PROVINCIAL POLITICS
1. INTER-PROVINCIAL RELATIONS IN SIBERIA
SOURCE. A paper by Professor Grigory L. Olekh on prospects of disintegration of the Russian Federation in light of competition among Siberian regions. The paper will be included in a collected volume on global and regional security problems to be published in the first half of 2003 by Novosibirsk State University.
Professor Olekh sees the most important factor tending toward the territorial disintegration of the Russian state as the glaring contrast between living standards in the center and on the periphery. In particular, the policy of concentrating tax proceeds in Moscow reduces even donor regions to the humiliating position of petitioners of the federal government, fuelling the regions' hostility to the center.
The inter-regional associations were one response of the regions to the neglect of their interests. Now the federal authorities have put regional problems of any significance in the hands of the presidential representatives in the federal districts and the councils headed by them, reducing the associations to helpless appendages of these newly formed state institutions. This administrative reform, like any innovation imposed from above, is an artificial palliative of doubtful effectiveness.
However, a much more powerful and permanent factor blocks the emergence of a united front of regions against the center -- inter-regional and intra-regional competition, spontaneously generated by the same disproportions in income distribution at lower levels. This competition not only places donor and recipient regions on different sides of the barricades: it tears the fragile fabric of inter-provincial solidarity to pieces, forcing each region into conflict with every other region. Horizontal ties cannot fill the resulting vacuum because the logic of competitive struggle in an uncivilized market on the brink of survival requires total victory.
The author examines competition among Siberian regions in the field of aviation and on the markets for food and alcohol.
AVIATION
A good example of the struggle to attract additional financial resources is the competition among five Siberian regions -- Omsk, Novosibirsk, and Irkutsk provinces and the Altai and Krasnoyarsk territories -- to host a planned new international airport capable of handling heavy planes like the Boeing-747 and Boeing-777. The project, estimated to cost at least 500-700 million rubles, can be carried out only with large government subsidies. Vigorous lobbying by the late Krasnoyarsk governor Alexander Lebed did not prevent the Ministry of Transportation deciding in March 2001 in favor of Novosibirsk, although Krasnoyarsk is more favorably located for receiving transcontinental flights (being closer to the Pacific and Arctic Oceans).
In October 2001 Lebed presented to the council of the Siberian federal district and the inter-regional association "Siberian Accord" an ambitious proposal for an aerospace show to be held in Krasnoyarsk. The proposal was unanimously rejected. The Krasnoyarsk administration nonetheless got the project approved by Rosaviakosmos, the Ministry of Transportation, and the State Civil Aviation Service. The show took place but was not a great success: only a couple of the planes exhibited were new models. The goal of extracting federal funds to upgrade the Krasnoyarsk airport was not achieved. The newspaper "Evening Novosibirsk" helpfully suggested that Krasnoyarsk stick to its market niche -- providing regular flights to the Far North.
Omsk also plans to upgrade its airport to international standard. Irkutsk too is seeking funds for the same purpose, mainly from Japanese businessmen.
THE FOOD MARKET
Growing inter-regional competition is a salient feature of the Siberian food market. Over recent years the leading agrarian regions of the Siberian federal district, Omsk and Novosibirsk provinces and the Altai territory, have produced milk, meat, and grain in excess of demand, leading to falling producer prices and the impoverishment of farmers. A wave of bankruptcies has prompted the governments of some regions to increase purchase prices, with the result that these regions have been flooded with farm produce from other regions where prices are lower, further exacerbating the crisis of overproduction. Regions worst affected by imports, such as the Krasnoyarsk territory in July 2002, have reacted by bringing purchase prices down again.
Both economic and administrative means have been used in the inter-regional struggle to "export" home produce to other provinces while protecting the home market from other provinces' "exports." For instance:
* The Novosibirsk provincial government encouraged formation of the Siberian Industrial Corporation, an alliance of about ten enterprises to find outlets for Novosibirsk goods, above all in Kuzbas. In July 2002 the Novosibirsk Food Corporation was formed, a state corporation headed by a well-known local businessman. Its officially declared purpose is "to assist deliveries of food [and alcohol] products to other regions and to reduce the movement of poor-quality produce into Novosibirsk province."
