The view that Russia has just two ‘regions’ today: Moscow and ‘the rest’

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With the fall of the USSR, signalling the end of the biggest socio-economic experiment in modern history, the scene was set for perhaps the most profound changes Russia has ever witnessed. Although many analysts predicted an idealised teleological development path to a Western-style market economy and liberal democracy across the whole of Russia, the reality has been rather different. Apart from the fact that a Western market economy is not the best description of today’s Russia, regional differences – be they social, political and economic – are striking. ‘At a first glance (especially if considering general economic variables such as contribution to GDP and share of FDI), it may appear that there are indeed just two ‘regions’: Moscow and the rest. However, this would be a gross oversimplification at best, and a distortion of reality at the worst.

Apart from having to go beyond the economic issues (though they will be the centre of this enquiry due to its limited scope) into the (often indivisible) realm of politics and society, we must examine regions and sub-regions under different socio-economic aspects, using a variety of factors, variables and attempts of classifications. We must also delve into the structures and connections between them, or parts of them in order to find potential communalities, differences and interdependencies.

In so doing, we shall discover that Russia is actually a geographical patchwork of spaces, which have, in their own specific ways, had their share of gains or losses since the beginning of the transition. Hierarchies and stark contrasts are indeed visible, and but not just in terms of ‘Moscow and the rest’. As so often in geography, scale is the key word. Moscow’s apparent supremacy is certainly relative to the scale and aspect under consideration. In addition, the legacy of the past is essential in the analysis of the present, and thus has to be borne in mind.

The transition period is seeing the action of new economic forces on the structural, economic, political and cultural legacies of the Soviet Union. The outcome of these processes will be determined by the economic niches that the new Russia and its component parts (right down to individual households) will occupy, and the political struggles between the various governance levels and interest groups. To begin geographical differentiation it is perhaps best to begin at a coarse scale and look at general issues.

Though by no means entirely accurate, we must use some sort of structural framework to begin our regional analysis. For this we will resort to the probably most famous categorisation of regions into winners and losers (Bradshaw, 1996). He identifies five major types of regions in Russia:

1. Agricultural regions, suffering from bad infrastructure and conservative policy outlooks (e.g. South European Russia and Southern Siberia).

2. Gateway and hub regions, which are highly integrated with other areas of Russia and in a strategic position. Most importantly, they possess international links. Their economy mainly focuses on services or high tech (e.g. large towns such as Moscow, St.Petersburg, Yekaterinburg in Central European Russia, Urals and West Siberia) It is important to note that regional centres as a whole, not only Moscow, are gaining importance.

3. Resource regions: Oil and gas producing regions (and some metals) are generally doing well, coal mining areas are in a state of decline.

4. Old industrial regions in the Central industrial areas, Volga and South Siberia coping badly with massive need for restructuring.

5. High tech regions have emerged in some old industrial areas (mostly around large towns in Central European Russia like Moscow, St.Petersburg, and Volgas (Saratov and Samara)).

Having identified the key types of region, we must now conduct a general survey of Russian regions to identify how this picture manifests itself across Russia. At a coarse scale we will do this by using the delineations of the official Economic Regions of Russia (after Shaw, 1999).

Moscow and the Central Economic Region contain over 20% of Russia’s population, over 17% of industrial production in 1995 (mostly in Moscow itself), but only 3% of Russian territory. Its role as the country’s key region was firmly established in the Soviet era when it was at the spearhead (politically, economically and militarily) of the state. The collapse of the traditional industrial sector and Military Industrial Complex initiated severe decline. However, concerted restructuring with an accompanying growth in services, construction and SMEs, have helped parts of the region to rebound and register some of the highest levels of wages (Moscow) in the country. Moscow has also become a gateway city and centre for multi-national corporations, and attracts the greatest share of FDI.

St.Petersburg and the North West used to be centres of heavy and light industries in Soviet times, which have all declined. However, with its historical tradition of being a gateway to Europe and its reinforced importance with the loss of Baltic ports, St.Petersburg is increasingly becoming an alternative to Moscow for businesses (especially services) to locate. Nonetheless, Moscow is still the preferred location, mainly due to its agglomeration advantages, access to networks and better infrastructure, and development is highly concentrated in St.Petersburg town itself.

By contrast, the Northern economic region mainly served as a raw material resource region and centre for various defence projects during the Soviet Union. The loss of state subsidies and policies of depopulating the region have resulted in its economic activities becoming increasingly unfeasible (mostly due to the real cost of transport now having to be borne). However, some oil rich parts of the region may in future be able to augment their wealth by exporting this resource, aided by the existence of some ice-free ports.

Lying to the North East and East of the Central Region, the Wolga-Vyatka Region represents a transitional zone between boreal forests in the North and steppe in the South, which is reflected in its economy and culture. The region incorporates the third largest city, Nizhnij Novgorod, and was, in terms of economic structure, an area of resource processing and military industries. Though hard hit by the transition, the regions generally dynamic leadership and strategic location may prove to be an advantage in the future.

The Volga region benefits both from its strategic location, large Russian population, as well as its natural resources (agricultural, oil/gas). Traditional heavy industries, relocated to the region during WWII, are in decline, but automobile plants and the aerospace industry are attracting FDI.

The Central Chernozem region has always been known as Russia’s breadbasket, due to its high quality agricultural land. However, it is today beset by the problems arising from its peripheral location, bad infrastructure and illegal immigration. Nonetheless its relatively modern iron ore mining and processing plants, as well as its chemical industry and engineering sector have attracted considerable Western investment.

