Federalism and Local Politics in Russia

Unification as a political project 95look unrealistic. The construction projects guaranteed by the federal centrehave slowed down. Perm Krai managed to attract the interest of someFinnish investors to support its biggest investment project – the constructionof a new pulp and paper mill (the total project will cost about 700 milliondollars) but it is highly unlikely that the new mill will be located in theOkrug. 44 The Belkomur project that was part of the compromise agreement45 between the Oblast and the Okrug during merger negotiations hasnot received sufficient interest from the key Joint Stock Company, ‘RussianRailways’, which is not willing to support such an unprofitable project.Construction of a nuclear power station seems to be very speculative, as theOkrug doesn’t have enough infrastructural and human resources to back itup. Both projects cannot be realized without significant federal support.Therefore, the question arises – what are the economic gains of the merger ifall the really significant projects are fully dependent on federal support?According to the newly adopted consolidated budget of the Perm Krai for2007, the Komi-Permyak Okrug is due to receive 500 million roubles ofextra support, which constitutes a 50 per cent increase. If the Okrug retainedits status as an independent subject of the federation the increase would bemuch smaller, between 8 and 11 per cent. Such an increase reflects theOkrug’s special status within the newly formed Krai, and the need for levellingup, as the average increase for other territories within the Krai is 20 percent. However, while the Krai budget is willing to support the Okrug’sdevelopment, the Okrug itself has very limited capacity to ‘absorb’ themoney by offering new investment projects and infrastructural development.46 At the same time the budgetary redistribution within the Perm Kraibudget that is aimed at decreasing intra-regional differences (providing morefinancial resources to the Komi-Permyak Okrug) would decrease the positiveoutcomes of the merger, as this redistribution would be at the expense ofother territories within the Perm Krai.Therefore, the first joint-budget is based upon a typical mechanical redistributionand does not offer a new institutional framework to bolster theOkrug’s sustainable development. Moreover, the increase in transfers fromthe regional to the Okrug’s budget is seen as a temporary solution and willhave a short-term economic effect on the Okrug’s development if any. Thus,the economic indicators do not provide us with a clear answer regarding theeconomic gains and losses arising from the merger.Unification as an elite projectOn the surface Perm and Komi-Permyak elites initiated the process of unification,but one could argue that this initiative was encouraged by thePresidential Administration. President Vladimir Putin offered unconditionalsupport to the process as the merger fully complied with his major goal – thebuilding of a ‘power vertical’, with regional enlargement as a key componentof his centralizing policy. Moreover, Putin openly demonstrated his support