HORIZONTAL INTEGRATION IN RUSSIA AND MOSCOW

By Vladimir Mironov

HISTORIC RELATIONS WITHIN RUSSIA For many years individual Russian territories had “twinning” links with each other and with towns and regions of foreign countries. Such contacts between republics, krais, okrugs, oblasts and their “capital” cities tended to be limited in the past to culture, and had only marginal significance in the political and economic life of the country. But during the last decade subjects of the Russian Federation have begun to include political, economic and legal cooperation in their relations with each other. What are the reasons for this?

First, the political and economic system which existed in Russia for so many years was based on autarkic principles: detachment from the outside world, contact with which was channeled through the single center of power; a strict hierarchy and structure; and a minimum number of autonomous subsystems. The Soviet model of social development was based on monocentrism, centralism and integration. Vertical relations were paramount within the state. All strategic and tactical decisions were either taken or confirmed by the center, which regulated the flow of raw materials, industrial, agricultural, financial and other traffic. Because of its simplicity, this system was particularly durable, but at the same time was not equipped to react quickly or adjust and adapt to the political and economic changes taking place in the world.

Keen competition with the leading Western states, which had entered the post-industrial stage of development, created the need for modernization, requiring not just a more sophisticated system, but an open one. By the end of perestroika, the number of political and economic actors within Russia had increased and the center largely stopped carrying out important ruling and coordinating functions. To the forefront came polycentrism–meaning a redistribution of powers from the center to regional and sub-regional leaders; federalism, which takes into account the variety of natural, ethnic, economic and social conditions in the rational construction of a legal space and the creation of models and rules of economic behavior; differentiation in the country’s regional development, meaning flexible economic and social policies which allow for territorial particularities within the framework of a national economic development strategy. As a result, the adaptability of the system increased, but so did its instability. The rejection of isolationism almost immediately resulted in a much more important role being played by the varied nature of Russia–its scale, its geographical and climatic contrasts, the elaborate nature of the state system, the multiracial population.

For various political, economic, geographical and demographic reasons–proximity to or distance from state borders, competitiveness of the existing industrial base, the presence of natural resources which are profitable to export, the density of the population, the generation ratio, et cetera–different regions are returning to world civilization at different rates. Some are able to integrate themselves faster into European, Asiatic or world economic structures. In this way they establish their position among the other subjects of the federation, turn into new centers of power in Russia and become a kind of catalyst to integration, creating macroregions.

Second, the program of social, economic and political reforms which Boris Yeltsin announced at the end of 1991 and which the government headed by Yegor Gaidar immediately implemented, prompted fundamental changes in Russian life and preordained the subsequent course of social, economic and political changes in the country. The economic system based on state ownership and centralization, which perestroika had already undermined, collapsed. From December 1991 to April 1992–Russia’s first few months as a sovereign country–the federal authorities removed themselves from the economy, saying that they were prepared to accept only the responsibility for macroeconomic processes and coordinating economic activity. With this, the ability of the federal government to implement many economic projects of nationwide significance was greatly reduced. It was unable to ensure that any of the federal economic programs functioned. The financial reserves which Moscow could have allocated to the needy regions began to dwindle dramatically.

Under these conditions, the republican and regional leaders, left alone to face the economic problems crashing down on them, were forced to seek out reliable partners within the Russian Federation and abroad by reviving old economic links and creating new ones. This process generally took place beyond the control and attention of the federal structures.

The republican and regional authorities, which had taken microeconomic control and management upon themselves, began spontaneously to take over the regulation of social, economic and other aspects of public life on their territories.

Third, a new political and economic model for organizing Russian society has not yet attained the necessary stability and durability. It is exposed to threats of destabilization, because the process of reforming the Russian economy has not yet been completed and the economic crisis has not yet been overcome. Huge unresolved social and economic problems create the potential for political instability.

