At the time of the conquest of the Central Asian khanates (see map 32), Russia began to introduce a new administrative system for the conquered territories. This administration underwent several modifications and received its final form only in 1899. After that time, all territories in Central Asia annexed by Russia during the 19th century were divided among five different jurisdictions. The major part of these annexed territories formed the Governorate-General of Turkestan, with its capital in Tashkent, subdivided into five oblast’s (the map gives their official Russian names): Transcaspian, Sir-Darya, Samarqand, Ferghana, and Semirech’e. The oblast’s of Akmola's and Semipalatinsk formed the Governorate-General of the Steppe, and two oblast’s, of Turgay and Uralsk, were directly subordinate to the Russian minister of the interior. The truncated khanates of Bukhara and Khiva were retained, under their existing rulers, as Russian protectorates. Following the pattern of the administrative structure in the rest of Russia, the oblast’s were subdivided into uezds, and the latter into volost’s. The governor-general of Turkestan was a serving general under the war ministry, and the governor-general of the Steppe was subordinate to the ministry of the interior. The governors of the oblast’s and the “uezd commandants” were also military officers. The administration of the lower units, heads of volost’s and village elders, were natives elected by popular vote.
Officially this system was called “military-popular administration” (voenno-narodnoe upravlenie), and it resulted, on the one hand, from the Russian government’s belief that only firm military rule could keep the country in the hands of the Russians, and, on the other hand, from the desire to make the local administration as inexpensive as possible. Such a desire was also the main reason for the preservation of the two khanates. Each of them had a special status. Bukhara did not officially become a Russian protectorate, and its amir was treated by the Russian government as an independent ruler. Amir #Abd al-Ahad (1885-1910) even played a visible role in Russian society, visiting Russia annually and being received at the court in St. Petersburg.
Until 1888 official relations between the khanate and Russia were conducted through the exchange of occasional embassies between Bukhara and Tashkent; in 1888 the Russian Political Agency in Bukhara was established, with a dual responsibility, to the foreign ministry in St. Petersburg and to the governor-general in Tashkent. Greater control of the khanate came with the construction of the railroad through its territory and the establishment of Russian border posts on the Amu-Darya, which also became Russia’s customs border in 1895.
The Khanate of Khiva never enjoyed even a semblance of independence. All relations between the khanate and Russia were conducted through the commandant of the Amu-Darya district (to addle) in the newly built Russian town of Petroaleksandrovsk, subordinate to Tashkent. The khan was not treated as an independent ruler and did not often visit Russia. One thing the two protectorates had in common was that the Russian government did not interfere in their internal affairs and administration, being content as long as peace was preserved, the rulers were in full command, and the legal rights of Russian subjects, especially merchants, were observed. The entire administrative and social structure of the khanates remained unchanged, except that their armies were reduced and slavery was abolished.

After the creation of an entirely new administrative structure, the strongest effect of Russian rule was on certain aspects of the Central Asian economy. In agriculture, the major economic impact was a sharp increase in cotton cultivation, following the increased demand of the Russian textile industry and the introduction of American cotton to Central Asia in the early 1880s. By the beginning of the 20th century Central Asia supplied half of Russia’s cotton needs. In the industrial development of Russian Central Asia the main innovation was the railroads, the first of which, from Mikhaylovskiy Bay on the Caspian Sea to Qïzïl-Arvat, was built in 1881 by Skobelev, but for purely strategic purposes.
By the end of the 1890s it was extended to Tashkent (crossing the Khanate of Bukhara), with a branch line to Ferghana. In the early 20th century other branch lines were added, and in 1906 the railroad from Orenburg to Tashkent was completed.
The railroads gave a great boost to cotton cultivation, making the transport of the Central Asian crop to the textile centers in European Russia much cheaper and faster. The railroads also contributed to the development of industry in the cities they connected, as well as to a greater mobility of the population. Most of the industrial enterprises were cotton-ginning mills, and by World War I almost two thirds of them were own by the locals. About 80 percent of all skilled workers (on the railroads, practically all) were Russians, and this social group, new in Central Asia, was especially susceptible to the socialist propaganda brought from European Russia at the beginning of the 20th centur.