peter Clement is the Issue Manager for Russia in the Office of Russian and European Analysis at the Central Intelligence Agency. He has spent most of his 30-year career at the CIA and has held a variety of analytical and managerial positions. Dr. Clement has published numerous articles and books on Soviet foreign policy, Russian domestic politics, and politics in Central Asia.

Andrey Fedorov has been Political Project Director of the Council on Foreign and Defense Policy (CFDP) since 1997. Previously, he was adviser to the Prime Minister of the Russian Federation (1989-90) and Deputy Foreign Minister (1990-91). The author of numerous publications, Mr. Fedorov is also Chairman of the Political Research Fund and adviser to the International and Legal Committees of the State Duma.

Joseph Fewsmith is the director of the East Asian Interdisciplinary Studies Program and Associate Professor of International Relations at Boston University. He is the author of Dilemmas of Reform in China: Political Conflict and Economic Debate and Party and Local Elites in Republican China. Dr. Fewsmith has written numerous articles on the politics and economics of contemporary China and is the editor of The Chinese Economy, a journal of translations published by M. E. Sharpe.

Timothy Frye is currently an Assistant Professor in the Department of Political Science at the Ohio State University. He has written about post-Communist presidencies, the Russian equities market, and small business in Russia and Poland. Dr. Frye is now working on a project comparing the development of legal institutions across Russia and Poland.

John Gannon was appointed Assistant Director of Central Intelligence for Analysis and Production in June 1998. He continues to serve as Chairman of the National Intelligence Council, a position he has held since July 1997. Previously, he served as Deputy Director for Intelligence. Before that position, he served as Director in the Office of European Analysis.

Dmitry Gorenburg is a Research Associate at the Program on Cold War History Studies at Harvard University’s Davis Center for Russian Studies and a doctoral candidate in that university’s Department of Government. He currently is completing his dissertation, entitled "Nationalism for the Masses: Minority Ethnic Mobilization in the Russian Federation." Mr. Gorenburg has conducted research in several republics of the Russian Federation, including Bashkortostan, Chuvashia, Khakasiya, and Tatarstan.

Thomas Graham recently joined the Carnegie Endowment as a Senior Associate in the Russia/Eurasia Program. Previously, he was a Foreign Service Officer on academic leave with RAND in Moscow from 1997 to 1998. From 1994 to 1997, he served as Head of the Political/Internal Unit and then Acting Political Counselor at the US Embassy in Moscow. Dr. Graham has also served on the Policy Planning Staff at the State Department and as a Policy Assistant in the Office of the Under Secretary of Defense for Policy.

Elise Giuliano is a doctoral student in the Department of Political Science at the University of Chicago. Her research concerns ethnonationalist mobilization in Russia’s republics. She has worked for USAID on a privatization project in Novgorod, Russia, and has conducted extended research in Tatarstan, Russia. Ms. Giuliano is the recipient of a Fulbright-Hays Doctoral Dissertation Research Fellowship as well as grants from the John D. and Catherine T. MacArthur Foundation and the Mellon Foundation.

Dale Herspring is Professor and Head of the Political Science Department at Kansas State University. Before joining the faculty, Dr. Herspring spent more than 20 years in the Foreign Service. He spent from 1991 to 1992 as a Senior Fellow at Woodrow Wilson Center for International Scholars and during the 1992-93 academic year served as Professor of International Relations at the National War College. Dr. Herspring is the author or editor of seven books and more than 40 articles on civil-military relations in Germany, Eastern Europe, and the former Soviet Union.

Ildus Ilishev , currently a Senior Fellow at the United States Institute of Peace, is chief expert to the administration of the President of Bashkortostan in the Department of Foreign and Ethnic Affairs. He is also senior researcher at the Russian Academy of Sciences’ Ufa Center, Institute of History, Language, and Literature. Since 1994, he has been a consultant to the Committee on Nationalities in the Duma, the Russian Parliament’s lower house. His fellowship at USIP will culminate in a book on the relationship between language and politics in a multiethnic state.

George Kolt has served since 1992 as National Intelligence Officer for Russia and Eurasia in the National Intelligence Council. Early in his career, he specialized in Soviet and European Affairs while serving in politco-military, intelligence, and academic assignments in the Air Force. He was detailed to the National Intelligence Council in 1981 first as the Assistant National Intelligence Officer for the USSR and then from 1984 to 1986 as the National Intelligence Officer for Europe. After retiring from the Air Force, he headed the Directorate of Intelligence’s Office of Soviet and then Slavic and Eurasian Analysis from 1986 to 1989.