The normal functioning of the market economy being created is made more difficult by the absence of a developed legal infrastructure, by the heavy workload of the law enforcement bodies and legal structures, and by the general sharp decline in executive discipline at every level of Russian society. Against this background, the organs of power are beginning to participate directly in setting up links between autonomous economic subjects.

To some extent, the development of interregional relations through economic associations and treaties on trade and economic cooperation is an attempt to include the organs of power in economic processes so as to provide some measure of control. To put it another way, it is a attempt to preserve a state presence in the economy.

Fourth, the process of state-building in the Russian Federation is not yet complete. This encourages both the center and the regional authorities to quickly establish ties between Moscow and the republican and regional leaders, and to establish more advantageous negotiating positions. One way to strengthen the position of the local political and economic elite is to consolidate the efforts of the representatives of several federation subjects.

The most intensive contacts between federation subjects take place on an interregional level. In the last few years of the Soviet Union, the regional authorities–attempting to protect their political and economic interests from new ideas, to pressure from the center and to create a lobby for the interests of the regional elites in the redistribution of state property and privatization–began to form economic associations. This practice was initiated by the leaders of the Eastern Siberian region, which created in the autumn of 1990 the interregional association “Sibirskoye Soglashenie” (Siberian Concord), which included nineteen Russian Federation subjects. In time, all the Russian republics, krais, oblasts, autonomous okrugs, the autonomous oblast and the two “capital” cities with federal status were united in eight economic associations. Gradually, coordinating structures and funds began to be created which handled the development and implementation of regional policy. From 1994, economic associations which signed agreements with the Federal Assembly and the government on cooperation and coordination of activity were granted certain state powers. The Federation Council, in particular, took their views into consideration in its legislative efforts, and in September 1998 the leaders of eight federation subjects were included in the Russian government’s Presidium.

Alongside contacts within the associations, the leaders of some federation subjects are developing individual links with the Russian Federation as a whole. However, these are likely to be successful only for the industrially powerful, financially independent and politically influential federation subjects. Here, the most important element is the ability of the federation subject to pay for goods and raw materials with “real money,” overcoming the fall in production, the expense of cargo shipments and the shortcomings of the accounting and payment systems; to have regional lawmaking experience which could be used in other subjects of the federation; and to provide political support in federal power structures.

Horizontal integration with regions in other countries is not very well developed. Such links have established by:

–the leaders of border regions (Sakhalin and Hokkaido, Karelia and the neighboring regions of Finland, Murmansk Oblast and Norway, the Kaliningrad enclave and Polish regions, Belarusan oblasts and Lithuanian regions);

–those subjects whose economies are export-oriented or are part of a technological chain (for example, Belarusan oblasts, which in Soviet days were the country’s “assembly shop,” closely cooperate with Kuzbass (coal) and Lipetsk (metal); and

–those subjects which have a certain ethnic cultural alliance with foreign partners (for example, the links between Khanty-Mansiisk autonomous okrug, the Mordovskaya and Mariiskaya republics and other territories settled by Finno-Ugric peoples, and regions of Hungary).

MOSCOW: A UNIQUE PLAYER Moscow’s participation in horizontal integration processes has its own characteristics. First, it takes all three forms–within the interregional association “Central Russia,” on an all-Russia level (Moscow has agreements with seventy-six subjects of the federation) and in contacts with regions of foreign states (in particular with Sevastopol, Belarusan oblasts and so on). Second, Moscow’s system of agreements with the republics and regions is of segmented and multileveled. Third, Moscow “supplies” the federation subjects not just with material and financial help and legal experience in the integration process, but also with politicians and managers.

This situation has arisen because, first of all, Moscow is the most economically powerful and politically influential subject of the Russian Federation. Moscow is a megalopolis which has entered the postindustrial phase of economic development. Despite all the economic difficulties, the city is developing rapidly and is among the few federation subjects which are net contributors to Russia’s budget. Moscow’s tax contributions provide more than one-quarter of the income of the federal budget. The capital is Russia’s financial heart.

