Russia 2010. Part 5. Regions and Regional Development

(the part of book "Russia 2010. Report of Transformation")

Part 5. REGIONS AND REGIONAL DEVELOPMNET

Major trends of regional development of the RF in 2010

The key goal of the regional policy of the federal Center in 2010 continued to be maintaining the stability: the issue of “system” development of the social-economic situation and political process became especially relevant in the run-up to the pre-election 2011.

Economy: the post crisis stage. Budgets and investments

The key trend in the economic sphere was transition from the anticrisis subsidized policy basically provided by large-scale financing from the federal budget to the postcrisis stage of development of the relations between the Center and subjects of the federation that is characterized by tougher federal control and stimulation of effective local financial policy.

The economic situation in Russian regions is still ambiguous: postcrisis recovery is under way throughout the country, though not at a very high rate; however, most regions yet find it hard to solve problems of budget deficit (63 out of 83 had budget deficit in 2010). According to the International Fitch Ratings Agency, the general forecast of development for most subjects of the federation is positive; however, the level of industrial production has exceeded the precrisis one only in half of the regions. Considerable success has been achieved in solution of the unemployment problem; however, regions have yet failed to diversify “monoeconomy” and to achieve steady investment inflow.

According to the Ministry of Finance of the RF, in 2010 the subjects of the Federation succeeded in raising their own tax and nontax budget revenues considerably, in absolute values these indicators reached the level of the precrisis 2008. The regions’ own tax collection is provided by 75% by two taxes: the individual income tax and the corporate profit tax. The subjects’ budget revenues from the income tax (52% of collections) amounted to 240 bln. rbl. (data as of March 1, 2011), which is 10% compared to the revenues volume as of March 1, 2010. The profit tax (23% of collections) collected over the first two months of the year amounted to 108 bln. rbl., which is 71% against the year before. We would like to note that expenditures in most cases (of 73 subjects out of 83) have also grown: as of March 1, 2011 their total volume was 652 bln. rbl. (8% more from the same period last year). Expenditures dropped in 10 regions: the maximum reduction was in Ingushetia (by 32%), Tyumen region (by 24%), Chuvashia (by 16%). As of March 1, 2011 in Russia as a whole the regional budget surplus was 86 bln rbl. (84 bln rbl. a year before). 31 subjects (16 in 2010) utilized their budgets with the aggregate deficit of 19 bln rbl.. The worst lag of revenues from expenditures was recorded in Krasnoyarsk Krai (3.1 bln rbl.), the Khanty-Mansijsk AD (2.5 bln rbl.), Samara region (2.3 bln rbl.).

There is a positive trend towards growth of revenues; however, it should be considered that, the same way as before, the financial success of regions is quite nonuniform. According to the Ministry of Economic Development as of the end of 2010, the small group of the regions mainly forming tax revenues of the consolidated budget comprised 12 subjects of the Federation: the republics of Tatarstan and Bashkiria, Perm Krai, Krasnodar Krai and Krasnoyarsk Krai, Moscow region, Sverdlovsk region and Samara region, Moscow and Saint Petersburg, Yamalo-Nenets and Khanty-Mansijsk autonomous districts. The average growth of regional revenues in 2009-2010, however, does not exceed 4-5%. As to the state of economy, the subjects where a considerable part is made by metallurgy and engineering industry (they were affected the most by the decline caused by the world market situation), it is too early to speak about recovery from the world trends.

This is also evidenced by the low dynamics of investments that has not changed in most cases (compared to the precrisis situation). Quite illustrative is the fact that with the general growth of the volume of the funds spent by regional budgets (their greater part of more than one third was spent on salaries) the investment expenditures in 2010 dropped 10% and amount to 33 bln rbl. (specific weight of 5%). Thus, administrations of the subjects have failed so far to create significant incentives for business activity growth in regions. Apart from objective economic realities a major factor is the administrative barriers preventing creation of a favourable business climate. 

At the meeting on economic issues on April 22, 2011 Dmitry Medvedev emphasized the responsibility of the heads of regions for creation of a favourable business environment in subjects of the federation. This indicator is likely to be of special significance in assessment of the effectiveness of the work of regional heads at the federal level. New authorities have been also granted to plenipotentiaries: according to the special instruction of the president since May 2011 every federal district has got the institution of an investment authorized representative, and active interaction with this person will become an important part of work of the resident’s plenipotentiaries. The activities of investment authorized representatives will be aimed at assistance in implementation of private investment projects: the new officers are supposed to become some kind of intermediaries in interaction between the investors and executive authorities in regions. 

Attracting investments for creation of new production facilities, introduction of new technologies and services is considered at the federal level as the basic solution of the problem of improving the level of social-economic development of Russian territories. An obstacle on the way of its implementation is the insufficient activity of administrations of regions in the process of implementation of concrete measures aimed at formation of an environment favourable for business activities. The most popular way of increasing the budgets irrespective of the economic condition is application for federal donations and subsidies while the local investment programs often stay just declarative. In practice potential investors face considerable administrative and other barriers, which decreases attractiveness of even “resource-intensive” subjects significantly. Typical obstacles on the way of business activity growth are related to work of the customs and post agencies, insufficient development of transport infrastructure, complicated visa and administrative procedures.

Representatives of the business community have already given their proposals aimed at strengthening of the role of the head of regions to the Ministry of Regional Development. The most topical ideas corresponding to the federal priorities include: organization of representation of the jurisdictional territory by the governors at investment forums, assistance to legislative protection of investors’ interests. This refers to adoption of laws setting the basic requirements to provision of state services as well as guarantees of security of investments in the key risks relevant for a particular subject (increased risks are one of the negative consequences of the economic crisis). The business community widely supports the proposal for regular revaluation of the expediency of the provided tax privileges and the possibility for entrepreneurs to apply to authorized structures to resist the pressure of “the administrative resource” and corruption. In this context especially relevant is the president’s decision to introduce a special mechanism of considering complaints about government bodies’ action or inaction that contain accusations of corruption. This requires amendments to the legislation aimed at ensuring inevitability of punishment and additional incentives to bring down corruption (for example, public and personal responsibility of officials).

