Putin's federal reform package: A recipe for unchecked Kremlin power

When President Vladimir Putin took office at the beginning of 2000, he inherited a political system that was working badly. He had to take action and chose to implement a set of reforms that sought to centralize power in the Kremlin and institutions directly under his control. In this article I will briefly describe the situation that Putin faced when he came to power. I will then provide a short overview of his reforms. Finally, I will analyze the effectiveness and likely consequences of Putin's initiatives.

The Legacy of the 1990s

At the beginning of the 1990s, Russia's federal system faced serious troubles.' The federal government did not have the ability to implement many of its policies throughout the country. Most important, the country lacked a unified market, as regional leaders often erected barriers to trade between regions. Some governors stemmed the flow of goods into their regions because they wanted to generate tax revenue from local producers. Others blocked the export of foodstuffs to ensure that local shelves would be filled. Such measures deprived farmers of incentives to produce because they would not be able to get a market price for their products.

The Russian bureaucracy of the 1990s was in particularly poor shape. Many of its employees were unqualified to deal with the challenges presented by the new market economy. Corruption was endemic because bureaucrats largely controlled the regulation of business enterprises and could impose arbitrary fines or collect bribes with impunity.

Despite its overall weakness, the federal government was in a position to block regional initiatives. For example, it set the rates for the key revenue-raising taxes and authorized the regions to collect only about 7-8 percent of their revenue without first gaining permission from Moscow. Since the regions had few ways of raising money on their own, they frequently resorted to lobbying the center to obtain needed funds. At the same time, federal efforts to help the regions, such as development programs, usually existed only on paper. The federal government also shirked many of its responsibilities by requiring regional and local governments to meet many of the population's social needs but denying them the financial base to fulfill those obligations.

In the face of federal weakness, Russia's eighty-nine governors felt free to violate federal laws. Regional legislatures adopted laws that declared their regions to be sovereign, placed regional laws above federal legislation, established forms of citizenship independent of Russian citizenship, asserted ownership of natural resources in regional territory, and claimed the right to sign and renounce international treaties. In the latter part of the 1990s, they had essentially unchecked power in their own regions, with no other individuals or institutions in a position to provide much opposition. Governors had close links with regional economic elites in whose interests they often acted.

Although the federal government held most of the formal economic power, the governors were often able to gain economic power de facto by exploiting barter and other forms of nonmonetary exchanges.2 It was relatively easy to hide nonmonetary exchanges from Moscow, so governors often favored deals involving goods, debt offsets, or simple nonpayment, particularly to energy utilities.

Additionally, the governors often were able to exert enormous influence over federal employees working in the regions because the federal government lacked the resources to provide them livable salaries or such necessities as office space. By controlling the local branches of the police or procurator, which are technically federal institutions, the governors did not have to worry about pesky criminal investigations into their activities. Control of the regional court system provided similar benefits. In many regions, though, the local Federal Security Service, the successor to the KGB, stayed outside gubernatorial control and could investigate particularly egregious abuses. Finally, most governors had extensive control over most of the important media outlets in the region, particularly television.

Putin's Reforms

Promptly after his inauguration, Putin launched a set of initiatives to restructure Russia's federal system and address the problems he inherited from the Yeltsin era. On 13 May 2000, he signed a presidential decree dividing the country's eighty-nine regions into seven federal districts, and he appointed presidential representatives to each of them.3 He also succeeded in passing bills through the national legislature that transformed the way members of the upper chamber Federation Council are chosen,4 gave the president the right to fire governors and disband regional legislatures (at least formally),' and gave governors the right to fire mayors.6

The Federation Council

Putin's obvious goal in changing the way the Federation Council members are chosen was to reduce the status of the eighty-nine governors from national politicians to regional ones and to take away their immunity from criminal prosecution. From the beginning of 1996, governors and the chairmen of regional legislatures had been automatically members of the Federation Council, which endowed them with national stature and access to the national media that they would not otherwise enjoy. Putin wanted to remove them from that body to lower their status and reduce their ability to lobby the federal government for funds.