Carl Lankowski directs the research program at the American Institute for Contemporary German Studies. Before joining AICGS, he served on the faculty of the School of International Service at the American University. Dr. Lankowski’s research activity has focused primarily on issues of European regional integration, such as European Investment Bank, the impact of Economic and Monetary Union on German politics, and the "social dimension" of European integration.

Alexandr Nemets is a researcher at the Foreign Systems Research Center at Science Applications International Corporation (SAIC). Previously, he was a visiting research fellow at the Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota. An expert in analysis of separatist trends in Russia, Dr. Nemets is the author of numerous publications in the United States and Russia.

Robert Orttung is a Senior Research Analyst at the EastWest Institute in New York. Previously, he was a senior research analyst covering Russian domestic politics at the Open Media Research Institute in Prague. He also has taught at Florida International University in Miami and the University of California, Los Angeles. The author of two books and numerous articles, Dr. Orttung contributes to the Economist Intelligence Unit’s Business Russia and is senior editor of the EWI Russian Regional Report.

John Paden is the Clarence J. Robinson Professor of International Studies at George Mason University, where he has been active in the graduate program in International Transactions, and at the University’s Institute for Conflict Analysis and Resolution. The author of Religion and Political Culture in Kano, Dr. Paden was a professor at Ahmadu Bello University in Zaria, Nigeria, and the first Dean of the Faculty of Social and Management Sciences at Bayero University in Kano, Nigeria.

Nikolay Petrov leads a research project on Russian elections at the Carnegie Moscow Center and is consultant to the project on Politics and Society in Transition. He is the founder of the Center for Political-Geographic Research, an independent think tank monitoring regional social-political developments in Russia. From 1990 to 1995, Dr. Petrov served as an expert to the Russian parliament, government, and presidential apparatus.

Blair Ruble is currently Director of the Kennan Institute for Advanced Russian Studies of the Woodrow Wilson Center. He also serves as Co-Coordinator for Comparative Urban Studies at the Wilson Center. He worked previously at the Social Science Research Council in New York and at the National Council for Soviet and East European Research in Washington. Dr. Ruble is currently engaged in research examining evolving urban patterns and urban management arrangements in post-Soviet Russia.

David Samuels is currently the Benjamin E. Lippincott Assistant Professor of Political Science at the University of Minnesota. Professor Samuels specializes in Latin American politics and the comparative study of political institutions, with particular emphasis on Brazilian politics, electoral systems, political parties, legislatures, and federalism. He is the author of forthcoming articles in Comparative Political Studies and has received grant support from the National Science Foundation.

Darrell Slider is Professor of Government and International Affairs at the University of South Florida. A specialist on Russian regions, Dr. Slider has published numerous articles and chapters on regional politics, economic development, privatization, and federalism. He is also coauthor of the book The Politics of Transition: Shaping a Post-Soviet Future.

Jack Sontag is Chief of the Russian Division in INR’s Office for Analysis of Russia and Eurasia. He has worked on Soviet, Chinese, and Russian affairs for the US Government.

Peter Stavrakis is currently Associate Professor of Political Science at the University of Vermont and editor of the journal Problems of Economic Transition. From 1994 to 1997, he served as Deputy Director of the Kennan Institute for Advanced Russian Studies. His works include articles on contemporary Russian and Ukrainian politics, Russian regionalism, the effectiveness of US foreign assistance, and bureaucratic reform in the Soviet successor states.

Daniel Treisman is an Assistant Professor of Political Science at the University of California, Los Angeles, and a National Fellow at the Hoover Institution, Stanford. His research focuses on the politics and economics of Russia as well as comparative political economy. His book, After the Deluge: Regional Crises and Political Consolidation in Russia, will be published by the University of Michigan Press in spring 1999.

Svetlana Tsalik is a doctoral candidate in political science at Stanford University. She is writing her dissertation on the regulation of center-regional relations in weak states. As a doctoral research affiliate to the Carnegie Endowment for International Peace in Moscow from January to August 1998, she conducted field research on this topic, concentrating on four Russian regions: Sverdlovsk Oblast, Novosibirsk Oblast, and the Republics of Sakha and Kalmykia. She is the author of several publications on Russian federalism.