Another widely discussed measure of raising the responsibility of regional administrations for the condition of the investment environment is creation of a standing council for improvement of investment attractiveness of the region headed by the governor in every subject as well as a government agency for attracting investments, with its employees being involved in monitoring of particular investment projects. In this case account is taken of the need to ensure operative communication and effective interaction between investors and regional administrations. One of the ways proposed by the federal Center for this purpose is wide use of modern means of communication (on-line solution of investors’ current problems and creation of multilanguage Internet-portals on investment activities).

In 2010 the financial policy in the sphere of relations between Moscow and territories was characterized by transition to post-crisis priorities. The federal Center has been consistently pursing the course towards reduction of donations stimulating local authorities to more effective command of the available resources. Given the fact that most subjects cannot count on an investment inflow, the most relevant ways of maintaining financial balance are still measures of the budgetary policy (creation of reserves) and attraction of additional funds at the expense of privatization programs.

According to the data of the Ministry of Finance on budget utilization by RF subjects as of March 1, 2011, the budgets received 525 bln rbl. of tax and non-tax revenues, which is 28% from the same period last year. The territories received additional 251 bln rbl. in the form of transfers from the federal budget (7% less than a year before). The total assistance of the center accounted for 34% in the volume of the regions’ revenues. The transfers of 8 RF subjects accounted for 80% of the revenues. These are Ingushetia, Chechnya, Dagestan, Tuva, Kalmykia, Altai, North Ossetia, Karachay-Cherkessia.

Creation of financial reserves is a traditional recommendation to regional authorities from the Ministry of Finance. It is aimed at maintaining stability of the social-economic situation. In the “pre-election” 2011 this issue is especially relevant, and the Center reminds about the responsibility of heads of regions for fulfillment of their commitments, first and foremost, the socially significant ones. With a view to prevention 90 of deficit growth the administrations of most regions will probably have to take unpopular measures, such as “freezing” of the level of salaries of public sector workers. In its turn the Center will render assistance to the subjects having the worst financial problems; however, in accordance with the federal priorities this must not be a “mass” process. The total volume of donations to balance regional budgets reserved for 2011 is 39 bln rbl., budgetary loans are supposed to be allocated in the amount of up to 113 bln rbl. however, representatives of the Ministry of Finance have already announced about double tightening of loans: this measure is aimed at improving the budgetary discipline of the subjects at the postcrisis stage.

An important area of work related to higher effectiveness of administering the resources available in the regions in 2011 is supposed to be implementation of regional privatization programs. The Ministry of Finance earlier came forward with an initiative to reduce financial support of the subjects of the federation whose administrations apply to federal funds for subsidies for implementation of infrastructural projects but are unable to use effectively the available non-core assets and insufficiently effectively controlled assets within privatization programs. Such programs were largely adopted under the pressure of the Center; however, their implementation is often formal and falls behind the plans. Dmitry Medvedev focused attention on this topic in the last year Address speaking about “exorbitant property” of regional authorities, its operation being directly unrelated to exercise of the authorities of the executive power (airports, ports, boiler houses, etc.). The matter in question was solution of the general tasks of increasing the income base of the subjects of the federation through implementation of property privatization programs and the need of reducing the administrative impact of egional administrations on the political process through control (to a greater or lesser degree) over printed and electronic mass media as well as television and radio channels. The measure under consideration looks reasonable both from the point of view of attracting additional revenues to the budgets of the subjects and from the point of view of increased administration effectiveness. Practice shows that government authorities are generally less good at solving management tasks than business structures. Besides, the Center strives to reduce the high government expenditures on support of territory development projects. According to calculations of the Ministry of Finance, high-quality privatization of regional property will bring assets to the market in the amount comparable to the appraisal of the privatized federal property with quite comparable receipt from their sales (over 1,8 trillion rbl.). The additional revenues received by regions, in their turn, could be appropriated for co­financing of “resource-intensive” infrastructure projects (road building, reconstruction of airports, etc.), which would reduce the necessary investments of the state.

Evaluating the prospect of changing the financial state of the subjects of the federation one should consider that a number of factors contributing to growth of regional expenditures came into play in 2011. In particular, regional budgets are expected to be actively involved in financing of the federal target program “Housing”, large investments will be required to implement measures approved at the federal level in the process of fighting the abnormal conditions of the last summer (fire safety provision, financing of agriculture). Besides, a significant role is played by changes of the fiscal policy: according to the Ministry of Finance, as a result of the increased rates of insurance contributions to extra-budgetary funds from January 1, 2011 from 26.2 to 34.2% the regions’ consolidated budgets will lose more than 200 bln rbl. Local and regional authorities will have to transfer these funds additionally to the Pension Fund and other social funds for public sector workers (with salaries preserved at the present level). The growing fiscal load on employers may result in growth of the “shadow” sector in the sphere of private business (off the books salaries), which will bring down the proceeds of the individual income tax into budgets. On the other hand, there is a real threat of reduction of the profit income base for enterprises working in compliance with the legislation. Finally, as forecasted by the Ministry of Finance, abolishment of advance payments of the individual property tax and land tax will result in temporary losses of regions’ budgetary revenues of 30 – 50 bln rbl.: this money for 2011 will actually arrive in 2012 only.

Thus, the problem of encouraging regional authorities to raise the effectiveness of their work is still on the agenda. From the point of view of the interests of the federal Center, the priority aspect is improvement of the financial situation through more rational management of available resources as well as attraction of additional budgetary resources by administrations of the subjects through “internal” possibilities (rather than application for federal donations).

