Regional budgets: the troubles continue

Treasury data on regional budgets in the first 3 months of 2026 was published this week. It suggests that the ongoing squeeze on regional finances, which started in 2025, has only intensified at the beginning of this year.

The crux of the budgetary crisis continues to be corporate income tax receipts, one of the three most important income sources of regional budgets. Most regions recorded lower corporate income tax receipts even in nominal terms than a year earlier, continuing the trend that began last year. The below is a comparison of CIT receipts in Q1 2026 vs Q1 2025 in nonconsolidated regional budgets (without the inclusion of local finances).

The regions that did increase receipts are overwhelmingly Far Eastern regions benefiting from Russia’s pivot to Asian markets and resource extraction; North Caucasian regions where corporate income tax receipts have been historically low; resource exporting regions that received a tax adjustment in the first quarter; and, most importantly, regions with a direct connection to the defense industrial complex benefiting from the advance financing of the state defense order. At the same time, regions relying on commodity exports lost a considerable part of their receipts, as did several regions relying on industries such as metallurgy and petrochemicals.

One can say that the picture is mixed. Regions with the largest gaps between their incomes and expenditures in the first three months of the year include several that struggled last year already and had no reserves: the Kemerovo Region (a coal industry hub), the Vologda Region (whose dominant industry is steelmaking) as well as the Irkutsk and Novosibirsk Regions; and, newly, several oil and gas producing regions (e.g. Komi, Sakhalin and the Khanty-Mansi Autonomous District). Overall, however, nominal CIT receipts in (83) regional budgets in the first quarter were 11.6% lower than a year prior and for industries such as coal and metallurgy, there seems to be no easy way out of the crisis, even as in the first quarter, eastbound coal export transhipment grew somewhat. Regions relying on these industries are facing income shortfalls and, eventually, cuts to their budget.

For many regions, the overall picture with own revenues is better only because personal income tax receipts are still 15% higher than last year. Even so, in aggregate terms there is virtually zero nominal growth of own regional revenues on last year, which means a contraction in real terms. Federal transfers don’t change the picture either. Moreover, personal income tax growth is concentrated in about two dozen regions, including, mostly, Russia’s largest cities and regions benefiting from defense orders, further underlining the bifurcation between these regions and others relying on civilian production.

Many regions are cutting spending on housing and utilities, in spite of the issue’s political relevance and the federal government’s debt forgiveness program that aims to incentivize such projects. Growth in spending on housing and utilities in the first quarter was driven almost entirely by Moscow and St. Petersburg along with a couple of peripheral regions that are experiencing a boom from the Asian trade pivot and the government’s efforts to develop the Arctic. Spending under the “National Economy” and “Health Care” headings has declined by more than 8% in nominal terms, and even social policy payments - the single largest expenditure item - is declining in real, if not nominal, terms. Debt servicing costs, meanwhile, while still relatively low when compared to the main areas of regional spending, are growing steeply: overall by 147% over last year. This spending is also concentrated in a handful of regions: those that drew down large commercial credit facilities in 2025 as their budgets suffered shortfalls and the federal government was reluctant to increase transfers, including Kemerovo, Irkutsk, Novosibirsk and Nizhny Novgorod. Financial experts expect regions to keep taking out loans from the market this year.

As I outline in a fresh piece for the University of Bremen’s Russland-Analysen - building on my earlier series of articles for Riddle - this is important because it suggests that the deficit problem in regional finances is not temporary, but structural, and it will take more than a temporary upswing in the Russian economy to remedy it, especially if the engine of the upswing is solely either military production or the oil and gas industry.

Solutions proposed so far by the federal government and regional financiers, ranging from debt forgiveness to slightly expanding regional tax bases, do not have the scale and the depth to address these problems, while cash injections from the federal government’s own funds only keep regions running chronic deficits on a lifeline. Nor would a quicker loosening of monetary policy, which business leaders seem to want, do the trick, as the federal government would almost certainly try to capture surplus revenues. Even the end of the war would not constitute a silver bullet, as it would not diminish long-term draws on federal and regional finances such as the expenditures associated with rebuilding of the military, heightened social obligations or the erosion of property rights that discourage investments. Solving the issue would need a major overhaul of the system of incentives and accountabilities that underlie regional budgeting, and equip regions to focus on crisis prevention, rather than constant crisis management.

Takeaways from the spring “gubernatoropad”

Two governors of regions sharing a border with Ukraine - Belgorod’s Vyacheslav Gladkov and Bryansk’s Alexander Bogomaz - were removed from their posts (officially resigned) in May, so far putting an end to the spring “gubernatoropad”, or “season of falling governors”, when the Presidential Administration reshuffles regional leadership ahead of elections scheduled for September. This year also saw the de facto dismissal of Dagestan chief Sergey Melikov, shortly before Gladkov and Bogomaz. Melikov was dismissed because of his mismanagement of the republic’s many crises, while in the two border regions, as in the Kursk Region last year, corruption investigations connected to the construction of defensive fortifications played a role, officially, with subordinates of both outgoing governors, including their deputies, implicated.

Despite weeks of prior speculation, Gladkov’s ouster is notable because he had excelled by the Kremlin’s own previously stated or implied standards for governors. He attempted to uproot the patronage networks left by his predecessor, Yevgeny Savchenko who managed the region for almost 30 years, and as the leader of a region directly exposed to the war, he had come to cultivate a reputation as one of Russia’s most communicative and genuinely popular governors. It was reportedly exactly his aspiration to popular legitimacy that put him on collision course with the federal government and especially the increasingly influential security elite, as it prompted him to behave bolder and more independently vis-a-vis the federal center; most recently, in his public resistance to mobile internet shutdowns and the proposed federal ban on Telegram. Gladkov justified his position in practical terms, arguing that unfettered communication was essential to warn residents about shelling and drone strikes.

Whether it was this conflict or the corruption investigations around the defensive fortifications that ultimately decided that Gladkov would need to go, the case is a textbook example of how the changes in political priorities and power relations dictated by the logic of the war are upsetting the prior system of Russia’s personnel politics.

Between the mid-2010s and the war, the Presidential Administration’s main objective was to build a training and cadre rotation system to uniformize and professionalize regional leadership, in order to replace local officials representing or beholden to local business interests, or worse still, public legitimacy, with interchangeable enforcers who would professionally manage the region without actually ruling it. For officials, the promise was, ultimately, an appointment to a cushioned federal position after a couple of years spent in the provinces, as long as they kept meeting key performance indicators and met the Kremlin’s expectations.

As the full-scale war increasingly forced its own logic on domestic politics after 2022, this changed (as I outlined in a report for FPRI last year). Due to the federal government’s increasing risk avoidance domestically, avenues of promotion got clogged. Paranoia over domestic stability as the war required increasing unplanned diversions of funds allowed the security services to expand their domestic reach. Lionizing war participants and the war itself became an important way of signaling loyalty, and the Kremlin increasingly had to treat the war as an entry ticket to a new, privileged group of elites and make space for them. Service in the occupied territories was introduced as a new, parallel fast track to receiving appointments in the regions, rendering the previous system less relevant. In a nod to regional stability, a number of local officials with a prior federal stint were also appointed, turning the original system on its head. To replace Gladkov, Putin appointed a career military officer with regional roots who has served in multiple Russian wars, including the current one (the new Bryansk governor likewise has ties to the war, having served as an occupation administrator, though he otherwise fits the mold of the standard technocratic appointee). In parallel, from 2024 on, as most regions started facing a financial crunch, governors’ duties multiplied, from keeping their residents safe and satisfied and regional economies humming, to spending more on social aid and recruitment.

The corruption cases around the Kursk Region’s defensive fortifications, which ended up with one governor in prison and another found dead near his car - not to mention countless other criminal cases - demonstrated that a certain type of corruption, which the Kremlin regards as undermining the war effort, was going to be punished harshly, and officials were not safe from the security elite even if they receive their long-awaited federal appointments, although it is worth noting that after his dismissal, Bogomaz, one of the wealthiest governors in Russia, was appointed to the State Duma almost immediately, taking a seat freed up by United Russia list member Ayrat Farrakhov, albeit it seems that he will ultimately be unable to join the Committee on Agriculture due to a conflict of interest due to his agribusiness.

Gladkov’s case, however, especially if it amounts to a career demotion (which we do not know yet, but there have been rumors about a pending appointment to the Russia-linked unrecognized statelet of Abkhazia to serve as envoy - a demotion, yes, but better than a prison term) represents another step in the collapse of the logic of the Kremlin’s personnel rotation system. As Olga Churakova pointed out in an excellent article on Gladkov in IStories, the case leaves sitting governors without a legible map of what behavior is actually expected of them. This could push them toward seeking alternative guarantees of financial and professional security.

As I point out for Delphi in an analysis of past month’s politics in Russia, underneath it all is the dawning recognition that another renegotiation of war timelines may be underway. The implicit expectation that Donald Trump’s return to the White House would deliver Russia a quick victory of sorts is eroding as Moscow appears to be holding out for more than is currently on the table, while also downplaying the domestic costs of doing so. This shift is already visible in military recruitment efforts.

Also-happeneds

• Regional arrests continued over the past month and the focus still is on people in or adjacent to the defense industry as well as on second-grade regional officials. Three cases stood out to me. Alexander Gavrilov, CEO of the Krasnoyarsk defense enterprise Krasmash (a Roscosmos subsidiary who was standing for office in the United Russia party’s primaries), was arrested in late April 2026 on suspicion of accepting a bribe of 3 million rubles. The mayor of Ufa, the capital of Bashkortostan (mayors of regional seats have the de facto rank of deputy governor), Ratmir Mavliev was arrested by the Federal Security Service on charges of corruption - specifically, he is accused of facilitating the illegal transfer of a sanatorium land plot and extorting bribes from developers. Meanwhile, the case against Alexander Zyryanov, the CEO of the state-owned Novosibirsk Development Corporation - reached trial over the past month after prosecutors confirmed an indictment on four counts of large-scale bribery. The case has been notable because of a Chinese connection: a Chinese investor claimed last year that he was being pressured to pay 30 million rubles for utility connections for his oilseed processing facility.

• Another railway plan is put to sleep(ers): after more than a decade of promises, the government has now removed the Salym–Khanty-Mansiysk–Priobye railway from its list of priority projects, officially because “funding volumes were never determined”, officialese for a lack of money in the budget. The roughly 200-kilometer branch would have connected Khanty-Mansiysk, the seat of the oil-rich Khanty-Mansi Autonomous District, a city of over 110,000 to the Russian railway system. The 40-billion-ruble project had been formally prioritized since 2013, but construction never began. Similarly to other railway expansion plans, especially in Russia’s north, that have been cancelled or demoted during the full-scale war, the decision reflects a federal budget strain exacerbated by a continued focus on war-related spending and falling energy revenues.

• Court battles over assets: a Yekaterinburg court granted the prosecution’s claim in the third case against businessmen Artem Bikov and Alexei Bobrov whose STS Corporation and related assets had already been seized due to alleged corruption, in the same wave of nationalizations that also swept up Vadim Moshkovich, founder of agro-giant Rusagro, in May (among many others). In this third lawsuit, real estate, cars and bank accounts were also seized. This is happening in parallel to an appeal against the previous asset seizures, which a Chelyabinsk Region court accepted to hear in May. The case merits attention as it shows how regional elites are trying to fight back against the federally sanctioned wave of nationalizations, and the limits of this approach.

• Crypto bans: On May 20, deputy prime minister Alexander Novak chaired a government energy commission meeting that considered banning cryptocurrency mining in Moscow and the surrounding Moscow Region as well as in several districts of the Kursk Region. What made the Kursk proposal interesting is that it has to do with the free electricity provided to certain districts of the region, which, according to governor Alexander Khinshtein, immediately led to an uptick of cryptocurrency mining. This is a story that has been seen elsewhere in Russia, notably the Irkutsk Region, which for several years has had one of the lowest electricity tariffs and highest concentration of cryptocurrency mining firms. The region’s per-capita electricity consumption grew 35 percent over 2020–2024, 2.2 times the Siberian Federal District average, with the regional audit chamber attributing the surge to crypto mining. 2025 itself saw a small reduction, which officials attributed to a warm winter and to a new (extremely unpopular) differentiated electricity tariff that forced moderation on both crypto miners and households (which however, unlike mining companies, mostly cannot relocate to other regions).

• Utility basket cases: In the Maritime Territory, the Far Eastern Energy Company (DEK) announced that it would limit the provision of power to debtors, citing a critical rise in residential debt, with the total debt exceeding 5.8 billion rubles. Around 13,000 disconnection notices had already been sent out - this happens against the backdrop of rapidly rising utility tariffs, which hit the Maritime Territory particularly hard. Earlier, there were similar disruptions in the Sakha Republic, with the regional government having to enlist external financing to ensure heating provision in remote areas. In Kemerovo, another region under increasing financial stress, the debate around electricity provision escalated to the courts: in late April, the Kuzbass Energy Grid Company filed a bankruptcy petition against Rosseti Sibir, one of Russia’s largest electricity distribution subsidiaries, claiming 2.5 billion rubles in unpaid obligations. Rosseti Sibir flatly rejected the claim and challenged in the Supreme Court earlier rulings that awarded the money to KEnK. Rosseti Sibir also claimed that law enforcement has opened a criminal case into KEnK officials who attempted to steal funds from RS. Meanwhile, residents of Bodaibo, a gold mining town in the Irkutsk Region, were again experiencing a heavy disruption of water supply after they spent several days without heating and water earlier this year. Once again, the local authority was relying on gold mining companies to deliver water to the town while the repairs lasted, highlighting the role of the resource extracting companies as providers of social goods, especially during crises (which companies in crisis-ridden sectors will find increasingly difficult to do). These stories also show the frictions resulting from having to distribute the higher cost of energy, infrastructure maintenance and declining industries.

• Municipal reform still contested: Deputies of the Izhemsky district in the Komi Republic passed a formal resolution calling on the regional legislature to stop adopting Komi’s version of the federal municipal reform law, which would essentially abolish lower-level municipalities and their institutions. Komi’s local Communist Party branch simultaneously filed paperwork for an initiative group formally demanding a referendum on the issue. One the one hand, this is a particularly active regional branch of a (systemic) opposition party trying to find talking points before the Duma election coming in September, knowing misgivings about the effects of the municipal reform on government services and accessibility. On the other hand, the fact that the issue threw up not only protests but referendum plans, reminded me of a similar series of failed ecological referendums from almost a decade ago, which then allowed civil society and the institutionalized opposition to converge and learn from each other. Five years ago I discussed the takeaways for Riddle. The domestic political atmosphere is much more repressed now, of course, but the issue is perhaps also heavier.

Primaries and care

A report by Novaya Gazeta this month found that 261 participants of the war in Ukraine had registered to stand in the primaries of the ruling United Russia party, out of a total pool of 3,017 registered candidates. According to the party’s own communications, every 1 in 6 primary participants is a veteran. Notably, in Moscow and St. Petersburg this proportion is even higher, even though these cities are underperforming in military recruitment relative to their population. Like in previous years, the ruling party provides a 25-percent bonus for candidates who were “participants of the special military operation”, and plans to field 70 veterans as candidates for the State Duma.

United Russia “primaries” are primarily mobilization exercises before actual elections. In most cases, the local races are not competitive. But political operatives, officials and the members of the local administrative and business elite can test and showcase their ability to turn out “reliable” voters for ruling party candidates.

This exercise follows a fairly regular pattern. This month, for example, Krasnoyarsk political analyst Alexei Aksyutenko reported that public sector workers in the Krasnoyarsk Territory were being coerced into voting in the UR primaries. Specifically, managers of budget-funded institutions were issued leaflets spelling out how to register on the party portal and vote for specific candidates, with some institutions even planning to set up a dedicated room with a computer for employees to vote “voluntarily”. This is not new. Reports of similar forced voting in United Russia primaries were abundant in 2021 already. To stay with the same region, TVK Krasnoyarsk then reported that public sector workers in the region were pressured to vote for specific candidates, with reports numbering in the dozens within a single day of the primary opening. Online voting makes pressuring easier, even if it is not exactly invisible. Stanislav Andreychuk, the former co-chair of the “Golos” election monitoring NGO highlighted last year that there were noticeable peaks in remote electronic (online) voting turnout around 9 AM on the first day of elections when people arrived in their offices and voted under the supervision of management.

Public sector workers in the Belgorod Region, meanwhile, were reportedly being coerced to support a local initiative to integrate war participants into local government. A letter circulated to budget-sector organizations cited instructions from deputy governor Olga Medvedeva, responsible for regional political control, which directed institutions to mobilize their staff to vote for the project via the Gosuslugi government services portal.

It is not just about mobilization in general: in this particular case the Kremlin is likely also monitoring the behavior of and the reactions to war participant candidates. While in recent years the number of war participants fielded and elected in regional and local elections has grown substantially (from 106 United Russia candidates elected in 2023 to 890 in 2025), the Kremlin is aware of the pushback that these candidates have faced from established elites and the political risks that the election of some of them created as when elected representatives started taking their role seriously. Therefore, the Presidential Administration has reportedly quietly tuned down expectations to elect one hundred Duma deputies with “war participant” credentials. The primaries will be a way to monitor citizen and elite reactions to individual war participants and decide whether they should be standing as candidates in single-member districts, on party lists, or not at all.

Lastly, this is also about loyalty signaling, and this is not limited to United Russia. Engaged in a fierce battle for the position of Russia’s second largest party - which it may lose in September - the Communist Party is also eager to signal to the Kremlin that it is ready to integrate some war participants. The party’s first deputy chairman Yuri Afonin said that at least 11 war veterans would participate in the communists’ first ever primaries, including members of the Chechen “Akhmat” battalion.

Nonetheless, the number of war participants integrated into public administration this way will likely stay low. Based on past appointments, they are much likelier to end up in appointed and supervised roles with narrowly defined powers and responsibilities in a field adjacent to the domestic war effort, such as veteran reintegration, “patriotic education” or similar. Thousands are also expected to finish their education in regional equivalents of the “Time of Heroes” training program this spring, and be appointed to serve in regional institutions and companies, after undergoing a mentorship period. But even this is a relatively small slice of returning soldiers whom the authorities need to reintegrate, and frustration is visibly growing with the shortcomings of this effort.

At a Federation Council meeting in April, chief prosecutor Alexander Gutsan publicly condemned the Ministry of Labor’s handling of veteran employment and rehabilitation: only 1 in 2 returning war participants who sought employment assistance in 2025 actually found work, all while tens of millions of rubles allocated for job creation remained unspent; and retraining programs were inefficiently organized. Gutsan demanded action at the federal level, but it is likelier that the Kremlin will, as it has so far, pass the baton to regional governments, which need to engage the private sector.

In November, the regional legislature of the Altai Republic passed a law requiring companies to ensure that at least 1.2% of their workforce consists of war participants. According to official bookkeeping, since the law was adopted, only 32 veterans were hired by companies across the region, so regional authorities have now approved amendments introducing fines of up to 25,000 rubles for companies and up to 10,000 rubles for individual officials that fail to meet the quotas. The law itself looks like an admission that the region lacks the resources to adequately deal with returning soldiers, as social workers are facing increasing caseloads and almost half of demobilized war participants have not been able to find a job. The authorities are increasingly eager to enlist the resources of the private sector, just as they have been in the field of military recruitment as well.

This is happening on the federal level as well. While the federal government has allocated a substantial amount of money (almost 100 billion rubles in 2026) for rehabilitation aids for disabled people, it is trying to shift the long-term costs of their reintegration into the workforce onto others. A new proposal would expand employment quotas for disabled people beyond just head offices and branches to encompass all business units, from September on. Since disabled veterans count for two people under the current rules, this essentially signals to employers that the federal government wants them to employ more returning soldiers with disabilities, with all the costs associated with this in lost productivity, adapting workplaces, etc.

The proposals are not only about shifting costs but also about normative control, with the authorities demonstrating that the war is a collective social effort, in which the state sets the rules, but the private sector must also participate with its own resources and initiatives. But with corporate profits shrinking for the second year in a row and a sharp rise in overdue corporate debt signaling a liquidity crisis, it is very unlikely that employers will be able to both take on an increasing proportion of war-related costs and increase investments as the Kremlin wants them to.

Snip snap

Higher oil revenues driven by the closure of the Strait of Hormuz - estimated by Reuters at $9 billion for April - paused planned budget cuts, but are not enough to save the federal budget by themselves after a brutal increase of the deficit in the first two months of the year and growing signs of a slowdown across several sectors.

Even though the Finance Ministry is not planning to introduce major amendments to the federal budget (which would require a vote in the Duma), some cuts seem to be going ahead: the government cut spending on federal road maintenance by 11 billion rubles (2.5 percent) this year, by 20 billion rubles in 2027, and by a total of 100 billion rubles for the next six years, all while the budget of the federal road corporation Avtodor is also cut. Notably, road investment in the annexed Ukrainian territories was also cut, from 103.5 to 95 billion rubles. The Ministry of Agriculture also suggested cutting subsidies for the technological development of agricultural enterprises by more than 25 percent and tightening the rules of obtaining these subsidies.

Regional budgets, most of which will not be helped by windfall oil revenues, are meanwhile cutting expenditures on core functions, such as housing, education and health care, as I am laying out in a new article for Riddle. Wage costs for public employees are also cut in certain regions, which in practice means suspended bonuses and closures of non-protected public jobs (regions such as Omsk, Irkutsk, Moscow and the Krasnoyarsk Territory are planning the biggest cuts), and regions facing severe liquidity problems are reducing even social expenditures. Cuts to federal transfers to regions will likely force further local-level cuts to non-investment spending budget lines throughout the year.

To improve regional finances, the federal government continued its debt forgiveness program, with 41 billion rubles forgiven to 27 regions so far this year. The program has essentially replaced the previous policy of replacing regional debt with cheap budgetary loans: regions invest their own funds into infrastructure or other socially significant projects, and the federal center reduces their outstanding budget loan debt by an equivalent amount, up to 1 trillion rubles by 2030. On top of this, Putin also suggested that the government postpone the deadline to repay 100 billion rubles of debt from 2026 to a later date.

But this is a politically symbolic measure targeted at the most indebted, poorest regions, not a structural solution. Last year, domestic debt servicing costs grew by more than 30 billion rubles in regional budgets outside of Moscow as the restriction of subsidized lending and cuts to federal transfers forced regions, especially those running large deficits to shift the composition of their debt towards more expensive loans from the market. Data from the first two months of 2026 suggests that this will grow further. The total amount of debt written off in 2025-26 has been a little over 250 billion rubles - by no way insignificant, but not a panacea, either: expenditures on social policy grew by more than twice this amount in regions outside of Moscow in 2025 and total regional deficit was over 1.5 trillion rubles, with the Finance Ministry now expecting this to grow further in 2026, with several regions running deficits as high as 20% or more of their own revenues, with their reserves now exhausted.

Furthermore, the federal government is executing this policy all while it is struggling to enforce conditionality on a similarly large infrastructure lending program. The Accounts Chamber audit of the Infrastructure Budget Credit program, which allocated around 700 billion rubles to regional infrastructure projects found that the program was functionally broken. Regions face no real sanctions for failing to meet loan conditions; selection rules are loose, project targets fail and some regions have even engaged in a kind of creative bookkeeping where they have simultaneously raised utility tariffs - a touchy political issue - by adding investment components, and taken out infrastructure credits.

Also-happeneds

• Stalin’ the onslaught: In April, Khakassia’s communist governor, Valentin Konovalov launched what he called a referendum on installing a Stalin monument in Abakan, officially at the request of a pro-Communist veterans’ organization. According to the official figures, 13,500 people, or 2.6% of the region’s population, participated in the vote that was held at various state-owned facilities and social centers, although there is no way to verify this independently. Of them, 78.5% voted yes, which Konovalov presented as evidence of wide public support. In itself, erecting Stalin monuments is not unusual in Russia: roughly a hundred now exist nationwide, with more than a third erected in the past decade. What makes the referendum notable is that Konovalov used it to signal to the local population and to the Kremlin that he is holding the reins of power in the republic, in spite of years of attempts by the Kremlin and its local allies to unseat him. The governor, who in 2023 saw off a challenge from a Kremlin-backed challenger with “war participant” credentials, but then faced a United Russia supermajority in the regional legislature, has been trying to assert his powers vis-a-vis the ruling party on issues such as the municipal reform and the budgetary powers of the governor, mostly successfully. Staging a referendum is a relatively cheap way to send a signal to the federal authorities. It is also notable - and shows the complexity of regional politics in Russia - that the other governor who made federal news in recent years with his Stalin monuments, is Georgy Filimonov, the ultraconservative governor of the Vologda Region, who, unlike Konovalov, has been strongly backed by the Kremlin and disliked by the region’s local elites.

• Fear and looting in Krasnodar: Recent weeks marked another high-profile corruption case in the Krasnodar Territory, this time involving Andrei Korobka, the region’s former deputy governor in charge of agriculture. The prosecution alleges Korobka awarded land leases without competitive tender and directed state contracts to affiliated structures, enriching them, and that some agricultural land was converted to commercial development. His alleged partners were regional deputies Sergei Fursa and Alexei Sidyukov. The cadastral value of his listed assets, which will now be seized, exceeds 10 billion rubles; their market value is likely much higher, making it a particularly notable corruption case. Korobka’s case is only the latest in a long series of corruption cases and arrests in the region, which has seen the detention of several high-ranking officials over the past year, including two other deputy governors. In Russia’s domestic press the Krasnodar Territory cases have been held up as an example of tighter law enforcement in the provinces, and a signal to regional elites who have excessively enriched themselves over the past decades that the rules of the game are changing.

• Making up numbers? There is an increasing and increasingly visible anxiety about the state of the economy among both officials and figures in the private sector. Vladimir Putin himself questioned the government twice over the past month about lagging economic growth, in spite of the positive effects of the Strait of Hormuz crisis on Russia’s budget. Minister of economic development Maxim Reshetnikov made an unusually candid public statement, suggesting that Russia’s economic reserves have largely been exhausted, and the macroeconomic situation is significantly more complex than in recent years. Vladimir Boglaev, the director of the Cherepovets Foundry and Mechanical Plant accused the federal government of having “lost touch” with economic reality. The series of examples could go on - what makes them remarkable is their openness, as an increasing number of political and business leaders think that it is OK or even necessary to make these remarks in the public space, suggesting growing frustration and inability to get input across to the government and the Kremlin. They also came at the same time as claims from the head of Swedish Military Intelligence, who told the Financial Times that Russia was engaged in systematic falsification of economic statistics to create the impression that its economy is successfully managing sanctions and war expenditures. Nilsson, for example, cited real inflation as close to 15% versus Rosstat’s official 5.87% in March, although it is unclear where the date came from. The Russian authorities have indeed greatly restricted the publication of certain data series over the past years, and Rosstat has changed the methodology of calculating certain social indicators. However, there has been no evidence of the authorities systematically falsifying economic data.

• Making up the numbers: The authorities seem to be resorting to increasingly desperate measures to address the drop in military recruitment, which was around 20 percent in the first three months of the year, according to Janis Kluge, based on regional budget data. Universities are now subject to informal 2% recruitment quotas for male students (as reported by Farida Rustamova), while the military-industrial complex has siphoned thousands of civilian drone specialists. Social media posts from the Kemerovo Region suggest institutional pressure on students to sign contracts with the Defense Ministry or become drone operators. This drain on human capital is exacerbating the negative effects of a historically low unemployment rate, which Central Bank governor Elvira Nabiullina warned was a ceiling on any potential economic growth as there are little capacity gains to make without significant technological upgrades.

• Great expectations: Putin took part in the third “Small Homeland — The Strength of Russia” forum of municipalities in April, which set a number of goals for municipal development in the next few years, such as: the annexed Ukrainian regions must reach average Russian-level indicators by 2030; gasification in the regions should reach 85 percent; utility tariff growth must be more strictly controlled. These targets may seem somewhat ambitious, but these are mostly previous goals being restated after the government failed to reach them by the previous deadline. For example, the gasification target was already set by Putin in 2020 (when the government envisaged “completing” the task by 2024) and has been repeatedly reaffirmed since without being met, with only marginal progress over the past six years. The 2030 parity goal for the occupied territories mirrors targets set in the 2023 socioeconomic development plans for them. As regards the rather vague goal about tariff control, this contradicts the government’s own two-stage tariff indexation plan for 2026 (up to 22% in some regions from October even as residents in many regions have already been complaining about excessive tariff growth since the beginning of the year) . Similarly, development goals for the Far East, adopted by the government this week, reflect declining ambitions: a 2017 strategy foresaw a population growth for Far Eastern regions of 2 million people by 2024, which did not pan out as population figures continued declining; in a 2020 development strategy the government planned to reconstruct 40 airports in the Far East by 2035 - now the plan is to have 25 by 2036; a goal of creating 450,000 jobs was effectively reduced to 310,000 in the new strategy, etc. Nothing new under the sun - only, sometimes, the goalposts.

Culling protests

The protests and panic in several Siberian regions, primarily Novosibirsk, over the culling of livestock due to a long unspecified disease outbreak over the past weeks again highlight the complex risk environment that the Russian authorities have navigated themselves into.