Douglas Verney is a Visiting Scholar in Political Science, an Adjunct Professor in South Asia Regional Studies, and a Fellow at the Center for the Advanced Study of India at the University of Pennsylvania. Previously he was Professor of Political Science at York University in Britain and Visiting Professor at Princeton University. Dr. Verney is the coeditor of Multiple Identities in a Single State: Indian Federalism in Comparative Perspective as well as many articles, monographs, and chapters.

Appendix C

The Prospect for Disintegration Is Significant

Alexandr Nemets

Science Applications International Corporation

Summary

The overall situation in Russia has deteriorated to the point that separation is becoming the only way of survival for many of the regions. By the beginning of 1998, already Russia had become a "half-broken country." From 1989 to 1998 human losses approached 14 million people, the number of children below the age of five had decreased almost two times, the medical service and educational systems were devastated, and the number of drug addicts had increased tenfold. The technological potential has been half destroyed, with the wiping out of modern industries and serious depletion of industrial capital funds. Only export-oriented raw materials producers have managed to survive. GDP and industrial outputs have decreased by a factor of 2, coupled with a very large foreign and internal debt. At least 40 percent of the population is living below the poverty line, the rule of crime has replaced the rule of law, and the central government has lost control of the situation in the country. In addition, wealth has become concentrated in several major cities of European Russia, and the peripheral regions, especially Eastern Siberia and the Russian Far East, have become objects of exploitation for the profit of Moscow’s political and economic elite. This overall situation has created significant pressures and movements for separation, especially in the eastern regions of Russia. The recent financial events of March-August 1998 have virtually eliminated the chances for reversing the trends and have made disintegration of Russia unavoidable. The majority of the Russian people are ready for such a development.

Russia Is a Virtually Broken Country

In 1998, Russia, due to continual deterioration since 1989, is a virtually broken country. This is due to several factors.

If the 1989-98 growth in population were to have occurred at the same level as in 1986-88, then in this period the population would have increased about 9.5 million. In reality, by preliminary data, the "natural decrease" of population during these 10 years was about 5 million people; as a result, Russia lost at least 14 million people, which would comprise about 10 percent of its present population. It should be emphasized that the eastern regions of the country, first of all, the Russian Far East, suffered in maximal degree from depopulation processes. It is expected that drastic deterioration of the social-economic environment in Russia in August 1998 (the "August 17 catastrophe") will result in further decrease of birth rate and growth of mortality, so by the year 2000 accumulated human losses may approach 20 million. This will occur even in the case of "peaceful" situation development without serious internal conflicts or large-scale famine.

Malnutrition is also a factor. Even before the "financial catastrophe" of August 17, 1998, malnutrition transformed into a scourge of Russia. In 1996-97, the average consumption of meat products fell to the 1960 level, and fish products to the 1950s level. Simultaneously, nutritional value decreased from 3,200 to 3,300 cal a day in 1990 to 2, 300 to 2,400 cal in 1997. And half this quantity was provided by bread and potatoes. It seems that the average nutrition level and consumption of major food products in Russia "returned" by 1997 to the beginning of the 1960s level.

The situation in food consumption was the worst in the eastern regions of Russia, where in 1997, and especially in the first half of 1998, a large part of the people dealt with real hunger. The situation became much worse, however, after August 17. Hunger, cold, and poverty are three major threats to the Primakov government during the winter 1998-99. The grain harvest in 1998 fell to about 300 kg per capita, which was the lowest level since 1946-47. In addition, after "August 17," food imports fell 2.5 to 3 times. Russia’s own production of meat and milk also continues to decrease. So in the winter, and especially in the spring of 1999, Russia may deal with real hunger, possibly complicated by food transportation blockade on regional borders. And again, the Russian Far East, especially the "Far Northeast," which is not connected by reliable railroads or highways with other parts of Russia, has become the most suffering zone.

The previous several years have also been characterized by a drastic growth of tuberculosis, sex diseases, and other dangerous diseases, coupled with a dramatic devastation of medical service. The number of tuberculosis (TBC) bearers in Russia increased, officially, from less than 1 million in 1990 to 2.2 million in 1997 and 2.5 million by mid-1998. But the real number may be as much as 5 million. The situation is epidemic in the Russian Far Northeast; in some districts of the Magadan region, TBC bearers form up to 50 percent of the population. Between January 1997 and October 1998, the number of people with HIV in Russia sprang from about 3,000 to more than 10,000. Russian officials warn that the actual number of HIV cases may be up to 10 times higher and would increase several times by 2000. The officially registered number of diabetics in Russia is 2.1 million; in reality, the number is 6-8 million, and they get almost no treatment. By the beginning of 1998, Russia also had 5 million insane persons. By the year 2003, there may be 10 million. The number of such persons in Russia increased by four to five times between 1990 and 1997.

