Staunton, VA – November 12, 2014 Moscow no longer has the funds or access to foreign investment to promote either growth or equalization in Russia’s regions and instead has opted for a regional policy within the country based on geopolitical considerations and fears of Russia’s possible disintegration, according to a Moscow State University geographer.
In Vedomosti on November 12, Natalya Zubarevich says that any country, including Russia, can give priority to one of three things in its regional policy: stimulating development, equalizing incomes and growth, or investing in this or that region out of geopolitical calculations (vedomosti.ru/opinion/news/35854761/geopolitika-irazvitie-regionov).
The balance among these three can change and in Russia over the last two decades it has changed and changed fundamentally. In the first ten to twelve years after the collapse of the USSR, Moscow focused on promoting equality although it lacked the funds and structures to make that happen.
Then, when the rise in oil prices gave the center more money to play with, Moscow focused on promoting growth in one or another region. But its success in doing so was limited by “the barriers of the Russian institutional milieu.” Over the last five years, as the center’s income as declined, Moscow’s policies increasingly have reflected geopolitical and security concerns.
Thus, Zubarevich says, Moscow has focused on Kaliningrad, the non-contiguous Russian region in Europe, the North Caucasus with its restive nations, and the Far East, an enormous underpopulated region next door to China. More recently, it has announced plans to put enormous sums of money into newly-annexed Crimea.
While Moscow has not achieved all its goals, it has certainly redistributed transfer payments to these four places, the geographer says, and she provides statistics showing just how much money is flowing or is supposed to be flowing to them as opposed to the rest of the Russian Federation.
The Russian central government does not have the resources to engage in geopolitical equalization, given declining income and the unwillingness of foreigners except possibly for China to invest massively in the regions, and consequently, it has adopted a policy of “geopolitical stimulation.” But here too there are real limits, the geographer says.
Because businesses in Western countries are ever less willing to invest in these regions because of sanctions, the burden of developing the regions falls increasingly on Moscow, again except in the Far East where China may be willing to do so, even though Beijing’s role there raises geopolitical concerns of its own.
Faced with these limitations, Moscow chose to create gaming centers and special economic zones. The first does attract new money, but the second works only “if it is not geopolitical.” That is, special economic zones wherever they are set up must be able to attract outside investment. In the current environment, that isn’t happening and won’t anytime soon.
After all, Zubarevich says, “who will invest in Crimea if there are no favorable factors of development and subsidies can be received only when investments are of sufficient size?”
Given this trap that they now find themselves in, Moscow officials have adopted yet another strategy of regional development: give special subsidies to everyone and hope for the best. But what that means, the geographer says, is that the center is setting itself up to fail by creating a new kind of black hole into which government resources will go without returns.