Politics: new decisions in the sphere of territorial management

The major decisions in the sphere of territorial management in 2010 involved changes of the number of federal districts and introduction of the position of the president’s plenipotentiary in the North Caucasus.

By the decision of Dmitry Medvedev the North Caucasian district (NCD) was separated from the South Federal District (SFD) and will include Stavropol Krai, the Chechen Republic, Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia and North Ossetia. The “capital” of the new district is Pyatigorsk.

It is notable that the administrative center is located in a “Russian” subject of the federation: this decision is supposed to maintain political stability and ensure better manageability. Separation of national republics only to form an independent administrative-territorial unit would create prerequisites for exacerbation of intraelite contradictions, the more so as the administration of the region where the center of the district would be located would symbolically appear to be in a “privileged” position. Besides, in terms of the geographical location the NCD structure proposed by the president seems the optimal one: Stavropol Krai borders on 8 regions of Southern Russia. It is noteworthy that governor of Stavropol Krai Valery Gaevsky nominated to this post by Dmitry Medvedev in 2008 was to solve management tasks primarily. The SFD administered by former prosecutor-general Vladimir Ustinov still includes Krasnodar Krai and Adygeya that is actually an enclave on its territory as well as Astrakhan region, Volgograd region, Rostov region and Kalmykia.

The president’s plenipotentiary appointed in the new federal district was former governor of Krasnoyarsk Krai Alexander Khloponin who also receved the post of a vice-premier of the Russian government (such competencies were combined for the first time). He was entrusted with the duties of a plenipotentiary (in particular, work with the staff and law enforcement agencies) as well as economic powers typical for a vice-premier. Khloponin coordinates the work of the federal executive authorities and is authorized to instruct them on “issues of development and implementation of the state policy in the area of integrated social-economic development of the subjects of the North Caucasian Federal District”. The plenipotentiary also coordinates distribution of financial aid from the federal budget, is responsible for implementation of investment projects in the district (public projects as well as projects based on public private partnership) and creation of infrastructure facilities.

The decision about creation of the office of the president’s plenipotentiary in the NCFD as well as introduction of criteria of effectiveness of the work of the federal authorities in the region was to ensure stricter control over the situation on the part of the Center. The president’s initiative reflects a new approach to administration of the North Caucasus, its priority being higher level of the social-economic development of “depressive” territories. In terms of the antiterrorist struggle this approach is quite justified: a significant factor of destabilization of the situation in Southern Russia continues to be the existence of the social basis of extremism (high level of unemployment, especially among young people, low living standard of the population. Large-scale corruption and lack of trust in the power, etc.). 

It should be noted that the situation in the security sphere in 2010 generally kept being unfavourable although some positive trends may be traced. Over 10 counter­terrorist operations were carried out in the region, with over 300 militants neutralized in them. According to the National Anti-Terrorist Committee, the number of victims of terrorist attacks in Russia in 2010 almost halved: down to 310 people; one can also observe reduction of the total number of terrorist crimes: there were 1030 of them in 2009 and 779 in 2010. The least trouble-free regions are still the republic of Dagestan, Ingushetia, Kabardino-Balkaria, the latter demonstrating a clear growing trend in extremist activity. The largest terrorist act in 2010 was the explosion in Moscow underground (March 29, 2010) and Domodedovo airport (January 24, 2011).

The nomination of Alexander Khloponin for the post of the president’s plenipotentiary in the new district satisfied the outlined priorities: the former governor of Krasnoyarsk Krai with a significant experience of work in business structures is known as an efficient executive. The anticrisis program initiated by him in Krasnoyarsk Krai was implemented quiet successfully; the region became one of the leaders of the RF in terms of attracted investments. Given the specific features of the traditional clan society of the North Caucasian republics it is quite significant that the new plenipotentiary is “equally spaced” from the elite groups existing in every regions and being quite a well-off man he is less prone to corruption. The major political tasks of Khloponin in the new capacity are attraction of investments for development of southern republics and effective development of their economic potential as well as control over spending of the resources sent to the region from the federal budget.

The official statistics reflects the “depressive” character of development of the subjects of the North Caucasus. The SCFD produces only 0.6% of Russian oil and 0.2% of Russian gas. The main segment of Caucasian economy is the sector of state administration followed by agrarian industry. Only 11% of the population are employed in industry and tourism gives only 2% of the gross regional product. Caucasian tourism makes only 6% of the entire tourism of destinations inside Russia. The share of the North Caucasus in the aggregate foreign trade turnover of the RF is 0.4% only. The volume of foreign capital investments in 2008 was only 1 bln USD, i.e. 0.5% of all foreign investments in the RF.

However, it should be noted that in the case of the SCFD regions the statistics is quite conventional and gives only a limited idea about the real social-economic situation. The main way of employment of the citizens of the North Caucasus is an informal way related to use of kinship-clannish relations, mostly in the “shadow” sector of economy. There is also quite limited data about the level of life in the SCFD subjects: the highest official poverty indicators in the country may conceal higher per capita incomes achieved through revenues from illegal business activities and transfers between representatives of one family (clan).

There is a high demand for investments in the North Caucasus; it is significant, however, that by the level of its social-economic development the republics of the district are far behind the most business-attractive “Russian” regions of the Russian South of Kransodar Krai and Stavropol Krai, Volgograd region, Rostov region and Astrakhan region. These relatively steadily developing regions of the “transition” type may be said to include Karachay-Cherkessia, Kabardino-Balkaria, Adygea, Noth Ossetia and Kalmykia; “depressive” territories are still Dagestan, Chechnya and Ingushetia. In this context stimulation of investment activity on the part of the federal power looks an in-demand measure: the Caucasian republics will be unable to win the competition against regional “locomotives of growth” on their own.