At the same time, medical service in Russia has been devastated. In 1997, state expenses for medical service decreased to about 3.4 percent of GDP; it is expected that in 1998 this indicator may fall to 2 percent of GDP. Large, six months or more, wage arrears of medical personnel became normal. After the "August 17 catastrophe" funding of medical systems greatly decreased, import of medicine also decreased several times, and drugstores in Russian hospitals became empty. Just as in all other fields, the situation in the eastern regions is the worst, and in the Far Northeast medical service has almost ceased to exist.

There also has been a significant growth of alcoholism and a tremendous growth of drug addicts. Consumption of alcohol in Russia increased, by estimation, a factor of 2 to 2.5 times between 1990 and 1997. There are many millions of alcoholics in Russia now, with the exact number unknown. By official data, the number of Russian drug addicts reached 2 million, but by expert estimations 12 million. During the last five years, the number of drug users increased 14 times, with the growth even greater in large cities. In some cities 10 to 30 percent of teenagers use drugs. The present economic turmoil will provide new opportunities for the spread of narcotics.

According to a nongovernment survey in October 1997, incomes of 40.2 percent of Russian people were below the poverty level, officially equal at this moment to 407,000 ruble a month (about $70). They were starving or half starving. By reliable estimations, the average salary in the first half of 1998 decreased in real terms by 10 to 12 percent from the first half 1997, and 2.5 times from the 1990 level. Huge wage and pension arrears have additionally reduced the small incomes of the "common Russian." By July 1998, wage arrears reached at least 1.5 months per worker, while pension arrears reached about 1 to 1.5 months. At the same time, unemployment increased to 8.3 million (about 11.5 percent).

The distribution of wealth is also important. Wealth in Russia is geographically concentrated in Moscow, Petersburg, Yekaterinburg, and Nizhniy Novgorod, and the poverty is concentrated in the peripheral regions of the east and the south. The Russian Far East became an "absolute poverty zone." In the first half of 1998 at least 60 percent of the people in the Russian Far East were below the poverty level; in the Far Northeast (to the north of Trans-Siberian Railroad) this index was at least 80 percent.

By mid-1998, real average incomes were about 10 percent less than a year ago. After the "August 17 catastrophe," however, the situation worsened. According to official data, the share of people below the poverty line officially increased to 30 to 32 percent; by independent surveys, the number was more than 50 percent. By estimation, Russia’s average income and consumption, which corresponded to the beginning of 1960s level before the "August 17 catastrophe," fell by the end of 1998 to the beginning of the 1950s level. And, in the Russian Far East at least 70 percent of local people live now under the poverty line.

Most of Russian cities and towns do not have enough money to pay for power, coal, fuel, and oil. As a result, in most parts of Russian regional and district centers, temperature in apartments in the winter season is rarely above 14 C. As in all other cases, the Russian Far East suffers the most. In 1995-97, Vladivostok lived without power. This winter the city is trying to live almost without heating. And, the Russian Far Northeast, which accumulated only half the fuel necessary for the 1998-99 winter, may transform into a real "death camp" in January-February 1999.

Because of these factors, by the end of 1998, the human potential of Russia was, without exaggeration, half destroyed. The prospects for 1999-2000, however, even for an optimistic scenario, which suppose absence of social unrest and large-scale epidemics, are even more grim. This period may well see additional, and maybe very significant, population decrease as the result of lack of food, fuel, medicine, a reduction of living standards to the "century old" level as a result of economic destruction and the further reducing of the state social role almost to zero, and a final devastation of the medical service and education system. By the year 2000, Russian human potential may be irreversibly destroyed. Only some very large-scale "assistance from outside," including the lifting of Russian debt burden and providing, in addition, many billion dollars for Russian education, medical service, and scientific-technical systems may prevent such development.