Authorities justified the culling, which started in mid-February under a regional emergency decree that was kept secret for a month, by citing outbreaks of rabies and “mutated” pasteurellosis. Public anger was further fueled by suspicions that the cullings may actually have been prompted by an outbreak of foot-and-mouth disease, which the authorities officially denied (experts say that the measures taken by the authorities match those usually triggered by a foot-and-mouth outbreak), but which would have seriously complicated food exports, a sector dominated by a handful of large enterprises. Furthermore, many farmers insisted that their animals are healthy and that the authorities provided no diagnostic documents. Another rumor - that the authorities were trying to kill off smaller producers to benefit large agro-conglomerates such as Miratorg - also spread, even though there was no evidence that larger enterprises were protected from the cullings (however, as researcher Ilya Shumanov explained to Meduza, they do have easier access to insurance, essentially a form of support). Analysts estimate direct property damage to farmers across the affected regions at 1.59 billion rubles, with additional losses from broken production cycles totaling nearly 400 million rubles

After farmers in several villages protested, erected roadblocks and recorded appeals to Vladimir Putin, tensions escalated to the deployment of OMON riot control units and to the arrest of several protesters and their supporters, including a veteran of the Chechen War, Ivan Otrakovskiy and Ivan Frolov, a local journalist. A farmer in the village of Chernokurya, Pyotr Polezhayev, made headlines by pouring petrol over himself and threatening self-immolation to stop the killing of his animals. In Kozikha, a local woman with a disabled child said that the authorities threatened her with getting social services involved if she did not stop criticizing the cull on social media. By the end of March, the authorities in the Novosibirsk Region, the epicenter of the protests, broke the resistance of locals as the last family still holding out was forced to give up and allow the culling of their livestock. The campaign continued, however. On March 31, farmers from six regions appealed to Putin and the legislature again to stop unjustified cullings.

The unrest fits into a wider trend of slowly accumulating smaller-scale domestic political risks - think of anger over utility breakdowns, price hikes or the attempted blocking of Telegram - that in a way all reflect on the same developments: disruptive domestic changes triggered or accelerated by the war, a lack of willingness on behalf of the federal government to allocate budgetary funds to solving domestic problems as opposed to war-related goals and symbolic politics, and a growing communication gap between the authorities and the society.

The rumors, which started spreading after the exposure of the emergency decree and galvanized protests and sympathizers, converged on the point of suspecting state authorities of aiding large, politically connected business players at the expense of small producers. Even when the evidence is weak, people will often suspect the continuation of trends that they have experienced before: in this case the violent asset redistribution triggered by the war, the bifurcation of several economic sectors to well-connected and heavily supported major players and vulnerable smaller ones (which was the case in the Russian agriculture even before the war), the lavish spending on war-related goals and war participants at the expense of other budgetary goals, etc. The lack of effective communication between the regional government and local residents speaks to the top-down accountability that defines Russia’s flawed federal structure and also highlights the important role of the very municipal authorities and public services that are being eliminated Russia-wide under the Kremlin’s municipal reform (including in the Novosibirsk Region).

In a telling move, Sverdlovsk governor Denis Pasler reportedly ascribed the outbreak to an ostensible sabotage action that has to do with imported German livestock feed. This is not the first time that regional authorities are pointing at an external enemy to divert anger with domestic policies (for example earlier some regional officials have accused pro-Ukraine saboteurs of starting wildfires).

The protests have also followed an oft-seen pattern: they remained localized, even though the issue is not; tactics were similar to previous similar protest movements: roadblocks, self-immolation, appeals to Putin. We have seen such tactics utilized by prior protest movements, e.g. during last year’s protests against the municipal reform. To me this says that Russian citizens have built a reliable toolkit over the past years that they think has the best chances to capture the attention of the federal authorities because they understand that it is to the federal government and not them, the voters, that regional authorities are accountable to, that such problems will rarely be resolved locally, and they also understand that the Kremlin is able to put pressure on regional and local governments with relative ease.

Neither is there anything new in the response of the authorities: a mixture of information blockage, selective repression (including, it seems, by supposedly neutral government agencies) and the promise of material support, which however was deemed woefully insufficient by the protesters, even as a one-time compensation, let alone a suspended support for small farms to relaunch production.

This is, in part, due to a lack of willingness and ability to spend more money. The Novosibirsk Region, for instance, was in what I’d call a “fiscal danger zone“ even at the end of last year, with a deficit hitting almost 20% of its own income, corporate income tax receipts falling by more than 15% relative to 2024 and barely any reserves to speak about. Recently the regional government announced a revision of the region’s 2026 budget, adopted only a couple of months ago, but already facing a ballooning deficit and growing debt. With the initial allocation of 200 million rubles for “operational compensation” likely to grow further, and with the additional social payments further burdening the regional budget, the aftershocks of the outbreak can reach a point where either some other budgetary items will have to be cut to increase payments or the federal government will have to increase transfers from its own reserves. Another question, of course, is whether the payments will actually reach the intended recipients in a timely manner, which we know was not the case recently, with housing certificates for displaced people in the Kursk Region. And this is just one issue in a rapidly deteriorating regional fiscal landscape.

A curious campaign

It seems unsurprising that as domestic political risks accumulate, the Kremlin is reportedly revising expectations about the September Duma election. At the end of February, the “Senezh” leadership center, linked to the domestic bloc of the Presidential Administration, held an orientation seminar for deputy governors responsible for domestic affairs (including elections). Sergey Kirienko, the deputy head of the Presidential Administration presented three electoral scenarios: an optimistic “Victorious Nation” scenario premised on peace on Moscow’s terms and the subsequent economic boom, a pessimistic “Besieged Fortress” scenario based on a deterioration of Moscow’s war effort, and a baseline “Nation of Heroes” scenario based on the continuation of the war without major shifts. While the existence of the three scenarios suggest that the Presidential Administration still has not discounted the possibility of a turning point in the war in Ukraine in the next 3-4 months (be it a military victory or a political one against an already beleaguered NATO), the realistic expectation is that 2026 will be another lean year, with growing domestic resentment.

Accordingly, it seems that the Kremlin would now be satisfied with a 50-percent turnout in the election, as opposed to the initially preferred 55, suggesting that it only wants governors to turn out “reliable” pro-government voters using relatively quiet means, instead of intensive campaigning, as high turnout creates unpredictability, especially in cities, and unpredictability in turn increases the need for riskier tactics, such as the outright falsification of the results, which the authorities have used before, but which come with a much higher price than simple manipulation and pressure. Underlining how much the Kremlin fears any domestic instability, deputy governors were reportedly also told that they should keep local conflicts under wraps, and the goal of moving hundreds of war participants - including actual soldiers, not just career civil servants with a safe stint near the frontlines - into elected positions was quietly downgraded. As the Kremlin found out over the past months, they too can create uncertainty if they take their position as genuine representatives of the people and the “new elite” too seriously.

The Kremlin is in an easier situation with legislative elections where the core strategy has always been minimizing political engagement, than with presidential votes, because in a personalist autocracy, a near-universal acclaim always has to be orchestrated for the leader, but not so much for the loyal parliament. It is enough to turn out the right voters and suppress everyone else. Still, the problem is not so much the falling popularity of United Russia (around 30% if one believes the state-owned VTsIOM), but the growing gap between how easy the Kremlin sees the task of engineering a satisfying electoral result in firmly controlled regions vs in problematic ones. Regions in Siberia and the Far East, for example, are increasingly viewed as problem zones where local triggers (ecological issues, utility network degradation, price rises) will not be drowned out by the standard nationalistic messaging.

What governors are expected to do, however, is unclear. Most regional budgets - including many in problem regions - are facing increasing deficits, with several regions having announced adjustments to their fiscal plans adopted just months earlier. Novosibirsk, mentioned earlier, is just one example: similar cuts are planned or were adopted in the Chelyabinsk Region, the Maritime Territory, the Tula Region and the Saratov Region, with likely more to come. Most regions will not benefit directly from the oil windfall that the Iran War has brought to Russia, since these revenues primarily go to the federal budget, which has been increasingly reluctant to redistribute them in recent years. Some regions have responded to falling revenues by increasing their debt burden. The cost of servicing regional debt rose by a whopping 133 percent in January year-on-year as several regions took out costly loans from the market. Nineteen have made severe cuts to health care expenditures (regions are mainly responsible for the maintenance and building of hospitals, but also, among other things, for bonuses paid to doctors and medics). The adjustments adopted this year mostly concerned capital expenditures and fields such as education. Social payments and war-related payments are largely untouchable, although in the Kemerovo Region, which has been in deep trouble due to the crisis of its dominant coal industry, even these have been trimmed. This leaves little room for pre-election spending, at least at the regional level. There are some signs that the Kremlin is trying to mitigate this problem by developing an early warning system to flag at least the most flagrantly bad cases: the All-Russian Association for the Development of Local Self-Government (VARMSU) told construction minister Irek Faizullin that in future it would collect problems raised by municipal heads every month and route them directly to the Ministry of Construction, bypassing intermediate levels.

The underlying economy of the so-called “adminresurs”, when authorities rely on public officials as well as large enterprises and the local business elite to turn out the vote, is also shakier after several years of steadily eroding property rights, stricter anti-corruption enforcement in the regions as the Kremlin is trying to squeeze more efficiency out of leaner regional finances, and the constant pressure for established elites to make room for returning war participants. The expansion of online voting (expected in around half of Russia’s regions) has reduced the need for the authorities to rely on intermediaries to some extent, but it is not a miracle switch and it has limitations, both technological and political.

Barring a significant change in federal policy priorities or regional financial means, this means that coercion will likely play a growing role in the election in certain regions - the newest restrictions of digital freedoms are part of this. This itself creates political risks, but the Kremlin likely understands that the localized flare-ups of dissatisfaction are related, even if they are not connected, and prices the risk associated with them higher.

The authorities can still rely on a lack of infrastructure for any solid protest voting strategy. Unlike five years ago, there is no clear “second party” in Russia’s loyal opposition to gather the protest vote, nor is there an organized protest voting strategy akin to what the late Alexey Navalny’s team designed. The security services have targeted more active chapters of systemic opposition parties (e.g. the Communist Party in the Altai Territory) likely to discourage campaigning. The Kremlin’s domestic political bloc may struggle to navigate a campaign without messages that resonate and much money to distribute, but there is barely any alternative to be worried about.

Also-happeneds

• Squaring the transit circle: Due to import restrictions, squeezed regional budgets and better opportunities with private transit companies and the military industrial complex (where wages rapidly grew), regional public transit has been one of the areas hardest hit by Russia’s wartime restrictions. A selection of news from the past month shows the real-life manifestation of these issues. According to official statistics, nearly half of Russia’s current bus fleet is over ten years old and suffering from significant wear and tear, with fleet updates held back by funding shortages. To address this, the governing United Russia party proposed integrating private taxis into municipal transport systems. The head of Buryatia, in turn, suggested that regions divert 20% of traffic fine revenues - roughly 30 billion rubles across the country - directly to transport modernization. Meanwhile, the city of Tomsk is facing critical service failures, a deficit of more than 310 drivers. Tomsk is not alone with this in Russia, over the past years several regions have announced the closure of various transit routes.

• RZhD going South: Russian Railways reported its first net loss since 2020, totaling 4.4 billion rubles, as cargo volumes have plummeted. The company has accumulated a total debt of nearly $50 billion, forcing the layoff of 6,000 employees from its central apparatus (at the same time, it has also reportedly begun importing technical workers from India to fill specific vacancies, a slight contradiction that many have noted). To stabilize its finances, RZhD has been liquidating major assets, including the historic Rizhsky Station building in Moscow and a luxury skyscraper in Moscow City, a business center in the Russian capital. This is not the first time that RZhD goes through rough times. In the early-to-mid-2010s the company went through a major crisis due to gross mismanagement (described succinctly by Vladimir Gelman in his book “The Politics of Bad Governance in Contemporary Russia”), after which it should have been reformed - but was not. Over the past years the company has again struggled with unused capacities due to ineffective traffic organization and underinvestment in maintenance, and had to cut its overambitious investment program several times in spite of getting lifelines from the federal government.

• The prosecution of regional officials continued apace over the past month. In one of the most high-profile cases, regarding defensive fortifications in the Kursk Region, former deputy governor Alexey Dedov pleaded guilty to accepting bribes. Dedov also promptly passed the bucket to his former boss, Alexey Smirnov, who in turn pointed at his predecessor, Roman Starovoit as the main bribe-taker. Starovoit has - somewhat conveniently to the two other men - died last year in an apparent suicide. But there have been a slew of other cases. In the Ivanovo Region, two former deputy chairs of the regional government, Irina Ermish and Sergei Zobnin were each sentenced to 10 years in prison for bribery and abuse of office involving state contracts awarded to a construction firm run by Zobnin’s brother-in-law; the former Deputy Governor of the Rostov Region was placed on an international wanted list for bribery; the former deputy governor of the Bryansk Region was sentenced to ten years in jail for corruption; the former construction minister of Dagestan was arrested on charges of abuse of power; the former acting head of the Tambov Region’s digital development department was arrested on suspicion of embezzlement; the health minister of the Krasnodar Territory and the former sports minister of the Lipetsk Region are both suspected of fraud; lastly (to close out this probably non-exhaustive list) a former official of the Saratov regional government was detained on charges of abuse of powe. As I have noted earlier, some of these cases may have been motivated by score-settling, however, it is also wholly plausible that increased law enforcement activity is spurred by the federal authorities’ desire to reduce waste when it comes to regional spending.

• …and a prominent criminal case ends: a court sentenced Shahin Shikhlinski, the de facto head of the Azerbaijani diaspora in Yekaterinburg, to 22 years in prison in a case related to a murder and an attempted murder in 2001 and 2011, respectively. Five of the Safarov brothers, prominent members of the same diaspora group, also received long prison sentences. The verdict is notable because the initial arrest of the men in June 2025 and the subsequent death in custody of two of the suspects led to an escalation of a tense diplomatic conflict between Azerbaijan and Russia and even led to concerns about a possible move against more high-profile people with Azerbaijani background, such as former Lukoil president Vagit Alekperov. The two governments however appear to have calmed the tensions since, with Azerbaijan’s ambassador in Moscow talking about a “process of normalization” quite recently.

• The execution of the municipal reform has continued, but more regions have announced that they are going to preserve their two-tier system of local public administration, after the scrapping of village councils has led to protests and vocal dissatisfaction in several regions over the past year. As of March, one year after the adoption of the federal reform, only 34 regions have fully transitioned to the single-tier model desired by the Kremlin, while 15 regions have retained the two-tier system in full. The Republic of Bashkortostan, which is considered a problematic region from the Kremlin’s point of view due to its recent history of strong grassroots protests, announced in March that it would preserve the two-tier model with four types of municipal entities: rural and urban settlements, municipal districts, and urban districts. However, the regional government will, like many other regions, strengthen control over appointments: mayors in rural settlements will be elected by local deputies, while in cities and districts candidates will be drawn from a shortlist provided by the governor. The implementation of the reform in some other regions has been slowed down by local opposition, including (as, for example, recently in the Khabarovsk Region), resistance by local councils, or, as in the case of the communist-governed of Khakassia and the Oryol Region, resistance from the governor. Interestingly, Oryol governor Andrey Klychkov justified his decision by citing the need for local village heads during utility emergencies - a priority issue for the Kremlin. In the Tver Region, meanwhile, district deputies who were complaining to the Prosecution about pressure on them by the head of the municipality to sign off on corrupt contracts, also used the opportunity to complain how the understaffing of the district assembly, a consequence of the municipal reform, increased the burden on them.

• “Veteran correspondents”: as federal lawmakers are now proposing mandatory employment quotas for war veterans in large private companies in order to lessen the burden on the state apparatus, Russia’s regional governments are also trying to invent novel ways to signal to the Kremlin their readiness to participate in the integration and social elevation of returning war participants (the lion’s share of which will likely fall on them anyway). Some regions are coming up with truly bizarre ideas. Over the past month, Bashkortostan enacted a law granting “veterans of military journalism” priority hiring status within state and municipal authorities. This new status provides benefits comparable to those of a “veteran of labour”, including transportation and utility subsidies. While war bloggers and correspondents, who have criticized the federal government several times over the past years and have consistently urged more hardline nationalist policies than even the ones enacted by the Kremlin, are without a doubt a group that the authorities would like to keep an eye on, it is questionable whether a risk-avoiding Kremlin would like to shower this fundamentally unpredictable bunch with jobs in public authorities. We shall see.

More on regional budgets

[UPDATE: this post was revised on February 27 using the Treasury’s more granular data]

Regional spending and income figures were released for 2025 in February by Russia’s Treasury (figures are slightly different from the ones in the Electronic Budget due to the Treasury’s more precise breakdown). The Finance Ministry also released aggregate figures for consolidated regional budgets (these include municipal finances and extrabudgetary funds). On both counts, the situation looks much worse than it was originally expected. Consolidated regional budgets accumulated a total deficit of 1.5 trillion rubles, five times as much as in 2024. 2025 was also notable because consolidated regional finances were already in the red in the first half of the year – usually this is not the case. Janis Kluge, an analyst focusing on Russia’s budgetary framework (whose Substack is a great follow), noted that even correcting for gross regional product, regions had not had deficits this size since 2013.

The negative trajectory of the past years, as regional expenditures grew as federal transfers stalled and corporate taxes dwindled, is clear. The war is an obvious source of pressure. In 2025 social expenditures, which represent the highest proportion of region’s war-related spending, rose by almost 20% in regional budgets, while regions’ own incomes rose by less than 5%, well below inflation. Rising recruitment bonuses and hidden war-related expenditures (such as employment support for war participants or reconstruction contributions) are more difficult to quantify precisely, but these also continue weigh down regional budgets.

In August regions outside of Moscow had accumulated 1.9 trillion rubles on unused funds on their accounts, but these funds were unevenly distributed. Many regions that did have liquidity reserves opted instead to finance their deficits through market loans, or deferred investment-related expenditures in the expectation that the federal government’s debt forgiveness program would free up funds in their budget. Several regions were already struggling with growing expenditures in the second half of 2024 and had to make cuts to core budget items. The Kemerovo Region, an extreme example because of the ongoing crisis of the coal industry, recently started cutting aid to war participants. Public sector workers in the region have also complained of salary arrears (as did public employees in some other Siberian and Far Eastern regions struggling with liquidity issues, e.g. firefighters in the Transbaikal Territory and medical workers in Khakassia).

Looking at just the regional budgets, for which there is a breakdown, the worst indicators belong to regions whose key industries have been in protracted crises, among them the Vologda, Kemerovo, Arkhangelsk and Murmansk Regions, but also some of Russia’s oil and gas producing regions (e.g. the Komi Republic or the Yamal-Nenets Autonomous District) which had been doing relatively well so far.

Poorer regions that are normally heavily subsidized by the federal government and whose main source of income is, on the whole, stable, will find the turbulence of economic slowdown easier to weather than regions that face a sudden collapse of their own revenues (e.g. due to industrial decline) and have very little accumulated reserves (e.g. Kemerovo, Vologda, Irkutsk, Murmansk or Arkhangelsk). Those with a large proportion of poor citizens and soldiers relative to their population, and high associated social expenditures are also in the danger zone.

To an extent, the Kremlin is relying on governors to manage the resulting political risks from as little money as possible (while acting as political shields) and on quasi-state actors such as big corporations and civil society to pitch in and complement the effort. This approach has more or less worked so far, but as the Kremlin is reluctant to provide more substantial aid to crisis-ridden industries and regional budgets, some may feel incentivized to co-opt and use, rather than suppress, dissatisfaction over liquidity issues.

Spreading the costs of the “new elite”

Since early 2024 when Putin announced that war participants would be turned into Russia’s new elite, the main vehicles at the federal level have been the “Time of Heroes” training program, which has provided training in public administration for a small number of handpicked war participants, and the United Russia party, which was tasked with fielding former war participants as electoral candidates, which the party has done in increasing (though still low) numbers, in spite of resistance from the established elites in its regional branches. An interesting innovation in this latter field is a bill that would make it possible for war participants to file their candidacy documentation via representatives, perhaps in the hope that regions would hit quotas without actually needing to integrate soldiers into the local elite.

Last year, instructed by the federal government, regions have also started their equivalent of “Time of Heroes” to prepare, typically, 30-60 war participants for managerial positions, depending on their population size. These programs share several similarities with the federal program. Most of them offer standardized courses in partnership with the regional branches of the Presidential Academy of National Economy and Public Administration (RANEPA), albeit some regions (e.g. Arkhangelsk, Nizhny Novgorod and Ulyanovsk) partner with local universities, which might offer better prices than RANEPA’s that can come out to double-digit millions in a mid-sized region, based on the university’s price list. The selection process, consisting of written tests, face-to-face interviews and extensive vetting for character traits and war trauma, is similar. The modules, both in the federal and the regional programs, are reminiscent to earlier cadre training programs such as the “School of Governors” and the “School of Mayors”, and include a lot of corporate-style team building; lastly, the declared goal of the regional programs, like that of the original federal one, is to prepare returning war participants for civilian jobs.

The regional programs themselves represent a very limited track of advancement. In their first year, out of some 46,000 applications (this is the official total, which is very close to my count), based on publicly available data some 3,500 people were accepted in Russia’s regions and the occupied Crimea, with at least a further 900-1,000 (and likely more) in reserve, but with several people sent back to the frontline after being accepted for training. As of February 2026, only a couple of dozens of graduates have been appointed to various positions in a handful of regions, with many training programs still ongoing. Those who do not get jobs immediately are added to a “cadre reserve” for later appointments.

But looking at these programs is important not because they are going to soak up most returning war participants, but because they provide an insight into what networks regions are going to rely on to handle returning veterans. Regions already use a combination of measures including social support, employment quotas, business incubators and other measures, and are actively trying to involve funds outside of their own budgets.

Appointment patterns are similar to the ones observed in the case of the federal program. Positions are scarce, often have to do with the war or veteran care itself, and are created specifically for program alumni to fill, e.g. deputy officials responsible for security, public associations, “Special Military Operation” support or patriotic education. These positions, of course, create a small, but additional strain on regional and municipal budgets that need to finance them. Other types of appointments do exist, but are rarer, e.g. war participants appointed to head districts in the Vologda Region, whose governor, Georgy Filimonov, is one of the most visible full-throated domestic supporters of the war.

Even with numbers this limited, the regional programs cast a significantly wider net than the federal program, which, though with notable exceptions, has mostly elevated career public servants and soldiers. This is deliberate: as of 2026, an increasing number of regional training programs are accepting people with secondary vocational education, without a university degree. But, apart from some exceptions, it also seems much likelier that the alumni graduating from these programs will be channeled into private enterprises and municipal positions with little power rather than the regional elite.

From scattered regional press releases we know that regions accept people from outside of their territory into their training programs, thus they could in theory draw people to wealthier and more industrialized regions. This appears to have happened in some cases (the Moscow Region and the Krasnodar Territory), but typically the vast majority of applicants are regions’ own residents. Indeed, the correlation between a region’s confirmed losses (as per latest numbers published by BBC and Mediazona) and the number of applicants is almost as strong as it is between the regional population and the number of applicants (all while population is not a strong explainer of war losses – as a recently published study in The Bell showed, soldiers are disproportionately recruited from regions where the percentage of residents living under the poverty threshold is high).

The “mentorship” element of regional training programs is one way, in which extrabudgetary organizations are involved. In several regions, major industrial firms participate in the programs as the goal is to integrate war participants into the regions’ leading industries. For example, the general director of the Magnitogorsk Iron and Steel Works (MMK) serves as a mentor in Chelyabinsk’s “Heroes of the Southern Urals”; local industrial directors act as mentors in the programs of the Novosibirsk and Sverdlovsk Regions. The “Heroes of Tuva” program partners with firms in the mining, energy and utilities sectors to hire alumni; Tatarstan offers a 100,000-ruble bonus for the successful employment of a program graduate at one of the regional enterprises where participants study corporate processes (including in the Alabuga defense industry center and the tech incubator Innopolis) etc. Regions such as Vologda, Penza, and the Moscow Region announced hiring quotas. Companies with a specific number of employees are required to reserve at least 1% of their staff positions for veterans. Larger state-owned corporations have their own training programs, which they coordinate with regional authorities.

Companies are thus asked to provide training and jobs, and are sometimes, to some extent, compensated, but the extent of this is unclear, and with it, so are the cost-benefit calculations. There surely are non-pecuniary benefits. Employing one or two decorated veterans could be a badge of honor that helps relations with the government. But this might look like a worse deal if the implication is that the regional authorities, responsible for veterans’ employment and satisfaction, expect firms to maintain that hiring pipeline when tens of thousands more return from the frontline.

Also-happeneds

· High-profile arrests continued in the regions, affecting mid-to-high-level regional officials. In Chukotka, deputy governor Pavel Koshcheyev was arrested for bribe-taking in his previous job in the Kurgan Region; in the Chelyabinsk Oblast, deputy governor Andrey Faleychik was arrested for allegedly accepting annual kickbacks from the director of a municipal children’s camp, once again, in his previous position; in the Krasnodar Territory, former deputy governor Anna Minkova was detained on suspicion of fraud; in North Ossetia, former regional agriculture minister Alan Kusrayev and the head of the ministry’s capital construction department were arrested on suspicion of embezzlement; in Bashkortostan, minister of culture Amina Shafikova was detained on suspicion of exceeding her official authority; a similar arrest took place in the Rostov Region where a district head is accused of overstepping his authority. This list is non-exhaustive. The current corruption crackdown in the regional bureaucracy started in the summer of 2025 (following a similar wave of arrests in 2024), and has seen dozens of regional ministers, deputy governors and district-level officials arrested, as the Federal Security Service is tightening its grip on regional institutions and low-level corruption affecting tight regional and municipal budgets is less tolerated. In many, though not all, cases, officials are arrested for wrongdoings in a previously held position, allowing their superiors to distance themselves from the crimes.

· Tula vs Dzyuba: On February 17, Viktor Dzyuba, a Duma deputy from the Tula Region, submitted his resignation, citing disagreements with the current “political elite” in his region, under governor Dmitry Milyaev. Notably, Dzyuba submitted the resignation letter to Alexey Dyumin, the secretary of the State Council, who was Milyaev’s predecessor in the region. Three other regional and municipal deputies resigned together with Dzyuba. All of them are linked to the “Mekhmash” corporation, a local firm specializing in producing pipeline fitting. This would suggest that the conflict is actually between the governor and a regional elite group, with both sides appealing to Dyumin as higher authority. Dyumin, Putin’s former bodyguard and confidant was governor until 2024 as a “Varangian” or outsider technocrat; Milyaev, who was appointed by Putin to follow him, is a local official, however one who has worked in close cooperation with Dyumin.

· Tourism tax with caveats: Russia’s new tourism tax, introduced in 2025 to replace a locally-set resort fee, collected 5.5 billion rubles over the first three quarters of 2025 — marginally exceeding the Federal Tax Service’s initial forecast of 5 billion rubles, which officials presented as a success. The aggregate figure, however, as Vedomosti spotted, masks a sharp revenue decline in two regions where tourism is a significant source of income: the Stavropol Territory collected only 316 million rubles from the new tax vs 687 million from the old resort fee in all of 2024, while the Krasnodar Territory took in just 286 million compared to 819 million in the (whole) year prior. The Krasnodar Territory authorities blamed the shortfall on the Black Sea oil spill near Anapa, a popular resort, which could have played a role, but industry experts highlighted that in Stavropol the new tax actually narrowed the tax base. Both regions are also relatively close to Ukraine and have thus been subject to drone attacks against industrial and energy facilities. The tax was presented as a new revenue source for increasingly cash-starved regional budgets to tap a rise in domestic tourism (a byproduct of the war), but it appears that this is not a given for all regions.

· More to spend on elections: The Sverdlovsk Region’s legislative assembly, ahead of the September 2026 regional and federal legislative elections, put forward a proposal to roughly quadruple the permitted expenditure limits for candidates’ election funds. Supporters of the proposal say that this is required because of high inflation over the past years, although these limits were rarely observed in the past. Yet, the main problem that the Kremlin’s political engineers have faced over the past years in regional and local elections, as Golos pointed out several times over the past years, is an increasing reluctance of locals to stand as candidates due to the risk-benefit ratio getting significantly worse. The raising of official spending limits may change this calculus a bit by reducing some of the risks associated with running and increasing opportunities.

· Regional sport ministers are going to be appointed and dismissed in coordination with the federal Ministry of Sport, according to a bill introduced by the government in early February. This would add sport to a growing list of policy fields where regional governments need to get the approval of the federal authorities before appointing or dismissing ministers, a practice enshrined in the 2021 public administration reform, thus the bill fits into the general trend of eroding regional political self-governance. Ostensibly, the change is needed to ensure “uniform national standards”, however sports and physical education is also one of the fields where former war participants are appointed in increasing numbers.

· Anti-migrant violence in Ufa: in early February a neo-nazi teenager in Ufa, the capital of Bashkortostan wounded four Indian nationals in a dormitory for foreign medical students who then appealed to Indian prime minister Narendra Modi for help. The attacker was described in the Russian press simply as “nationalist”. While recent weeks have seen a series of violent attacks in educational institutions in several regions, the Ufa attack deserves to be highlighted because, as Stefaniya Kulayeva from Memorial stressed, it underlines a broader anti-migrant sentiment in the country; this happens at a time when Russia is actively looking to import labor force and know-how from Asian countries. Such attacks, if they receive broad publicity, if they create the impression that the Russian authorities do not have the willingness or the resources to protect migrant workers and students from atrocities, may hamper that effort.

Shifting reintegration costs

The authorities’ ability to absorb war participants returning from Ukraine in a way that will not see them develop into a source of political risk will remain an issue of concern throughout this year – obviously, as I have laid out in a recent report for the Foreign Policy Research Institute, much more so in case active hostilities in Ukraine end or are paused sometime this year. The government is acutely aware of this risk, and, as the report warns, is creating the legal and institutional pathways to decentralize responsibility for solving the problem.

