moscow Paying for the Caucasus’ Loyalty with Siberian Oil

As of early March 2026, subsidies from russia’s federal budget to the regions had increased by 23.8% compared to the same period in 2025. The figures reveal a systemic transfer of resources from productive regions to politically sensitive republics, where the actual contribution to the country’s economy is close to zero.

irkutsk region, which ranks among the top 10 exporters in the rf and accounts for large-scale mineral extraction and electricity production, ended the first quarter with a budget deficit of 45.6%. nizhny novgorod region, which accounts for about 1.7% of the country’s total gross regional product and ranks among the top 15 federal subjects by GRP, had a deficit of 39.1%. kemerovo region, which accounts for nearly 50% of russia’s total coal production and 1.5–2% of GRP, recorded a deficit of 35.7%. tyumen region, the second-largest regional contributor to the federal budget in 2022 with a 9.1% share of GRP, recorded a deficit of 34.2%.

Meanwhile, ingushetia, whose share of russia’s GRP is less than 0.1%, entered the spring with a surplus of 223.2%. dagestan, with a contribution to the country’s industrial production of 0.1–0.3%, recorded a surplus of 206.5%. chechnya, where oil production accounts for 0.002% of russia’s total, recorded a surplus of 180.7%. karachay-cherkessia, one of the smallest regions by GRP, recorded a surplus of 123.5%.

The mechanism is clear: moscow takes resources from the regions that drive the economy and channels them toward funding its own priorities, particularly the war against Ukraine. At the same time, through the subsidy system, it buys off the Caucasus, whose elites have for decades kept the federal center under pressure with the threat of separatism, terrorism, and armed extremism. As a result, subsidies arrive even before the republics officially request them.

The second dimension of the scheme is purely corrupt. The excessive funding of the Caucasus republics is not only a geopolitical bribe but also a “secret commission” infrastructure: local leadership steals from subsidies in a controlled manner and shares the proceeds with the kremlin officials who “protect” this scheme.

The National Wealth Fund helps cover the growing deficit: as of the end of March 2026, its balance had decreased by 134.96 billion rubles. The main item of expenditure is covering the state budget deficit. Meanwhile, industrial regions are left to fend for themselves with own debt obligations, which are steadily increasing.