Russia’s Almost Destroyed Technological Potential

Russia’s science and educational systems have been devastated. In real terms, science financing in Russia decreased at least 12 times between 1990 and 1997. Evidently, under the present "postcatastrophic environment," the Russian science and technology (S&T) sector will be finally destroyed. The Russian education system is half devastated. Education expenditures were equal to about 2 to 3 percent of GDP in 1997, which in real terms is about 25 percent of the 1990 level. Teachers wage arrears in many regions increased by up to one year or more. The catastrophe of "August 17" may finally destroy the entire Russian educational system.

Russia’s high-tech industries (general machine building, electronics, aircraft industry) are vanishing, with the survival of "high-tech remnants" (part of the space industry, some branches of the weapon industry) on the basis of foreign orders only. Between 1990 and 1997 the output of almost all major industrial goods in the machine-building and electronics sectors decreased from five to 10 times. The general machine-building, electronics, power equipment, electrical appliances, precision machinery, shipbuilding, and aviation industries, in practice, ceased to exist by 1997. 1998 brought a new wave of deterioration to Russian industry. Particularly, the machine-building and electronics sectors further decreased their output volume by at least 10 percent. These industries already cannot produce goods of competitive characteristics and quality.

Aging and destruction of industrial equipment, and half destruction of the basic infrastructure (power system, transport, urban infrastructure) is the reality. In 1997, total capital investment decreased four times from the 1990 level; this included a sixfold decrease of investment in the productive sector. Only 10 percent of present Russian industrial capacities is suitable for competitive products manufacturing. In 1998, total capital investment, by preliminary data, will decrease 12 to 15 percent from the 1997 level, and there is little chance for situation improvement in the following two years. By the year 2000, most Russian industrial workshops may transform into "empty boxes" containing metallic trash. The capital fund in nonmanufacturing branches of Russian industry, the construction sector, transportation, and agriculture are in the same or even worse shape than in the manufacturing industry.

Macroeconomic indicators (GDP, industrial and agriculture output, transportation volume, total investment) also decreased back to 1950-60s level. Russian GDP and industrial output by 1997 decreased at least 55 percent from the 1990 level; as a result, by reliable estimations, in 1997 the GDP per capita returned back to the 1960-61 level. The decrease was maximal in the peripheral regions, especially in the Northern Caucasus and in the Russian Far East. Real GDP decrease in 1998 may be about 10 percent, and contraction of the Russian economy will continue in 1999-2000. By the year 2000, Russia may return to the 1953-55 "average Soviet" level.

In 1990-97, the GDP and industrial output of Russian Far East decreased at least three times, and the Far Northeast suffered, along with large population decline, about fourfold economic contraction. 1998 "provided" new devastation even for "fortunate" regions along the Trans-Siberian Railroad: their fish, wood, and metals lost customers both in Russia and in crisis-hit East Asia. What for the Russian Far Northeast was once the main economic activity and life was, in practice, paralyzed by the yearend.

Export-oriented branches (the oil and gas, steel and nonferrous metals) have become the last stronghold of the Russian economy. In 1991-97, the oil and gas, steel industry, nonferrous metals industry, and some branches of the chemical industry reduced their output volume for 10 to 50 percent "only, because from 60 percent to 95 percent of this production was reoriented toward foreign customers." Even these branches, however, had to deal with the aging of capital funds, related production volume contraction, and other problems of Russian industry. In October-December 1997, after world prices fell drastically, even these branches became money losers. The situation slightly improved after a threefold devaluation of the ruble in August-September. The export of oil, oil products, and some other goods increased greatly, in parallel with a very significant reduction of internal consumption.

In 1998 even the prosperous Tyumen region felt the consequences of both the Russian and the world crisis. The situation in Eastern Siberia, which used to export almost entirely its aluminum, copper, and nickel, was much worse. The Russian Far East, having "only" fish, timber, gold, and diamonds, was almost destroyed. It is possible to expect in 1999-2000 even further stagnation or slow recession in the Tyumen region, a further deterioration of the economy in East Siberia, and an almost guaranteed economic collapse of the Russian Far East.

Financial Catastrophe

Already by the end of 1997, the Russian Government’s foreign debt reached about $131 billion, with an additional internal debt (in dollars) of $88.3 billion. Jointly, the debt comprised more than 50 percent of the 1997 Russian GDP. By August 1998, the foreign debt was more than $150 billion, and internal debts approached $110 billion, comprising in total about two-thirds of Russian GDP. The burden appeared to be too large for the weak Russian economy. Russia became bankrupt. In September 1998, the foreign debt of the Russian Government was at least 75 percent of GDP, and the total sovereign debt exceeded annual GDP. This does not include the "nonsovereign debt," the bad debts of industry, agriculture, transport, and construction sectors; pension arrears; the obligations of failed banks to Russian depositors and investors; and the huge foreign debt of Russian companies and banks. The total value of these debts in September 1998 greatly surpassed the Russian annual GDP.