In January the State Duma adopted, in the first reading, a bill that will accord “Special Military Operation” veterans the same preferential treatment as currently benefits disabled WW2 veterans and the spouses of conscripted men with children, making it more difficult for employers to lay them off. Given that the expectation is that traumatized veterans returning from the front (who, under current legislation, have the right to return to their former jobs within three months) are going to be less productive than other employees on average, this in fact shifts the cost of their integration from the government to employers. Currently, regional governments are already encouraged to incentivize employers to employ returning war participants via training, subsidies and wage support, but the new law, when adopted, will give the authorities an additional stick too.

The authorities have released contradictory information about the reintegration of returning soldiers over the past month. Journalist Farida Rustamova spotted in January that a December news flash on the website of the state-controlled RIA News Agency, in which a Kremlin official claimed that some 250,000 former soldiers were not employed, was modified with the number removed. Meanwhile, in the same month the Kremlin had claimed that 167,000 soldiers had returned from Ukraine, 30,000 more than as of March 2025 (albeit this, according to Kommersant, means only those who have received a veteran certificate). In December the “Defenders of the Fatherland” fund, the umbrella organization created by the Kremlin (and overseen by deputy defense minister Anna Tsivilyova, Putin’s cousin) as a one-stop-shop for soldier reintegration, reported that 55 percent of the veterans that had asked the fund for help “found a job with a decent salary” (however, the total number of war participants that had gone through the fund was only 16,500). Interestingly, the fund’s figure was slightly lower than the overall percentage (57%) reported by the government six months earlier, in June.

One important circumstance complicating the reintegration of returning soldiers is that the “war participant” label covers several distinct groups: mobilized soldiers, contract soldiers, members of volunteer battalions and territorial defense forces, mercenaries (among them a high number of felons) as well as pre-existing members of the administrative elite who are trying to benefit from the Kremlin’s push to get returnees employed through training programs run by various bodies of the state. In the Kremlin’s rhetoric, the pretension is that these groups are, if not homogenous, at least marked by their big common endeavor as their defining quality. This creates the illusion of a rapid social mobility pathway, which is central to the Kremlin’s effort to support recruitment efforts and shape social norms regarding former soldiers, but it is not true. The state will likely care very differently for distinct groups of war participants as they reenter civilian life.

According to official data, as of late 2025 more than 70 war participants who were handpicked for one of the (so far) two tracks of the “Time of Heroes” federal training program have been appointed to ministerial or mayoral-level positions or to federal organizations. Most (albeit not all) of these war participants have held positions in public administration or the military prior to their deployment in Ukraine and their subsequent elevation through the program. Appointments from the regional equivalents of Time of Heroes, which are expected to cover a wider range of war participants, have started only recently, and as expected, the positions occupied by participants are much more modest and apolitical, generally deputies to actual institutional leaders. Still, mobilized servicemen and contract soldiers will likely stand a better chance to enter the ranks of the administrative elite through these regional programs than through the federal track.

The handful of war participants appointed through these programs will likely be held up as examples of the successful reintegration and elevation of war participants by the authorities, even if they do not actually hold positions with actual influence (which some nevertheless do or might in the future). For a much higher number of returning soldiers, the costs of retraining and employment will likely fall primarily on employers (both private and state-owned companies) and, partially, on the budgets supporting them. A third group will likely be absorbed by the gray – or outright illegal – economy. It is worth remembering that tens of thousands of (according to Ukrainian Intelligence, up to 180,000) soldiers were recruited from the prison system and criminal acts committed by returning soldiers already constitute a major problem with at least 423 people killed and additional hundreds hurt. Statistics have so far understandably focused on violent crime, which is more visible, but over time the traces of pathways for former soldiers into the criminal economy will start to emerge too.

Changes in regional elections

Electoral legislation in Russia is malleable. As I laid out in a blog post a couple of years ago, rules governing elections to the State Duma have been in constant change over the past decades, mostly in order to help engineer a stable majority for the ruling party in spite of fundamental shifts in political circumstances. While various forms of rigging, coercion and falsification have become more common in Russia over the same period, institutional changes still fulfill important functions, including reducing the need of outright rigging and making it more difficult for anyone within the established elite to mount a challenge.

Regions often serve as laboratories where later federal-level policy changes are tested and regional and local elections have been also undergoing numerous changes over the past years to benefit the ruling party. Notably, the number of seats allocated in a proportional system, where voters choose between party lists, has steadily declined in most regions over the past years, allowing ruling-party candidates to strengthen their position.

This is especially important when, as in this year, regional elections are held on the same day as elections to the State Duma, since this means a somewhat, if not staggeringly, higher turnout than in regional elections in other years when it is usually enough for the authorities to mobilize the core categories of voters whom they can more easily coerce or motivate, such as public sector workers, pensioners or employees of large state-owned corporations.

Only in one of the 39 regions where legislative elections will be held in September has the number of seats grown; in the Khanty-Mansi Autonomous District, where deputies created two mandates to make up for self-governance units scrapped under the Kremlin’s municipal reform. Meanwhile in several other regions the trend is the opposite. In the Vologda Region, which under its ultraconservative governor, Georgy Filimonov, has become an incubator for some extreme policies, there was a discussion about eliminating party lists altogether. This has not happened, but the region did remove the so-called “general part” of party lists, which were usually headed by the best-known and most popular figures of the respective parties, allowing other candidates to benefit from their name recognition. In the Lipetsk Region, however, both the total number of deputies and the number of those elected via party lists have been reduced. Similar changes have been discussed and implemented in the Maritime Region and in the Kursk Region.

Over the past years this kind of very direct electoral engineering has been a feature of regional, but not of federal-level legislative elections. This suggests that the Kremlin sees federal-level legislative politics manageable and sufficiently non-competitive as it is now, without the need to give further institutional advantage to the ruling party. At the regional and local level, however, politics has so far remained more pluralistic, with local opposition candidates – even in so-called “systemic” opposition parties - able to offer something closer to a real alternative, either by courting protest votes or by seeking cooperation with local civil society and the “non-systemic” opposition.

The reform of regional and municipal public administrations over the past five years as well as the criminalization and disenfranchisement of non-systemic opposition activity have also created tools for the federal center to reduce political pluralism in regional politics, but regional legislatures, traditionally political playgrounds for local elites, are apparently still considered to be dangerously pluralistic, especially in regions where systemic opposition parties have strong organizational structures.

Also-happeneds

· What to cut: 2026 will be a lean year for regional finances. Many regions adopted budgets with planned deficits amounting to 10-20% of their income, the rest to be covered by additional federal transfers or debt. I have covered some of the budgetary cuts in regions whose core industries are in trouble, in an ongoing series for Riddle. But it is not only industrial regions facing hardship. Take the Transbaikal Territory, one of Russia’s poorest regions, for example. The regional parliament cut social payments substantially in this year’s budget, including housing and utilities compensation for families including pensioners, as well as for people living and working in remote rural areas. The region’s parliamentary deputy, Andrei Gurulyov was unusually candid about the reasons why the federal budget, which would usually be expected to fill the gaps, cannot do so this time, explaining that a federal program to rehouse people living in dilapidated buildings has essentially been suspended “since the start of the Special Military Operation”, with its terms now modified, shifting the financial burden on the population. Gurulyov was answering questions from frustrated residents. Payments on social support have actually grown in regional budgets, on average, over the past years, but this is itself a consequence of the war, not an increase of existing payments. Still, regions are usually reluctant to cut social support due to the political risks associated with it. Investment projects are more readily suspended. On this note: the federal government has decided to further postpone the construction of the Northern Latitudinal Railway, a Soviet-era project valued at 800 billion rubles. The construction of the railway was to begin last year, but Russian Railways was unable to finance it.

· I’ve got a minister for that: Gleb Nikitin, the head of the Nizhny Novgorod Region announced the creation of a “ministry for demographics” in 2026. The new minister is to follow demographic trends and come up with ideas on how to improve fertility rates. Since the inclusion of this goal in the key performance indicators (KPIs) of governors in December 2024, regional leaders have publicized a range of ideas, ranging from the wishful but sensible to the downright outlandish, all while regions are forced to cut health care expenditures (occasionally with tragic consequences, see e.g. in the Kemerovo Region). The Nizhny Novgorod Region will keep spending on education and health care roughly at level in real terms in 2026 (at least considering the Central Bank’s official inflation figures), while 9.2 billion rubles will be earmarked for “stimulating fertility” – however, as in several other regions, corporate income tax projections are 30 percent lower than they were for 2025. Both this earmarking and the appointment of a specific minister likely serve the purpose of signaling to the Kremlin, which can allocate further transfers and preferential loans to regions, that Nikitin, a shrewd communicator, is busy working on an issue so important to the president. The governor also added that the results of the past six months are “cause for optimism”, but since demographic statistics have been classified for the past year, this is impossible to verify.

· Wasted time: An old hobby horse of mine is the Kremlin’s 2019 waste management reform, which, for several reasons that I have outlined in earlier articles, is a perfect example of how policy planning in Russia is often inspired by solid analysis, but execution is hijacked by vested interests. The newest development in the execution of the failed reform is the adoption, by the State Duma, of an amendment that will allow the continued use of illegal waste dumps until 2028. Under the previous iteration of the law, these should have been closed before January 1, 2026 (itself a result of a previous extension in 2023). The number of illegal landfills in Russia started to drop after 2022, although it is unclear how many were simply reclassified. Due to the high costs of replacing illegal landfills with legally certified ones (according to estimates in the Russian press, the cost of a new landfill that meets regulations can be as much as 2 billion rubles), municipalities with a shrinking fiscal space and regional waste operators have been reluctant to do so. The new rules do not change the incentives substantially, but they do make governors personally responsible for executing the policy. The hope seems to be that getting the regional government involved, which also provides a significant part of municipal finances, political pressure will move the issue ahead in the list of priorities.

· Arrests of regional officials have continued over the past weeks. The current wave has started over the summer and has seen dozens of officials under arrest, among them regional ministers and deputy ministers, in what many have labeled a coordinated repression against regional administrative elites. The case I would like to highlight is the arrest of a former head of the regional council of ministers in the Ivanovo Region, who is accused of influence peddling related to municipal appointments. Specifically, according to the Federal Security Service, he sold the position of head of a municipal district to a local businessman – something not unheard of in Russian regional politics. The arrest is nonetheless notable because it happens at a time when governors, most of whom currently are so-called “Varangians” (technocrats without links to the regions they are leading) are given additional powers to influence municipal appointments, with the goal of strengthening vertical control over local elites. It’s worth watching whether we’ll see more cases of this sort.

· Repression in Bashkortostan: At the end of December a court in Izhevsk, Udmurtia sentenced the last remaining “regular” defendants in the so-called “Baymak Case” to several years in prison. The crime of the defendants, several of them young people, was simply attending protests in 2024 in defense of Fail Alsynov, a Bashkir activist who himself faced a long prison sentence. The organizers of the protest, which the authorities labeled “mass disorder”, are still facing a trial in the Orenburg Region. The Baymak protest was, as of today, the last large protest against a regional governor in Russia and the response of the authorities has been ruthless. According to Idel-Real, a total of 68 people have been sentenced to prison, most of whom are recognized by Memorial as political prisoners. The harsh response could have been motivated by the shaky position of the region’s governor, Radiy Khabirov, but also by growing anxieties about domestic unrest in a region that has seen disproportionate losses in the war in Ukraine.

· “A giant vacuum cleaner” was how Maxim Zolotukhin, a deputy in the Krasnoyarsk Territory’s regional legislature described current institutional and economic incentives that have led to the rapid depopulation of Siberia, at a scientific hearing. From over 20 million at the fall of the USSR, the combined population of Siberian regions has now fallen to less than 17 million and if current trends continue, it will be under 12 million by the end of the decade. Zolotukhin named “reindustrialization” as the key to improving the situation; this is the hobby horse of Sergey Shoigu, the secretary of Russia’s Security Council, who regularly mentions his plans to build cities in Siberia around industrial clusters, and no doubt the deputy was trying to appeal to his attention too. Shoigu, who himself needs to package his policy proposals in language that appeals to his boss, has most recently talked about the practicalities of creating a rare earth processing center in Siberia to help Russia achieve technological sovereignty. These industrial centers may very well be created; but the industry-centered view reflects Soviet-era reflexes that led to the creation of (still-surviving, but not thriving) monotowns in inhospitable regions, such as Norilsk, and the legends in public consciousness associated with them. It will hardly address the more important circumstances that are accelerating depopulation and making repopulation more difficult: the lack of adequate social infrastructure for a reasonably comfortable living, creating which is impossible without major capital injection, either directly from the federal budget or via regional budgets that currently lack the funds. And this is just one of the two ways in which the focus on the war is making the solution of this problem impossible. The giant vacuum cleaner has a name, it just cannot be said.

The municipal reform and its discontents

Nine months after its adoption – and more than four years after its conception – the implementation of the Kremlin’s reform of municipal public administration keeps redrawing the political map of Russia’s regions, but also stirring up public and elite protests.

Over the past months, most Russian regions have, quietly if they could, implemented the reform, which, save for a handful of regions, scraps all lower-tier municipalities in the region, folds them into bigger municipal districts, scraps direct mayoral elections and allows governors to decide who can and cannot be a mayoral candidate in regional capitals. In a series of major cities – e.g. Krasnoyarsk, Izhevsk, Orenburg or Birobidzhan, but even in formerly relatively pluralistic cities like Yekaterinburg and Syktyvkar – governors have essentially handpicked mayors, using their new powers.

Some, however, are fighting back. In a notable case from November, the head of the Kirov Region city of Sosnovka, Nikita Gorelov spoke up against the municipal reform, which would. Notably, Gorelov behaved like an activist: he started collecting signatures and used the same arguments against the reform (primarily the risk of a further decay of public services and people losing access to government) as the protesters who in March rejected the implementation of the federal reform in several regions.

Gorelov’s story was similar to what happened in the Sakha Republic city of Olyokminsk in September where mayor Sergey Shcheblyakov resigned in order to precipitate a direct mayoral election before the municipal reform that, unlike in Kirov, would keep the two-tier system of public administration, but scrap direct mayoral elections in the region. In both cases, the mayors were essentially powerless to resist the regional government with anything else than with an appeal to grassroots support. Notably, while Shcheblyakov’s resignation did not halt the reform in Sakha, the local assembly did, after weeks of wrangling, call an election for January. The local branch of the United Russia party, loyal to the governor, managed to remove Shcheblyakov’s ally from the helm of the city assembly and have the Supreme Court of the republic determine the legality of the January election, but it is still regarded as a possibility even by the governor-appointed acting mayor who registered to take part in it.

What adds a further flavor to Gorelov’s story is that he is a former war participant and graduate of the Kremlin’s “Time of Heroes” program, one of the few without prior experience in public administration appointed to a position of leadership, however insignificant; as a former business owner who was mobilized after September 2022, Gorelov apparently took his role as a people’s administrator more seriously than his superiors would have expected.

In prior writings I have warned several times that the Kremlin’s push to appoint war participants to the administrative elite, however symbolic, could backfire when the handful of appointees who were not part of this elite before their military service actually start to think of themselves as the new elite and the representatives of other war participants and the “common folk” in general. At the federal level there was no question of appointing anyone without prior experience – save for the high-profile Donbas separatist and now Urals plenipotentiary Artyom Zhoga – to a position with real power, and at the regional level there has been enough pushback from existing regional and local elites to keep the numbers very limited. Yet, in order to keep recruitment numbers high and Putin’s promises about a new elite of war participants credible, there has been pressure from the federal government to increase the number of war participants in public administration. This however meant that most war participants were promoted to position in local government units, many of which the ongoing municipal reform aims to erase, creating an awkward conflict of interest.

Note also that many war participants had been on the “wrong” side of this issue even before Gorelov. War participants joined major protests against the reform in the Krasnoyarsk Territory earlier this year, while in 2024 soldiers at the frontline appealed to the government of the Kostroma Region, asking it to postpone the already ongoing public administration reform. They did not succeed, but Kostroma has remained one of the regions where local residents are still actively opposing the reform.

The news outlet Vyorstka has reported several times that in spite of its surface-level enthusiasm for the “new elite”, the Kremlin is actually afraid of the emergence of popular war veterans, and has thus carefully selected loyal people for its career ladder programs. Gorelov, who somehow slipped through the cracks, does indeed look like the exception rather than the rule. However, the problem is also wider.

As I am outlining in a new report for the Foreign Policy Research Institute, public administration is just one layer of the government that returning war participants will be exposed to, only to find that there is a gap between the Kremlin’s rhetoric and the Russian federal state’s capacity and political priorities. While Russia has the financial resources to put behind rehabilitation and reintegration efforts, its social infrastructure lacks the necessary capacity, particularly in the fields of healthcare and law enforcement. This problem is known to the federal government, but capacity expansion has been slow: a 300-bed military hospital that has just been opened in the Arkhangelsk Region, took three years to build; shortages of psychiatric practitioners qualified to treat post-traumatic stress disorder have led to the State Duma discussing recruiting veterans of other wars for this task. The list could go on.

Direct Line

Once again Vladimir Putin held his end-of-the-year press conference merged with his trademark choreographed call-in show, “Direct Line”. The show, which lasted for four and a half hours this year – a rather average length when it comes to Putin – was carefully timed to take place after the meeting of the European Council that failed to adopt the so-called reparations loan, likely to give Putin opportunity either to do a victory lap or to issue threats. And a victory lap he did, touting Russian military successes in Ukraine, underlining supposedly unchanged Russian war aims, and taking a dunk on weak Eurozone growth (even as the numbers and statements did not always add up).

The war was understandably Putin’s main focus, to the extent that several times he gave the floor to an army officer from Kalmykia to act as the loyal and grateful representative of Russian soldiers fighting in Ukraine, while also quoting figures meant to underline that domestic support the war supposedly remains overwhelming (e.g. that according to official data, more than 400,000 people signed contracts with the Defense Ministry this year and the authorities collected 83 billion rubles worth of donations for the army; never mind that regional media reported employers pressuring officials and workers to give up part of their salary).

There were also several messages to Western audiences, as the BBC’s Steve Rosenberg and NBC’s Keir Simmons both got to ask questions, and Putin, predictably, mocked Volodymyr Zelenskyy. There was, as always, the odd series of questions about love, friendship and the motherland, allowing Putin to try and appear human (largely unsuccessfully). These could have been copy-pasted from last year’s broadcast and few would have noticed.

But Direct Line, in its heyday, used to have another function: to take the temperature of the Russian society by encouraging people to send questions to Putin. Of course, most of these never actually made it on air, but they let the Kremlin’s spin doctors know which issues Putin had to raise in the show, and what questions could be dressed up as a polite supplication to the benign tsar. This has now been largely supplanted by the enhanced collection of data and complaints by the federal government (which has been inspired by Direct Line) and extensive social media monitoring. Nonetheless, the domestic problems discussed by Putin and the way the president talked about them do say something about the issues that worry the Kremlin.

Take taxes, for example. Twice Putin mentioned recently introduced unpopular tax hikes – of the recycling fee for cars and of VAT – that have led to protests in several regions. In both cases, he stressed that the tax hikes were not permanent. In the case of the recycling fee, Putin also took a swipe at “well-earning” residents of “large cities” who, in his reading, were the ones hit by the recycling fee hike, highlighting once again how Kremlin is giving up on this demographic, once a core element of Putin’s coalition, as a new “wartime coalition” emerges. Perhaps relatedly, Putin warned Moscow mayor Sergey Sobyanin – once a champion of keeping urbanites in the pro-Kremlin coalition by fixing up the capital – that he should not “sit on his laurels”.

Putin also reviewed several questions about domestic shortages affecting the day-to-day life of citizens, among them rising electricity tariffs in the Sakha Republic, labor shortages in Tomsk, the provision of goods to remote parts of the Komi Republic, medication shortages in the Sverdlovsk Region, or the delayed payment of social support to a soldier’s wife. In all of these cases, Putin simply threw his hands up and pointed at regional and local officials. This is nothing new; however, the president also seemed to lose focus here and there when talking about these issues, suggesting frustration and a lack of understanding that the system somehow still refuses to run itself smoothly enough.

Putin was also all too ready to point at circumstances outside of his government’s control when talking about delayed or failing policies such as the creation of a rare earth processing cluster in Siberia (“a task of a historical scale” for which “investors” are needed), or Russia’s demographic decline (“an issue that affects all major countries”); perhaps the grimmest moment of the whole excruciating four-and-a-half hours came when Putin spoke proudly of the many young men born in the 1990s currently serving at the frontline.

And while the fact that these issues were addressed suggests a degree of attention to them in at least some echelon of the federal government, another function of the Direct Line is to bury them as much as possible, by putting them on the same shelf as inane questions about “Satanism” or whether Putin still drives a car himself. To a significant extent the president’s team seems to regard framing as the core of the problems raised – the same way as Putin seems to think that the stricter enforcement of tax laws could still result in a significant increase of fiscal revenues. Both of these are questionable assumptions.

Also-happeneds

· A regional bill to watch: An underresearched power of regional parliaments is to act as “policy laboratories” and introduce bills to the State Duma, even though often these bills are not adopted. An interesting example from November is a bill supported by five regional legislatures – of Moscow, St. Petersburg, Tyumen, North Ossetia and the occupied Sevastopol – proposing to abolish so-called public councils. The purpose of these councils is to conduct public discussions of adopted legislation and make recommendations to government bodies, but in practice, few regions have them. It seems that the bill’s purpose is to enshrine, in the law, the de facto already existing norm that these councils make little difference, if at all, as policies are dictated from the federal center and regional governments are usually entrusted to fine-tune their local implementation.

· Once again, trash: The federal Ministry of Environment suggested that regions and regional waste management operators jointly create “working groups” to monitor problems with waste removal over the winter holidays when the volume of household waste is higher. Earlier this year, the federal government more or less acknowledged the failure of an overarching waste management reform launched in 2019, and proposed a range of updates. However, hostility to bottoms-up policymaking and wartime fiscal limitations are preventing the authorities from initiating a radical overhaul of the system, as I laid out for Riddle in June. The working group proposal is essentially a signal to regional governments that the Kremlin expects them not to let people get angry during the holidays over a long-festering problem that the federal authorities regard as a political risk.

· A Khakassian saga: The fascinating story of Khakassia’s law on interbudgetary relations, adopted more than a year ago, took another turn in early December. As a reminder: the United Russia majority in the regional parliament adopted a law removing the governor’s right to suspend budgetary transfers to municipalities if they overspend. Valentin Konovalov, the region’s communist governor who has been engaged in a power struggle with United Russia for several years, vetoed the law, but the United Russia supermajority in the regional legislature overrode the veto. Konovalov then took the matter to court, arguing that United Russia’s law ran counter to federal budgetary legislation, and, in October, won – only to see the same regional legislature adopt similar amendments to the law once again in November. This time, however, Konovalov signed the law, arguing that a legal review (and the court’s decision) allows him to exercise his power like earlier. This was not the only issue that saw clashes between the governor and the regional legislature this year (Konovalov also opposed the Kremlin’s municipal reform), thus it’s worth keeping an eye on whether the governor will indeed be allowed to exercise his powers.

· City budgeting under pressure: In Khabarovsk, teachers are suing the city government for higher salaries. According to Govorit NeMoskva, such lawsuits have recently been successful in several cities in the region, and there is an ongoing case across the country in the Kursk Region as well. Successful lawsuits are important because they create precedent at a time when cash-strapped municipal and regional governments are trying to save money on vital public services, including education and health care. In another Far Eastern city, Petropavlosk-Kamchatsky, the city authorities are meanwhile collecting donations from residents and local companies to cover the deficit of the city budget – a rarely seen fiscal maneuver, suggesting liquidity problems in the regional budget.

· Operational headquarters: The Ministry of Defense wants to put mayors and governors in charge of local defense during martial law. A bill introduced by the ministry this month expands the system of “operational headquarters”, already used during COVID, mobilization and in the occupied territories, where regional and local officials sit with representatives of the federal government and law enforcement agencies, to defense. The bill also puts territorial defense forces, which were formed in several regions, including the occupied territories and border regions, under the control of these headquarters. The system of operational HQs has in practice allowed security agencies to oversee and monitor regional and local officials implementing policy, while leaving political responsibility with them.

I comment on matters of international politics very rarely on this blog, mostly because this is not my research focus in a narrow sense. However, due to the centrality of the issue, let me share a couple of thoughts, from a political analyst’s perspective, on the so-called “Reparations Loan” that, as of this writing, the European Council is still planning to discuss at its Thursday summit. I would like to focus on the politics as, not being a jurist, I can only consume others’ analysis and try to understand the specifics of the labyrinthine explanations of the situation, into which EU leaders have navigated themselves.

I promise that later this week we are going to return to Russian regional politics, which is why most people read this blog.

The chances of a positive decision are low. In spite of a last-ditch effort by German chancellor Friedrich Merz and other supporters of the loan, and in spite of the support that the long-term freezing of Russia’s immobilized assets received earlier this month, the latest reports implied that seven member states – including Italy as well Belgium where most of these assets is held – were against using the money as collateral for a loan to support Ukraine’s financing in 2026 and 2027. On Wednesday morning Hungarian prime minister Viktor Orban, a staunch opponent of not just this loan but of supporting Ukraine in general, claimed that the issue was off the table. As of Wednesday evening, I haven’t seen a confirmation, but the prospects of the plan certainly aren’t looking good. Of course, under high pressure and behind closed doors much can change in very little time. And there is certainly a lot of pressure here. Even more importantly, though, politics is driven by perceptions of what is possible, of what alternatives are, and these perceptions seem to vary wildly in this case.

The first thing that I need to say is that whatever one thinks about the merits of the loan itself, the long-term freezing of Russia’s assets makes sense from a political point of view. It is a necessary, though belated attempt to strengthen the EU’s role in the ongoing negotiations with and about Ukraine, and moving beyond the “veto politics” of disruptive illiberal EU governments, primarily Hungary’s, in a way that may create a precedent for future institutional reforms.

Through its own sclerosis and lack of commitment the European Union has failed to react to the changing political circumstances of the war in Ukraine. This failure dates from a decade ago, and it was about faulty perceptions, with the EU’s then leading officials failing to understand or to act on the implications of Trump’s election to the presidency and what an openly and actively adversarial US administration means for the European Union. Wishful thinking led to a failure, among others, to build defense industrial capacity in Europe, to decouple the EU from US platforms and improve the EU’s sanctions firepower. This has contributed to, but does not fully explain, EU leaders’ scramble to pander to Trump upon his return to the presidency, with an even more openly anti-EU foreign policy, instead of playing hardball from the onset and taking initiative, using the EU’s own sticks and carrots.

As regards the question of whether or not the Reparations Loan is a good idea politically, this also depends on perceptions, namely what one thinks the alternatives are. It is more or less universally acknowledged at this point that Russia is not going to get its frozen assets back, but opinions differ about what could plausibly happen to them. In order to see the assets go into Ukrainian reconstruction, undoubtedly an attractive alternative to simply propping up a weak Ukrainian state, one has to believe that 1) negotiations about an eventual peace or ceasefire deal have indeed reached a breakthrough and 2) that they will produce a stable status quo, i.e. what is reconstructed is not going to be ruined again in a couple of years (or earlier, by sabotage actions), even setting aside the issue of whether the money should also be used to finance reconstruction in Russian-held territories (i.e. flow back to Russian accounts) and Trump’s bizarre obsession with “profits”. The above are also necessary prerequisites to take the US side’s arguments about investors flocking to Ukraine seriously, which they will not do if the status quo emerging from the talks is not propped up with strong enough guarantees. I am obviously not intimately familiar with the latest developments of the ongoing closed-doors negotiations, especially regarding security guarantees for Ukraine, but my own perception has so far been that these are not settled issues. A “fast-tracked” EU accession of Ukraine, which some have raised as a silver bullet to solve both the question of security guarantees and post-war development as early as 2027-28, is not going to happen, as it is politically and institutionally unfeasible.

Orban’s perception is different, and so is Russia’s. Based on his domestic communications, Orban is saying – and likely actually believes – that Russia will inevitably win the war one way or the other and is trying to make the most of the situation for himself and his government; his bargaining position in the EU was weakened by the use of Article 122 to place the sanctions on Russia’s assets outside of the scope of member state vetoes, hence his loud protestations about the “rape” of EU law. Orban also has a heavy domestic stake in the failure of the Reparations Loan and the quick, flashy success of US-Russia negotiations. In four months, he is facing a parliamentary election in Hungary, which the latest polls say his party stands to lose. Arguing (without evidence) that “Brussels” would force his opposition to raise taxes on Hungarians in order to “send the money to Ukraine” has been a cornerstone of his campaign, as were expectations that a “peace summit” would be held in Budapest before the election.

The Kremlin’s perception of the situation is more difficult to gauge. However, if one believes that Putin regards Ukraine as only one battlefield in a wider conflict with a Western coalition, then it would be difficult to argue that, in spite of the slow and grinding advance of Russian troops in Ukraine and the gradual breakdown of the domestic economy, the past year has not felt like a massive improvement in Russia’s chances. Commentators often dismiss Trump (and Orban) as Russia’s tools or agents, which is a lazy and incorrect argument. One must recognize, however, when and where interests align. The interests of Trump and, based on the US’s new National Security Strategy, many in his foreign policy team, align with Putin’s when it comes to weakening and eventually dismantling the EU. Trump’s administration now openly backs the takeover of EU governments by illiberal parties in the near future. It is hard to argue that the Kremlin does not see this as an opportunity. Incidentally, an EU failure to find a solution to fund Ukraine without increasing the burden on member state taxpayers, is likely to precipitate this outcome.

