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Russia needs a proper regional policy to ease the pressures of economic and political transition, a Moscow expert told theconference.

Sergei Artobolevski, senior researcher at the Russian Academy's Institute of Geographical Sciences, said: "We have the infrastructure and the institutions, but no regional policy at all. There is not even a department responsible for regional policy in the ministry of regional policy."

While there is a regional aid system, with 15 per cent of the state budget allocated to provincial governments, the distribution is made on political rather than economic need grounds: "It is typical of our system as a whole, where there is no system but favouritism."

Typical of this is the situation in the North Caucasus where North Ossetia receives much more money than neighbouring Dagestan: "This is not because of need, but because the local head of state has good relations with Moscow."

He said regional inequalities inherited from the Soviet system had been widened in the past few years. Once-guaranteed export markets in eastern Europe and the rest of the former Soviet Union had been lost, along with much of the home market. Single-industry and closed military communities had suffered particularly.