* The governments of neighboring provinces have obstructed the efforts of Novosibirsk dairy farmers to "export" their milk.
* Omsk provincial governor Polezhayev was reported in September 2001 as banning the provision by Omsk enterprises of material or technical assistance to farms in Novosibirsk province.
THE ALCOHOL MARKET
Local alcohol production is a major source of income to provincial governments. Thus both local production and local government budgets are jeopardized by alcohol "imports" from outside the region. So regional authorities force wholesalers to buy locally produced vodka. Otherwise fire, sanitary and trade inspectors will make problems for them.
Omsk, Kemerovo, Altai, and Tyumen seek to protect their markets from the inflow of Novosibirsk goods. [This seems to be a persistent pattern: the interests of Novosibirsk, the province with the strongest economy and correspondingly the greatest clout in Moscow, clash with the interests of other Siberian provinces. --SDS] In so doing they take advantage of the federal law on state regulation of the production and circulation of alcoholic products and ignore the federal law on competition.
One method used is to distribute leaflets to scare consumers off buying "foreign" goods. This "black propaganda" is probably the work of businessmen acting with the connivance of provincial state officials.
SIBERIAN SOLIDARITY?
Nevertheless some attempts have been made at pan-Siberian solidarity. At the end of September 2001, a Union of Commodity Producers of the Siberian Federal District was set up in Novosibirsk. But this turned out to be a formal and not very active organization. In February 2002 there was a meeting of managers of food and food-processing companies of Siberia and the Far East, followed in April by a joint session of the Council of the Siberian FD and "Siberian Accord" (with minister of agriculture and vice-premier Gordeyev taking part) to work out a "balanced policy" for food sales. Everyone agreed on the need for a unified Siberian food market through a joint marketing agency of the regional administrations, eliminating intermediaries. Some commentators speculate that the center is secretly impeding realization of the idea.
Professor Olekh gives an account of the intra-regional conflict between Krasnoyarsk territory and Taimyr autonomous district, and of other conflicts over revision of boundaries and schemes to amalgamate provinces. He speculates that the center may not actually want to see such conflicts resolved, as they prevent formation of a Siberian bloc.
Thus the Siberian regions do perceive shared interests vis-à-vis the center and make some attempt to cooperate, but they are divided by conflicting interests as well as mutual envy, resentment, and suspicion. "The stretching of Siberia's regional fabric by opposing tendencies toward consolidation and disintegration, especially given the temptation of the federal authorities to encourage these convulsions in the interests of preserving the territorial integrity of the RF, is fraught with the most serious, dangerous, and unpredictable consequences both for Siberia and for Russia as a whole."
EDITOR'S REFLECTIONS
The tensions surrounding inter-provincial trade, which the author describes so vividly, surely stem from the absence of effective policies of market regulation at the national level. Like other countries, Russia needs national regulation both of the functioning of the economy as a whole and of specific sectoral markets, certainly including agriculture.
Macroeconomic regulation is needed to stabilize the effective demand of the population at an optimal level. What the author, following Marx, calls "crises of overproduction" can equally well be regarded as crises of underconsumption. After all, many Siberians, and children first of all, would benefit from consuming the "surplus" meat and milk but cannot afford to buy them: incomes are too low. It's the same situation that prevailed in the US during the Great Depression of the 1930s and inspired John Steinbeck's classic novel "The Grapes of Wrath."
In agriculture, the seasonal cycle and the unpredictability of annual output do not permit the free market to maintain a stable balance between supply and demand or between the vital interests of producers and consumers. Therefore it is essential to regulate prices and the timing of the release of products on to the market. But price supports, like other forms of market regulation, require a closed market that coincides in territorial scope with the sphere of regulation. Otherwise the sort of chaos that has occurred in Siberia is inevitable. Even pan-Siberian coordination would not suffice to avert such chaos, at least in the zone adjacent to European Russia.
The Common Agricultural Policy of the European Union exemplifies a price support system that functions in a fairly stable way within a closed market. That is not to deny that it has irrationalities of its own (the various food "mountains" and "lakes") or to claim that its benefits justify its costs. --SDS
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