The 1992 federal treaty and the new constitution of 1993 established a formal legal basis for center-region relations, but both documents were unclear on many issues. This lack of clarity strengthened the growing inequality among regional units. At the beginning of 1993, President Yeltsin stated, "The Russian government does not conduct any kind of a regional policy. This does not mean that the process of defining the contents of Russian regional policy is under way, but really that such a policy does not exist."

Thus the regions were left to cope with the economic hardships of the 1990s as they saw fit. Some, notably the few resource-rich ethnic republics, decided to maximize their political and economic independence. Many regions resorted to anti-market measures, such as export restrictions, import tariffs, and local money surrogates in their pursuit of self-sustainability, especially in the food sector. Every region tried to maintain good relations with the government to attract the most subsidies, transfers, and cheap loans for its regional development.

The center tried to clarify the situation by negotiating "power-sharing" arrangements with certain regions. These secret bilateral agreements, however, did little to improve the situation. The federal authorities were both unwilling and incapable of controlling a rapidly growing jungle of contradictory and unconstitutional regional laws. In 1996, as part of President Yeltsin’s re-election strategy, governors were for the first time elected and not appointed by the President.

The Putin era so far seems to be based on a completely different set of ideas from those of his predecessor. In his inaugural address in early May, Mr. Putin stated that he would seek to strengthen the role of the state, which implied greater efforts to establish respect for the law, crack down on crime, and implement economic reforms without endangering the emergence of democracy.

One of his first acts as President was to initiate an administrative reform that reallocated Russia’s 89 regions into seven federal administrative districts led by representatives picked by Mr. Putin. Numerous regional-level regulations in conflict with federal law were also abolished. After tough negotiations, he even succeeded in passing a law on formation of a Federation Council. The act diminishes the powers of regional leaders by eliminating their automatic right to a seat on the Federation Council. Mr. Putin also now has the right to dismiss regional leaders and disband regional parliaments.

While it is too early to judge the merits of these legal reforms, Russia clearly needs simple, enforceable legislation to elaborate the division of powers among federal, regional, and local governments.

But, as always, there is the reverse side. We see imposing more control on regional activities as a good move—but only to a limit. Overwhelming decentralization and excessively tight restrictions on regional economic policies are bound to be detrimental. The Soviet-type impossibility of doing anything without permission from above is incompatible with innovation, imitation, and economic reform at the regional level. The big danger is that regional initiatives will be killed before they are ever born.

Due to the large number and variety of natural, economic, and social conditions, Russia needs to allow for regional variation in policies within a clear legal framework.