The country’s main monetary reserves are concentrated in Moscow, as are the so-called “system-forming” private banks whose financial reserves are used both to form a modern banking system in the regions and to change the profile of enterprises to advance the economic revival of Russia’s regions. Mayor Yuri Luzhkov, taking advantage of his influence during the financial crisis which erupted this past autumn, managed to extract a promise from the federal authorities to support the large banks active in the city. Moscow, in other words, is a reliable partner, capable of making good on contracts for goods it receives. For the leaders of many federation subjects, who are trying to resolve the severe nonpayment problems, Moscow’s solvency is a serious argument in favor of developing links with it. Orders from Moscow assist the regional leaders in providing work for local enterprises, lowering unemployment and receiving money to pay off the debt to pensioners, teachers, state employees and workers.

Second, Yuri Luzhkov is also interested in developing political and economic links with as many Russian republics and regions as possible. On the one hand, Moscow’s industrial potential, despite the twofold fall in production as compared with 1990, considerably exceeds the city’s own requirements. However, for it to function normally, a reliable supply system of raw materials is required, for the city has practically no local raw materials base.

On the other hand, Yuri Luzhkov has the reputation of being a solid economic planner. When, as a politician of federal stature, he signs these agreements the Moscow mayor is not only resolving the economic problems of a post-industrial megalopolis, but he is also naturally looking after his own political interests. His priorities here are to raise Moscow’s image among Russia’s citizens, who are traditionally mistrustful and suspicious of the capital, and to look for allies among the official leaders of federation subjects. The provincial political elite gets the opportunity to establish ever-closer contacts with the mayor of the capital. It can even be said that there is a tendency among some of the local “parties of power” to orient themselves towards the “planner-politician” Yuri Luzhkov, thus distancing themselves from the ideological confrontation between democrats and communists.

The upper house of the Federal Assembly–of which the elected leaders of the two republican-regional branches of power are ex-officio members–is an influential institution in the Russian Federation’s state system, a vital element for the stability of the political system, a sort of “buffer” between the president and the State Duma.

Third, the city’s authorities have the opportunity, using the loopholes in Russia’s legal system, to take advantage of the benefits which come both from its status as a federation subject and as a municipality. They have created a multilevel system of agreements with Russia’s republics and regions, which includes links between the mayor’s office and the federation subjects, between the city parliament and the representative legislative organs of the republics and regions, and between the government of Moscow and the mayor’s offices of republic, krai and oblast centers.

The closest links are between Moscow and the Moscow Oblast. The Moscow mayor’s office and the Moscow Oblast administration have signed a ten-year mutual understanding and cooperation agreement, which defines areas of strategic common interests–including economic security, ecology, law and order and so on–and which establishes common interests on questions of economic restructuring. Moscow’s agreements on trade, economic and cultural cooperation with other federation subjects generally involve purchasing raw materials for the capital’s industries, assisting in changing the profile of some of the republican or regional industrial enterprises, purchasing certain enterprises and developing a local banking infrastructure.

The activity of the Moscow city parliament is of interest to the legislative assemblies of many federation subjects. In this connection, agreements on cooperation are signed between legislative assemblies for exchanging experience and using Moscow’s lawmaking expertise for such things as drawing up local Charters and other legal documents.

The contacts between the Moscow government and the mayor’s offices of oblast and krai centers are not on such a large scale as those between federation subjects. As a rule, they touch upon concrete local issues. The system of political, commercial and cultural links being formed between subjects of the Russian Federation, which involve predominantly middle-level official power structures, seems to offer good prospects for Russia’s horizontal integration, cementing the country. And it seems that by making use of its objective advantages, Moscow may be the flagship in this process.

Vladimir Alekseevich Mironov is a senior fellow of the Institute of International Economic and Political Studies of the Russian Academy of Sciences in Moscow.