Assessing the perspective of implementation of economic projects one should consider a number of objective negative factors preventing fast development of “problem” regions. For example, the dominant industries of the economy of southern regions are distinguished for their low labour productivity and salary. To ensure economic acceleration the SFD started developing industries with the maximum labour productivity and added value: tourism, engineering, metallurgy, forestry industry, etc. Attracting tourism can be a profitable option for most subjects of the SFD, except Chechnya, Ingushetia and Dagestan (with all the achieved success these territories are not yet perceived by public opinion as secure). Industry (production of building materials, mineral water bottling, etc) could ensure growth in Kabardino-Balkaria, Karachay-Cherkessia and North Ossetia. There are wide possibilities for development of hydraulic power engineering: by expert estimates 80% of resources are not used. 

At present one can state completion of “conceptualization” of the stage of work for attracting investments to the North Caucasus: the strategy of development of the region until 2025 developed by the plenipotentiary office under the instruction of the president has been approved by the government; before the end of the year the plenipotentiary office intends to approve plans of concrete actions for every republic. The total value of the approved investment projects to be implemented in the North Caucasus is about 600 bln rbl. This money is to come to the region as a result of business structures activities and is quite comparable in terms of the volume with public financing: as said by Vladimir Putin at the interregional conference of the Unified Russia in July 2010 in Kislovodsk (Stavropol Krai), over the recent 10 years 800 bln. rbl. have been allocated for the needs of regional development within the frames of federal programs.    

The objective of the strategy developed by the office of the president’s plenipotentiary in the SCFD sounds quite traditional: to ensure faster social and economic development of the subjects comprising the district by raising the level of employment and quality of life of the population, to improve and develop interethnic relations. The most promising areas for attracting investment seem to be agriculture, construction, transport, development of the recreation sphere. The strategy of the office of the president’s plenipotentiary involves active development both of the basic industries of the region’s economy and healthcare, education, housing and utilities sector, physical education and sports, preservation and development of the cultural heritage of the North Caucasian peoples, consolidation of civil identity and interethnic relations. However, significant achievements in these spheres are still tasks of a far more distant perspective. In the opinion of the authors of the strategy, the key threats for development of “southern” republics is the clan system, corruption, orientation to natural economy, ethnic separatism, religious radicalism, professional dequalification and propensity to dependency of some part of the population. This list is not surprising; however, it should be noted that large­ scale financial investments making the basis of the measures proposed by the plenipotentiary office may hardly neutralize these negative factors.

The principal direction of the investment program implementation will be creation of new production facilities and jobs, accordingly: the contribution to the process of fighting unemployment will be about 400 ths. new vacancies, which is to help reduce the level of registered unemployment from 16% to 5%. The plans include an increase of the annual GPD growth rate in the North Caucasian regions up to 7.7% and increase the average salary level in the North Caucasian Federal District to 23 ths. rbl. All these benchmarks are designed for a long-term perspective: the set indicators are supposed to be reached by 2025.

The largest project of the investment program proposed by Alexander Khloponin is creation of the Stavrolen gas-chemical complex in Stavropol Krai (the cost is 112 bln rbl., it is to be implemented by a LUKOIL subsidiary). Other projects include construction of an oil refinery in Chechnya in 2011-2013 (17 bln rbl., Rosneft), development of industrial parks in Nevinnomyssk and Budenovsk (18.7 bln.rbl.), construction of a cement plant at Alagir deposit in Karachay-Cherkessia (6 bln.rbl., the UMMC). The highest grade of readiness at this stage is demonstrated by the project of construction of the Arkhyz resort complex in Karachay-Cherkessia: Sinara Group of Dmitry Pumpyansky has already signed a memorandum with the VEB on financing of construction of the first start-up complex (2 pistes, 6 hotels; the total investment volume is 6 bln rbl.). Besides, according to mass media information, protocols of intention to invest in construction of resorts in the North Caucasus have already been signed by western investors, too: Credit Suisse and Invest AD, an investment company from the United Arab Emirates.

The tourist sphere is the most promising one for attracting investments to the North Caucasus in the mid-term perspective. According to preliminary estimates, implementation of tourist projects will require about 300 bln rbl. from the state budget, 60 bln rbl. of them are supposed to be appropriated in the next 4 years for creation of the infrastructure; other expenses are to provide tax privileges for the investors for 10 years.  

Five projects of ski resorts have already been developed and approved at the federal level: in Matlas (Dagestan), Mamison (North Ossetia), Arkhyz (Karachay-Cherkessia), Lago-Naki (Adygea) and on Elbrus (Kabardino Balkaria). The total required investment volume is about $15 bln. The process of their construction will be controlled by the newly established “Resorts of the North Caucasus” Company. The state will get the major part of the company’s share capital (about 98%) by investing $2 bln. in the charter capital of the joint-stock company. Thus, the federal Center strives to control the process of application of the large-scale funds intended for creation of elements of a high-quality business environment, in particular, construction of roads and the infrastructure. The VEB and Sberbank will be the minority shareholders, their main task being assistance to the project investors in the process of obtaining credits. Besides, the new company is supposed to have direct interaction with private investors interested in development of tourist facilities in the regions: government guarantees are still the major way of attracting “exterritorial” business structures in the economy of the North Caucasus. In April 2011 the government approved issuance of government guarantees to the subjects of the district for 50 bln rbl. against the investment programs.

Implementation of the strategy of development of the NCFD proposed by the office of the president’s plenipotentiary will demand system work in several key areas, such as formation of a legislative framework favourable for investments, ensuring security guarantees for business structures, administrative support on the part of authorities of various levels, attraction of highly qualified staff, including management staff. Given the scale of the existing problems, real economic results from implementation of the declared projects can be expected at least within 5-7 years.