Much depends on how confident Putin feels that he can take a bigger bite if he keeps pushing now vs later; this is a more difficult question than it seems, not knowing for sure how clearly Putin sees the risk not just of a sudden setback on the battlefield, but economic decay, elite anxieties, risks associated with soldiers, etc. but so far Russia’s negotiation strategy has been playing for time while cajoling Trump at the right moment, playing on his narcissism and his negotiators’ woeful lack of skills, suggesting the perception that Russia has the upper hand.

I see the EU’s discussion of de facto seizing Russia’s assets primarily as a negotiation tactic, and this is why I have found it frustrating to see it dismissed by many as some kind of irreparable faux pas that would condemn Ukraine to continued warfare by kneecapping the ongoing negotiations. One cannot accept Trump’s grand pronouncements and Steve Witkoff’s bumbling idiocy as simply a negotiation tactic while holding the EU to a different set of standards. The problem is not that the loan is on the table, even if it comes with costs for the EU, as long as the perception is that available alternatives would cost even more and that the goal is to force a change in perceptions.

The problem is that the EU has so far had no answer to the question of “then what”: what is the next step if the Reparations Loan is adopted, and what if this is not enough to change the perception of how the war is going in the Kremlin; what are the security guarantees, short of European troops on the ground, which seems hardly realistic under the current political conditions, which the EU and Ukraine deem acceptable and workable; and how else sympathetic EU leaders can, even without a hostile US government, raise the pressure noticeably on Russia in case the loan does fail and they need to revert to one of the known alternatives. The threat of a Reparations Loan may indeed move the needle, but only if it is part of a credible strategy able to change perceptions. Otherwise, it may very easily turn out to be a knife in a gunfight.

The unending headache of the municipal reform

The federal (and in some cases, regional) political agenda may have moved on to more pressing matters, such as ballooning budget deficits, but the reform of municipal administrations has continued over the past months, with notable pushback in many regions, especially in Siberia and the Far East. In these large and scarcely populated regions with difficult access to Moscow the absence of local bodies of self-governance and government infrastructure is more keenly felt.

Perhaps the most interesting case has developed in the Republic of Khakassia, which over the past two years has become the scene of a power struggle between United Russia and the region’s communist governor, Valentin Konovalov, the last holdout of designated also-rans who in 2018 won gubernatorial elections in a rare and surprising upset, who has in recent years successfully rallied local elites behind himself. After 2023 it seemed that United Russia would successfully grind down Konovalov’s defenses when the party engineered a supermajority for itself in the regional legislature and successfully bypassed the governor’s veto against a law curbing his right to withhold financing from municipalities. The purpose of the law was likely to change the balance of power in the region by exacerbating tensions between the governor and local leaders, but Konovalov argued that the law ran counter to Russia’s federal budget code. A Novosibirsk court has now decided that the governor was right and the veto stands.

This is not only a rare defeat for one of the governing party’s regional branches, but could also have consequences for the municipal reform, which Konovalov also vetoed in July. Overriding this veto was already a bigger challenge for United Russia than in the first case, with the regional parliament postponing the matter several times. The court case could make it even more difficult. What makes this interesting is that theoretically, the governor and United Russia were both on two different sides in the two cases. Konovalov preserving powers to control municipal finances is very much in the spirit of the Kremlin’s municipal reform (and the government is planning to tighten control over municipal spending even more in a separate law). Yet, in both cases the governor had federal legislation to appeal to; in the case of the municipal reform, the federal law nominally allows regions to decide whether they would like to preserve their two-tier public administration system, even though the expected norm created by the Kremlin is clearly the implementation of the reform, with the exceptions preserved for regions with special rights. The Khakassian conundrum thus provides a good example of how conflicting elites can appeal to various aspects of higher power under conditions of relative pluralism.

But Khakassia is not the only region where the reform keeps creating turbulence. In Buryatia – where the parliament adopted the reform this week – and the Altai Republic local residents have been using public hearings to express their opposition to the reform. This was inconvenient enough for the authorities to start to limit or shut down these meetings; the government of the Republic of Altai argues, for example, that it is precisely the municipal reform itself that forbids local deputies to organize meetings with voters without the approval of the regional government. The authorities have also harassed Aruna Arna, one of the leading local activists who protested against the reform and who was recently also added to the federal Ministry of Justice’s list of terrorists and extremists.

An emerging pattern is conflicts between municipalities and the districts around them, into which they would be folded. In October, the mayor of Olyokminsk in the Republic of Sakha, who opposed the reform in the republic, resigned so that the town council could call for early (direct) mayoral elections before the reform enters into force. Several local deputies obstructed the decision by not turning up to sessions. A quorum was finally reached at the end of October, but shortly afterwards a deputy claimed that he was not present at the session, throwing the election into limbo once again. In the Irkutsk Region, the regional legislature has recently scrapped village councils, in spite of protests and appeals to the federal government. Notably, some towns will be swallowed, in an administrative sense, by the regional capital, which has created a range of concerns among local residents and officials.

The fact that the State Duma is considering legislation to make such mergers even easier, suggests that we are going to see similar conflicts in other regions as well (apparently Vladivostok has been picked as a pilot project). Agglomerations were the focus of the government’s domestic urban development policy even before the war, partly in an attempt to tap the resources of relatively wealthy regions and cities more easily. There are plans to add mayors of regional capitals institutionally to regional governments, codifying a situation that de facto already exists. Many however seem to be afraid that agglomeration-building in practice will lead to a loss, rather than an improvement, of public services.

The reform of municipal administrations was a logical endpoint of the Kremlin’s centralising policies over the past two decades, and while the reform itself took more than two years to adopt due to serious pushback from federal and regional interest groups, the Kremlin considered the matter closed when the law was adopted in March this year and several regions that had not eliminated lower-level self-governance units began almost furiously to do so. At the same time, there are some signals now suggesting that the federal authorities are acknowledging the risks of pressing ahead with the reform’s implementation as planned. Last month Gennady Zyuganov, the head of the Communist Party raised the problems triggered by the scrapping of village councils to Putin in a public meeting. The president acted surprised, almost as if he had heard about the issue for the first time. This does not mean that the Kremlin will pause the reform, simply that the president will want to keep it as far away from himself as possible, defining simply the overall goals and perhaps tightening the monitoring of public opinion, while devolving the responsibility to regional governments. It is also worth noting that a substantial part of the relatively small, but growing number of war participants who have been integrated into the administrative elite, mostly by the United Russia party, were promoted to local councils.

Eccentric governors: still the future?

October was not a great month for Russia’s newest, flamboyant kind of governors. There were rumors that two of them – Vologda governor Georgy Filimonov and Samara governor Vyacheclav Fedorishchev – were on their way out due to their extravagant policies and erratic behavior that have started to develop into a political liability for the Kremlin, but as of mid-November, they were both still in their offices, likely in part due to their friends in higher places: the deputy head of the Presidential Administration Sergey Kiriyenko and State Council secretary Alexey Dyumin. (For a profile on both governors, see the Meduza article linked above; I also profiled Filimonov for The Moscow Times earlier this year). Yet, both Filimonov and Fedorishchev maneuvered themselves into embarrassing situations.

The Vologda governor, whose flagship (and very unpopular) policy was a severe restriction of alcohol sales in the region, got into a row with Rosstat, the state statistical agency. A day after the agency published figures showing that in spite of the governor’s “dry law”, his region’s residents were drinking more, the Health Ministry said that there was a “technical error” and corrected them. Alas, the new figures are not exactly flattering either; they are showing that alcohol consumption has not changed people in the region still drink about 25 percent more alcohol than the Russian average. This, of course, has not prevented other regions from following Filimonov’s lead and curbing alcohol sales, but it did draw attention to lingering questions about the practical results of the governor’s policies.

As regards Fedorishchev, the governor became the center of attention when a video was published of him “dismissing” Yury Zhidkov, the head of one of the region’s districts, using foul language. Fedorishchev reprimanded Zhidkov over a damaged WWII memorial before slapping him on the shoulder and saying “you are fucking fired.” The story was emblematic of Fedorishchev’s ongoing conflict with local elites: it came shortly after threatening local United Russia deputies with making sure that they would lose their jobs. Worst of all for the governor, he did not emerge well from the confrontation: he had to publicly apologize; the ruling party’s local organization rebelled and referred him to the party’s ethics commission; district council deputies did not support Zhidkov’s dismissal (even though later he left his job anyway).

In a way, the recent emergence of these characters is the consequence of the Kremlin’s own policies that have made most regions highly dependent on federal transfers and budgetary loans, lifted ultraconservative tropes into a sort of makeshift domestic ideology and incentivized governors to signal loyalty to the Kremlin by following and promoting such policies, and improving their chances of being “seen” by the boss. More importantly, however, in both cases the underlying conflict is between Kremlin-appointed governors and relatively powerful local elites. Both Vologda and Samara have important industrial facilities (in metallurgy and carmaking), which carry their own weight in regional politics, but whose influence the federal government would like to weaken. Governors are using their backing in Moscow as well as, in some cases, alignment with federally mandated policies (see e.g. Filimonov’s announcement that he would appoint war participants to head districts) as well as the theatrics of cracking down on local officials in the interest of citizens, to carry out this function. A similar conflict seems to be developing in the Rostov Region, where the recently appointed governor Yury Slyusar oversaw the dismissal and prosecution of the capital’s former mayor, Alexey Logvinenko.

It is worth keeping an eye on whether Fedorishchev and Filimonov will be honorably dismissed or whether we are going to see more similar governors appointed. At this point, in spite of their “mensis horribilis”, I still think that the latter is more likely, but both are possible.

Also-happeneds

· Still no bridge over the Lena: the bridge over the river Lena, which would connect the Sakha Republic’s seat, Yakutsk, to Russia’s highway network, and has become the epitome of vital domestic infrastructure projects put off due to the Kremlin’s focus on the war in Ukraine ever since its first postponement after 2014, is suffering further delays, in spite of the announcement of the completion of its first support. Sardana Avksentieva, the former mayor of the city, now a fairly well-known Duma deputy of the New People party, claimed in October that both the region and the federal government are failing the task, in spite of governor Aisen Nikolayev having promised to “eat his tie” if the bridge isn’t ready by the end of 2025. Avksentieva says that the federal government has only allocated 1.3 billion instead of 65 billion rubles to support the project, while the regional budget coughed up 4.8 instead of 9.6 billion. Part of the reason of the ballooning costs is the reclassification of the land on which the bridge is supposed to be built, by the regional government; another one seems to be the involvement of the VIS Group, a notorious company that has been involved in several other overpriced and underdelivered infrastructure projects, including another delayed bridge in Novosibirsk. VIS is supposed to finance about half of the exorbitant, 175-billion-ruble cost of the bridge, but this is contingent on loans.

· Coal and construction sector applies for government help: as of October, 137 coal producers had applied for government support, according to the Energy Ministry. These include loan restructuring, tax and tariff deferments and help with logistical costs. In spite of the federal government stepping in, the situation in the sector continues to be dire. 18 companies in the Kemerovo Region, Russia’s main coal producing region, have suspended operations, throwing the region’s budget into tailspin; eastward exports from Khakassia dropped by 22.5 percent, to a large part due to the significant discounts on Russian coal in the Chinese market, as a growing number of companies are operating at a loss. While coal producers and officials are pointing at the tariffs set by the Russian Railways (RZhD) as the core of the problem, the company’s maneuvering space is itself limited due to its ambitious investment program, past bad management decisions, growing debt service costs and the necessity to guarantee throughput capacity for coal exports. Apart from coal production, the government is also planning to adopt support measures for the construction sector, which has been hit by high rates – a consequence of wartime policies – and the phasing out of subsidized mortgage programs. A recent study by the Center for Macroeconomic Analysis and Short-Term Forecasting found that the net debt of construction companies exceeded their profit by almost six times. The details have not been determined yet, but it appears that the government aims to outsource at least part of the task to regions.

· Blackouts in Belgorod and Bryansk: as Russia’s war against Ukraine drags out and the Ukrainian army’s hits on Russia’s industrial establishments and power stations become more and more precise, life in Russia’s border regions is increasingly reminiscent of life in a country at war. The federal government recently transferred 3.5 billion rubles to Belgorod and Bryansk, two border regions, to purchase generators before the winter months in order to ensure electricity and heating. Recently around 40,000 residents were left without electricity after attacks on a power station. The heightened financing needs and the frequent blackouts in the regions are all the more striking, since prior to the full-scale war Belgorod was considered to be a relatively wealthy region due in part to its profitable agrarian businesses. The war, however, which has affected several border districts and the regional capital, has changed the picture. As of September, the region’s budgetary reserves were at a mere 200 million rubles—around 0.1% of its yearly spending plans.

· Meet the new senator, same as the old: the Federation Council, the upper house of Russia’s parliament, confirmed its new composition in October, after regions that held gubernatorial elections in September confirmed their new “senators”. There are no massive surprises, but two changes are interesting to highlight. First, the Kursk Region, now headed by Alexander Khinshtein, a firebrand conservative politician, will send olympic fencer Yevgeniya Lamonova to the upper house, thereby replacing Alexey Kondratyev, a former war participant whose appointment a mere year ago, when a part of the Kursk Region was still under Ukrainian occupation, was touted domestically as a proof of the Kremlin’s commitment to elevate the status of war veterans. True, Kondratyev will not lose his job entirely: as it happens, he will now represent the Tambov Region, whose newly minted governor, Yevgeny Pervyshov, is himself a former war participant. True, both men are first and foremost career officials: before his brief stint in the war, Pervyshov was mayor of Krasnodar, while Kondratyev had already represented Tambov in the Federation Council in 2010-15. Another telling switch occurred between the Jewish Autonomous Region (EAO) and the Komi Republic: after Rostislav Goldshtein, the EAO’s former head was appointed to head his native Komi last year, he apparently decided to bring his senator, too, even though Vladimir Dzhabarov’s political career had taken place entirely in the EAO, showing how personal relationships can override the federative principle of the chamber. Perhaps it is also worth noting that no former governors were appointed to the upper chamber this time, even though historically this has been a popular sinecure.

· Further cuts in regional budgets: regional governments have continued cutting their expenditures over the past weeks. The end of the year is usually when regional budgets face the heaviest expenditures, and in spite of the federal government increasing discretionary transfers somewhat over the past weeks, the aggregate deficit of regional finances will likely be larger than in recent years, with little hope to fill treasuries in 2026. I have detailed the causes and potential effects both here and for Riddle last month. Some recent examples follow. The Irkutsk Region is setting up a crisis management committee due to a 27-billion-ruble, or roughly 10-percent gap in expected fiscal receipts, and will reduce spending in several key areas, including on health care and education this year and on development projects and drone production next year. Rostov governor Yury Slyusar ordered “urgent proposals” to reduce spending until the end of the year, as the region does not want to take out further debts from the market. The deficit of the Novosibirsk Region will also be higher than planned. Other populous industrial regions, e.g. Chelyabinsk and Nizhny Novgorod are also facing ballooning deficits and will likely have to cut either social spending or capital expenditures. Twelve regions have also reduced salaries in education, and regions are not even close to finishing the drafting of 2026 budgets.

Regional finances in late 2025

The Russian government adopted the main parameters of the 2026 federal budget, containing a VAT hike, higher tax burden for small enterprises, as well as a minor (and temporary) drop in direct military expenditures. The details of the budget will no doubt be further discussed as its first and second readings are completed in the State Duma. I would like to focus instead on the state of regional finances. Regional budgets will be drawn up and adopted after the federal budget when it becomes more or less clear how much money the federal center is going to transfer to regions next year and what policy priorities regions are supposed to follow. However, some trends are clearly visible already.

In late 2024 and the first half of 2025, regional budgets, as a whole, started experiencing financial shortages. The aggregate data provided by the Financial Ministry (see below) differs somewhat from the data in the Electronic Budget portal due to accounting differences, but the trend is visible: this year regional finances have been much tighter than in any of the three previous years of the war, and while regional budgets, on the whole, run surpluses at mid-year (often until the very last month of the year when they face the heftiest expenditures), in 2025 they were in the red already at the end of July.

Some regions, of course, stand out negatively: the Kemerovo Region, dependent on coal mining, is suffering from the second consecutive year of the sector’s ongoing crisis and it will not realize more than 10 percent of its planned revenues. The Rostov Region suffers from draught. But overall, the reason simply is that while the federal government has seized on a whole series of new resources to pay for its war in Ukraine – from extra taxes and dividends to regularized tax hikes - the structure of regional incomes is more or less the same as it was three years ago. At the same time, while regions do not have to spend directly on warfare, they have faced a range of extra costs associated with it, for which they received little to no compensation from the federal center, at a time when their own revenues have suffered due in part to the economic processes triggered by the war.

In 2024 Novaya Gazeta estimated that regions spent more than 800 billion rubles on war-related expenditures (including social aid, civilian defense, recruitment bonuses and others) that year, which was almost twice as much as originally planned. Moreover, this is without Moscow, whose budget amounts to about a fifth of the whole, and without taking into account a substantial amount of spending that cannot be easily disentangled from the rest (e.g. aid to “other” categories of citizens or payments to support construction projects in the occupied territories, which are usually executed through specially created non-commercial organizations). This extremely conservative estimate would suggest that regions on average spend at least 4 percent of their budget on war-related tasks.

In the first half of 2025, regional expenditures grew by 14.9% year on year, significantly above inflation, while regional incomes grew by a mere 2.1%, significantly below. Most regional budgets for 2025 were planned with deficits, but these plans did not anticipate the shortfall that many regions then experienced – visible also from recent budget amendments. Of the three most important income sources for regional budgets, only personal income tax receipts grew this year (and there are major differences between regions; corporate income tax receipts were significantly lower (7.8% in nominal terms according to the Electronic Budget portal; see the Finance Ministry’s aggregate numbers below for comparison), while transfers from the federal budget have been dropping for several years in a row. As next year the federal budget halts the growth of war-related expenditures, under the current (and likely unchanging) circumstances the only drivers of growth, it is unlikely that corporate income tax receipts will meaningfully recover.

The federal government has partially compensated regions for these losses through its debt forgiveness program, however, this will only provide around one trillion rubles over three years, according to the plans (in reality, 165.9 billion were written off over the past year), and comes with strings attached. Only the poorest regions are able to use the funds thus liberated to pay for war-related expenditures. While on aggregate, regions had a balance of 2.9 trillion rubles on their accounts at the end of 2024, the lion’s share of this belongs to Moscow, while most regions have very little or virtually no reserves. It is no wonder that a growing number are taking out loans from the market, even though it is exactly this behavior that the federal Finance Ministry has tried to discourage over the past decade and that it is once again trying to establish firmer control over regional debt.

Just as war-related expenditures have become an untouchable item in the federal budget over the past year, some regional expenditures are very difficult or impossible to cut back: regions spend roughly two-thirds of their budgets on health care, education, housing and social services. Some other items, such as public transit or law enforcement bonuses, are becoming increasingly expensive due to the wartime labor market crunch, but are difficult to cut due to their essentiality. Capital investments – which the federal government wants regions to co-finance – are the easiest targets to cut, in spite of grandiose urban and industrial development plans in the Arctic and the Far East.

A lot of these systems are already underfunded (as it regularly becomes obvious from e.g. school building collapses). Some (e.g. health or social services) would experience extreme strain with the return of hundreds of thousands of war veterans to the country, but under the current circumstances most regions cannot invest in them proactively. Spending on housing and utilities, for example, grew by a little over 9 percent this year, barely above inflation, in spite of the fact that the worsening state of public utility networks has ostensibly made this a policy priority. Regions however seem to be putting these investments off, perhaps in anticipation of their turn in the federal debt forgiveness program. Health care expenditures grew by a mere 10 percent, with regions no doubt anticipating some kind of federal injection if and when this becomes a large enough problem. This however is questionable based on past experiences during the COVID pandemic or military mobilization, when regions were largely left to their own devices (or expected to loop in local employers). And in any case, to improve their negotiating position, governors are incentivized, among others, via the federal key performance indicator system, to spend on priorities such as improving fertility figures or patriotic education.

Based on these earlier experiences, it is very likely that the federal center will expect regions to take political and operational responsibility for managing sudden crisis, with governors then passing the bucket on to employers or citizens shoring up the state in their own capacity. And now it looks like they will be hit by an economic crisis caused by the war or a societal shock triggered by an eventual ceasefire or peace deal at a time of already dire fiscal situation, unlike in 2020 when COVID hit or 2022-23 when they were able to rely on the gains of the short-lived post-COVID economic conjuncture and the war-induced demand.

Also-happeneds

· A heavily filtered internet: Since May and especially since Ukraine’s successful “Operation Spiderweb” in June, which relied on Russian cell phone networks, almost all Russian regions have started experiencing regular outages of mobile internet service, ostensibly as a security measure, albeit in several regions authorities have also tried to talk it up as a means of improving people’s moods and enhancing social interactions. The operational decision to block access to mobile internet networks may be taken at the regional level, but, given the high number of such shutdowns over the past five months, the nudge to do so certainly came from the federal government. It also seems unlikely that these shutdowns are effective in preventing drone attacks, as it is becoming increasingly obvious from recent strikes that have taken down up to 38 percent of Russia’s oil refining capacity. However, they do fit into ongoing government efforts to tighten control over the content and services, to which Russians have access, and the purpose of the shutdowns seems to be testing how disruptive they are to local economies and how citizens react to them. As in many similar cases, policies seem to be piloted in some regions first and rolled out across the country later: internet shutdowns started in regions holding Victory Day marches on May 9, under the pretext of protecting these events, and were then rolled out across the country; in early September the governor of Chuvashia ordered the setting up of an “anti-bot” system in the region, allowing users to access some services during outages, before federal authorities presented a federally approved allow-list of mostly government-controlled sites; and in mid-September Kamchatka’s authorities announced a full five-day internet shutdown, allegedly to repair cables linking the Russian mainland with Sakhalin.

· Dodgy birth figures: Due to the recent inclusion of fertility rates in the list of key performance indicators (KPIs) that the Kremlin uses to evaluate the work of governors, several regions started highlighting record high numbers of births in certain maternity clinics over the summer. The news outlet NeMoskva, which published a collection of these, highlighted that in some cases the trick is easy to see: e.g. in Ryazan the temporary closure of one of two clinics led to an uptick in births in the other. In other cases regional authorities were careful to highlight numbers from a specific clinic or district, while keeping hush on wider regional statistics. Fertility figures across Russia have become more difficult to come by: since the beginning of this year Rosstat has withheld demographic figures that used to be openly available, part of a creeping withdrawal of public access to statistics. However, according to total fertility rate (TFR) numbers that Rosstat has published, between January and August only 15 (of 83) regions have recorded any increase in their fertility rate, and in a third of these regions the difference was insignificant. It is unlikely that the federal government will be fooled by the celebratory announcements of regional authorities, however, given the very limited means at the disposal of regional governments to influence fertility rates at a time of war, demographic slump and growing economic instability, the hope in regional headquarters certainly seems to be that loud signaling will be considered good enough for the Kremlin, and that the chief executive will not bore himself with actual statistics.

· Freezing in Sakha: Several districts of the Republic of Sakha – a vast, sparsely populated region in Eastern Siberia – reportedly struggled with the start of the heating season in mid-September as utility providers underestimated fuel and repair costs and the region’s budget faced a ballooning deficit in 2025, even as heating tariffs rose by 13 percent. Due to a lack of funds on the republic’s accounts, Sberbank had to step in and provide a 4-billion-ruble loan to ZhKKh RS Yakutia, the company servicing the more remote, Northern parts of the region, which was in debt to several energy companies. Sardana Avksentieva, a former mayor of Yakutsk, now a deputy of the State Duma, asked the prosecutor general’s office to start a probe into the matter to ensure that heating is provided in the region. At the end of the month, however, locals were still reporting heating outages. Problems with utilities are increasingly common across Russia due to the breakdown of old (often Soviet-era) utility networks, which neither utility companies nor regional budgets have funds to comprehensively repair, and often even the responsibility for repairs is a matter of contention. High interest rates and inflation seem to have exacerbated the issue as both scheduled repairs and fuel cost more than initially planned.

· How the municipal reform is going: In several Siberian regions the Kremlin’s municipal public administration reform has continued being contentious. In the Sakha Republic regional authorities seem to have abandoned the idea of carrying out the federal reform. In Khakassia the ruling United Russia, in spite of its parliamentary supermajority, failed to override the veto of the region’s communist governor, Valentin Konovalov, against the scrapping of village councils. In the Altai Republic opponents of the reform have been consistently trying to hold protests against it, and used public hearings with local deputies to express their disagreement. The regional authorities have not only banned these gatherings but also conducted searches – a form of intimidation – in the home of Aruna Arna, a leading local activist who was labeled an “extremist” by the federal government, effectively limiting her activities. The reform, which took years to hammer out and led not only to localized protests but also differences within the Kremlin’s curators of domestic policy, remains a sensitive issue as in several regions it would significantly limit residents’ access to government services. Judging by his performance at a meeting with the heads of federal party leaders, Putin himself is eager to push political responsibility for the reform that he himself signed in March, on to regional authorities.

Russia will hold regular regional and local elections on September 12-14 . The “single day of voting” – admittedly, the name is a little confusing given that since 2020 elections in many regions have been held over two or three days – has, over the years, become the start of Russia’s fall political season: a time for governors to demonstrate that they are controlling their regions; for political managers to market their skills; and for decision-makers to make potentially unpopular announcements after the votes. It would be foolish to analyze these votes as “real” elections, but they are nonetheless important even under the circumstances of Russia’s hard authoritarianism.

Demobilization and fading pluralism

This year, gubernatorial elections are held in 19 regions (plus the occupied Sevastopol), regional legislative elections in 11 regions, local council elections in 25 cities and various local votes across the country, although of these Russia is going to hold significantly fewer in the future. The number of free-standing municipalities has dwindled by more than 17% between 2022 and 2025 and as a result of a recently adopted federal reform, this process will accelerate. Novaya Gazeta estimated that up to 150,000 positions in various local councils could be eliminated as the result of the federal law and the various regional municipal reforms inspired by it that have taken place over the past years. One can also tell this by the falling number of ruling party candidates.

Looking at just the number of gubernatorial candidates, the demotion of the Communist Party (KPRF) – the most likely catch-all opposition party an electoral cycle ago – is clear. The party was allowed to field gubernatorial candidates in 17 regions only, behind United Russia (19) and the Liberal Democratic Party (18), albeit this required the effective disqualification of communist candidates in two regions – Leningrad and Komi – that are problematic for the Kremlin (in both regions this was done by using United Russia’s dominance in municipal council to deny the communist candidates the needed number of supporting signatures. The party was complaining about pressure from the security services in other regions too. In the Irkutsk Region – another problematic area for the Kremlin due to residents’ dismay over rising electricity prices, United Russia infighting, and where the local branch of the KPRF has traditionally had strong positions – the authorities did allow Sergey Levchenko, a former governor, to run against the incumbent Igor Kobzev, but Levchenko’s campaign has been pretty muted. The “Fair Russia” party is kept on life support through Chuvashia’s governor, Oleg Nikolayev – this is the one region where United Russia does not have its own candidate – but the party was also forced to withdraw its support from one of its more popular candidates, Alexandra Novikova, a former television anchor, who was going to run against the unpopular governor of the earthquake-ridden Kamchatka Territory.

War participants: a brand, but not a force

The number of war participants among candidates has undoubtedly grown since last year’s elections. This however does not mean that there are particularly many of them nor that they are going to be elected into positions of real power. United Russia officially selected 951 war participants to stand as candidates in various elections, which however is a mere 2 percent of the people standing for office as ruling party candidates in various votes. The vast majority (1,052) of the 1,397 candidates across parties, brandishing a “special military operation (SVO) veteran” marker, will run for essentially powerless municipal offices. The 339 candidates running for regional and city assemblies make up 2-3 percent of candidates for these positions. Of the two gubernatorial candidates with a war participant badge, Stepan Solovyov is a serial designated also-ran for the “Green Alternative” party, this time in the Republic of Komi (his battlefield activities are shrouded in mystery); while Yevgeny Pervyshov, the acting governor of the Tambov Region belongs to the class of “SVO veterans” with prior experience in public administration (he was the mayor of Krasnodar) and whom the Kremlin therefore trusts with some actual power, unlike most other war participants who can, at best, hope to be appointed to unelected positions overseeing their local governments’ communication with other veterans. Pervyshov has more in common with figures such as acting Orenburg governor Yevgeny Solntsev – a career public servant who used his status as a former occupation official in Donetsk as a career elevator – than with most war participants.

These caveats, of course, do not stop the authorities from touting these candidates as an example of the inclusion of war participants into the echelons of power, an attempt to signal to the wider population that the authorities will care about returnees. One consequence of this is that war participants are undoubtedly becoming more visible as a political brand, but not yet as a political class or a political force.

The war and technological limits are unlikely to cause disruptions

Even beyond the war participants running (and appointed after the votes) it will be interesting to see the war’s effects on the Kremlin’s voting machine, albeit it is unlikely that any circumstance will significantly impact the “electoral events” (to borrow this evocative example of Russian political newspeak from Yekaterina Schulmann who often highlights it). Drone attacks may cause disruptions in border regions such as Kursk and Bryansk or the occupied Sevastopol, but the authorities are determined to turn out the numbers even in these territories, so tested methods such as “voting on tree stumps” (the colloquial name for makeshift, irregular “polling stations” widely used during the 2020 constitutional referendum) or increasing the number of people registered to vote from home will be used. The authorities are also promoting online voting – which, due to its obscurity, and to Russia’s poor data security practices, arguably allows the authorities to deploy traditional methods of coercion and rigging in a less costly manner – and have highlighted that an increasing number of voters are registered to vote online. But these efforts are limited by regular mobile internet outages in a number of Russian regions since Ukraine’s successful “Operation Spiderweb”, which relied on mobile signal. But time-tested “offline” methods, such as the coercion or incentivization of public officials and employees of state-owned companies to vote the right way, are still available, as stories from Magadan, Orenburg, Sverdlovsk and other regions show.

