As the economic crisis deepens in Moscow, Kremlin is rolling up its sleeves to likely reshuffle local governments that are sinking further into debt and defaulting on loans and mortgages. Kremlin officials are angered by the misuse of the funds Moscow had allocated to the regions to quell their financial crisis.

Among those on the radar is the prosperous and second most populated Russian entity: the Moscow region, which surrounds, though not includes, the nation's capital and spans 18,000 square miles, headed by a Russian army veteran Boris Gromov.

But with its 18% budget deficit and a string of scandals plaguing the Moscow region since Gromov, 64, became its governor nearly a decade ago, there are talks that he may be ousted from his post.

The region’s debt hovers above 155.2 billion rubles ($4.9 billion), nearly a quarter of the debt of all Russian regions combined, according to the figures released by the Russian Ministry of Finance in June.

And while the Moscow region needs to pay about 33 billion rubles ($1 billion) of its debt by the end of the fiscal year, it only has one third of that in the budget, according to vice-minister of finance Anton Siluyanov.

Back in December of 2008, Standard & Poor downgraded the region’s rating to SD, or selective default level.

The federal government in July allocated 4.6 billion rubles to balance out the region's finances “in response to the claim of the region’s governor Boris Gromov,” Russian State News Agency reports.

But scandals and criminal investigations plaguing Gromov’s governorship only highlight the region's financial woes. Last August, the federal government began a criminal investigation when news broke out that the former minister of finance, Aleksey Kuznetsov, misappropriated land for use by the company of his wife, an American entrepreneur Zhanna Bullock. Kuznetsov also turned out to have had American citizenship, prohibited for a Russian government official. Kuznetsov fled Russia immediately.

Another scandal involved MOITK, Moscow’s Regional Investment Trust Company, a government vehicle intended to stimulate cash flow into Moscow region’s budget. The plan was to return 50% of profits back to the region and to invest the other half.

Boris Gromov, governor of the Moscow region

But, co-founded by Gromov in 2000, MOITK ended up building opulent structures all over the region financed by loans it couldn't pay, or, figuratively speaking, printing the money it needed. Borrowing from Russia's banks, including VTB and Sberbank, as well as the local government’s coffers, MOITK projects boasted a ski complex, bobsled tracks, stadiums, and electric power plants, totaling about 500 buildings all in all.

However, MOITK was unable to pay back the loans and defaulted, getting a rating downgrade of SD by Standard & Poor.

To make matters worse, last month the federal prosecutor’s office opened an investigation into the missing 2.6 billion rubles ($82 million) from Moscow region’s budget, Rosbalt news agency reported on July 21.

The region's government routinely doled out funds to firms registered to "alcoholics, persons serving prison sentences, persons with missing documents and others" to pay off fictitious debts, according to the Rosbalt report. After that, the funds would go offshore.

Yet another point of contention on Gromov's plate is the alleged system abuses by the "Battle Brotherhood" (Boevoe Bratstvo), an organization of Afghan war veterans, which Gromov, a decorated general who fought in the Afghanistan war (1979-1989), helped found.

Leningradskaya Pravda newspaper alleges government favoritism in promoting Afghan veterans, or "brothers," to business and political posts in the Moscow region and corrupt business tactics in their network. One recent case involved the scalping of government land to outside investors at inflated prices.

The brotherhood network led to a slew of reactionary resignations of Gromov's non-veteran assistants in 2009, Leningradskaya Pravda states.

While Gromov’s fate is unclear and the heavily-scrutinized Moscow region hovers on the verge of bankruptcy, Gromov is likely to become one of the first casualties of the power shuffle. Some are betting on a new gubernatorial candidate from the office of Yuri Luzhkov, the mayor of Moscow, who has long had his eye on unifying the powerful capital city and Moscow region into one political entity.