Meanwhile, regional authorities often lack political will to make decisions promoting creation of a favourable business environment. Leaders of republics make regular reports on the projects under way; however, there are few real changes for the better, which arouses a logical negative response of the chief executives. In this situation the Center has to use political pressure on regional authorities: during the meeting with Khloponin in mid-November 2010 Medvedev said that the heads of the subjects of the NCFD that did not cope very well with the tasks set might lose their posts as advised by the plenipotentiary. This political signal has three important aspects. Firstly, the president’s statement shows the intention of the Center to exert thorough control over the situation in the region in the run-up for the federal elections of 2011-2011. The issue of ensuring stability and manageability of the political processes becomes strategically significant. Secondly, the Center strives to strengthen the administrative “weight” of the offie of the president’s plenipotentiary headed by Khloponin for more effective implementation of the decisions made at the federal level. This is especially relevant in the case of the North Caucasian republics the leaders of which have worked out an informal practice of applying to federal authorities through their own lobby channels (in the State Duma, the Council of the Federation, the Administration of the president) bypassing the office of the president’s plenipotentiary over the recent 15 years. Thirdly, Medvedev harsh statement is meant to create new incentives for heads of the NSFD republics raising their personal responsibility for the achieved results. At the same time, one should expect radical staff decisions regarding heads of the “disadvantaged” regions of the NSFD in the near future. In the run-up for the parliamentary and presidential campaigns of 2011-2012 such measures may create new threats of destabilization; besides, some executives either have been in their positions for quite a short time (Dagestan, Ingushetia) or have been recently reappointed for the next term (North Ossetia, Kabardino-Balkaria).

Staff policy of the Center: main priorities

In 2010 the major trend of development of the staff policy of the Center was unseating of regional “heavyweights”: governors who had held the leading positions in the subjects of the federation since the early 1990-ies. Dmitry Medvedev repeatedly spoke about the need for regular replacement of regional heads with a view to raising management effectiveness giving the optimal term of office of not more than two-three years.

In 2010 the process of staff rotation due to expiry of powers of active executives involved a whole number of regions headed by governors of “Yeltsin’s epoch”. Most of them resigned: the influential “resignees” included Mintimer Shaimiev (Tatarstan), Alexander Filipenko (KhMAD), Yuri Neelov (YaNAD), Petr Sumin (Chelyabinsk region), Murtaza Rakhimov (Bashkiria), Vladimir Chub (Rostov region), Aleksei Chernyshev (Orenburg region), Vyacheslav Shtyrov (Yakutia), Nikolai Fedorov (Chuvashia), Kirsan Ilyumzhinov (Kalmykia), Yuri Luzhkov (Moscow). However, heads of Kemerovo region (Aman Tuleev), Lipetsk region (Oleg Korolev), Kaluga region (Anatoly Artamonov) as well as the Republic of Mordovia (Nikolay Merkushkin) have kept their positions. All of them, with the exception of governor of Kaluga region Artamonov, completed their fourth term of office (he completed his third term in 2010), which is considered at the federal level to provide possible grounds for “planned” rotation.

These “exceptions” may be explained by the diversification of the staff policy of the Center. The priority of regular replacement of governors within the federal line goes together with the measures aimed at maintenance of political stability and continuation of implementation of electorally popular social-economic projects in regions in the run-up for the federal election campaigns of 2011-2012 (parliamentary and presidential). Considering that these heads of regions generally coped with the tasks assigned and their line corresponded to the federal priorities, prolongation of their powers was quite expedient from the point of view of management effectiveness. In some cases the federal authorities took account of the increased risks related to the specific features of the regional situation: in Kemerovo region and Lipetsk region this was the social situation caused by the presence of “problem” single-industry towns in the regions and the high unemployment level, in Mordovia and Kaluga region special attention must be paid to search for measures to overcome the effects of the economic crisis in industry. Finally, one should also consider that the informal rule of the limited term of office of governors of 4 terms of power primarily concerns the cases when these are full (more often 5-year) terms. In the case of head of Mordovia Nikolay Merkushkin the first term of powers was 3 years, the second – 2 years, which allows to speak about “an exception”. The situation was the same for governor of Tambov region Oleg Betin (his first term of office was a year only), the decision was made at the federal level to preserve the present “team” with account for the aggregate political and social-economic factors.

The “heavyweights” keeping their political positions that were not affected by the “staff issue” in 2010 include governors Viktor Kress (Tomsk region), Leonid Polezhaev (Omsk region) and Boris Gromov (Moscow region). The powers of these heads of subjects expire in 2012. Kress and Polezhaev have been in power for a long time already (since 1991), and this factor together with the considerable age (Polezhaev is 70, Kress is 62) can be considered to be a prerequisite for change of power. Considering that the federal Center is interested in ensuring political stability at the regional level in the period of preparation for the parliamentary and presidential elections an early change of power in Tomsk region and Omsk region is quite a possibility. This is especially relevant regarding the latter case: apart from the mentioned factors another unfavourable factor for Leonid Polezhaev is the growing intraelite conflict. The head of Moscow region will complete his third term of office in 2012 and one can forecast a change of power upon expiry of his authorities.

The resignations of the heads of two subjects of the federation that happened in the already “pre-election” 2011 should be considered separately. The change of power in Kamchatka Krai and in Karachay-Cherkessia became a significant political signal of the federal Center to head of regions. This refers to demonstration of preparedness for tough measures within the frames of the line for higher quality administration of territories that is especially relevant in the run-up for the election campaigns of 2011-2012. The Center strives to control the situation at the local level and makes it clear for governors that they incur increased responsibility in the pre-election period. Coming to the fore in evaluation of the results achieved are the tasks related to ensuring of security and social-economic development.