These technological and perhaps, in some regions, financial limits to electoral engineering are however unlikely to cause much worry, as regional and local politics have also become less pluralistic over the past years. The past five-year electoral cycle has coincided with the carrying out of a multi-stage reform of public administration, which further solidified a top-down power vertical, first (in 2021) between the federal government and regional governments and later (in 2022-25) between regional governments and municipalities. Over the past years this has led to a growing lack of interest in standing for office in regional and local votes, as the potential benefits of these positions are now lower, while the risks associated with them are significantly higher than just a couple of years ago. This is also reflected in how much money candidates are able to spend on their campaigns: even official figures show that the 20 incumbent governors this year are spending more funds than all other candidates together (some of this money is essentially obtained from state-owned companies through elaborate schemes), not to mention the advantages they have from the so-called administrative resources at their disposal. Also crucially, with the recent shutdown of the independent election monitoring network Golos, following the jailing of one of its founders, there is currently no reliable country-wide network of election observers (albeit smaller projects with a local and regional focus exist), which makes it much easier to hide manipulation. It seems almost superfluous that even with such advantages, AI-generated campaign material is increasingly flooding the Russian internet.

Consequences of the hardening vertical

Another consequence of the hardening of the vertical is that governors appointed mid-term have had a freer hand to make personnel changes, including in municipalities. Just a couple of years ago, it was customary for newly appointed governors to tread carefully in the months between their appointment and the election that was to confirm their position and where their performance relied, to a significant extent, on whether local elites and officials helped to turn out the vote. Some of the governors appointed over the past year – who will have to be confirmed in next week’s votes – have moved much faster. Denis Pasler, the newly appointed governor of the Sverdlovsk Region (and a native of the region) instantly moved over his team from Orenburg, the region that he had led prior to his appointment.

In Komi, Rostislav Goldshtein did not only change the heads of several major cities prior to the election, but also pushed for a change in the electoral law, which will likely further increase the ruling party’s weight in the region’s municipal councils. This is significant because Komi is one of the rare regions where political life has been relatively turbulent and pluralistic and where the leading local “systemic opposition” party – the local branch of the Communist Party – has successfully harnessed some anti-government sentiment. The party’s more visible faces were neutralized: former regional deputy Viktor Vorobyov was declared a “foreign agent” (and thus unable to stand), while its local leader, Oleg Mikhailov was not allowed to run in this year’s election – but there is still a chance that the communists could bounce back in local and legislative votes, embarrassing the newly appointed governor.

In general, the Kremlin will likely watch the performances of Pasler and Goldshtein closely not only because of the (from their point of view) problematic political history of the regions, but also because their appointment was some of the latest in the series of governors with local roots but a substantial career in federally determined positions, being appointed to head regions, a cautious semi-reversal of the previous trend that gave preference complete outsiders. In the past three years there were seven such gubernatorial appointments. These appointees have however mostly worked in relatively unproblematic regions (and had close federal overseers); an obvious exception, former Kursk governor Alexey Smirnov, spent a mere six months in his position before being removed and indicted for corruption related to the region’s defensive structures.

A final blow to the late Navalny, but not the issues that powered his movement

Lastly and importantly, this year’s votes will also see United Russia bury some of the last significant electoral results of the late Alexey Navalny’s countrywide campaign in the late 2010s. In Tomsk and Novosibirsk, two major Siberian cities where an alliance of local opposition candidates and Navalny’s offices managed to bring down ruling party majorities in city councils in 2020 – which in turn led to all sorts of inconveniences for Kremlin-appointed political managers – United Russia will likely retake a decisive majority. A similar result is expected in Tambov where the ruling party also lost its majority in 2020. However, it should be noted that the second stage of the Kremlin’s public administration reform further diminishes the importance of these local councils by essentially allowing governors to handpick mayoral candidates (“competition committees”, while a far cry from direct elections, have still allowed local elites a degree of control) and dismiss them more or less at will.

In general, the municipal reform is continuing to cause simmering disagreement. In several Siberian and Far Eastern regions councilmembers and citizens are resisting the authorities’ attempts to disband village councils and are contesting regional municipal reforms at court and public hearings. While these attempts are unlikely to be successful, the fact that activists are trying to exhaust every potential way of appeals – similarly to how it happened with environmentalist protests – suggests that citizens understand the stakes.

Perhaps the most important takeaway from this year’s regional and local elections is exactly this: while the federal government has extended significant efforts over the past years to monitor local political and social issues more effectively, these are usually seen as problems for political technologists, and not for politicians to solve. Even where officials signal that they are aware that these issues exist (e.g. in Komi, Novosibirsk and Irkutsk) and talk about it, between the increasingly tight budgets of regions and municipalities and the federal government’s prioritization of performance indicators that most regional and local leaders either have little influence over (e.g. birth rates) or no real budget to solve (e.g. the integration of returning war participants), there is little that they are able or motivated to do about it. The usual pre-election visits of federal officials to regions to announce additional transfers or talk up local development projects can remind citizens what “the expected way” to vote is, but the real risk for the Kremlin is not that governors score below the ruling party’s designated benchmarks; it is that systemic issues remain unresolved and increasingly unresolvable through politics.

The “new elite” - revisited

As the war against Ukraine is continuing, the question of when contract soldiers and mobilized men will be able to return from the front and what they will do once that happens. Regions have been instructed to fund retraining programs, business incubators and psychological helplines for veterans, but these programs will require substantial funding, which already overstretched regional budgets are understandably reluctant to provide as long as there is only a trickle, and not an avalanche, of people returning. But there is also the promise of war participants becoming Russia’s “new elite”, made by Vladimir Putin more than a year ago and repeated by several officials since. Over the past year the appointment of officials with “special military operation” credentials has become a way to signal loyalty to and request attention from the Kremlin. However, on the whole, very little has come of these promises in spite of the federal and regional programs set up to operationalize them.

The promotion pipeline is very narrow. Of more than 65,000 applicants in the federal program called “Time of Heroes” so far, only 168 have been admitted. The overwhelming majority of them are not mobilized servicemen but career soldiers or former public officials – Novaya Gazeta counted only three mobilized men in the first year of the program. 83 of these people graduated last year, but a year later, only about half of them (45 if one believes Vladimir Putin) have been appointed to various federal and regional positions. With some notable exceptions – such as Urals presidential plenipotentiary Artyom Zhoga and Tambov governor Yevgeny Pervyshov – most of them have served in positions with little political clout, typically overseeing youth policy and policies affecting returning war participants (as the publication Vyorstka remarked, this is intentional). Those who hold other positions had typically been part of the administrative elite before their (real or pretend) service in the war. Georgy Andreev, the recently appointed minister for enterprise, trade and tourism of Yakutia, had been deputy minister prior to going to the war; Pervyshov himself had been a Duma deputy and mayor of Krasnodar.

In May the Kremlin reportedly set key performance indicators related to the employment of former war participants to regional governments. According to these, regions will have to find training and employment for 30-60 people a year, depending on their means and size. Regional variants of “Time of Heroes”, typically programs with names that include some lousy, lazy wordplay on “CBO”, the Russian abbreviation of the “special military operation”, have roughly followed these benchmarks: e.g. 35 places were offered in Buryatia and Volgograd, 50 in Kaliningrad and 70 in the more populous Bashkortostan.

But these are very low numbers. Of the estimated 700,000 military personnel involved in the war, only 137,000 have returned (according to the government’s numbers) but even so, the number of applications to the federal and regional programs have been overwhelming. In regions typically one out of ten or fifteen people were selected. In the federal program the ratio is one in four hundred. Through the Presidential Academy of National Economy and Public Administration (RANEPA) and Rosmolodyozh, the state agency for youth, the federal government has earmarked 562 million rubles for the education of roughly 5,000 people in 2025 – but this is just a sliver of the expected total bill. Not only will this cover less than 1 percent of those expected to return from the war, regions will also have to make sure to find employment for them, which in practice will mean creating public sector jobs or pressuring local employers to hire war participants who went through regional training programs.

The situation is similar for those trying to break into the elite via United Russia’s “primary election” process. While this year, according to the official data, 827 war participants will stand for office in regional and municipal elections – significantly more than the 304 who did last year – the vast majority of them will run for municipal offices with little influence or monetary resources. Only 23 (of 58 initial candidates) will run for mandates in regional parliaments, an important conflict resolution ground for regional elites who have successfully pushed back against pressure from above to share their positions with more war participants. Note also that this happens at a time when the usual candidates running for these offices – local businessmen, institutional leaders, etc. – are increasingly hard to find because the risk-benefit calculation associated with the job has changed radically. Privileges (e.g. traveling or opening a bank account abroad) have been cut, all while, over the past year, regional and municipal officials have faced extensive corruption crackdowns.

In 2024, following the votes, a handful of war participants received appointments after the election, but these positions depend on the goodwill of established elites – and similarly to “Time of Heroes” appointees, elected veterans have not really had the opportunity or the capacity to make meaningful contributions to legislation.

The fact that the numbers are low, however, does not mean that the trickle of appointments is insignificant. If the federal and regional governments are unable to create the circumstances for the successful reintegration of hundreds of thousands of war participants (or fail to coerce businesses to do so), while at the same time they continue the mantra about veterans becoming the new elite, with some handpicked appointments, the tension between rhetoric and reality may very easily prompt returnees to demand their ostensible rights or take matters into their own hands.

AI vs ОЙ

There is very little that is worth saying about last month’s St. Petersburg International Economic Forum. The event once celebrated as Russia’s answer to Davos has certainly lost its luster over the past couple of years as sanctions and the general toxicity of the Russian economy have kept foreign investors away, and, in spite of the presence of a couple of token Americans – among them a little-known musician and the obligatory crypto entrepreneur –, this year’s forum was not the glorious showcase of Western companies eager to return to Russia, either.

Even several Russian regions scaled down their representation at the forum considerably, signaling that there was perhaps not a lot of return to be expected on the investment necessary to maintain a significant presence at the event. One of the things that those who did go did to pass the time was talking about how regional governments are using artificial intelligence in governance, both AI and “technological sovereignty” being reliable buzzwords of the times, especially in Russia. The war and Western sanctions have, of course, dealt a blow to Russia’s AI development plans, which even before that, in the words of Anna Nadaibadze, faced a clear gap between rhetoric and reality. However, state-owned firms that are spearheading the development and adoption of artificial intelligence models in Russia, are eager to show off their work.

In Sakhalin and the Perm territory, for example, authorities are saying that they use AI to help identify illegal landfills, essentially by having an AI look at drone footage. Similarly, a combination of drones and AI are being considered in several regions to feed analysis into the “Lesokhranitel” system to help predict the spreading of wildfires, a growing problem in the spring and summer months, especially in Siberia and the Far East. In the Chelyabinsk and Voronezh Regions AI has apparently been used to help plan and predict road traffic and detect potholes, again, by having a model analyze a wealth of CCTV footage in near-real time.

Nizhny Novgorod has a use case remarkably reminiscent of Soviet times: to enforce legislation pertaining to public spaces, e.g. smoking bans, to have an AI detect undesirable behavior and prompt a loudspeaker to remind people of the correct way to conduct themselves. The region has apparently also used AI to manage waiting lists for health care institutions, while the Moscow Region has been using AI to augment its system of recording and answering citizen complaints.

“Gubernatorial dashboards” were also mentioned at the forum, at a meeting chaired by deputy prime minister Dmitry Grigorenko, the government’s overseer of digitization. This system, announced in January, according to its creators, allows key statistics and progress towards benchmarks, set by the federal government, to be displayed on what sounds like a big screen. As I mentioned then, the dashboards sound similar to the one serving mostly decorative purposes at the federal government’s Coordination Council. Yet, as of June, 43 regions were hooked up to the system with plans to add all by the end of this year. Along with several other federal efforts from the past years targeting data collection and aggregation, the thinking seems to be that if human data collectors and local aggregators - who can manipulate data - can be sidelined, governance will be both more efficient and truer to the guidelines set by the Kremlin. And while Grigorenko mentioned “increased transparency” as one of the goals of the project, it is difficult to see how they are planning to achieve this with closed-door meetings, and at a time of the government withholding an increasing amount of formerly public data.

Perhaps the most sinister mention of AI in the context of public policy has come from Pskov governor Mikhail Vedernikov who has recently said that the region could use it in its electoral process, without elaborating how. Given that the use of “remote electronic voting” (essentially, online voting) has arguably allowed the authorities to use the same means of electoral engineering and manipulation as they had before, but with a higher degree of efficiency, one can only wonder what artificial intelligence may bring to the electoral process in Pskov. (Reporters Without Borders has also recently expressed concern about how Roskomnadzor, Russia’s media and social media monitoring agency that works in lockstep with the Federal Security Service, has been using AI to aid censorship.)

This, by the way, also highlights the problems with the above (incomplete) list: civil AI uses are either offshoots of where AI funding actually goes (in the military, while civil AI research funding has been cut in recent years) or good-looking band-aids on persistently mismanaged issues where merely adding technology is unlikely to help. Take illegal landfills, for instance, an existing and important problem, where the issue has not been the lack of identification, but, as I highlighted in a recent piece for Riddle, a lack of motivation to close them and a lack of viable alternative solutions (in a recent example, activists reported to Vyorstka that a waste processing plant built next to Nizhny Tagil in the Sverdlovsk Region for 6 billion rubles was barely working, with garbage trucks routinely bypassing it on their way to a landfill). The problem is similar with health care waiting lists and complaint monitoring, where the authorities are simply proposing to use a machine to replace missing human operators and make citizens feel like they are being listened to and cared about. And, of course, to collect data.

As regards AI-powered drones, as Ksenia Buksha pointed out on RussiaPost, this is the main direction in which AI has been developed in Russia, with the ongoing war and the need to analyze stolen data more efficiently on the authorities’ mind. Notably, the government cut the funding of Russia’s civilian drone development program. But even for AI-powered military drones, as Buksha points out, Russia needs to import foreign microchips via the gray market, that is, at a hefty premium and with all the risks associated with relying on foreign tech, be it Western or – what decision-makers probably fear even more – Chinese.

Also-happeneds

· Municipal reform: Conflicts in Siberia and the Far East over federally mandated municipal reforms have continued. In particular, in Khakassia the region’s communist governor Valentin Konovalov once again used his veto to block the version of the reform adopted by the region’s United Russia-dominated legislature. The governing party will likely overturn Konovalov’s veto (although it is notable that not everyone in the United Russia group supported it), but the governor is throwing everything he can at the issue, even publishing an op-ed in a local paper, in which he calls the conflict over the bill a matter of conscience, and is, once again, appealing to village dwellers. Another question hanging over Konovalov’s head is when and how the Kremlin is going to up the pressure on him to resign, with an honorable path back to Moscow also in the cards: the governor has recently been elected to the presidium of the Communist Party, which will likely soon face a leadership election to choose the successor of the ancient Gennady Zyuganov. Meanwhile, in both the Republic of Altai and in Buryatia various forms of protests have continued against the local versions of the reform.

· Nationalizations continue: over the past weeks, the authorities continued the nationalization of important privately held companies. Apart from Moscow’s Domodedovo Airport, which was nationalized by a court order in June, Yuzhuralzoloto, Russia’s third largest gold producer, and Dagnefteprodukt, a Dagestani oil company, were taken into state ownership over the past weeks, and since the eruption of a diplomatic conflict between Russia and Azerbaijan, the possibility of the Kremlin stripping Azerbaijani Russian businessmen from assets has been raised. Both the Yuzhuralzoloto and the Dagnefteproduct case have a regional political angle as well. The former company belongs to Konstantin Strukov, an influential regional lawmaker in the Chelyabinsk Region; one of Strukov’s business partners, Sergey Evteyev, who himself stands accused in the case has since announced that he was not going to run for a seat in the regional assembly. The owner of Dagnefteprodukt, Magomed-Sultan Magomedov, was state secretary of the republic, before his dismissal for suspicion of corruption in the case that also saw the company seized. Since then his relative, Makhmud Amiraliev, the head of a district in the region, has also been detained. According to recent estimates, the Russian authorities have seized over $50 billion worth of assets over the past three years; the latest wave prompts the question of to what extent nationalization can and will be used in regional political score-settling by the security services. Investigators also continued arresting and questioning regional officials over the past weeks in various corruption cases, including the deputy mayor of Krasnoyarsk (whose boss is already in custody) and the former deputy head of the National Guard who is accused of bribery in the Kemerovo Region.

· Higher utility prices: On July 1 utility prices across Russia have risen by 11.9 percent on average, but reportedly by significantly more in some regions. This is higher than the official rate of inflation. A similar indexation is planned for next year. The authorities are justifying tariff hikes with the necessity to invest money into decaying utility infrastructure, which has caused an increasing number of accidents and service disruptions over the past years, even as plans to allocate federal funds to fix infrastructure have been scaled back. Higher prices with no meaningful improvement in the quality of service have also prompted protests in several regions over the past years. The federal authorities are trying to direct the anger over price hikes to service providers, with the Prosecution announcing a probe into utility companies and Duma deputies asking the Federal Antimonopoly Service to investigate price hikes.

· Police shortages: In June Tatarstan’s regional legislature requested additional funds from the federal government to increase the salaries of police officers and to provide housing assistance to them. Since then, other regional parliaments have supported the appeal. The war has exacerbated shortages of police officers across the country: at the end of 2024 almost 20% of positions were unfilled, while regional governments with increasingly overstretched budgets have found it difficult to compete with the army and the defense industry for manpower. It remains to be seen whether the federal government can and will allocate more money to regions to spend on this issue, but the appeal highlights the role of relatively privileged regions in putting problematic issues on the federal agenda (during the recent adoption of the reform of municipal governance it was also Tatarstan that spearheaded the resistance against the mandatory scrapping of village councils).

· Two interesting studies were published over the past month by government institutions about regional economies. In June the Central Bank released a paper analyzing the multiplier effect of government spending on regional economies in the Central Russian Federal District. While many of the findings are unsurprising – e.g. poorer regions are more sensitive to both positive and negative spending shocks – but there are still interesting takeaways. The study found, for example, that since 2022 the multiplier effect of social spending – that is, targeted subsidies, but also war-related payments – has grown significantly due in part to a bigger weight of increased consumption in regional economies. Another study, published in July by the Audit Chamber, looked at the use of infrastructure credits, an instrument set up in 2021 to provide cheap, long-term loans to regions for specific infrastructural improvements selected by the government, and fiscal transfers for regions to invest in housing and utilities. This study found that there are severe shortcomings – project revisions due to cost overruns, failure to implement projects as planned, etc. – negatively affecting the use of these funds. While part of this is due to the vested interests and corrupt incentives baked into the system, war-related circumstances, such as inflation, high interest rates & a shortage of money in regional budgets certainly seem to complicate things further, preventing the achievement of development goals.

Today, on July 7 transit minister Roman Starovoit was found dead near a parking lot in Odintsovo where he lived. He apparently shot himself, or at least this is the working theory of investigators. Starovoit was dismissed by Vladimir Putin just hours before, and was likely facing an investigation into his role in massive embezzlement of about 4 billion rubles affecting the erection of defensive structures in the Kursk Region, which he led in 2018-24. That investigation, which started after the Ukrainian army broke into the region relatively effortlessly in August 2024, had already led to a series of arrests, including that of Vladimir Lukin, the head of the Kursk Regional Development Corporation, and Alexey Smirnov, Starovoit’s former deputy who was also briefly his successor as governor. Similar probes were opened in two other border regions, Bryansk and Belgorod, suggesting that corruption was likely not a unique feature of the Kursk Region; however, those two governors have so far stayed in office, likely due to their luck of not managing the one region where the actual value of these fortifications was tested by a “black swan” event most had thought impossible.

Before his demise, Starovoit was the poster child of the “School of Governors”, a training program for Russian public officials with the aim to homogenize the gubernatorial corpus. Following his appointment to head the Transport Ministry in 2024, he became one of the few representatives of the core promise of the system, having received a federal promotion after a stint in a backwater region, even though this was more due to his strong links to Arkady Rotenberg, a close Putin ally and the main beneficiary of road construction contracts. For a while Starovoit also publicized his good relationship with the Wagner Group and its leader Yevgeny Prigozhin, which had seemed like a good career move prior to Prigozhin’s mutiny and subsequent death (he tried to talk down the tightness of these links later).

Following his appointment to the federal government, he also remained a de facto overseer of Kursk, which had in the meantime acquired importance as one of the regions bordering Ukraine, with his former lieutenant, Alexey Smirnov, a local official with links to Moscow mayor Sergey Sobyanin’s circle, nominally in charge. This then looked like a new model of regional governance that the Kremlin was experimenting with. In a couple of months, however, with the failure of pricy defensive structure erected by the government of Starovoit and Smirnov on full display and with local residents angrily complaining about the lack of emergency housing, the fate of both officials quickly took a U-turn, with Smirnov first dismissed and then arrested in April.

Prior to the war, incumbent federal government officials had traditionally enjoyed a degree of protection from prosecution. The one exception was former deputy economy minister Alexey Ulyukaev who was arrested and jailed in 2017 on corruption charges likely orchestrated by Rosneft chief Igor Sechin, but Ulyukaev was a technocrat with few if any powerful backers in the business elite. Over the past year, however, things started to change. Following Vladimir Putin’s inauguration for his fifth presidential term, a wave of arrests of high-ranking officials at the Defense Ministry signaled that the prosecution of incumbent or recently dismissed officials was no longer taboo (all while the appointment of Andrey Belousov to head the ministry suggested a mandate to root out corruption in military procurement). Former deputy minister Timur Ivanov was sentenced to 13 years in prison last week. This was accompanied by an even bigger wave of criminal prosecution of regional officials, typically regional ministers, deputy ministers and mayors in both 2024 and 2025, suggesting that the security services had received a red light to pursue cases that had been frozen likely due to domestic risk-avoidance in the first two years of the war.

It thus seemed likely that Starovoit would face a criminal case sooner or later, with the only remaining question being whether Rotenberg would offer him enough protection. However, in February, another of his protegees, Novgorod governor Andrey Nikitin was appointed to the Transport Ministry as deputy minister and obvious minister-in-waiting, as yet another signal that Starovoit’s time was running out. Developments such as the collapse of air travel before the Victory Day holiday in May, the disaster caused by the sinking of an oil tanker in the Kerch Strait, or a series of explosions of ships after calling in Russian seaports, have further weakened his position. He had probably been well aware that he would soon be facing legal action and is thus entirely plausible that he killed himself to avoid almost certain prison time.

The problem is that alternative explanations may seem almost as plausible as the official version of suicide.

Following the discovery of Starovoit’s body, rumors started circulating almost instantly. Most crucially, it remains unclear whether the minister died before or after being dismissed by Putin, and with that, there are, inevitably, versions of the story circulating, in which Starovoit was, in fact, murdered, perhaps several days before his dismissal was announced. Political commentator Sergey Markov, for example, suggested that the minister was murdered to prevent him from testifying against other high-ranking officials in his pending corruption investigation. Other versions have variably named the Rotenbergs and their opponents as the perpetrators. The death of another, lower-ranking official in Starovoit’s ministry on July 7 seems to have fueled conspiracy theories further, even though nothing indicates that the two deaths are in any way connected.

Whether or not any of the above speculations are true, the suicide of a high-ranking federal official, unprecedented in post-Soviet Russia, will almost certainly lead to a shock in Russia’s political elite, even if most will likely keep pretending, for the moment, that everything is fine (predictably, Kremlin-linked television channels had very little airtime for Starovoit’s suicide).

Worryingly for the Kremlin, regardless of what actually happened, some of the versions of the story that will be circulating imply that Putin, who built his power vertical on his ability of arbitrating elite disputes, was either a passive bystander in this case or, at the very least, reacted to developments instead of controlling or preempting them. If this thinking takes root, especially against the backdrop of growing unpredictability regarding property rights, arrest waves and the economy at large, the consequences are difficult to foresee.

Municipal reform: a stubbornly contentious issue

I have written more extensively about the implications of the recent federal reform of public administration, on the provision of public services, budgets and regional power games, for Riddle Russia. A more recent article, also on Riddle, by Kseniya Smolyakova, which is well worth your time, looks at the reform’s implications for regional elites and the protests that broke out in various regions against it.

The reform was one of the most contested bills recently in Russia’s otherwise heavily controlled political system. In spite of its backing by some of the most heavyweight members of the State Duma and the “political bloc” of the Presidential Administration, its adoption was essentially frozen for more than two years before the parliament picked it up again in late 2024 – and then it suffered various delays and pushbacks, including from influential regional leaders such as the head of Tatarstan and Duma speaker Vyacheslav Volodin. A somewhat watered-down version was adopted in March. As several regions had carried out their own versions of the reform even before the adoption of federal law, protests bringing together citizens as diverse as liberal oppositionists and war participants erupted against these.

The most recent example of an unexpectedly heavy backlash against the reform is the Krasnoyarsk Territory, where governor Mikhail Kotyukov – an official with local roots but significant time spent in the federal officialdom – decided to rush through the reform this month, before the federal law mandating it could take effect in June. Kotyukov was not the only governor trying to do this and there are several potential reasons for the urgency: regional governments get to decide specific parameters of the reform on their own, show off their control of local elites, and, most importantly, signal to the Kremlin that they have understood the assignment (especially given that the region’s influential representative in the Federation Council, Andrei Klishas, was one of the co-authors of the federal reform). Kotyukov himself, who has been asserting his position against local elites and officials linked to his predecessor, Alexander Uss, was likely also eager to take a firmer control over the region’s municipalities.

The reform in the vast (though sparsely populated) region would fall on the somewhat more radical side, cutting down the number of municipalities from 472 to 39 and the number of urban districts from 17 to 6, also mandating that city and district heads would be selected from candidates proposed by the governor. The reform was introduced to the regional parliament on April 21, without any meaningful public consultation, and promptly adopted in the first reading, with plans to wrap it up before the end of May. However, protests in several municipalities immediately started with an unexpectedly high number of people from unexpectedly diverse backgrounds, including many usually thought of regime supporters. Several district heads representing the ruling United Russia party resigned in protest and the governor received a barrage of criticism on social media. Instead of taking a step back, Kotyukov doubled down and brought forward the law’s second reading to May 15.

The governor’s goal was likely to create a fait accompli as soon as possible, in order not to drag out the wave of protests and resignations, as this would have been considered a bad look in the Kremlin. The authorities even brought in Klishas personally to explain the “benefits” of the reform to residents. But this is difficult. In the Krasnoyarsk Territory especially the reform, as it was carried out, touches a lot of political pain points: due to the vastness of the region eliminating local government services matters a lot; local pride was not taken into account, with older settlements folded into more recently created ones; and the closeness of regional and local elections, which would have been held in September, means that the authorities will have to negotiate conflicts among local elites in a rush. A similar conflict in the Irkutsk Region city of Bratsk and its adjacent district led to an elite split and the defeat of the incumbent mayor in 2024.

The Krasnoyarsk Territory is not the only one that saw regional authorities rushing through changes in the weeks since the adoption of the federal reform, and in many cases the approach to the reform reveals regional characteristics and conflicts.

In the Far Eastern Maritime Territory, for example, the elimination of the two-tier system, which was finished in May, took place over several years, frequently encountering protests along the way, which however the governor’s team gradually ground down. The reform was considered a part of broader efforts by governor Oleg Kozhemyako to break the local “systemic” opposition, spearheaded by the Communist Party, after a surprise (and later invalidated) upset of the governing party in the 2018 gubernatorial election.

In the Omsk Region, governor Vitaly Khotsenko’s bill would not only eliminate all remaining city councils (except for Omsk’s) in the region, but would also stipulate that instead of a competition committee, it would be the governor himself selecting potential candidates for mayor or district head, from candidates proposed to him by handpicked organizations. The federal bill makes this possible, but does not prescribe it – the highly centralizing version however is not a surprise coming from Khotsenko, an official who was appointed to head the region after a stint in Ukraine as an occupation official, an experience that left visible marks on the governor’s rather militaristic style of governance.

In Khakassia, meanwhile, there is not one, but two bills. One of them, drafted by governor Valentin Konovalov, would preserve the region’s two-tier public administration system. The other, written by United Russia, would eliminate it. The regional parliament will consider both in June. The municipal reform thus became another chapter in the conflict between Konovalov – who, with the support of local elites, saw off a challenge by a Kremlin-backed challenger in 2023 – and United Russia, which, having engineered a supermajority in the regional parliament, has since tried to chip away at the coalition Konovalov had assembled. Curiously, doing this has also required the governing party to act against the guiding principles of the federal public administration reform: after months of back-and-forth, the regional parliament has recently overridden Konovalov’s veto against a law that stripped the governor of his power to withdraw funding from municipalities, by appealing, among other things, to the principle of self-governance. On this issue, the governing party asserted its dominance over the governor and this is likely to happen again, but having the debate will allow both Konovalov and United Russia to measure and demonstrate support among local elites.

A widely accepted theory in political science suggests that in autocratic regimes political movements become riskier for the status quo when popular dissatisfaction over an issue coincides and aligns with a split in the elite along the same cleavage. Locally, it seems, the public administration reform has been such an issue in several regions. While it is unlikely to spark a federal-level protest movement, under the current circumstances, it may very well complicate life for the Kremlin’s machine of power locally in the coming months.

