The Law on the so-called Closed Administrative Units was adopted in 1992 and was aimed first of all at the formerly closed, nuclear weaponry design and production centres. The latter suffered from funding shortfalls and were happy to accept the offer to becoming a Closed Administrative Unit.

This status brought with it a number of privileges. Primarily, all taxes collected inside such a unit remain in the local treasury rather than being shipped to Moscow never to be seen again. Secondly, the Law allowed favourable taxation on investments within the boundaries of these units.

By 1996, a good number of applications to the Government for obtaining the Closed Administrative Unit status existed. Numerous requests were approved. Among others, the nuclear weaponry research centre in Arzamas-16, the former nuclear bombs ingredients manufacturing plants in Tomsk and Krasnyarsk received this status. On the Kola Peninsula and in the Far East, the special status was granted to the naval shipyards and cities adjacent to nuclear-power submarines bases.

At present, there are 10 former nuclear weaponry design and production centres operating as closed administrative units: Snezhinsk (Chelyabinsk-70), Ozersk (Chelyabinsk-65), Novourask (Sverdlovsk-44), Lesnoy (Sverdlovsk-45), Seversk (Tomsk-7), Zheleznogorsk (Krasnoyarsk-26), Zelenogorsk (Krasnoyarsk-45), Zarechny (Penza-19), Trekhgornoe (Zlatoust- 36) and Sarov (Arzamas-16). In addition, two military shipyards subjected once to the former Ministry of Defence Industry and currently to the Ministry of Economy, and some 20 cities and settlements subjected to the Ministry of Defence operate as special units as well.

The law was a success. Investments started to flow into the cities gradually, providing the local treasuries with deerly needed funds. But the developments were not welcomed by Moscow. The Ministry of Finance decided to retake control over the funds received from the commercial activities. The amendments depriving the closed cities of the right to keep locally collected taxes passed the State Duma hearings on February 20 this year.

As a consequences, the closed cities will feel harder than ever before the squeeze of reduced federal budgets. Apparently, the decision taken by the State Duma members is not a result of a thorough review and examination of the situation. Social tensions are likely to increase, jeopardising the nuclear safety and security, believe local administration in Arzamas-16.

Last autumn already, closed atomic cities were hit by protests. In Arzamas-16, salary arrears reached 3 months. Similar actions are expected to take place this year, as a result of the adopted amendments.