In the early years of its existence, the Russian Federation adopted a system of differential treatment of its regions in order to cope with the great degree of diversity present in them. This paper examines the Russian Federation’s asymmetric federalism by evaluating the system’s role, significance and effects on the Federation’s development. The study incorporates a detailed description of the asymmetric federalism over time along with the benefits and costs incurred by its implementation. It also stresses the importance of the system within the process of nation-building in the Federation over the last decade. The paper concludes that asymmetric federalism helped significantly to glue the country together in the early years when national preservation and unity were the main issues in the Federation. However, as the separatist threats significantly decreased and the political friction and economic difficulties of the asymmetric treatment of regions became more pronounced and obvious, most of the country rightly demanded a simpler, more transparent and fair approach to intergovernmental fiscal relations. Asymmetric federalism, therefore, contributed to the Federation’s 1998 debt crisis and had eroded national solidarity and a national purpose. Thus, the early cure had become poison.