In the first case the early resignation of Aleksei Kuzmitsky continued the peculiar tradition characteristic of a region with a complicated social-economic situation. It should be taken into account that nomination to the governor post in 2007 was a big “challenge” for the politician who had long lived in Saint Petersburg, and his voluntary withdrawal may quite be true in this case. The work of Kuzminsky in the governor capacity was not very effective first and foremost from the point of view of the political situation: the level of protest sentiments in the region is quite high; however, the “anti-rating” of the governor and his differences with the local elite that occasionally grew into open conflicts (with the influential fishing industry lobby, in particular) were perceived at the federal level as evidence of the inability of the head of the region to keep the situation under control. Kuzminsky was an outsider and was not perceived by the local elite as “a yes-man”, which complicated the management process: his “provisional” status prevented him from fitting-in in the local establishment and acquiring the necessary “regional” influence. Kuzminsky also failed to show effective management skills in solution of topical regional problems. As a result, his resignation “by mutual consent” meets both his personal interests and the interests of Kamchatka elite groups.

Kuzminsky’s successor in the governor office was Vladimir Ilyukhin, the chief federal inspector in the region. This decision was a compromise and contributed to “conciliation” of the political situation. Ilyukhin knows the local problems and can sort out intraelite conflicts.

The official reason for resignation of the head of Karachay-Cherkessia Boris Ebzeev, the same as in the case of the head of Kamchatka Krai Kuzmitsky, was “his own desire”; however, right after publication of the president’s decision there appeared information in mass media about the dissatisfaction of the federal authorities with the work of the already former head of Karachay-Cherkessia. In this case there were also intraelite conflicts that were negatively appraised at the federal level. A significant factor was the fact that the judge of the Constitutional Court who became president in 2008 was perceived by the local elite as an outsider. As a result Ebzeev’s intention to build his own system of power through large-scale staff replacement faced resistance on the part of the clans representing the principal ethnic groups (the Karachaians and especially the Circassians) aspiring to power positions in accordance with the historically established principles of distribution of political functions. An illustrative example is formation of the new government in Karachay-Cherkessia after Ebzeev became the president. The formerly active informal scheme presupposed nomination of a Karachaian to the position of the president and a Circassian to the position of the head of the government of the republic while the positions of the vice-president and the speaker were privately assigned to the Russians. However, after accepting the resignation of the ex-premier Alik Kardanov, a Circassian, Ebzeev, a Karachaian, announced about the ineffectiveness of the previous cabinet and the need to toughen struggle against corruption. He appointed Vladimir Kaishev, an ethnic Greek, head of the government of Karachay-Cherkessia reasoning this decision by the search for a professional candidature. The appointment was perceived rather as strengthening of the positions of the Russian-speaking diaspora and generated protests of Circassian nongovernment organizations expressing de facto the interests of some part of the local elite.

As distinguished from his predecessor the new head of Karachay-Cherkessia Rashid Temrezov who had lived in Moscow for a long time is not an outsider for the local elite. The federal choice in his favour was caused by the striving of the Center to restore “the balance of forces” and to prevent “an upsurge” of new conflicts between groups of interests that have been formed on the national and clan basis. Temrezov, a Karachaian, is considered to be a figure loyal to the ex-president of Karachay-Cherkessia Mustafa Batdyev who left the office after expiry of his regular term of power in September 2008 and now heads a regional division of the Pension Fund of Russia.  

Evaluating the perspective one can forecast that the “multivector” staff policy of the Center will continue. Within the framework of this line the decisions are made both with account for the federal priorities (the major one is ensuring political and social stability in regions) and for the specific features of the situation in a particular subject of the federation (intraelite and interethnic conflicts, social tension and the level of support of the head of the region by the population, etc.). Overcoming the consequences of the economic crisis remains a topical task for administrations of most subjects of the federation. Besides, the Center sets new tasks for governors involving increased management effectiveness (regulation of the situation in socially significant spheres, such as housing and utilities sector and provision of medicines, provision of state services in the online mode, etc.). One can single out several important indicators that reflect “success” of heads of regions and influence the process of making staff decisions at the federal level. They include the ability of governors to control the political situation, the skill of finding optimal solutions of budgetary problems, economic specificity of the region and crisis-related risks of change of power, attractiveness of the region for large federal business groups and influential representatives of the federal administrative elite.  

Control over the political situation generally implies lack of high-profile intraelite conflicts as well as availability of “levers” of influence at the governor’s disposal to ensure a “system” scenario of election campaigns of the regional and federal levels. We would like to note that due to increased competition of the election process of special significance is the ability of the head of the region of effective management of information flows and monitoring of the public opinion to prevent sharp growth of protest sentiments. In this context a demonstrative measure was the resignation of the governor of Kaliningrad region Georgy Boos in August 2010 who incurred significant image losses as a result of the mass manifestations related to contradictions inside the local elite (January-March 2010). The main reason for the open discontent was the ineffective solution of a number of socially significant problems by the authorities, such as the tariffs on the services of the housing and utilities sector, the transport tax, etc. quite a significant factor was the low “rating of trust” in the governor on the part of the population, which prevented Boos who announced his preparedness for compromise measures and a dialogue with the opposition from taking the situation under control in an operative way.        

Optimal solution of budgetary problems implies a balanced line towards costs reduction provided security of social obligations and lending restriction (this is a matter of the quality of work of administrations of regions as federal authorities in the person of the Ministry of Finance perform quite operative financing of regional budgets).    

In making staff decisions the Center also takes into account that the political “price” of a change of power varies depending on the damage inflicted by the effects of the crisis on the economy of the particular region. Change of power may create additional risks of destabilization for industrial subjects and resource-intensive republics that suffered the worst drop in production. This holds true for national republics as well but in this case this is a question of the political rathr than economic background of intraelite conflicts that may result in exacerbation of latent interethnic contradictions.

