According to a report by a Russian credit rating agency affiliated with RBK media holding, 62 of Russia’s 83 regions (this total excludes the illegally annexed Crimea and Sevastopol, which Moscow considers its 84th and 85th federal subjects) are likely to deplete their financial reserves this year due to falling budget revenues and the need to increase spending to address the coronavirus pandemic and the collapse of oil prices (Ratings.ru, March 13). The number of Russian regions with budget deficits doubled in 2019 to 32, as tax revenues fell three-fold. This year, the regions will continue spending their budget reserves under any scenario. By the end of the year, an estimated 62 regions might be left without essential monetary assets, the agency reports. Experts attribute the main reason for the falling regional budget revenues to the slowdown in corporate tax proceeds. The reduction in revenues coincides with the rise of government spending on social programs. The ability of Russian regions to borrow on the market is limited, which means their dependence on central government subsidies will increase. The planned subsidies for 2020 already exceed 700 billion rubles ($10 billion). Under the influence of COVID-19 and other negative factors, this amount is likely to increase significantly, the credit agency warns.
The report says that, currently, the Udmurt Republic, Mordovia, and Ulyanovsk region have already depleted all their financial reserves. The small North Caucasus Republic of Ingushetia has the third-highest overdue accounts payable in Russia. North Caucasian republics are usually ranked as the poorest Russian regions, and the unfolding economic crisis is likely to hit them especially hard. For example, in 2019, Karachaevo-Cherkessia, Dagestan, Chechnya and Ingushetia rated the lowest among Russian regions in terms of mortgage availability. Adygea, Kabardino-Balkaria and North Ossetia also were close to the bottom of the ranking (RIA Novosti, March 10). Overdue individual credit is also most rampant among residents of the North Caucasus. In 2019, people from Ingushetia, Karachaevo-Cherkessia and North Ossetia were among the most likely in the Russian Federation to have overdue credit payments (RIA Novosti, March 2, 10).
The Russian central authorities may regard the financial dependence of formerly separatist regions such as Chechnya as something positive. If a peripheral region receives substantial subsidies from the central government, it is usually less likely to rebel or attempt to secede. However, there is another side to this equation, and that is the attitude of the population of the core state—in this case, ethnic Russians.
Relatively recently, in 2011–2013, the Russian opposition and nationalists exploited Moscow’s subsidies for Chechnya and other North Caucasian regions as a political tool against the government. “Stop feeding the Caucasus!” became one of the most popular political slogans among Russians at the time (see EDM July 7, 2011). Leading Russian opposition figure Aleksei Navalny also trumpeted the issue of subsidies to boost his popularity (Interpreter, July 27, 2013). Supporters of the campaign vilified the Kremlin for diverting financial resources from majority-ethnic-Russian regions to ethnically “alien” territories. At the height of the campaign, thousands of Russians gathered in the streets to support cutting financial aid to the North Caucasus republics (YouTube, October 24, 2011). Many of the people who spoke against funding the republics in the North Caucasus also supported cutting them off from Russia altogether.
Russian isolationism in regard to the North Caucasus peoples, especially Chechens, Ingush and Dagestanis, has a substantial history. In 2011 and 2013, respectively, only 13 percent and 10 percent of Russians supported using all means necessary to keep Chechnya part of the Russian Federation, according to polling carried out by the Levada Center. The majority of respondents were either indifferent or supported Chechnya’s secession (Levada.ru, July 1, 2013).
Will the new financial crunch lead to the rise of another wave of Russian isolationism? Perhaps, but this time, it is likely to be accompanied by resentment among populations in the North Caucasus. The new amendments to the Russian constitution include mention of ethnic Russians as the “state-forming people,” which implies that ethnic non-Russians are somewhat inferior (Vedomosti, March 2). Some observers note that this “state-forming people” clause is Vladimir Putin’s overture to Russian nationalists. Others warn that the discriminatory clause might backfire in the future. It appears to already be affecting the situation in some regions of the Russian Federation.
Protests against legislation adopted by the Russian authorities is highly unusual in the North Caucasus. Nevertheless, several people staged public protests against the constitutional amendments in Nalchik, Kabardino-Balkaria (Kavkazsky Uzel, March 12). Ingush teips (clans), one by one, announced their boycott of the Russian plebiscite on the constitutional amendments (Fortanga.org, March 12).
The looming financial crisis, combined with the discriminatory new amendments to the Russian constitution, are likely to have consequences for federalism in Russia. The regions’ financial issues will raise public awareness of wealth redistribution among individuals and regions. Ethnic discrimination will produce significant discontent. Though it is hard to predict what exactly will happen, recent experience shows that the new fault lines in Russia are likely to involve the North Caucasus republics once again.