Another regional arrest wave

Apart from the aftershocks of the municipal reform, the past month has also seen another wave of arrests of regional officials, including several ministers and deputy ministers. Here’s a non-exhaustive list from the past couple of weeks:

· The head of the capital construction department of Buryatia and the region’s minister for transit, energy and roads.

· A former deputy governor of the Krasnodar Territory.

· The minister for industry and trade of the Novosibirsk Region.

· The minister for property relations of the Irkutsk Region.

· The first deputy minister for natural resources of the Krasnodar Territory.

· The mayor of Novocherkassk.

· The head of the Kemerovo district in the Kemerovo Region.

This year’s sweep does not look quite as serious as the one following last year’s presidential election when it looked almost like the security services suddenly received a nod to carry out arrests in cases that had seemed to have been frozen after the start of the full-scale war in order to minimize the chances of domestic turbulences.

The timing of the arrests, however, is likely not coincidental. May is usually the time when the spring “season of falling governors” is over: newly appointed officials start making changes, those who received the (tacit or active) backing of the Kremlin can rest easy and revisit their relationship with their local allies. Security officials are eager to show that they are busy and wrap up cases before summer vacations begin, and given that there are still four months until regional and local elections in September, no arrest is likely to be too disruptive for the regional political machinery.

Of course, not everything is programmed like clockwork in Russia’s multi-tiered power vertical. Local elites, local branches of the security services and regional officials – most of them, at this point, outsiders – have their own agendas, which do not always converge. But on the whole, major arrests taking place at unusual times would be more indicative of a politically disruptive event interesting to an analyst. Arrest waves like the one in May would rather suggest that political players understand and respect the rules of the game, for now.

Also-happeneds

· Mine your own business: The crackdown on cryptocurrency miners has continued this month with the government proposing a ban on mining in two additional regions: Buryatia and the Transbaikal Territory. Similary to an earlier ban in the Irkutsk Region, the problem is a growing pressure on the power grids feeding electricity to these regions. Apart from cryptomining, this is a consequence both of Russia’s trade pivot to Asian markets and lagging maintenance and upgrades. The risks associated with power cuts to industrial establishments and residential areas are apparently deemed large enough for the government to crack down on cryptomining, in spite of the growing influence of mining companies. Oleg Deripaska’s En+ has also sued one of Russia’s largest cryptomining companies, BitRiver, for its unpaid electricity bills.

· Khabarovsk rows: According to URA, a news site that often shares regional political gossip, Dmitry Demeshin, the head of the Khabarovsk Territory will use the reform of municipal public administration to appoint a new mayor of Khabarovsk, in a bid to wrench the city away from the region’s old elite. While a lot of local observers have commented on the possibility, it has, of course, not been independently confirmed. The move, however, would make sense, given that Demeshin, a former deputy prosecutor general known for his toughness on regional elites, was appointed to head the region with a mandate to break the opposition of local elites to the Kremlin, after a surprise electoral upset in the 2018 gubernatorial election and the subsequent arrest of governor Sergey Furgal in 2020, which triggered a major protest wave. Khabarovsk is the largest remaining regional capital in Russia still to have direct mayoral elections – that the region’s parliament has notably refrained from scrapping even as other similar regions made the move – but the reform, which will enter into force in June, will invalidate this.

· A funny thing happened on the way to the Federation Council: The parliament of the Republic of Tuva appointed Sholban Kuzhuget as a new member of the Federation Council, the upper chamber of the Russian parliament, from the region. The appointment essentially ended months of intrigue in the region’s politics, as people kept guessing whether Ruslan Tsalikov, a former deputy defense minister under Sergey Shoigu, a native of Tuva, who is now the Secretary of the Security Council, would receive a Federation Council seat – and with it, immunity from prosecution. This was important, as, following his dismissal from the Defense Ministry, several of Shoigu’s former subordinates were arrested on corruption charges – something that Shoigu has been unwilling or unable to do much against – and reports suggested that Tsalikov himself might be in danger. The former deputy minister promptly entered the Tuvan parliament, but the vote on his appointment kept disappearing from the legislative agenda. Domestic commentary on the issue highlighted that Kuzhuget, a doctor, is himself a distant relative of Shoigu, who was thus not entirely ignored; however, the mere fact that he was apparently unable to secure the position for his former ally is significant and will certainly be noted.

· Coal blues: The crisis of the Russian coal sector shows no signs of ending. According to official data, all coal companies of the Kemerovo Region, Russia’s main coal mining region, are now operating at a loss, and the combined losses of the whole coal industry in the first quarter of 2025 had reached 70 billion rubles. Another sign of how unprofitable coal exports have become is that coal exporters, who last year were lobbying for more guaranteed cargo capacity on Russia’s Eastern railways, are now refusing to ship even the guaranteed amount, even though forcing railway operators to provide shipping discounts was at the core of the federal government’s rescue plan. Coal companies are turning to short-term financing instruments, suggesting growing liquidity problems. The budgets of both Kemerovo and the neighboring Khakassia have been suffering for the second year in a row from a steep drop from fiscal receipts from the coal sector. The federal government, which has been in no rush to bail out the sector – or Kemerovo – would now like to nudge the region to diversify its economy instead, which will take a significant amount of time and money. Short of a major fiscal injection – which seems unlikely under the current circumstances – higher global demand could ease the pressure on coal companies, but this is not where the market seems to be headed.

· When the Kremlin says a number: The federal government signed memoranda with regional governments on the modernization of utility networks. This obliges them to standardize consumption and maintenance fees, reduce consumer debt towards utility providers by 2 percent annually and have them approve investment programs (a draft law on these was introduced in April), which will then have to be implemented in full by 2030. Crucially, of the 4.5 trillion rubles that the Kremlin had earlier pledged to spend on fixing dangerously decaying utility networks, more than half (2.8 trillion) will have tom come from private investors. Just like in several earlier cases, essentially the federal government, after announcing a major spending program, is outsourcing a large chunk of the financing to the private sector (which has been reluctant to invest under the current financial conditions), and the implementation of the policy (that is, pressuring investors) to regional governments: a textbook example of how many similar policies (e.g. the waste management reform, COVID-era policies or military recruitment) work in todays’ Russia.

· “Victory” Museum: The Omsk Region’s governor, Vitaly Khotsenko, a former occupation official in Ukraine (also mentioned above) announced the creation of a “Museum of Victory in the Special Military Operation”, ostensibly suggested to him by war participants. The museum, which would have representations across the region, would be opened “after the final victory” of Russia in the war, conveniently leaving an unspecified time for the governor to actually realize the vision. The proposal, however, is another example of a shiny, but, beyond its publicity value, meaningless pro-war measure, designed to improve the governor’s position in negotiations with the Kremlin. I have recently written for The Moscow Times about how Vologda governor Georgy Filimonov has come to exemplify this kind of regional policymaking.

Image Source: Federal Penitentiary Service for the republic of Buryatia

I might disappoint some readers with the main topic of today’s dispatch, especially after such a long hiatus, but this has been a hobby horse of mine for some time, so buckle up. In today’s dispatch I am going to take a glance at Russia’s waste management reform, which was recently updated by the federal government, and explain what it tells us about policymaking constraints in wartime Russia and why this is important.

Years wasted on the waste reform

In March 2025 the federal government announced changes to the waste management reform, which originally started in 2019 and was roughly halfway through its planned implementation. A review thus seemed justified – but it was also preceded by a series of damning critical remarks from unusually high places. Valentina Matvienko, the head of the Federation Council had stated in December that the reform was a failure. Former United Russia supremo Andrey Turchak (now in the somewhat diminished position of Altai Republic governor) said the same about the reform specifically in his region. Viktoria Abramchenko, a United Russia deputy who as deputy prime minister had been responsible for the implementation of the reform, called Siberian regions specifically problematic. The government mouthpiece Rossiyskaya Gazeta printed the same about the Far East. Prosecutor General Igor Krasnov singled out several regions in the Federation Council, highlighting the poor implementation of the reform in these territories. The upper chamber of the parliament held an audit, which found that the reform suffered from several shortcomings, including a shortage of container spaces and specialized equipment.

The thunderous condemnation of the failures of the reform are, to a large extent, due to these high officials trying to look busy when there is little else to do, and of course also to push political responsibility for a politically risky failure as far away from them as possible. But the reform does seem to be a spectacular policy failure. When it was launched in 2019, its main goals included making waste management across Russia more efficient, cleaner and greener by reducing the number of both legal and illegal landfills (by ensuring that no more than 50% of municipal waste ends up in these), standardizing waste management practices, sorting 100% of municipal waste by 2030 and incentivizing recycling. It is unlikely that any of these will happen, and Russians are noticing it. A survey carried out by the pro-Putin organization “People’s Front” last year showed that 30% of Russians thought the problems with waste management actually got worse, with an additional 27% reporting no positive change at all. Only 34% saw any positive developments. The reform envisaged the creation of 868 waste management plants by 2030; in 2019-24, only 250 were commissioned, of which 64 waste disposal and 34 waste processing plants. Even according to official statistics, which are questionable, only 53% of household waste is sorted, and at least 80% - but likely more – ends up in landfills.

Mostly based on the criticism articulated by Matvienko (and Turchak), the new rules announced in March singled out so-called regional operators. These enterprises – 182 of them as of 2024 – were created by the 2019 reform to act as intermediaries between residents, local authorities and the various waste management companies involved in the collection, transportation and processing of municipal waste. Several regions did indeed change operators over the past years as the Federal Antimonopoly Service found various violations, and it became obvious that the regions are not meeting the benchmarks of the reform. The government will also roll out a controversial new system of calculating waste removal fees – based on living area – in the whole of Russia.

But the shortcomings are more than just the result of neglectful implementation. The design of the reform was flawed from the very start: while waste collection fees went up considerably and often in an untransparent manner as regions created politically protected quasi-monopolies, the rules did very little to incentivize residents or companies to use recyclable packaging or invest in new technologies, focusing instead on building new plants, such as waste incinerators, even though existing ones were underutilized. Sectoral experts – interviewed, for instance, by Kedr, an independent news site focusing on environmental pollution – highlighted unjustifiable intermediary fees, subcontractors cutting corners and falsified reporting. Newly created landfills, often the cheapest way for operators to get rid of household waste – have attracted the ire of residents in many regions.

The new rules will essentially tighten the requirements for regional operators. In future, their contracts can be terminated if they violate the agreement on the frequency of waste removal more than five times. They will be responsible for maintaining container sites, which often look like waste dumps themselves. Using satellite technology, the authorities will try to monitor garbage trucks more, to prevent them from dumping their loads in illegal landfills. The newly adopted law also aims to uniformize waste sorting across Russia by 2030.

Perhaps these updates (and others that are planned) will have some positive effects by improving service. But it is obvious that the problem is much deeper than this. In fact, the waste reform bears all the signs of policy that was flawed from the onset, but became much more hopeless due to the full-scale war.

The labor shortages exacerbated by the war have led to a shortage of truck drivers that waste management companies rely on (with vacancies increasing by almost 50% last year), and driven up salaries faster than in any other profession. Anti-migrant policies adopted in the wake of terrorist attacks in 2024 exacerbated this issue further – in several regions the first type of public service to face a collapse after anti-migrant campaigns started was waste collection. Buying and maintaining equipment have also become more difficult. Due to import restrictions, specialized trucks themselves have become more difficult to import and repair. Sanctions also affected companies’ plans to import and implement foreign waste management technology (even though the authorities claim that the sector’s dependence on imports was half of what it used to be before the war). Prior to 2020, Rostec had planned to build five incinerators using technology from the Japanese Hitachi company. So far only one has been completed. High inflation and the associated high key rate of the Central Bank disincentivized investments and made cost overruns, which had been a constant feature of the reform, both more common and more dangerous. Even the war-related boom in domestic tourism seems to have had some – albeit comparatively minor – negative effects on the sector, as it led to a previously unforeseen increase in household waste in a handful of regions.

Apart from the genuine benefit of having created a domestic waste recycling industry, weak as it is, one could note that the only way in which the reform worked as it was intended is that it shifted responsibility from the federal to regional governments: in the 2024 survey 54% said that they were dissatisfied with regional officials for their lack of results in the field of waste management. The rules adopted in March also reflect this way of thinking. The costs of cleaning up “accumulated harm” will fall on regional budgets. Deputy prime minister Dmitry Patrushev, who now oversees the reform, also mentioned that “extrabudgetary funds” would have to be found to accelerate the implementation; in practice, this means that governors will have to pressure local businesses to pull their weight.

More money for governors

By a presidential decree, Vladimir Putin substantially increased the salaries of regional governors, equalizing their status with deputy prime ministers from January 2026 on. This means that governors will be entitled to monthly and quarterly cash incentives and – while we don’t know exactly, since to the Russian government has been withholding data on the salaries of public officials – according to the sources of Farida Rustamova, the rise in compensation could be tenfold, from 150-200 thousand rubles per month to 1.2-1.3 million.

Of course, no one should be fooled into believing that most governors really only live on this relatively meager sum. Similarly to other high-profile jobs in public administration in Russia, governors have ample opportunities to engage in the practice of kormlenie: essentially, extracting various material benefits from business actors and other residents of their region. The increased salaries are likely not going to eliminate this. However, they could imply that the security services will have a freer hand to crack down on former governors and their appointees if they do engage in corrupt practices. Recent cases include Alexey Smirnov of Kursk (implicated in the corruption case related to faulty defensive structures) and Vasily Golubev of Rostov, who reportedly became a person of interest in corruption cases related to infrastructure projects in his region, even as he presciently (and quickly) secured a seat in the Federation Council after his dismissal. Both Golubev and Smirnov had local roots in their region, but the recently dismissed governor of the Sverdlovsk Region, Yevgeny Kuyvashev, was an outsider, belonging to the circle of Moscow mayor Sergey Sobyanin – and he may reportedly also face a corruption investigation.

This is also happening at a time when governors are expected to take on a number of new, politically sensitive responsibilities, from keeping prices low and recruiting contract soldiers, to increasing fertility in their region, all while the promise of upwards mobility that has been central to the Kremlin’s personnel policy of rotating centrally educated, technocratic cadres, has become increasingly difficult to implement in practice. I have written about this more extensively in my latest report for the Foreign Policy Research institute, but in short: while the majority of Russia’s governors are now part of this technocratic cohort (and the Kremlin has started to expand the system to municipalities as well), avenues of promotion have become more difficult to find after the full-scale invasion of Ukraine due to an altogether more conservative personnel policy, growing uncertainties about property rights and political influence, and the need to share positions with novel groups, such as war participants or retiring security officials. A natural reaction to this development would be officials trying to build mutually beneficial relationships with local business and security elites – something that the Kremlin is probably trying to avoid.

Also-happeneds

- Mayoral elections in Kursk and Kurgan: shortly before the detainment of Alexey Smirnov, the former governor of the Kursk Region, the mayor of Kursk, Igor Kutsak also resigned, officially of his own volition. Kutsak had been mayor of the city since February 2022, after heading the region’s property management committee. While Alexander Khinshtein, the new governor appointed in December last year claimed that he tried to “dissuade” the mayor (even after publicly reprimanding him for slippery streets during the winter), the resignation will actually allow Khinshtein to pick his own candidate to manage the city. This will happen likely later this year, after Khinshtein himself is duly elected governor, in a procedure over which, due to the new municipal administration reform, the governor’s office will likely have a larger influence over both the appointment and the eventual dismissal of the new mayor. The new mayor could reportedly be Khinshtein’s deputy, which would fit into the general trend of governors considering the mayor of the regional capital a member of their team, even – increasingly often – bringing in outsiders to manage these cities. It is possible that the election of the mayor of Kurgan – already postponed three times since early 2024 and now scheduled for April 23 – will be pushed back again for the same reason, even though a “competition committee” has already picked two potential candidates for an assembly vote.

- Lena bridge reloaded: the federal government now thinks that the Lena Bridge, linking Yakutsk to the federal highway system, will be built by 2028. There is reason to doubt this prediction, however, given the government’s earlier record on the project. The construction of the bridge was famously suspended in 2014 when the government reallocated funds previously earmarked for the bridge to the then recently occupied Crimea, even downplaying the importance of the year-round road accessibility of this important regional capital. The project was going to restart in 2020, but the COVID pandemic and later the full-scale war took priority, with construction starting only in October 2024, allowing the nonexistent bridge to become somewhat of a symbol of how the war took precedence over infrastructure development.

- Maria Ponomarenko’s inhumane treatment: when it comes to the issue of human rights, there is no shortage of depressing stories from across Russia each week. A particularly bad case is that of Maria Ponomarenko, a journalist of the RusNews news site from the Altai Territory, who in April 2022 was one of the first journalists to be imprisoned for violating the wartime law criminalizing the “spreading of fake news about the Russian army”, after she posted publicly about Russia’s bombing of Ukrainian civilians in Mariupol. Ponomarenko has recently started a hunger strike to protest the inhumane treatment, to which she has been subjected. In late March, speaking in front of a court where she stood accused of attacking prison personnel – carrying a possible sentence of two years on top of the six she was sentenced to in 2023 – she spoke about her treatment, the plight of human rights in Russia in general, but also about how she had become absolutely sure of Russia’s responsibility for bombing the Mariupol Drama Theater. It is worth a read. Russian courts passed 82 verdicts in cases related to “army fakes” in 2024. This is just one of the many criminal articles threatening journalists in Russia; journalists working for regional publications are especially vulnerable, given that they are usually not high profile enough either to avoid arrest or to be considered for a prisoner exchange.

- Campaign in Irkutsk: the Communist Party will support former governor (now Duma deputy) Sergey Levchenko in the September gubernatorial election against the incumbent Igor Kobzev. Levchenko, who was forced to resign in 2019 after Putin criticized him for the handling of devastating floods in the region, put the return of direct mayoral elections in Irkutsk into the focus of his campaign. Due to the recent adoption of the municipal public administration reform, this would require the amendment of a federal law, which Levchenko can hardly guarantee. Either way, he is unlikely to return as governor: even if he passes the so-called “municipal filter” – which usually allows the governing United Russia to block nomination of gubernatorial candidates via local assemblies – it is highly unlikely that he will be a serious threat to Kobzev. However, the elevation of the issue of direct mayoral elections itself highlights that the erosion of local democratic institutions continues to be an important concern in cities. Moreover, for the Communist Party the September elections are much more about the party’s ongoing struggle to survive as a relevant political machinery than anything else – reflecting its demotion in the 2023 and 2024 regional votes. For this purpose, supporting candidates with relatively good name recognition in politically problematic regions to test the extent of the Kremlin’s control over election infrastructure, may now seem like the best bet.

- Rare earths in Siberia: the federal government announced its intention to create an industrial cluster in Siberia to mine and process rare earth metals, of which the macroregion is estimated to hold 18 percent of Russia’s reserves. Earlier, Rosatom announced plans to establish an integrated supply chain for rare earth magnets, used in defense production and other high technology sectors; industry experts have expressed skepticism about the project’s profitability, but due to Russia’s push for technological sovereignty, it is not unlikely that the federal budget will keep supporting the project. But apart from this, focusing on rare earth metal mining right now also has immediate political value for the Kremlin, as Putin himself identified it as a potential area for US-Russia cooperation, having noted Donald Trump’s sudden interest in these minerals. Others are also trying to use the focus on rare earth metals for political gains: Igor Kobzev, the governor of the Irkutsk Region told deputy Prime Minister Dmitry Patrushev that significantly more work could be carried out on deposits in his regions, if it were not suffering from electricity shortages.

- United Russia “primaries”: the ruling party has launched its “primaries” to select candidates for this year’s regional elections. The votes are, in most cases, of course are held just to provide the veneer of intra-party democracy to an otherwise closely controlled selection process. However, given that United Russia is supposed to be one of the main vehicles for war participants to become public officials, it is worth keeping an eye on at least this aspect of the selection process. As it happens, out of roughly 16,000 potential candidates, only 319 are war participants, more or less in line with last year. On the one hand, war participants have been actively promoted to various unelected positions over the past year – and most mobilized and contract soldiers are still in Ukraine – this also suggests that the lack of enthusiasm among existing party members for sharing positions with people possessing a war participant badge has not changed. Stories about individual conflicts are also still popping up with some regularity, and their number is expected to grow if and when soldiers indeed return from Ukraine.

Hail the mob – the aftermath of the Zelenskyy-Trump meeting

More than three days have passed since the disaster triggered by the US president and vice president in the Oval Office, and, in spite of early hopes of a quick reconciliation, this does not appear to be the direction, in which developments are headed. US national security advisor Mike Waltz said that the White House now expects Zelenskyy to apologize before any further negotiations on the “minerals deal”, which Zelenskyy was supposed to sign last week. Trump has reportedly ordered a “pause and review” of US military aid to Ukraine.

For the below reading of the situation, I must add that I am not a specialist on either Ukrainian or US domestic politics, however, I believe I have a good grasp of how both foreign policy and illiberalism work.

In my view, those arguing that Zelenskyy should not let himself be provoked are misreading the intention of the White House. I believe by the time the meeting took place there wasn’t any actual deal on the table: not because, as several experts pointed out, Ukraine does not have (or at least does not have easy access to) the deposits that Trump claims to want, but because the deal, as it was laid out, made no sense to either side. For Ukraine and Zelenskyy personally, who faces domestic political challengers, agreeing to any deal in the context of the ongoing US-Russia negotiations, which does not contain security guarantees, would be disastrous. Some suggest this was exactly why Zelenskyy insisted on going ahead with the White House meeting, which may have been his actual mistake.

Trump and Vance, on the other hand, had made it fairly obvious prior to the meeting that they regard Zelenskyy as an obstacle to the actual deal that they want to strike: the one with the Kremlin (and let’s not forget also that Trump has a personal grudge against Zelenskyy, which in this administration matters). Thus, the Ukrainian president had to be humiliated and forced into a position where he had only bad choices. Of these, by the way, I believe Zelenskyy chose the somewhat less terrible alternative: supinely acquiescing to lecturing from someone like JD Vance or attempting to change the topic would simply have invited more bullying and calls to show respect.

Just like the listing of adulatory messages that the Trump White House put on proud display following this disaster, perhaps in an attempt to remind everyone else of the eager deference they expect, it was all theatrics and bully politics, and we need to be ready for more of this. It looked like a performance arranged by a former reality show star who played a businessman on TV to some success, and is now trying to play a strongman. My immediate reaction – that any Secretary of State with a shred of decency would have to resign after the spectacle in the Oval Office – still stands, but to be honest, I am finding it increasingly difficult to convince myself that it matters whether the fresh-faced hologram this White House is sending to certain meetings is called Marco Rubio or StateGPT as long as the White House’s vision of international politics is something akin to mobsters establishing protection rackets over their own territories without even a pretense of lawfulness or principles.

As regards Russia – and here I am on more familiar territory – one of the questions that has often surfaced over the past three years in various contexts is whether Putin is a rational actor or not. To many this may seem rhetorical, given the vile destruction that the Russian leader has unleashed on Ukraine (and, in a different way, but also on his own country), however, it is an important question. It is important not only to understand how Putin arrived to the decision of launching the invasion – was it an intelligence failure, was it isolation triggered by COVID, was it the domestic political situation, his deeply held beliefs about history, or perhaps all of these? – which is the context in which this question is most often asked, but also to decide whether Ukraine and its backers can conduct negotiations in Putin beyond talking to the man to check his state of mind.

With the caveat that nobody really knows what is inside Putin’s head – and I am certainly very far removed from him – I believe Putin is a rational actor. But this is exactly why I also believe that currently he has very little incentive to want to end the war. I have not seen convincing arguments either to suggest that Putin has given up on his original war aims or that he could not be coerced and talked into giving up on them. But I think this debate is beside the point: the objectives of the moment are determined by the Kremlin’s assessment of the domestic and international limitations, and with Trump and Vance in the White House, Putin may very well assess that he is going to be able to improve his position in the foreseeable future from whatever the initial offer was on the table.

The initial reactions in Russia to the chaos that Trump unleashed in the field of foreign policy over the past month, were, of course, partly jubilant – but this kind of commentary, usually coming from paid propagandists, is what the media will be very eager to pick up. From the Kremlin itself (including Kremlin-adjacent analysts), the reaction has been rather more cautious. Putin postponed his yearly address to an indefinite future date, suggesting that he understood that a lot was depending on how talks with the US would go, but was not sure yet how to use the opportunity – or indeed what the achievable alternatives were. Russia chose serious negotiators for the Riyadh talks – the contrast between the two delegations was, frankly, striking – but at the same time, Putin’s office also made it clear that Putin was in no rush to meet Trump or to talk about the end of the war. Instead, in the past weeks, the Russian government has worked hard to convince Trump that they had better deals to offer, from rare earth minerals (partially taken from Russian-occupied parts of Ukraine) to common development of Arctic deposits and the Northern Sea Route. From the Kremlin’s point of view, these would also help to de facto legitimize Russia’s claims over Ukrainian territories, and push the US towards removing sanctions from Russia’s Arctic development projects – sanctions which actually did hurt the Russian economy and led to the mothballing of major projects.

The Kremlin seems to understand that from its own perspective, the best thing that it can presently do is to take things slowly, for several reasons. First, the purpose is to see how much damage Trump is able to cause on his own to European politics, in American domestic politics and to the US’s international alliances. All of this would improve Putin’s position, but as of early March it is unclear how much pushback Trump and his agents of chaos are going to face. Second, Putin’s main objective is not to end the war but to have US sanctions removed, without which, according to the Kremlin’s likely calculus, EU sanctions will soon also fold. Yes, there is war fatigue in Russia: public opinion, while tricky to gauge, has likely shifted, and wartime policies are causing frictions both in the elite and on the level of policies relying on scarce resources. The Kremlin’s ability to maintain domestic stability has depended on maintaining the mirage of an eventual Russian victory as timelines gradually shifted from a short war against Ukraine to a long conflict with the West, from temporary fiscal prioritization to fundamental budgetary and asset redistributions, and changed domestic political dynamics. From the Kremlin’s point of view, the return of Trump is not a chance to end the war, but to improve Russia’s position by so much that the continuation of the war will not cause critical domestic economic and political risks. A third reason for the caution, I believe, is that while Putin understands the necessity to react to the American overtures, he also wants to keep control of escalatory dynamics. Rushing into a deal with Trump – even talking about eventual outcomes as if they are imminent – deprives him of this possibility.

Obviously, the Kremlin cannot play this game for eternity. There will be concessions, negotiations – more theatre – but I cannot yet see a stable peace on the horizon, because currently, the Kremlin is not interested in this and the White House is indifferent to it; only Ukraine and the EU want a stable peace and they are currently either sidelined or unable to show force on their own. To change this, EU leaders will need to understand that the undermining of the European Union is not a negotiating tactic or a rhetorical hyperbole of this US administration, but one of its foreign policy objectives. And then they will need to get their act together very quickly.

Sectoral crises

I may write a longer piece about the political implications this in the future, but for now I would simply like to note that we have seen, over the past weeks, an increasing number of sectoral crisis management programs being considered or at least discussed. But this does not mean that they are actually going to be implemented.

It appears that, even though the coal industry’s troubles, triggered by a loss of Western export markets, clogged transit corridors and low global prices, have been laid bare over the past year, the federal government is in no rush to help out coal producers with subsidies. In late February the Ministry of Energy – led by Sergey Tsivilyov, who himself has business interests in the coal industry – took the position that before any subsidies are paid from the federal budget to struggling coal companies, transportation companies such as Russian Railways and ports should provide discounts to export coal via Southern and Western Russian ports from the Kemerovo and Novosibirsk Regions and Khakassia.

Of all the industries hit by the ongoing restructuring of the Russian economy, the problems of the coal industry are probably the most acute for the time being: in Kemerovo, Russia’s main coal producing region fiscal revenues dropped by 14.5% last year, at least eight mining companies have closed and others, including major firms, are accumulating losses; mines need to be put in conservation at a high cost; as of February, exporting coal from Kemerovo in any direction was unprofitable.

But representatives of other industries have also been requesting state support: both metallurgical and timber producers have turned to the government after the double whammy of the of Western export markets and the phasing out of subsidized mortgages. Both industries are also important for specific regions, several of them in Russia’s northwest, where bankruptcies may increase the risk of significant social upheaval. Potential support measures for the timber industry include tax breaks, mandatory federal and regional purchases of timber, and freeing up transportation capacities. Metallurgical companies, which were affected by a surtax earlier, requested tax cuts.

In general, the Kremlin also suggested Mishustin’s government to return to the type of structural support measures that Russia adopted during the COVID-19 pandemic, but it is unclear whether the government is ready put money behind these measures as long as war-related expenditures remain prioritized and inflation expectations remain high. A recent report of the Central Bank on loans confirmed that subsidized lending was responsible for up to 20 percent of the growth in money supply since 2022, even without accounting for preferential mortgages. Limiting these loans was the Central Bank’s main request of the government at the end of last year in exchange for not raising the key rate further.

Extending productivity-enhancing projects to whole industries to achieve a 20-percent productivity growth by 2030 sounds great, but this is easier said than done. Without better access to imported technology and as long as Russia’s current labor crunch, exacerbated by the war, is driving up salaries, as the Kremlin’s ongoing nationalization program further erodes property rights, there is only so much better organization and domestic technologies can do.

This matters because it underlines that under the veneer of stability, the ongoing significant structural reorganization of the Russian economy is triggering challenges and requests that the state, under the constraints created by the war, the Kremlin’s domestic priorities and international sanctions is currently ill equipped to handle, and which may thus increase competition both for the limited funds available in the budget and for the assets of companies that are weakened or felled by these sectoral crises.