Thus, the line towards higher quality of administration of Russian territories outlined by Dmitry Medvedev implies continued rotation of governors; however, this does not rule out preservation of the existing managerial “teams” if they cope with the set tasks well enough. 

Electoral processes in regions of the RF

The main participants of the electoral process are the parties represented in the State Duma. In the regional elections of 2010-2011 they put forward list in all pre-election regions as well as a large number of candidates in districts (the UR is the leader in terms of this indicator, the same way as before). The potential of “small” parties is lower and suggests the possibility of local participation in the elections at the regional and municipal levels. This is related to lack of resources: to get registered they need to go through the procedure of gathering signatures that requires considerable organizations and staff resources.

From the point of view of agitation campaigns the preparation for “single voting days” did not give any surprises: parties used quite traditional methods of work with the voters without offering any principally new ideas. 

A typical feature of the spring campaigns of 2010 and 2011 was “the accent” of social problems. The key topic was that of increased tariffs on the housing and utilities services. One should note a qualitative change of strategies f opposition parties: the main direction used to be protest actions that rolled over large cities in January-March 2010 (the most active participant was the CPRF) while in 2011 the socially significant topics were covered using more moderate methods of work with the voters. The oppositionists were rather forced to use radicalization of rhetoric having failed to find answers to topical issues of their own development related to offering of new popular figures and new ideas attractive for the target audience (especially demonstrative in this respect is the example of the CPRF). During the 2011 campaign the tasks of internal modernization were not fully solved by the left forces while the refusal from open protests must have resulted from informal arrangements of the parliamentary opposition with the federal power, its major priority being maintenance of stability of the political situation in the run-up for the Duma and presidential election campaigns.

“The party of power” also paid much attention to social problems. In the course of preparation for the 2011 elections the Unified Russia had inspection visits of regions and conducted a monitoring of the process of growth of the prices of the housing and utility services. It also took internal staff measures regarding the officials who failed to effectively perform their functions at the local level (especially this concerned mayor of cities). Such a tactic is quite justified: charges are traditionally raised at the beginning of the year, which causes a growing discontent with the actions of the authorities that may project on the UR as well. The party strives to give an operative response to socially significant problems so as to seize the initiative in the media field and to prevent growth of the protest electoral segment.

The October elections of 2010 were held against the background of the growing postcrisis pessimism noted by sociologists and the effect of negative short-term factors, such as the consequences of large-scale forest fires, harvest failure and growing prices for some foods. The topic of fire safety was partially used by the LDPR, the CPRF concentrated on traditional social slogans. On the whole the parties of “the second echelon” did not offer their voters any new original agitation ideas.

To sum up, the main trend from the point of party agitation may be said to be regionalization of election programs: in the situation of weaker administrative pressure and higher competition of elections it is the issues of regional significance rather than federal scale (social and economic policy of the state, overcoming the effects of the crisis, etc.) that come to the fore. The approach suggesting an accent on the problems significant for a particular region is quite justified and meets mass expectation of the voters that are more interested in the campaign in this case. It was used in the most successful was by the Unified Russia that supplemented the strategy of demonstrating “real actions” important for rank-and-file citizens with nomination of the candidates short-listed during the primaries who knew the specific features of the regions and enjoyed a resource of recognition at the local level. The SRs also strove to cover regional problems in the process of agitation while communists and liberal democrats mostly used general social problems.

The agitation methods were the usual ones; besides, the trend towards reduction of visual political advertising noted in 2009 continued (this is probably explained by the economical approach to spending of financial resources by the parties, which was especially relevant for the opposition). Billboards for propaganda materials were mostly used by the UR; the CPRF preferred traditional party printed media and distribution of leaflets “from door to door”, the LDPR and the Fair Russia primarily strove to work directly with their target audiences (meetings with voters, “address” materials, etc.). At the same time one should note that while in 2010 the tactic of showdown of its polls was used by the UR only, during the spring campaign of 2011 this technique was used by all opposition forces “visually” demonstrating their high chances of success. 

An important characteristic of the regional elections of 2010-2011 was reduced administrative pressure on the electoral process and, consequently, higher competition between the campaigns. Dmitry Medvedev repeatedly spoke about the need for work in this direction as a condition of improvement of the Russian party system. By the results of the spring “single voting day” for the first time over the recent years all the parties represented in the federal parliament (“Unified Russia”, the CPRF, the LDPR, “Fair Russia”) cleared the vote threshold in all the 8 regions where new legislative assemblies were formed. In October 2010 and March 2011 the variety of the political forces represented in parliaments of the regions reduced; however, on the whole this trend preserved. Thus, based on the results of the regional elections we can speak about qualitative expansion of representation of social interests at the level of regional legislative power. For “small” parties (“Yabloko”, “Patriots of Russia”, “Right Cause”) the task of conquering deputy seats in the parliaments of the subjects proved unfeasible in most cases: they succeeded in performing successfully only in municipal entities. To be registered they were to go through the procedure of collecting signatures that required considerable organizational and staff resources; therefore, it is no wonder that the scope of participation of nonparliamentary players in the election process was initially restricted.

