Moscow Adopting East India Company Strategy to Develop Russian Far East

When analysts consider Vladimir Putin’s strategy for running the regions of the Russian Federation, they generally focus on his supra-regional “innovations.” Those have included the federal districts he created at the start of his presidency (Ura.ru, April 24, 2014), the amalgamation of federal subjects he has pursued off and on since (Gorod 812, July 21, 2020; see EDM, June 16, 2020), or, most recently, his attacks on local institutions that, in his view, duplicate those that already exist in Moscow and limit the center’s ability to run the country as a single whole (Kommersant, November 18, 2020). And last year, Putin notably pushed through a Constitutional amendment that allows for the formation of federal territories Moscow can control directly (Kommersant, Regnum, November 9, 2020; see EDM, January 5, 2021).

But now the Kremlin leader is promoting an arrangement in the Russian Far East that could transform his country more than any of the above initiatives—though possibly at the cost of generating more resistance to himself. He is creating a single corporation to develop the Far East. That entity will overpower regional and republic governments as well as other lesser businesses and corporations; thus, in many ways, the Russian plan somewhat resembles the United Kingdom’s historical use of the East India Company at the start of its colonial rule over the South Asian subcontinent. If such an arrangement succeeds in accelerating growth in the Russian Far East, slows population outflows from the region, as well as manages the tense relations with Chinese investors there (see EDM, October 6, 2020), it is entirely possible that Moscow will try to apply this same scheme to other parts of the country as well.

Allowing a nominally private or mixed public-private corporation to run part of the Russian periphery represents a logical next step in the ongoing fusion of public and private economic power—something that has become the hallmark of the Putinist system. But whether it can succeed is an open question given the size of the challenges Moscow and its new corporation face in the Russian Far East, a region culturally, religiously and increasingly politically at odds with the center. Never having known serfdom, it is less deferential to federal authority than are other parts of Russia. And more Protestant than any other region in the country, its population has shown greater levels of entrepreneurialism as well as desire for freedom to act on its own. Moreover, Russians in this region have been willing to go out into the streets—repeatedly and in massive numbers—to protest arbitrary actions by Moscow, as in the case of the people of Khabarovsk, who have demonstrated for over half a year against the center’s dismissal and arrest of a popularly elected and well-liked regional head (Region.Expert, October 28, 2020; see EDM, August 3, 4, 2020).

For both security and economic reasons, Moscow has long been worried about the Russian Far East. The ongoing exodus of the population there has continued to decrease the proportion of ethnic Russians in the region while facilitating growing influence from Chinese businesses and migrants. Moscow’s approach up to this point has involved mostly funneling ever more money into existing industry. But this has not worked, Russian analysts say, since it ignored the problems of infrastructure and regional integrity that must be addressed if the Far East is to experience economic growth and hold onto its dwindling population (IA REX, January 18, 2021). These concerns and the importance of the region to Moscow have only increased since the Kremlin decided to place Arctic and Far Eastern development under a common bureaucracy. As a result, at the end of last year, Putin called for a new approach: one that would do an end run around existing bureaucratic bottlenecks and open the way for development not only in the Far Eastern Federal District but more broadly to the north (Vzglyad, December 5, 2020).

That idea is now taking shape. The Ministry for the Development of the Far East and Arctic has called for the creation of a Corporation for the Development of the Far East and the Arctic to supervise the economy and to assume control over many other things as well, including the free port of Vladivostok. The government has named Eduard Cherkin to run the new institution. Cherkin earlier served as the head of the Automobile Construction unit for the Boston Consulting Group in the Commonwealth of Independent States (Vzglyad, January 18, 2021).

In announcing this appointment, the Far East and Arctic development ministry declared that the corporation will additionally be responsible for the administration of the Arctic Zone of the Russian Federation and also of development in the territories adjoining it. It will directly work with the population to involve its members in economic activities designed to promote development of the region and of the country as a whole. In short, the new corporation will assume responsibility for many of the tasks that regional and republic governments normally oversee, and it will have the ability to expand its operations without regard to the existing administrative-territorial divisions of the country (Vzglyad, January 12 2021).

This arrangement may sound narrowly economic or even technical, but it is certain to upend political life in the already restive Russian Far East. The corporation, as opposed to regional and republic governments, will not have to be responsive to the electorate in any official way, so it will, therefore, be in a position to override both the voters and regional officials. Of course, this setup could backfire on Moscow, which may have unwittingly set the stage for a new alliance of the populations of these regions and regional officials to oppose the development corporation and, thus, the federal center. Such a coming together of people and officials could easily come to resemble what happened in some union and autonomous republics at the end of Soviet times. And on this occasion, the challenge to the Kremlin could be even more fateful because it would deprive Putin of the support of a region that he has sought to make a key part of his base.