How should Russia be governed? Is it governable at all? Eight years after the Soviet Union's collapse, these key questions have yet to be answered. The country's constitutional framework is weak and inherently flawed, and the balance of political and economic power between the centre and the regions is in flux. This paper argues that establishing an effective, regulated federal system is crucial if Russia is to develop a multiparty system in place of single-party rule, and a market economy in place of state ownership and central planning. It identifies two key areas that need to be addressed. First, fiscal relations should be clarified and codified to encourage the emergence of transparent, money-based regional economies. Secondly, the piecemeal devolution of political power to the regions should be rationalised within a precise constitutional framework. Russia, the world's largest state, requires greater decentralisation, but devolution need not threaten the country's integrity if it is transparent, and based on a greater respect for the rule of law.