In this essay we identify economic and political factors that led both the federal centre and the regions in Russia first to open the process of federal bargaining and then to pursue it in the form of signing bilateral treaties, unique for each region. Many Russian politicians and most scholars of Russian politics view asymmetric bilateral bargaining as a dangerous institutional choice contributing to federal instability and potentially threatening the disintegration of Russia. We offer an alternative view. While the treaty-signing practices are actively maintained by Russian political elites, we argue that the genesis of asymmetric bilateral bargaining in Russia had a strong ‘path dependence’ component. In particular, it was precipitated by the developments of the last period in evolution of the Soviet federalism.