Russian regional resilience: finance, cooperation and resource abundance (a case study of Khanty-Mansiysk)

Public Administration. PA. Высшая школа экономики, 2014. № WP BRP 15/PA/2014.

Леонард К. С., Ильина И. Н., Плисецкий Е. Е.

This paper, part of a larger project on governance and growth in Russia, examines regional financial resilience in Russia in the period following the global financial crisis. The level of risk is rising, as government emergency finance is withdrawn and regions face rising debt to cover even operational expenses, but “resource” regions seem securely well off, despite having been most affected by the financial crisis. This paper examines one region, Khanty-Mansiysk autonomous okrug (KhMAO), the largest “donor” to the federal budget, against the background of other mineral resource abundant regions. It traces developments since the dramatic budget reforms (late 1990s through 2005), including centralization of revenues and rationalized program expenditure (Alexeev and Shlomo 2013).  It assesses regional budget and debt management in response to pressures from increased federal required expenditures, post-crisis withdrawal of subsidies, and the roll-out of new debt guidelines. It describes and explains KhMAO’s stability and relative autonomy in these crisis conditions. The key questions are: Why are these “donor” regions, more affected by the crisis than others, also more resilient? Is Russia’s growth core of regions financially stable because of federal intervention? How vulnerable is the resource region to future oil price shocks? Our findings are tenative, since there remain questions about transparency and soft budget constraints (Plekhanov 2006). We show federalism at its most cooperative: among other factors, regional collaborative action fosters flexible budgeting.

Keywords: regional governance, oil-producing regions, fiscal federalism, Federal budget, regional programs of development, budget reforms