Also-happeneds

· More development projects disrupted by wage arrears: Following the builders of the Bashkortostan and Sverdlovsk Region stretch of the Moscow-Kazan motorway, the workers building a bridge across the Uda river in Ulan-Ude, the capital of Buryatia, also staged a protest in February due to wage arrears. Similarly to the incident in Bashkortostan, where the contractor complained about steeply increasing costs (due in part to war-related inflation and more expensive imports), the price tag on the Buryatian project seems to have been steadily inflating and the workers’ strike will likely cause further delays to the project that was originally supposed to be completed in 2024. These wage arrears do not only cause disruptions and delays – quite a common thing in Russia – but also force local and regional authorities to deal with the risks triggered by the strikes, which they are often not well placed to address, e.g. if the contractors are based in another region.

· New arrests in Rostov and Ulyanovsk: The situation of Vasily Golubev, the former governor of Rostov seems to be worsening. In February he was reportedly summoned to the Investigative Committee for questioning, with the FSB and the Prosecution also interested in hearing from him (albeit this was later denied). Meanwhile, now a total of four ministers in the regional government and other officials, including one of Golubev’s aides, were also arrested under suspicion of corruption. Following his dismissal in November last year, Golubev arranged for himself a seat in the Federation Council at lightning speed. This kind of promotion into a sinecure position has traditionally been seen as a relatively safe retirement. Another corruption case worth noting concerned Igor Edel, the former deputy governor of the Ulyanovsk Region and a close colleague of the region’s communist governor, Alexei Russkikh. Edel was sentenced to 12 years in prison in February for having received 117 million rubles in kickbacks from contractors when he managed development projects on behalf of the region. While Edel was arrested in 2023, it is worth noting that Russkikh is regarded as an ally of Security Council secretary Sergei Shoigu, many of whose former appointees and allies have been arrested after last year’s government reshuffle, which prompted speculations about the potential removal of Russkikh even before his current gubernatorial term ends in 2026.

· Putin meeting regional heads: A propos governors – in February Putin has started meeting and thus de facto approving the candidacies of governors who face elections in September. This concerns the incumbent heads of 11 regions, not counting six newly appointed regional heads (who are currently interim governors but will have to officially win a vote), the head of the Nenets Autonomous District who is not directly elected, and the head of the occupied Sevastopol. The governors who have received presidential approval include Kamchatka governor Vladimir Solodov, Bryansk governor Alexander Bogomaz, Kaluga governor Vladislav Shapsha and notably Irkutsk governor Igor Kobzev who has recently come under fire in the region due to the introduction of differentiated electricity tariffs that locals fear will lead to a massive spike in utility bills as many in the region use electric heating. Оther governors to watch include Alexander Drozdenko, the head of the Leningrad Region and Sergey Sitnikov, the head of the Kostroma Region, both of whom have been in office for 13 years. Drozdenko has had to deal with a series of corruption cases in the region over the past years, while Sitnikov’s seat, according to rumors, is coveted by Vladislav Davankov, the deputy speaker of the State Duma from the New People party.

· Cryptomining goes dark: As regards cryptomining – one of the main reasons why the government introduced the much-contested differential tariffs in the Irkutsk Region – it is unclear whether the regulatory changes have helped. Along with the tariffs the government also banned mining in several regions with overloaded electricity grids and in parts of certain regions (including Irkutsk) over the fall and winter. But with the price of Bitcoin going through the roof after Donald Trump’s inauguration, according to RBK many local cryptominers simply went underground and boutique mining cooperatives that work in garages or in apartments are difficult to track. At the same time, the Energy Ministry claims that across Siberia as a whole the ban has successfully reduced the load on the power grid. It could also be that some cryptominers have temporarily relocated their work to other regions. Far East plenipotentiary and deputy prime minister Yury Trutnev would actually like to attract cryptominers to the Far East, provided that the macroregion is able to build up energy reserves.

· Campaigning from the trenches: Russia’s electoral legislation is going through its newest frenzy of substantial revamps, as usual before Duma elections (due next year). The most absurd proposal so far came from the regional legislature of Tatarstan. The region would support Vladimir Putin’s call to get more veterans elected to assemblies of various levels by allowing military servicemen to put forward their candidacies through a “trusted person” – most likely their commander – while still fighting. It is unclear what will then happen to those who happen to win a seat: it is unlikely that the Ministry of Defense would simply make exceptions and rotate them back to Russia, while it is quite unlikely that they could fulfil their duties from the frontline. Perhaps they would be able to exercise their mandates through another “trusted person”? As far as I can tell, this might just be a brilliant idea to square the circle of complying with Putin’s vision of a “new elite” and report neat figures of war participants elected to positions of power, while keeping things pretty much intact on the ground.

· Regional debt reduction rules: The government finalized the rules of forgiving regional debt held by the federal government. The initiative itself to forgive two-thirds of this kind of debt came last year from the Kremlin and followed several years of the Finance Ministry actively replacing regions’ debt from financial markets with low-interest budgetary loans. According to the rules, regions will need to spend at least half of the funds they thus free up to modernize housing and communal infrastructure (a major problem in many regions), with the rest spent on various other development projects ranging from public transit to industrial development. In the Arctic and the Far East regions are encouraged to spend the funds on city master plans, as populating these territories is a stated priority of the Kremlin due to their increasing economic importance in Russia’s pivot to Asia; and poorer regions (where, interestingly, the “needs of the special military operation” are mentioned as a priority). While the Kremlin has presented the debt write-off as a major step in fostering a more active investment policy in the regions, it is questionable how much this will actually count. For one, regions will not benefit equally or even according to their needs, given that heavily indebted regions are going to see a comparatively bigger breathing room. Moscow, the Moscow Region and Tatarstan are going to be among the biggest winners, in nominal terms, albeit some smaller regions with significant debt burdens (e.g. Udmurtia or Tomsk) will also benefit.

· The power struggle in Khakassia continued with Sergey Sokol, the United Russia head of the regional legislature announcing on February 21 that a majority of the region’s municipal heads supported overturning governor Valentin Konovalov’s veto against a law, which would see Konovalov lose his power to suspend fiscal transfers to municipalities (I reviewed the debate and its stakes in an earlier post). This would have only mattered if it had moved the needle for Sokol in the regional legislature – but it did not. Five days later the chamber voted not to put the issue on the agenda, even though United Russia has just enough deputies to override gubernatorial vetos. The fact that Sokol has been seeking the performative support of municipal heads suggests that Sokol and his backers are trying – so far unsuccessfully – to dismantle the local coalition around Konovalov that prevented the Kremlin from removing him in a 2023 gubernatorial election.

Regional finances: another lean year for most

First of all, let’s look at Russian regional finances at the beginning of 2025 or (rather) at the end of November 2024, since this is the last moment for which granular statistics are publicly available (albeit the AKRA business rating agency has gained access to December 2024 data for their report commissioned by Vedomosti).

Regional budgets, the cumulative size of which in 2024 made up roughly half of the size of the federal budget, have two main sources of income: their share of personal income taxes (base rate) and corporate taxes (17 percent). They also draw income from smaller taxes and various federal transfers. The proportions, on the whole, have not changed much over the past years, as you can see from the below chart.

Of course the exact share of transfers and own incomes depends on the region itself, with some highly subsidized regions drawing 80% or more of their income from federal money. As regards expenditures: across the board, typically around 70% of regional expenditures go on education, health, social policy and housing (typically the smallest of the four).

Below are the statistics of the Finance Ministry showing the accumulation of regional fiscal incomes over 2023 and 2024. This includes occupied territories in Ukraine (which the more granular figures displayed later will not), and figures for the first two months of 2023 are skewed due to a tax reform that changed how receipts are collected. However, end-of-year bumps of PIT receipts and transfers are visible - as are comparatively lower corporate tax receipts in 2024 (after above-inflation growth in 2023).

Corporate tax receipts were 5.3% lower in nominal terms at the end of November 2024 than a year before. This is actually an improvement over September when the difference was 11%, and there are significant regional variations too: most notably, coal and metallurgical regions stand out negatively. But, factoring in inflation for this period (~9%) many regions are in the red, reflecting squeezed corporate earnings.

Federal transfers (grants, subsidies, subventions and other discretionary transfers) also declined in real terms across the country. The two brightest green regions on the map below are Orenburg, which experienced devastating floods in 2024, and Kursk, which was overrun by the Ukrainian army. Caveat: these figures may change substantially when December data becomes available, as the federal government usually pays out a larger amount of transfers at the end of the year.

In spite of the decline in corporate tax receipts and transfers, on the whole regional incomes did not decline. In total, they were 13.9% over 2023 levels at the end of November. This is mostly due to much higher PIT receipts, themselves a consequence of higher salaries and other payments. It needs to be stressed though that Moscow, which itself reported a 20% income growth in the first 11 months of the year, has a vastly outsized influence on these figures and less than half of regions experienced over-9% growth of incomes.

According to the 2025 federal budget, transfers to regions will decline even in nominal terms (although they may grow during the year as spending is revised). Proceeds from debt forgiveness, which the government wants regions to pour into development projects, will not, by itself, offset this decline. At the same time, receipts from corporate and personal income tax hikes adopted in 2024 will benefit the federal budget, all while there’s no indication that corporate profits will grow.

Meanwhile, regions will have to spend on new political priorities, such as improving fertility, but also keep returning war participants and their families happy, prices stable, spend more on repairing aging utility pipes, keep hiring recruits by setting higher signing bonuses and compete with the army and military industry for manpower to ensure public services are running. This will likely lead to more regions running deficits than in 2023-24, with some forced to introduce additional local taxes to fund these efforts (the Saratov Region will, for instance, collect a targeted surtax from restaurants that ostensibly offered this themselves). One can also deduce this from spending plans summarized by Stanimir Dobrev here - although these, too, can and will likely be revised during the year.

The risk is not that regions will go bankrupt en masse. After years of targeted debt replacement policies, most of their debt is now held by the federal treasury. Rather, the risk is that the execution of certain policies and the provision of certain services will get neglected and underfinanced as officials need to navigate conflicting priorities, resulting in local resentment the kind of which you can see in Kursk or Dagestan (and soon, I believe, in regions where the dominant industry is facing an acute crisis, such as Kemerovo).

House of cards in Khakassia

Readers of these dispatches will be familiar with the ongoing conflict over the governorship of Khakassia, the small, picturesque, coal-producing region in Southern Siberia that was one of the regions delivering United Russia a surprising electoral upset in the September 2018 gubernatorial elections, and the last remaining region, in which the unexpected winner of that year - communist governor Valentin Konovalov - is still standing, having successfully seen off a challenge in 2023 by Sergey Sokol, a Kremlin-backed deputy with “war participant” credentials, by succesffully rallying local elites, including some United Russia politicians, behind himself. The Kremlin did secure a partial victory in 2023, by obtaining a two-thirds supermajority in the regional parliament for United Russia by changing electoral rules, appointing Sokol head of the legislature, and forcing Konovalov to seek avenues of cooperation with the governing party.

The conflict, however, never stopped and its newest chapter has to do with budgetary subsidies to municipalities. Last year the regional legislature adopted a law depriving the governor of the right to suspend budgetary transfers to municipalities if they violate budget legislation (e.g. overspend). In future the regional assembly would have to approve such decisions, thus greatly reducing Konovalov's influence. The governor, predictably, vetoed the law. The deputies of United Russia theoretically have the votes to override this veto in February. However, Sokol still thought it necessary to ask municipal leaders - some of which command more authority - to "talk to their deputies about how to vote", suggesting that he's not entirely sure about the loyalty of each of his deputies, even considering that the deputies of the Liberal Democratic Party will likely vote with them. It is also telling that he was asking for an open roll-call vote. Local political rumors suggested that three or more United Russia deputies could vote against the veto.

Sokol’s allies have been trying to highlight Khakassia's undoubtedly poor budgetary position (see further up), and that the regional budget’s deficit will amount to around 9% of the republic's own revenues this year. This of course is not fully irrelevant but it is beside the point, as Khakassia is not the only region with a difficult fiscal situation, and most of the circumstances are outside of the region’s control.

This conflict is about political control. For United Russia, adopting the law is important because while Putin can fire Konovalov at will (this has been especially easy since a 2021 reform of regional public administration), Sokol likely wants to know that a critical mass of local elites will fall in line and accept the decision if and when this happens, given the prior opposition of regional elites to the Kremlin and Sokol personally.

It is interesting, however, that both Konovalov and his opponents are appealing to federal regulation, with United Russia saying that because of the governor municipalities cannot fulfill their obligation to index the salaries of public employees, while Konovalov points out that the law curbing his powers would contradict the Finance Ministry’s position on how regions should relate to municipal finances. It is worth mentioning that weakening the governor's powers vis-a-vis municipal heads also runs counter to the stated objectives of the wider municipal self-governance reform currently discussed in the Duma (but not yet adopted), which would, on the contrary, increase powers over municipalities and local elites.

The developments thus do not only show that competitive politics and intense bargaining are still present in some Russian regions, even in 2025, but also highlight some contradictions between the Kremlin’s stated plans to run the federation and how it is actually run.

Also-happeneds

• No mayor for Kurgan: In February the city of Kurgan will attempt to elect a new mayor for the fourth time since early 2024 when Elena Sitnikova who previously held the position resigned due to her arrest in connection with corruption and negligence affecting wildfire defense. Previously, Dmitry Zhukovsky, a United Russia deputy of the city duma seemed to be the favorite to win the procedure, which sees candidates selected by a “competition council” and then voted in by city council deputies, but both times that he was running, the election eventually had to be called off because one or both of the candidates who made it into the final round, withdrew from the process. In the third processed, launched in January, Zhukovsky did not even participate. While the reasons are not entirely clear, the inability of local officials to elect a capable and loyal mayor for more than a year highlights the growing difficulties associated with recruiting municipal leaders in the current circumstances. Mayors of second and third-tier cities often have little political and financial authority, but are expected to be political shields for governors by acting as first responders to residents’ problems and assuming political responsibility for failed policies. As scholars have also pointed out, mayors also face a high risk of arrest, especially as security services are gaining influence in domestic politics and mayors can be seen by governors as potential rivals.

• Golubev not out of the woods yet: Another notable corruption case associated with recent personnel reshuffles, as also highlighted on this blog, is the case of former Rostov governor Vasily Golubev who in November managed to secure a seat in the Federation Council (and thus parliamentary immunity) seemingly to avoid prosecution for alleged wrongdoing that could be related to transit development or the city’s 2018 FIFA World Cup projects. On January 22 the Prosecution reportedly asked the upper chamber to suspend the former governor’s immunity. This has not happened yet, however, a couple of days later Rostov’s mayor, Alexey Logvinenko, whose name also came up in relation with the case, resigned. It will be interesting to see how this case develops; arresting people in connection with one of Russia’s largest prestige projects over the past decade can easily open up a can of worms.

• New shiny dashboards: As a pilot project, twenty-nine regions will get "governor's dashboards", allowing key statistics and progress towards benchmarks to be displayed on what sounds like a big screen that, according to the description of its developers, will allow regional leaders to close their proliferating browser tabs (if only there were a similar one for researchers!). The dashboards, several years in the making, sound similar to the one serving mostly decorative purposes at the federal government’s Coordination Council. Along with several other federal efforts from the past years targeting data collection and aggregation, the thinking seems to be that if human data collectors and local aggregators - who can manipulate data - can be sidelined, governance will be both more efficient and truer to the guidelines set by the Kremlin.

• Gubernatorial PR at wartime: Alexander Khinshtein, the former journalist, ultraconservative Duma deputy and National Guard associate who was appointed to head the Kursk Region in an unusual and seemingly emergency move last year, has had a bumpy start. Residents of the region’s districts affected by the incursion of the Ukrainian army have continued protesting over the past weeks, as many of them have still not received housing certificates promised by the federal and regional governments or these certificates turned out to be inadequate. Apart from setting up a “Coordination Council” to address the issue, Khinshtein could not really say anything encouraging to the protesters and received a treatment quite similar to his predecessor, Alexey Smirnov. Khinshtein has tried to score points with other, mostly symbolic, decisions, such as personally inspecting the results of the regional government’s efforts to cap prices (and concluding that they were unsuccessful, leading to the resignation of his deputy), or banning officials from spending their vacation abroad after local media discovered that the region’s minister for culture had gone to India. However, at least while the situation of refugees is not settled, the PR value of these moves will be questionable, and they are not likely to make it easier for Khinshtein to work with incumbent officials.

The most important change that the past year brought to Russia in my view – something that I expect to become increasingly obvious in 2025 – is that the narrative that the Kremlin pursued in the first roughly two years of the war has irrevocably expired. This narrative implied that with a decisive Russian victory in Ukraine, which, in the Kremlin’s telling, was always just around the corner, the arrangements of domestic politics and economics, as well as Russia’s relations with the rest of the world could revert to business as usual. But with an economy and fiscal policy set more firmly on a war footing, an accelerating asset redistribution, new sanctions affecting financial flows, a looming crisis triggered by high inflation and interest rates, and the firmer integration of the war in domestic politics, this now looks impossible. Even in the case of a ceasefire, and regardless of the terms of it, the war (and a broader conflict with the West) will remain a defining principle of Russia’s domestic politics in the foreseeable future.

Asset redistribution will continue. Just in the course of 2024 at least 67 companies with combined assets of 544 billion rubles were nationalized and partially redistributed, benefiting specific groups of interest (such as Rostec or the Kadyrovs) and there is interest in further nationalizations and expropriations at the highest level. Gradually and cautiously, but the Kremlin is rolling back the remaining rights and privileges of the “old” elite, except for top security and political power brokers, who however will have to start to retire to cushioned but less active positions (like Nikolay Patrushev in 2024). Sanctions on key energy projects and trade are unlikely to be eased in the foreseeable future (albeit the terms of a potential ceasefire are unknown), which means that these constraints will continue dictating the direction of Russia’s domestic economic transformation, from monopolization to having to cede control over the terms of Far Eastern development. It seems very unlikely that the Kremlin will run out of money to finance its war effort in 2025 or even in 2026, but this will require increasingly worse and riskier trade-offs. And adjusting to post-war economic realities would also be politically or financially costly. Take, for instance, an interesting recent study by Craig Kennedy about the preferential loans with which the Kremlin has underpinned war spending (and supported other sectors too). Kennedy suggests that continuing the policy of preferential loans will, over time, increase credit market risks – and indeed the Central Bank has lobbied for the scaling back of these programs. However, I’d add, discontinuing them, i.e. in the event of a ceasefire, and scaling back defense spending, will raise the risk of a labor market shock.

I don’t want to repeat the arguments made by others in the ongoing debate about Russia’s economic resilience (or the lack thereof). Vladislav Inozemtsev’s piece on Riddle and Yakov Feygin’s thoughtful answer to it discuss the most important aspects. I do believe, however, that due to the above, the core challenge for the Kremlin in 2025 is constructing an image of peace. This has traditionally been understood as coming up with a spin on whatever settlement Putin is able to walk away with at the end of ceasefire or (rather unlikely) peace negotiations to then sell to the Russian public. This, of course, is an important aspect. However, the Kremlin will also need to explain to political and business elites variably looking for stability and spoils what victory looks like for them, and this will not be easy to square with constructing an image of victory for the tens of thousands returning from the war and looking for the rewards promised to them over and over by the president himself.

And now on to specific issues I will be watching as the year unfolds.

- In economic policy, the main conflict will be between business executives, especially in preferential sectors, and the Central Bank. 2024 ended with a fragile and unstable equilibrium whereby the Central Bank paused key rate hikes in exchange for the government scaling back preferential lending programs. But with inflation still accelerating, the ruble newly unstable, and the government urging both regions and companies to increase investments, it is questionable whether this agreement will hold in the longer term. It is very possible that in 2025, as productivity growth cannot keep pace with salaries and profit margins are squeezed by higher costs, we will start seeing the end of the growth of real incomes, at least in sectors that do not have access to special credit conditions. If inflation stays high, this will lead to discontent. The coal industry, which was squeezed and in certain cases disrupted by falling global prices, rising production costs and export bottlenecks this year, will, by virtue of its political and – in certain regions – social significance, demand bailouts and special conditions, which itself is a source of conflicts, as transit infrastructure capacities, a major part of the puzzle, cannot be easily and quickly expanded. In general, as Russia continues to reorient trade flows to Asian markets, I expect federal and regional authorities to lobby more eagerly for investments from “friendly” countries (mainly China) into infrastructure development in the Far East and the Arctic (the latter of which has been set back considerably by sanctions against key energy projects), ceding control over the pace and the priorities of development projects. Of course, whether or not the United States and the EU adopt more sanctions affecting Russia’s trade and payment flows – and, perhaps more importantly, whether they tighten the enforcement of existing measures – will make a world of difference.

- I expect to see more conflicts over expropriation and nationalization of assets, akin to the (still-unresolved) dispute over Wildberries in 2024, as interest groups can make use of increasingly repressive, war-inspired legislation to attack opponents, providing also opportunities for power brokers with the necessary amount of political capital to try and turn their clout into gold by offering protection. Putin’s ability and willingness to act as the ultimate arbiter of these conflicts has not been questioned so far; though this seems unlikely, if it happens, it would be a significant turning point. In the field of nationalization, major sectoral mergers supported by the state – e.g. in the oil sector – would be the next major line to cross, but I find a further consolidation of defense and defense-adjacent sectors likelier.

- The Kremlin will likely continue taking away privileges from regional elites by taking appointments in both operationally significant as well as simply influential positions (e.g. regional governments vs the Federation Council) under tighter control, and going after regional power brokers seen as relatively independently operating. Vladimir Yakushev’s task as operational head of the United Russia party appears to be strengthening the party’s top-down command structure at the expense of regional elites. Steps have been taken to reduce reliance on the operational support of local elites when managing elections, too: the Justice Ministry will now simply be able to disqualify any candidate or sitting lawmaker by labeling them a “foreign agent”, even if they pass localized filters, while the rollout of electronic voting to further regions in 2025 will make electoral engineering more efficient. At the federal level, one important thing to watch in 2025 is whether more key security and political officials are gently pushed towards something that looks like de facto retirement (FSB head Alexander Bortnikov has been on this list for what feels like an eternity – perhaps 2025 will be the year) and whether, in parallel, we will see more people with family connections to core regime leaders appointed to leading positions, or whether the retirements will partially unclog the pipelines of upwards mobility inside the system. I am leaning towards expecting the former.

- As regards specific regions, one important question for 2025 is whether regional leaders with links to Security Council secretary Sergey Shoigu will be axed, given the series of dismissals, corruption investigations and failed promotions affecting Shoigu’s circles. I have regarded the purge in the Defense Ministry as a process having to do more with addressing corruption in the defense sector, than a targeted hit on Shoigu himself, but it is unquestionable that the political momentum seems to be limiting Shoigu’s ability to push back, thus anyone seeking to unseat his allies may very well try to do it now. Andrey Vorobyov, the long-serving governor of the affluent Moscow Region looks like the prime target – and indeed the governor has had to deal with a series of corruption cases indicating attempts to weaken his position (as a side note: so has, to some extent, Alexander Drozdenko, the governor of the Leningrad Region who faces an election this year). But the Ulyanovsk Region, led by Alexey Russkikh, another person from Shoigu’s circles, could also be up for grabs. Then there is the question of whether the Kremlin will try to push former Donetsk commander Artyom Zhoga, Putin’s new plenipotentiary in the Urals Federal District, to play an active enough role to spook or even push out governors seen as inefficient in an area long since dominated by people close to Moscow mayor Sergey Sobyanin. Upon Zhoga’s appointment, there were rumors about “cracking down on the Yekaterinburg elite”, which the Kremlin sees as too liberal, for instance. Whether or not the Kremlin will attempt to play a direct more role in the upcoming vote on the head of Tatarstan in September this year will be indicative of how much the region’s traditional operational autonomy is still standing.

- Apart from the aforementioned changes in personnel policies, on the whole, I do not expect regional governance to change a lot in 2025; the crisis management system perfected in the COVID crisis, which distributes blame, political responsibility and micromanagement decisions downwards, while allowing the federal center to have a tight control over data flows and agenda-setting has worked well from the point of view of the federal authorities. Nonetheless, I suspect we will see a bigger emphasis on highly and sometimes flamboyantly performative politics to signal loyalty with the Kremlin’s stated or imagined policy priorities, many of which governors have little power or will to actually influence locally (e.g. birth rates or the appointment of war participants to administrative positions). This may also incentivize the kind of boastful and bullying behavior that has traditionally been the field of people such as Ramzan Kadyrov, but has now been adopted by, for instance, Vologda governor Georgy Filimonov in his conflict with steel mogul Alexey Mordashov.

- As regards politically risky issues, utility breakdowns and increasing failures in public services such as transportation or health care accessibility will continue to cause local dissent, and we might see growing tensions between those whose financial and social status has been elevated by the Kremlin’s focus on the war and those who are losing out or are simply exhausted. Especially if its hand is tied due to reduced military aid or a disadvantageous ceasefire, Ukraine could also ramp up drone and sabotage attacks against industrial establishments, infrastructure and key officials. However, over the past three years the Kremlin has learned to live with these issues. Repressive laws are now flexible enough for the authorities to interpret virtually any form of dissent as a serious crime or national security threat, and I expect “political technologists” and the security services to have plans ready to manage the risk. Operationally, the Kremlin will continue alternating between trusted (and tightly overseen) local officials and security-backed heavyweights (e.g. Khabarovsk governor Dmitry Demeshin) to handle local dissent, depending on how acute the crisis seems to be and how involved local elites are. On the other hand, sudden, violent eruptions of frustration, triggered by trivial issues but fueled by repressed dissatisfaction, will continue to represent a constant risk for the authorities that is difficult both to calculate and to mitigate.

“New elite” updates

The appointment of officials with war participant credentials continued in November and it looks like that this is increasingly becoming an expectation of the Presidential Administration of regional administrative elites. War participants are now also actively promoted in the “Leaders of Russia” competition of public officials, by Sergey Kirienko, the deputy head of the Presidential Administration who oversees domestic politics – this is yet another sign that the Kremlin would like to see regional governments hiring more of these people. No doubt the purpose is partly to underline Putin’s promise that war participants are Russia’s “new elite”, even as the government is effectively cutting payments for injuries.

The fact that these appointments continue at a steady pace, however insignificant the positions may be, suggests that sitting governors have understood the assignment and are now treating the appointments as a way to ingratiate themselves with the Kremlin, even when there is little substance behind the decisions. Notably, Tambov’s new governor, the aforementioned Yevgeny Pervyshov, a former mayor of Krasnodar highlighted the (rather questionable) war veteran credentials of his former chief of staff Valery Karasev when appointing him to the same position in the Tambov regional government, even though such appointments were completely commonplace in the past for outsider governors. Changing times call for changing ways of presentation of the same thing.

So far, nothing new, apart from, perhaps, where regional officials put an accent. But some recent developments suggest that we might be seeing a gradual, but more substantial change in what kind of war participants receive appointments and what they are going to be entrusted to do.

One notable example in November was the appointment of Lipetsk's new vice-governor, Roman Balashov. He is not the first war participant in such a position (and remember: Tambov governor is technically also a war participant), but the first without prior experience in politics, which means the crossing of another line in the ongoing, but so far fairly cautious, process of building a “new elite”.

It should be noted that, for all his lack of experience in public administration, Balashov is nonetheless a former soldier, thus not a complete outsider. As regards responsibilities, he is going to oversee issues related to sports (an area with relatively minor resources) and the well-being of other war participants, which could simply be regarded as a publicity stunt. But these issues are becoming more important for how regional administrations are judged, as is reflected in the new list of key performance indicators approved this month by Putin. Overseeing policies affecting veterans will potentially give those responsible a say over a growing amount of money in regional budgets. According to a recent investigation by IStories, regions on average are spending 13% of their social policy expenditures on payments to soldiers and their families. In Lipetsk this figure is 26%.

Meanwhile in Dagestan, the local assembly of Dagestanskie Ogni, a town of 30,000, elected Zamir Gadzhimuradov, another former soldier, deputy commander of the “Akhmat” battalion, and participant of the “Time of Heroes” program, as mayor. Gadzhimuradov had previously been appointed advisor for Sergey Melikov, the head of the republic. Vyacheslav Fedorishchev, the governor of the Samara Region announced that former war participants who took part in “Time of Heroes” would now supervise the work of the heads of municipalities on his behalf, and may, in future, do the same with the deputies of the regional parliaments, which is where regional business elites are typically represented.

Just as with the recent appointment of Artyom Zhoga to serve as presidential plenipotentiary in the Urals, we will have to see exactly how much autonomy the new appointees are going to be allowed to have vis-à-vis existing elites, but these decisions are potentially consequential as they may upset privileges for the sake of the ambitions of governors.

RZhD trouble

In spite of continuing logistical bottlenecks, it now appears that the 1.3-trillion-ruble investment program of the Russian Railways (RZhD) will be reduced by more than a third in 2025, and most of the remaining money will be spent on buying new engines, not the development of trunk infrastructure (that is, the improvement of the company’s throughput capacity). In particular, the third phase of the expansion of the Baikal-Amur Mainline, a key transit artery to the Far East, will likely suffer further delays as its budget will be reduced by around 80% next year.

RZhD is already raising its tariffs by 13.8 percent in 2024-26, but the company says that this is simply not enough to cover its increasing debt servicing and planned investment costs, not to mention rapidly increasing wages for workers, which is partly the consequence of the government’s focus on the defense industrial complex. Both aging rolling stock and worker shortages represent a growing problem causing delays in both directions. But producers who are also facing higher taxes and wage costs are unhappy about it. Meanwhile, both the Energy Ministry – led by Sergey Tsivilyov, himself interested in the coal sector – and the Kemerovo regional government, which Tsivilyov used to lead, are pushing hard to force RZhD to keep subsidizing coal exports at the expense of its investment program, and for the government to set prices for transshipment in ports. The railway company had previously proposed both to raise tariffs and to remove guaranteed transit capacity for coal producers, but the coal sector is facing its own deepening crisis due to falling prices and growing transit costs, a consequence of the loss of European markets.