By the beginning of December, the Russian Government had accumulated an additional $2-3 billion in debts, mainly due to failure of interest payments to German banks, the Paris Club, and so forth. The foreign debt of the federal government reached $154 billion, with the foreign debt of Russian companies and banks adding $54 billion more. Jointly, this is more than 100 percent of GDP. The price of Russian debt obligations at the world financial markets fell to 6 to 8 cents per $1. Simultaneously it became known that the Russian state is incapable of paying its $17 billion of principal debt and interest due in 1998. The Russian financial situation is, seemingly, hopeless.

The most probable prospects for 1999-2000 include: official default on foreign debts, the growth of total foreign debt up to 150 percent of GDP level or more; the parallel growth of internal debts to unpredictable volume; the breaking of economic ties between Russia and the "outer world"; and the final devastation of the Russian economy. In any case, Russia will be incapable to save either its human potential or its technological potential from irreversible devastation.

"There Is No More State in Russia"

This formulation became "common place" in Russia after "August 17." Paper columnists, Duma deputies, and governors of peripheral regions use it almost daily. Indeed, the Russian state, that is, the federal government, does not perform almost any functions at all in regards to the economy, the social sector, the army, crime stopping, the handling of emergencies, foreign and internal financial obligations, and so forth. It is possible to say that the Yel’tsin regime is over, and the Primakov government controls only the buildings it occupies. So, who rules Russia? Is it time to claim that crime and chaos are the only real "supreme rulers" in Russia? In September 1997, one of the commissions of Congress issued a detailed report about crime in Russia. But, evidently, it gave only a slight impression of what really is taking place, which is that Russia has become literally a law-free society. A lot of facts confirm this conclusion; it seems that no serious counter arguments are available.

Separation is the only way of survival for the peripheral regions. The strategy of the Russian political and economic elite from 1992 to 1998 has deliberately shifted the crises to others as their main survival tool. The shift included several components, including:

It is possible to estimate that money extortion from peripheral regions, and first of all East Siberia and the Russian Far East, by Moscow political and business elite was the most essential component of "Russian federalism" in 1992-98. This practice naturally caused the growing resistance of the peripheral regions, which transformed by 1997-98 into a mighty separatist movement. Regional leaders, political and economic elites, and common people understood properly that Moscow is driving them to final devastation, so separation has become the last and only means of survival.

The Situation in the Russian Far East and Siberia

The general situation development in the Russian Far East in 1992-98 is characterized by several major trends:

Talks between Prime-Minister Primakov and local leaders in November 1998 summarized the problems of regions "to the east of Baikal lake." "Does Russia Really Need the Far East?" That was the main theme of conversation. Primakov held a meeting with the "Association Far East--Trans-Baikal Zone" (governors of the Russian territories eastward of Lake Baikal). The Head of the Association, the Khabarovsk Governor V. Ishayev, has expressed the following opinion of these regions:

Primakov has assured the regions that now he understands the local problems but will not give any promises. It is possible to conclude that the Far Eastern regions gave "the last warning" to Primakov. At the same time, they understood that the Russian Far East cannot rely on the Russian Government and should save itself by all means available, as if this zone is independent already.

Within the Far Northeast, the social-economic situation in each of the major subregions is as follows:

General Separation Trends in the Eastern Regions in 1996-98

The emergence of a "separation potential" in the Primor’ye (Maritime) region and the Khabarovsk region already took place in 1995-96. The heavy failures of Russian troops in Chechnya in January-March 1995 showed the weakness of the federal government; as a result, the Far Eastern governors became bold in their disputes with Moscow. Maritime (Primor’ye) region governor Nazdratenko was the first Far Eastern leader to directly blame Moscow for local problems. More exactly, he claimed in March 1995 that Moscow is selling Primor’ye to China in the guise of border-settling agreements and that Moscow policy caused destruction of the local economy and infrastructure. Almost simultaneously, Khabarovsk governor Ishayev started his own "secret complot" against Moscow. He tried to concentrate control over the local economy and finances in his own hands, while diminishing the "Moscow share." At the same time, Ishayev tried to establish strong t