Policy Memos

Business and State in the Russian Regions

Policy Memo:

305

Publication Date:

11-2003

Description:

Since the 1998 financial crisis, Russian big business has dramatically expanded its operations into Russia’s regions and, in the process, transformed the country's political system. During the 1990s, Russia's governors and the regional business community had close and mutually beneficial ties, often giving the governors monolithic control over their regions. The governor provided businesspeople with access to state resources, licenses, favorable legislation, and protection from law enforcement agencies in exchange for electoral support and help dealing with potential challenges from Moscow or local opposition groups.
 
The arrival of big business at the regional level brought a major change in the way that regional politics worked. Before 1998, most of Russia's big businesses had concentrated on the extractive industries and played little role at the regional level. After the devaluation of the ruble, it became profitable to invest in the regions and the magnates began buying up regional enterprises. This insertion of big business into the regional level shook up the cozy ties that had developed among the regional political and economic elites. With the arrival of big business, the governors faced powerful new players who were not beholden to them and had access to enormous financial resources. Big business could have a much more powerful impact on the governors' authority than the appointment of Putin's seven presidential envoys, because the envoys did not have access to resources remotely approaching those of the largest companies. [...]
 

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About the author

Research Professor of International Affairs, IERES; Director of Research, Sustainable GW
George Washington University