The RZhD is not the only state-owned company that has indicated that it would reconsider investments next year due to high interest rates (which in all likelihood will grow further in the coming weeks as the Central Bank will probably consider another rate hike to stop the weakening of the ruble and mitigate the inflationary pressure that it generates), but perhaps it’s the most surprising, given the overload on Far Eastern railways and the stated priorities of the government.

In reality, it is unlikely that the investment program, or the cuts to it, will affect transit in the short term, as actual transit has increasingly been lagging behind stated throughput capacities in recent years. This is another major problem that is related to a lack of labor and throughput capacity, but is not fully explained by it. Last month railway operators reportedly complained to presidential adviser Igor Levitin that in mid-October, 35-40% of cargo intended to be shipped to Central Russia was not loaded in Western Siberia. RZhD blamed this on a lack of personnel, but it is also a result of Russia’s lopsided trade flows: its exports are mostly raw materials, making it less profitable to take container wagons back to the Far East (think of it as city bike rental schemes where, without trucks to shuffle the bikes around, the city center would be overloaded by abandoned bikes, at the expense of suburbs). The problem, however, is now so pressing that Putin himself instructed the government to figure something out. In the end, once again, someone will have to pay the bill, and it looks like the federal government is less and less willing to do so.

Regardless of whether or not additional investment would be able to change anything in the short term, both developments underline the incompatibility of Russia’s current war economy with investment goals, the heightened urgency of which is a consequence of the very same war.

Also-happeneds:

· Rostov sprint: It has been interesting to look at the mad dash of Vasily Golubev, the recently resigned governor of the Rostov Region, for a position in the Federation Council. The upper chamber of the Russian parliament has long since been a refuge of former regional leaders and elites (albeit this might be changing as seats are needed for the retiring security elite and war participants), but Golubev’s scramble was remarkably fast. On November 4 he resigned as governor. Ten days later, he received a mandate in the region’s legislative assembly, for which a United Russia deputy had to resign. Six days after that, one of the region’s representatives in the Federation Council, Irina Rukavishnikova, also resigned, opening the way for the chamber to approve, two days later, the appointment of Golubev in her place, as a member proposed by the regional legislature. The haste is probably not unrelated to the FSB’s interest in the region’s officials: just days after Golubev’s ship sailed into the safe haven of the Federation Council, one of his erstwhile proteges and deputy governors, Vitaly Kushnarev who was also regional minister for transportation, was arrested together with his deputy.

· Downscaling domestic flights: According to Kommersant, the Ministry of Transportation has not come to an agreement with the Finance Ministry on the conditions of roughly 19 billion rubles of aid that the government pays out to airlines to guarantee cheap flights between the Russian Far East and the Central (European) regions of the country and flights between Far Eastern population centers. This could lead to airlines reducing the number of flights, and reportedly many of them expect the government to cut these subsidies anyway. There are also technical bottlenecks. Airlines have recently also suspended flights on a total of 34 Airbus 320/321 aircraft due to a lack of spare parts or to reduce wear on engines, expecting them to expire soon. Aeroflot is taking over smaller planes from minor airlines to use for flights between Moscow and the Far East, with a refueling stop along the way, but industry insiders think that this is far from enough to ensure an adequate level of service. The issues highlight the tight corners, in which the government is operating as it is trying to guarantee and improve standards of living in an increasingly important macroregion.

· What is considered good politics: One way for the Kremlin to increase loyalty and internal coherence among the overseers of domestic and regional politics has been the promotion of various seminars and competitions, not only for officials, but also for so-called political technologists. One such competition is the annual “Hamburg Score” awards (the name comes from a Russian expression meaning, roughly, “fair judgement”) where the jury, headed by Kremlin-adjacent political analyst Yevgeny Minchenko, gives out prizes for the best electoral campaigns of the year. Of course, it would be quite absurd to treat these as genuine democratic electoral campaigns, given Russia’s current repressive political environment. But since local politics still tends to be more pluralistic than politics at the regional and federal level, and regional officials and political technologists still need to produce the figures demanded by the Kremlin, it’s interesting to see who was rewarded and why. The award for “best municipal campaign” was, for example, given to Alexander Dubrovin, the United Russia politician who, with the backing of local elites, defeated his incumbent rival – also from United Russia – in the mayoral election of Bratsk, in a rare intra-party split and in one of the very few semi-competitive votes held this year. The jury also praised the Liberal Democratic Party’s “use of artificial intelligence” in its campaign for the Solnechnogorsk assembly (supposedly to analyze voter data – but this is the party that had earlier created a neural network modeled on the late Vladimir Zhirinovsky). Unsurprisingly, the “best campaign for Putin” was found to be conducted in the Far East, where regions reported unrealistically high figures in March, which other regions then had to catch up with. The special award for “technologically challenging campaign”, given to St. Petersburg’s highly unpopular governor, Alexander Beglov, must have elicited at least a polite giggle from the audience. Notably, the jury also praised war participants running for seats in the assembly of the occupied Sevastopol for not touting their war credentials, but focusing on local issues instead. A soft pushback against The Narrative, if you’ve ever seen one.

· Municipal reform updates: The government-supported reform package, which will ultimately incorporate thousands of nominally free-standing municipalities into the existing vertical of power and extend the influence of regional governors over municipalities, is now expected to be adopted in December. However, the past weeks have seen municipal reforms in several cities and regions roll on. Yakutsk, where the scrapping of direct mayoral elections triggered a small protest, was perhaps the most heavily discussed case, but no less important changes have been adopted in other regions. In Smolensk and Voronezh discussions started to scrap party lists in municipal elections completely, which would see city all council deputies elected in single-mandate districts according to the first-past-the-post principle. As earlier examples of this reform have shown (e.g. in Vladimir), this would essentially mean ruling party candidates sweeping the vote, with the local opposition eliminated or reduced to a minimum. Meanwhile, Ryazan became the latest in the series of regions scrapping municipalities ahead of the adoption of the federal reform. Given the importance of municipalities both as (often) the last vestiges of pluralistic politics in Russia, but also for the authorities as a means to maintain grip on regional politics (e.g. through the “municipal filter” used to control the field of gubernatorial candidates), these reforms matter.

Municipal reform

One of the potentially most consequential bills on the agenda of the State Duma’s fall session is the reform of municipal self-governance.

The reform of municipal self-governance is the second stage of a public administration reform that started in 2021 with the adoption of the first part of the reform. This strengthened the powers of the federal government and the Kremlin over governors and regional governments, including codifying the president’s right to dismiss governors at will and influence the appointment of key ministries. That reform is still prompting further centralization attempts, e.g. a recent proposal by sports minister Mikhail Degtyaryov that regional governments should be obliged to get approval from his ministry before appointing regional ministers for sport (in classic Russian policymaking fashion, the norm, once adopted, could then gradually be extended to other portfolios).

The second part would have followed the top-down logic of the first, firmly incorporating Russian self-governments into the existing vertical of power, or, as the 2020 constitutional reform called it, the “unified system of public power”. Most notably, this would have meant the elimination of thousands of free-standing municipalities, but not only that. Regional governments would have vastly more power over the appointment of the heads of these districts, as well as, it increasingly appears, the mayors of regional capitals. Governors would be given the right to dismiss mayors who fail to meet key performance indicators set by the regional government, a month after warning them – allowing them to deal with potential local opposition effortlessly.

The bill was adopted in the first reading in early 2022, but the parliamentary procedure was then frozen for more than two years, only for the initiators of the law to dust it off for the fall session of the Duma this year, with almost immediately postponing the planned implementation of it again.

One of the bill’s authors, Pavel Krasheninnikov, who officially co-initiated several of Russia’s major political reforms over the past years, recently gave an interview to Kommersant, in which he explained that the law would likely be adopted before the end of the year, but with the implementation curiously postponed to 2026-35, dragged out over a ten-year period. This is unusually long: the original draft envisaged a transitional period of only five years. Krasheninnikov also partially walked back on another proposed measure, the elimination of roughly 18,000 free-standing municipalities and their institutions, folding them into city and municipal districts and doing away with their elections, by allowing the possibility for regions to pick and choose whether they want to preserve “historically significant” municipalities and “walking distance to government” (that is, the easy availability of government services). What the reform still does not answer – as I have pointed out in the past – is how to improve the state of municipal finances. At least, it seems, municipal officials will be exempt from legal responsibility if they fail to execute policies for a lack of money.

It is unclear what prompted the change, which postpones the implementation of the bill essentially indefinitely (considering how long 11 years are in the current political circumstances). The bill received more than 700 amendments, including from municipal representatives, thus it would be logical to assume that the authors simply took into account the political risks associated with such sweeping changes. Even with the current level of domestic political repression the Kremlin is likely too cautious to simply pull the rug out from under tens or hundreds of thousands of local officials on whose cooperation it has so far relied to exercise and maintain power.

But it is also questionable whether the concessions and the postponement matter at all.

Parliamentary hearings on the bill may have stopped in 2022, but the reform itself did not. Following the full-scale invasion of Ukraine the Kremlin used the tools of elevated domestic repression to roll back pluralism and local self-governance. Direct mayoral elections were scrapped in Tomsk, Novosibirsk and Ulan-Ude, all cities with vibrant (by Russian standards) pluralistic politics. Soon Yakutsk – which also elected an opposition mayor in 2018 – could be the next. The appointment of “outsider” mayors to manage major cities – e.g. in Tomsk or, most recently, Samara (a region where a team linked to State Council secretary Alexei Dyumin is taking over) – has become increasingly common, as has the appointment of officials from the governor’s team by city assemblies. In a number of regions municipal electoral systems were amended to benefit the ruling United Russia party. The authorities used the continuously expanding “foreign agents” legislation to expel independent local legislators from municipal and regional assemblies and to prevent new challengers from being able to stand. A growing number of regions have started folding municipalities into municipal districts, in spite of local opposition almost everywhere. The federal government launched the “School of Mayors”, based on the example of the School of Governors, to uniformize the cohort of municipal officials, and discussed introducing key performance indicators to monitor and evaluate the work of mayors.

It seems very likely that, instead of implementing sweeping changes over a short period of time and led by the federal government, the reform will instead serve as a directive for regions to observe and implement changes on their own territory and, crucially, not to implement anything that runs counter to the reform’s stated principles. With this, the Kremlin would essentially build on the first part of the reform, which was expected to strengthen loyalty to the federal government, as well as utilizing the crisis management mechanism that has been tested during the COVID crisis and military mobilization, which empowers regional governments to act with their own tools and on their own timeline to meet the goals defined by the Kremlin – and to take full political responsibility for any backlash or failure.   

Rates, inflation and investment

The business news site RBC drew attention to the fact that 2024 will likely turn out to be the year with the lowest degree of execution of public funds allocated for trunk transit infrastructure development projects since the program was launched in 2019. In the first three quarters of the year only 35% of the funds allocated for these projects were paid out (contrast with more than 57% at the same time last year). In particular, projects concerning high-speed railways (except for those linking Moscow with neighboring regions), the Azov-Black Sea area ports and the Northern Sea Route saw a low degree of financing, in spite of the latter two being stated development priorities. While some pointed out that this is partly due to changes at the helm of the Ministry for Transportation this year, and partly to a reorganization of National Projects and the reallocation of funds – which perhaps indeed has to do with it – the vaguely defined “geopolitical crisis” was apparently also brought up as a possible cause.

I have recently written specifically about the government’s development plans for the Russian Far East, for Riddle. I am not going to repeat the piece here, but the core takeaway is that while the Far East will likely develop at a faster pace than before due to Russia’s trade pivot to Asian markets, as long as the federal budget’s priority remains the war, the Russian government is not well placed to set the pace of this development. Development plans are fairly good at defining priorities but are often based on inflated expectations of funds and efficiency. They also envisage the use of significant private funds, a questionable assumption at a time of rising interest rates, rising cost of equipment, uncertain returns and a labor market crunch squeezing profit margins further – unless, of course, companies can rely on subsidized loans, which however amounts to state support. The weight of budgetary funds in public-private partnership projects has also grown over the past two years.

In reality the development of trunk infrastructure requires significant additional backing from the government even when there are strong private interests involved: in a recent example, the borders of the Khabarovsk Priority Development Area were changed to include a private railway connecting the Elga coal mine in Yakutia to a port on the Pacific coast, and the project was also added to the government’s list of priority development projects that can be executed faster.

Regional governments will be incentivized to spend more on development projects themselves by the government gradually writing off two-thirds of their debt on budgetary loans. But – after benefiting from the economic growth related to war production in 2023 – this year has highlighted problems with regional financing, as regions, on the whole, struggled to raise expenditures to match the level of inflation, and several municipalities and regions are struggling to raise funds on the market due to growing rates. Meanwhile, federal transfers are going to be cut in 2025. Several regions have drafted budgets with high deficits.

And it is not only regional budgets that face heightened pressure: in 2024 the federal budget will spend up to 1.5 trillion rubles more – backed by unclear resources – on war-related expenses and on supporting mortgages amid rising interest rates. Neither priority can be questioned without raising political risks, and war-related spending will grow further next year, crowding out development priorities. Furthermore, the draft 2025 federal budget was adopted assuming an average key rate of only 15%, even as the Central Bank raised its key rate to 21% in October.

Also-happeneds

·      Further restrictions on migrants: As the State Duma continues discussing several bills having to do with stricter regulations regarding migrants, regions have also continued adopting restrictions. The Ulyanovsk Region prohibited migrant workers from working in transit and retail; in the Irkutsk Region they won’t be able to work in transportation and education. The Omsk Region also forbids them to work in health care and pharmaceutical factories. The Maritime Territory will set up a migration agency to control the inflow of migrants and to provide “cultural education”. Certain regional officials – e.g. Kaluga head Vladislav Shapsha – have been calling for migration restrictions for years, but the current wave was triggered by terrorist attacks earlier this year, which led to a backlash against Central Asians (and also non-Slavic Russian citizens). Now more than thirty (of 83) regions limit migrants’ access to their labor market, even though several industries are struggling with worsening labor shortages. Last week Andrei Pertsev and Alexandra Prokopenko discussed this contradiction between political and economic interests in Meduza’s podcast on Russian domestic politics; it’s worth a listen.

·      FSB and law enforcement activity in the regions continued in October, leading to a handful of arrests of public officials, several of them connected to the local construction industry. In Dagestan the mayor of Izberbash was arrested at the beginning of the month for accepting a bribe from a developer. In Smolensk, a local United Russia deputy and head of a construction company was arrested in October, while in Ryazan the FSB arrested a former regional minister for construction. In the Krasnoyarsk Territory Alexander Gliskov, a local politician of the Liberal Democratic Party – who was arrested a year ago, shortly after he ran in the region’s gubernatorial election – was sentenced to ten years in prison for accepting a bribe from a road management company.

·      Personnel changes: The latest “veteran of the special military operation” to likely receive an appointment to a position in public administration is Sergey Sechenov, a former commander of the GROM assaulting squad who will reportedly soon be appointed to head the Tomsk city council. As in most previous cases, Sechenov would essentially be appointed to a relatively weak position, which depends on continued support from United Russia deputies (that is, established pro-government elites), but his elevation does suggest a rising trend of regions complying with the expectations of the federal center to put war participants into elite positions. At the same time, Belgorod governor Vyacheslav Gladkov was complaining to the Defense Ministry that too many regional officials were signing up as volunteers in the region’s territorial defense unit, causing “personnel issues”. Gladkov later prohibited law enforcement officers and employees of the Ministry of Emergency Situations from joining the unit. The governor, who is known as a savvy communicator, is likely angling for additional federal help to staff and finance the region’s territorial defense forces.  

·      A failed appointment: The regional assembly of Tuva did not appoint former deputy defense minister Ruslan Tsalikov member of the Federation Council from the region before the set deadline. Tsalikov was one of several deputies of Sergey Shoigu dismissed earlier this year after Shoigu was transferred to the Security Council. Several former Defense Ministry officials have since been appointed, but Tsalikov – whose name never officially emerged as a suspect in a corruption case – was seen as a shoo-in for the Federation Council from Shoigu’s home region. The fact that this did not come to pass could indicate that the purges at the Defense Ministry are not over yet.

·      Rumors on gubernatorial dismissals: The Vedomosti daily cited sources from the Presidential Administration that two governors – the Rostov Region’s Vasily Golubev and the Republic of Komi’s Vladimir Uiba – could be dismissed before the end of this year. Both of them are “outsider” governors, albeit Golubev – a former Moscow Region official – has led the Rostov Region since 2010. Uiba is a more recent appointment: a doctor tipped to head the region at the height of the COVID crisis in 2020, who nonetheless struggled to establish a working relationship with the region’s residents and elite and remained highly unpopular. Neither dismissal would be a surprise, especially as the Kremlin has seemed to move on from the practice of entrusting outsider technocrats to lead regions this years, but often such rumors turn out to be mere warnings to the officials in question.

·      AvtoVAZ wants higher tariffs: Russia’s car industry was one of the early casualties of international sanctions triggered by the war in Ukraine, as Western investors pulled out and supply chains became more complicated. The main beneficiaries were Chinese carmakers that quickly became dominant on the Russian market. It appears that the situation increasingly concerns domestic market players. In October, the president of AvtoVAZ, Russia’s largest carmaker requested help from the government to increase the market share of Russian manufacturers, even after the government recently increased the recycling fee. Currently, according to the company, almost 90% of the money spent on new cars ends up with foreign (primarily Chinese) carmakers. AvtoVAZ’s leaders also hinted that the government should provide subsidized loans to the company.

·      A political prisoner walks free: To end this dispatch on a high note – in mid-October Alexey Moskalyov, the father who was jailed because of his daughter’s anti-war drawing, came out of prison and was reunited with his daughter, Masha. Moskalyov was forced to spend almost two years behind bars, while Masha was transferred to her estranged mother – a deliberately inhumane and absurd sentence to discourage even the most innocent forms of anti-war activism.  

Image Source: Telegram

In this dispatch, I would like to dive into two recent developments that highlight that even in today’s Russia, Putin has to operate with certain constraints, such as vested interests or the laws of economics.

A new shiny representative of the “new elite”

On October 2 Vladimir Putin appointed Artyom Zhoga, a former entrepreneur and pro-Russian fighter from the occupied Donetsk Region in Ukraine to the position of presidential plenipotentiary in the Urals Federal District, a key industrial heartland which contains some of Russia’s most important energy and machine building regions. In recent years, and especially after his son was killed in the war, Zhoga has built himself a rapidly ascending political career. Prior to his appointment, he was the speaker of the “Donetsk People’s Republic’s” parliament, but most people probably remember him for his bad acting when, in December 2023, the Kremlin used his staged question to Putin about his plans to kick-start his presidential campaign.

Zhoga’s new position is the highest and most important occupied by a war participant since Putin announced, in his February speech, that the veterans of the war in Ukraine would become a “new elite”, in an attempt to attract more people to sign up contract soldiers.

Presidential plenipotentiaries are expected to act as liaisons between governors and the president (whom they represent in their district), coordinate and supervise the work of regional governments, and can also influence appointments. While the latter is not a given - and elites from key industrial regions have their own channels to the Kremlin - Zhoga certainly has significant backing in the Presidential Administration and can probably also build on the media hype around him, which links him personally to Putin (even if he is more of an avatar of the war than someone with real access).

In spite of this, his appointment does not appear to have been entirely smooth sailing. His predecessor, Vladimir Yakushev, who was appointed General Secretary of the ruling United Russia party, was dismissed more than a week before Zhoga was named to replace him. While rumors started almost immediately, Zhoga himself was not seen in public for almost a week until he appeared at a Kremlin-sponsored event celebrating the anniversary of the “annexation” of Ukraine’s occupied regions. There is some indication that local elites expressed strong disapproval with Zhoga. The Yekaterinburg-based website “66.ru” cited unnamed insiders who warned that Zhoga’s appointment might trigger a wave of resignations and dismissals in the regions of the Urals, beyond the new envoy “kneecapping” Yekaterinburg, the macroregion’s relatively pluralistic large city. Others hinted that Zhoga might want to focus on the war veterans of the Urals. The concern is probably justified, given that one of Putin’s recently appointed governors, Khabarovsk head Dmitry Demeshin is on a mission to rein in established elites.

Indeed, this is not the first time that local elites resist Putin’s “new elite”. War participants failed to sweep United Russia’s “primaries” this year, even though the number of such nominees grew threefold (from slightly over 100 to slightly over 300) between 2023 and 2024, partly a result of the party granting them a 25% bonus on each recorded vote. Most of these candidates however gained seats in weak municipal councils, not the regional parliaments, which serve as a major means for local elites to influence power. In Tuva, where a relatively high number of war participants ran (and received mandates), there were stories of outright intimidation, but war participants complained of incumbent elites actively undermining them in several other regions too. Some speculated that Andrei Turchak, the former general secretary of the party, had to leave – and become governor of the remote Altai Republic – partly because he failed to meet the Kremlin’s expectations in this regard.

More than a dozen other alumni of the “Time of Heroes” program, a kind of training for carefully selected ex-fighters to enter public administration, have been appointed to various positions over the past months; typically in regions whose leaders had – for various reasons - been more eager than others to follow the lead on the Kremlin’s pro-war initiatives. They were given positions either in towns or cities or as aides or deputies to established elites. It is unlikely that war participants with no prior experience and connections in public administration would get higher positions. They include city council speakers in Nizhny Novgorod and Krashnovishevsk (in the Perm Territory), a deputy speaker in Blagoveshchensk, deputy mayors in Stavropol and Tomanovo (in the Belgorod Region), a district head in the Khanty-Mansi Autonomous Region, an assembly committee head in the Altai Republic, a deputy governor in the Khabarovsk Territory, a regional minister in the Sakha Republic, an aide to the governor of the Kemerovo Region, an aide in the Ministry for Education, a director in the pro-Putin youth organization “Movement of the First”, and of course, three senators: one from the occupied Crimea and the Kursk Region (both directly affected by the war), and one from the Republic of Altai, led by Turchak who had not only tried to accumulate political capital with similar initiatives prior to his “exile” to the region, but is currently likely trying to do everything to get back into the good graces of the Kremlin.

Elevating actual war participants to leadership positions is just one part of the Kremlin’s efforts to build a pro-war coalition, along with a major ongoing asset redistribution in the economy, allowing officials to use war propaganda and service in the occupied territories as a career elevator, higher salaries in and around the defense industrial complex, as well as payouts and various goodies for soldiers and their families, which include free public transportation tickets, utilities, tax breaks, in some regions free land, and soon likely debt relief. 

Elevating war participants is clearly important enough for the Kremlin to push regional officials and elites to make an extra effort. As it is obvious from the occasional pushback, this is all fine until the numbers are low. Problems start when the supposed “new elite” starts to believe that they are entitled to more. Federation Council appointments, if they become a norm, can also cause frictions: these positions have been maintained for outgoing regional elites and, more recently, security elites. One important facet of power is the ability to define and enforce the contours of what is acceptable and expected behavior. With an increasing number of “veteran” appointments, the Kremlin is also testing its ability to do so.

The development of the Far East

Another issue that Putin has recently raised on the political agenda is the development of Russia’s Far Eastern regions. He spoke about this at last month’s Eastern Economic Forum in Vladivostok, an event that was supposed to highlight how successfully Russia is dealing with its forced trade pivot to Asian markets. In his speech, Putin enumerated some existing problems, notably the wider region’s energy production deficit (which he ordered the government to solve), transit bottlenecks (which he expects to solve with non-budgetary, including Chinese investment), as well as a lack of urban development (which the government wants to solve via adopting urban development plans).  

A couple of days later Putin’s Far East plenipotentiary and deputy PM Yury Trutnev said that Putin’s speech had a “magical effect on the surrounding world”. And indeed, the assumption often is that when the president issues an order, things speed up. Well, not quite.  

Investment in Far Eastern regions has indeed increased over the past years, at twice the pace observed in the rest of Russia. The draw is evident in rental rates. In a recent rating that I had reviewed on the blog earlier, compiled by the Cian real estate aggregator, Tynda, an important junction on the Baikal-Amur Mainline saw short-term rental prices double in the past 2 years. Cities in the Maritime Territory on Russia’s Pacific coast, home to the wide region’s biggest Russian ports, has also been affected. The federal government is expecting special economic zones to bring further investment. The Economy Ministry expects the total volume of investments to double and reach 10 trillion rubles by 2030.

However, a recent Audit Chamber report suggests that much of this investment has been ineffective. China has only reluctantly invested in development; notably, it has dragged its feet on two of the Kremlin’s priority projects affecting the Far East: the Power of Siberia 2 gas pipeline and the development of transit (mostly of liquefied natural gas) along the Northern Sea Route, due to worries about sanctions and the profitability of the projects.

Master development plans for cities, encompassing much of the wider region’s urban development projects (worth 4.4 trillion rubles in total), assume significant population growth in Far Eastern regions, with next to nothing to support these assumptions. Actually, in spite of various schemes designed to lure Russians to the Far East, these regions are still losing population. It is difficult to imagine that at a time of an already tense wage competition, rising taxes and declining profit margins, employers will be able to offer wages attractive enough for people to move to regions lacking basic public infrastructure. The money is not going to come from regional budgets, either. As the Central Bank recently noted, on the whole regional budgets have not been able to raise their expenditures on social policy, housing and capital investment even to match inflation. As long as the war remains the overall priority of the federal budget, this money will simply not be there. At the same time, the Kremlin has ambitious plans to meet what it expects to be growing needs.

Electricity shortages will need the construction of several more power stations, as it has been highlighted on the Vladivostok forum. The government expects overall electricity consumption to grow by 40% and need 3 GW of additional capacity. But this is not going to happen overnight; the growth of electricity demand is already evident from falling exports and it is likely that the authorities will prioritize industrial demand over other consumers, many of whom already routinely experience power cuts.

At high interest rates, railway expansion and electrification plans – which Putin also underlined – will need hefty tariff increases, as both Russian Railways and the Rosseti network operator have made clear. This will be translated into higher prices. Alas, even as throughput capacity is increasing on Russia’s Far Eastern railways, the gap between this capacity and how much actually gets transported has been growing. There is also a cutthroat competition for these limited capacities between exporters of various goods and commodities - including coal exporters who create low added value but have strong political connections and who cannot export profitably through Western Russian ports, and the infrastructure to do so along the Northern Sea Route does not exist.

One could, of course, go on (and I am planning to in an upcoming piece) – but one takeaway is clear. Once again, we see clear directives and lofty plans coming up against realities: in this case years of underinvestment in infrastructure, laws of economics that cannot be bent enough, and the unwillingness of partners whose support or assent the Kremlin would need to do something transformative.

Also happeneds

-       When money runs low: The independent election observation organization “Golos” drew attention to a fascinating story from the Perm Territory, highlighting how the election rigging – and its cost – extends way beyond election-day manipulations. The organization pointed out, based on court documents, that Elena Lopaeva, a former deputy prime minister of the regional government who was sentenced to four years in prison in February for embezzling money from a charitable fund, admitted to spending most of the embezzled funds to finance Vladimir Putin’s presidential campaign in 2018. Earlier the fund’s former head also claimed in an interview that tens of millions of rubles were spent on Putin’s campaign from the fund, as those responsible in the federal government for compensating the regional government for campaign expenditures did not do so. The case is a classic example of how regional governments are often simply given a list of expectations and benchmarks but not always the money to meet all of them.  

-       Arrest in Bratsk: One of the rare still somewhat competitive elections that took place in Russia this year was in the city of Bratsk in the Irkutsk Region, where a split in United Russia resulted in the incumbent mayor, Sergey Serebrennikov losing in a landslide against his fellow party member, Alexander Dubrovin. Now it seems that the conflict within the local elite did not end there. Two weeks after the election Vasily Dulya, a local businessman and opponent of now-former mayor Serebrennikov was arrested on charges of damaging Serebrennikov’s campaign ads.

-       Sabotage fears: In late September two teenagers were arrested in the Omsk Region for setting fire to a military helicopter, and accused of terrorism. Apparently, they were offered $20,000 for doing so by an unknown person approaching them on a messaging app. Later, the FSB arrested 39 “radicals”, among them several teenagers who are accused of talking to Ukrainian operatives on the Discord messaging app – which could soon be banned and blocked in Russia. The incidents highlight the continuing risks of random sabotage acts for the Russian authorities, made easier by the widespread and routine use, both by the Russian population and by operatives and cybercriminals, of encrypted messaging apps.

-       Municipal reform: One of the consequential bills that will be discussed and likely adopted during the fall session of the State Duma is the reform of municipal government. The reform is the second stage of an overarching public administration reform that began almost three years ago with the adoption of legal amendments affecting regional public administration. The proposed law on municipal self-governance would replicate many of the principles of the first stage of the reform, most importantly increasing the influence of governors over municipalities in their region and merging most current self-government units, effectively scrapping their representative institutions – a process that is already happening in several regions. I wrote about the goals of the municipal reform several times, including shortly after the original bill was presented.

-       Driver shortages: The average salary of long-distance truck drivers has increased by 50% since the beginning of the year, according to job service portal hh.ru. This is partly a consequence of transportation firms expanding their fleet, but also likely has to do with growing salaries in the defense industrial complex and adjacent industries. Along with rising replacement costs, this of course further drives up delivery costs. It is not surprising that developers are testing driverless trucks on certain highways.