Local Fiefdoms Risk Future of Federal Powers

Last week, Kursk Governor Alexander Rutskoi repealed an order on mandatory transfers of regional commercial organizations' bank accounts into the Kursky Gubernsky Bank. But it took the firm intervention of the State Anti-Monopoly Committee and the Association of Russian Banks as well as widespread criticism of the governor's decision in the press for the former vice president to revise his decision on the creation of scandalous monopolistic advantages to one of the banks of the region.

The Kursk governor's active policy of establishing monopolies has led small and medium-sized business to leave the region.

It should also be noted that even after considerable pressure, Rutskoi did not repeal altogether but only softened his order to concentrate accounts in one commercial bank by changing it from a mandatory instruction to a recommendation. It is not difficult to imagine that such "recommendations" are impossible to turn down.

Rutskoi's mischievous drive toward monopolies is not unique. He is simply a high-profile figure in the country. In the struggle with the largest so-called natural monopolies, such as Unified Energy Systems and Gazprom, somehow little attention has been give to the regional monopolism of recently elected governors.

Hardly a regional leader remains who would not try to limit the import of alcohol products to his territory and create advantages for his local spirits producers. There are many governors who would like to impose limits on any kind of good.

The situation is made worse by the federal government's absolute lack of control on the local budgets. Moscow cannot verify what the money it sends to the regional budgets is being spent on. Even the ubiquitous Audit Chamber is in no position to do so. Therefore, the part of local budgets that is misappropriated is huge, but determining that sum is very complicated.

The majority of the federal oversight and punitive structures, like the prosecutors office, the militsia, the Federal Security Service and others, are under both Moscow and the local authorities. Moreover, local politicians are trying to increase the balance of influence over these structures to their advantage. As a rule, new governors try to replace the local heads of the interior department with their own people. And they usually succeed. The same goes for the prosecutor's office and security services.

The strengthening of federal authority and the very preservation of the federation depend greatly on the federal officials who work in the regions. But their wages and benefits are usually far lower than those of local officials. This gives local authorities the chance to fatten the federal authorities on their territory. The governor of the Chelyabinsk region, for example, recently had built a chic building to house the territorial secret services department.

The federal authorities today simply lack enough money to provide material independence for their officials in the regions. This means that these officials are in no condition to effectively fight regional monopolies and ensure that federal laws and interests are observed.

In other words, Moscow must urgently find money for the fight against economic separatism in order to preserve the very federation.

Mikhail Berger is economics editor for Izvestia.