The majority of the seats in regional legislative assemblies in 2010 were taken by the Unified Russia, it is followed by the CPRF in most subjects, then by the LDPR and the Fair Russia. In some cases (such as Sverdlovsk region, Kurgan region, Kirovsk region and Tver region, the Republic of Altai, etc.) the final result of the party appeared to be lower than the symbolically important “threshold” of 50% (it is exceeded by the average result of all the campaigns being considered); however, there are not enough grounds to speak about a defeat of the party. It is expedient to consider this result as situational decrease of the support of the Unified Russia: it was ensured to some extent by the protest activity of the opposition “promoting” the socially significant topic of the tariffs on the housing and utilities services as well as the discontent with the work of the acting power (Altai) and the unstable positions of the governors that have just recently taken the office among the local elite (Khabarovsk Krai, Sverdlovsk region). In Novosibirsk region the results of the elections were influenced both by objective factors (traditionally high share of voters siding with the left forces) and the situational factors (change of the head of the region during the election campaign and the related growth of conflicts inside the regional division of the UR). The factors that are objectively negative for the party of power were in place in Kirovsk region, Tver region and Kaliningrad region. In these cases the low result was predictable: apart from the anti-rating of Dmitry Zelenin a negative role was played by the factors of the population’s dissatisfaction with the quality of the housing and utilities services against the growing tariffs and low living standard (especially in the first two cases) and the intraelite conflicts (in the last one). The insufficiently effective interaction with the local groups of interests and intraparty staff problems prevented the UR from realizing its electoral potential to the full extent in Nizhni Novgorod region and Khanty-Mansijsk AD. Besides, in some cases the agitation campaign was not effective enough, which enable the oppositionists to seize the initiative and actively promote their own agenda (the basis was criticizing of the power and the UR representing it in the party field). Nevertheless, one should note the growing support of the UR compared to the previous elections of regional parliaments (2005-2006) in the subjects of the federation that participated in the spring (2010 and 2011) and autumn (2010) “single voting days”. 

Representatives of the parliamentary opposition also performed quite confidently receiving quite high results in the “backbone” regions. In the 2010 elections the CPRF received considerable support in Novosibirsk region, Kurgan region and in Altai; in 2011 the communist party was most successful in Kirovsk region, Tver region, Kursk region. In 2010 the Fair Russia showed the best results in Sverdlovsk region, Kurgan region and Chelyabinsk region, in 2011 – in Kirovsk region and Tver region. Finally, the LDPR in 2010 gained high support in Ryazan and Magadan regions while in 2011 – in Kirovsk region and Orenburg region as well as the KhMAD.   

An important factor for successful performance of opposition players was the growing activity of socially oriented voters and, consequently, higher political ratings of the “left” forces in the regions of the elections. This is the question of the protest voting of the voters that are distinguished by unsteady political preferences. The growing activity of this segment of the electoral field in March 2010 resulted from the strategy used by all opposition parties: sharp critic of the authorities of different levels, politicization of social demands and “street” methods of agitation (rallies, picketing, etc.). In October 2010 the “street” activity was lower, this trend continued in 2011.

On the whole, the quite successful performance of the opposition in the regional elections was contributed both by active agitation events and the steady loyalty of the “core” electorate. The effect of agitation is especially relevant for the Fair Russia that is the process of searches for its electoral niche and needs clearer positioning to consolidate in the “left” wing. In cases of success of the SRs the reasons are often similar to those of the communists (for example, in Tver region and Kirovsk region).

The base of the supporters that has formed over the years of existence of the parties is still the key factor of success of the CPRF and the LDPR: “communists” rely on the socially oriented and the most “disciplined” voters in the person of pensioners while the liberal democrats rely on the younger audience that is inclined to perceive the power negatively. Through the efforts of its eternal leader Vladimir Zhirinovsky the LDPR effectively used the potential of the protest electorate in regions with a low living standard (Kirovsk region, Komi) as well as in the “oil and gas” KhMAD (a classical protest voting related to the discontent with certain aspects of the federal course). The successful performance of the LDPR in Orenburg region was contributed by the coverage of the “national” problem topical for the region (“Russia is for the Russians, too”). 

It should be noted that in October one could notice the trend towards growth of the support of the LDPR and the Fair Russia that used to be considerably inferior to “communists” in most cases. The main reason is probably the shift of some part of the socially oriented electorate to the rivals of the CPRF in the “left” wing (the SRs) and in the protest segment of the electoral field (“liberal democrats”) that offered a more attractive design of the agenda and put forward (supported by the local elite) relatively new figures. However, in March 2011 the communist party confidently came second again by the results of the parliamentary elections in most subjects: apart from the stability of the “core” electorate a favourable role was played by the traditions of voting in support of the “left” forces that persist in some regions. For example, in Tver region and Kirovsk region (“depressive” territories) the social problems traditional for the party effectively strengthened the discontent of some part of the population with the situation. The contraposition of “communists” to the power allowed the party to attract votes of the “protest” electorate in Nizhni Novgorod region, Kursk region and Orenburg region. Besides, a significant factor in the first case was the contradictions inside the local elite that enabled “communists” to attract opponents of governor Valery Shantsev as their supporters.

One should separately note that the success of the Patriots of Russia in March 2011 that were elected to the parliaments of Dagestan (over 10%) and Kaliningrad region (over 8%) is likely to be considered as a consequence of some specific features rather than a regularity. In the first case this is the protest sentiments of the voters that contributed to the growing support of the party alternative to the usual “left-wing” players; in the second – about the informal intraelite arrangements made in the course of the agitation campaign.

As a conclusion we would like to note that interpretation of the spring campaign of 2011 as “the primaries” of the parties before the December federal elections does not seem quite correct: the agenda of the regional elections has its specificity while the voters’ sympathies in many cases are influenced by specific features of the political situation in each particular case. The rather high percent of the votes in favour of the opposition forces largely resulted from the federal line towards reduction of the administrative pressure on the election process that is simultaneously an incentive to increase the effectiveness of work of the party of power. However, as the elections to the State Duma approach, the most-favoured-party regime for the opposition may change for a more neutral, equally-distant federal course, At this stage all parliamentary parties have good chances of gaining and expanding its representation in the State Duma. The UR will keep the role of the leader and will claim the majority but most likely it will not be the constitutional majority.