The North Caucasus is a classic example of mixed fortunes, which are inherently geographical. Although its Eastern parts are one of the least developed parts of Russia, suffering from ethnic conflict, the Western part of the region (being politically more stable) is doing better, attracting some investment into agricultural processing and acting as a gateway to the black Sea.

The traditional industrial powerhouse of the Soviet Union were the Urals. Although natural resources are running low, the region’s strategic position, its high degree of urbanisation, helping the emergence of a large service sector in Yekaterinburg, and the ability of parts of industry to find new markets, have kept the region afloat.

West Siberia, though only sparsely populated by European standards is frequently seen as overpopulated due to the distorting effects of the Soviet economy. Heavy industry, mining, oil/gas extraction concentrated around medium-sized towns, and collective farms were established against economic logic in an attempt to integrate this part of the country. Nowadays, the loss of subsidies has led to overall decay with the exception of a few pockets of astonishing wealth centred around oil and gas producing localities.

Whilst stretching over 25% of Russia’s territory East Siberia only contains 6% of its population, most of which is concentrated along the Trans Siberian Railway and the limited centres of agriculture in the South. At present, extensive known natural resources in the Northern part of the region are difficult to access due to distance and climatic conditions. However, as resources get scarcer, these will undoubtedly be explored some time in the future. In addition, the previous existence of metal mining and processing (e.g. aluminium smelting) is able to compete on price in the Asian market due to the cheap hydroelectricity. The general profile in the Far East is very similar to that of East Siberia. Some resource- and primitive industry- based activities along the Pacific coast may provide future prospects for investment, though high risk and long periods of returns are making the area less attractive.

This brief summary of regional profiles shows that there is no clear cut geographical or functional key to determining the winning and losing spaces of the transition. Hanson and Bradshaw (2000) show, for example that resource endowment does not necessarily mean wealth (e.g. Primorski kray is under-performing in relation to its endowment). Other factors such as geographic position, infrastructural integration and local political leadership and bargaining power (e.g. Tatarstan) are key to development. Nor is there a simple formula for success. Some regions have saved themselves with resource extraction, others (large urban areas) by developing service sectors. In addition, regions themselves show high differentiation within them leading to what Hanson and Bradshaw (2000) term a ‘leopard skin’ pattern of wealth.

Despite the fact that, when looking purely at contribution to % of Russian GDP, FDI and the concentration of big business and banking HQs, Moscow stands out as the leader, a closer look reveals a more complicated issue. Inn terms of per capita income, Moscow is behind Khanty-Mansi and Yamal-Nenets (oil regions), and the cost of living is highest in the remote areas of the North and Far East (Westerlund et al, 2000). Due to high land prices, but also increasing attractiveness of St.Petersburg, many service sector companies are deciding to locate there instead.

Far from singling out Moscow as the stark contrast to all other regions, Dienes (2002) describes Russia as an economic, social and geographical archipelago consisting of a nationally and internationally integrated network confined to a handful of urban areas (>250000 inhabitants) and resource extraction centres separated by vast geographical space. These integrated spaces incorporate roughly half of the country’s population, while the other half is isolated. This has led to the emergence of two ‘frontiers’: the classical hinterland and the inner hinterland. Dienes identifies these geographic locations by using several indicators of prosperity (e.g. gas consumption, access to education, real income, and the emergence of a middle class). They are usually very limited in their geographic extent, with little trickle-down being apparent. A further striking conclusion he makes is that these affluent spaces are in themselves highly internally differentiated. Access to quality education, for example is becoming increasingly socially limited in large cities. Westlund et al (2000) also found that areas of great average income (most notably big cities) showed the highest Gini indices.

Temporal persistence of a region’s relative well-being is greatly affected by the strategy it pursues, the economic profile it has, and the level of integration it enjoys within the Russian and global economy. The fate of the mostly much greater prosperity found in large cities and resource-extracting regions is tied more closely to the state of the international economy than the meagre economies of the demonetised spaces. In addition, variations in macro-economic conditions can affect different regions with different economic profiles in opposite ways. This became especially clear when comparing the early and late 1990s in terms of the rouble’s stability. A weak rouble is certainly good for import substituting industries and resource exports, but proved devastating for areas with tied-up financial capital such as the Far North.

Returning to the comparison of Moscow and ‘the rest’, it is however important to mention the political dimension of this relationship. It is after all the centre of governance, which determines budgetary allocations. However, some powerful regions such as Tatarstan have succeeded in gaining considerable leverage over Moscow. As O’Loughlin (2002) notes, even though Moscow does to some extent perform a regulatory and gateway role to the rest of the world, as it has done in the past, its privileged status is changing. Competition from other cities, and a tightening of federal monies allocated to the city (itself a subject of the Federation) certainly play a big part in this. In addition, due to the Russian economy’s great dependency on natural resources, Moscow is very dependent on its regions. In order to keep its privileged position Moscow has to try to expand its own engine of growth (e.g. services, science, or high-tech) in addition to being an entry point and mediator.

From the above discussion we have seen that Moscow, although slightly different in kind to other large Russian cities, it bears many resemblances to them. Prosperous loci in the ‘leopard’s fur’ are interlinked but are by no means necessarily driven by the same engine of growth. Russian regions are so diverse between each other and within themselves, yet in some aspects so similar (e.g. certain levels of prosperity or social exclusion) that the generalisation of ‘Moscow versus the rest’ is flawed. The search for an adequate simplification of the Russian regional development pattern thus continues.

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