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Analysis & Opinion
14.09.11 The Guessing Game
By Tai Adelaja

Carefully crafted statements by Russian Finance Minister Alexei Kudrin have lent fresh momentum to the guessing game as to who might occupy the Kremlin come 2012. Kudrin told the Reuters Russia Investment Summit on Tuesday that he is ready to remain in the government in any role after the 2012 elections to push through economic reforms. But with both President Dmitry Medvedev and Prime Minister Vladimir Putin keeping tight-lipped on which of them will run for president next year, local media has interpreted Kudrin’s statement as his declaration of intention to become the Russian prime minister after the 2012 presidential elections. This development, some analysts say, could only mean that current Prime Minister Vladimir Putin would reclaim the presidency next year.

Kudrin, who has been finance minister since May of 2000, is widely credited with prudent fiscal management, commitment to tax and budget reform and championing the free market. It was his decision to keep Russia’s oil windfall in a reserve fund, rather than spend it on infrastructure or social projects that have helped the country to weather the global crisis and finance its budget deficit. But with oil, gas and mineral exports still accounting for some 70 percent of Russia's exports, the economy remains hostage to sharp price fluctuations commonly seen in the commodity markets. That would mean that men like Kudrin will remain in demand for a long time to come, analysts say.

The finance minister, who doubles as first deputy prime minister, did not rule out the possibility that he could take up the job of reforming the country's economy, Vedomosti reported on Wednesday. "If reforms are being actively pursued, then it becomes interesting," Vedomosti quoted Kudrin as saying. "And if we are ready to do that, then I am ready to work in any capacity that would facilitate this." Kudrin, the paper writes, has also publicly criticized the current policy of the government and the Kremlin, which he described as "risky" because "Russia began to live beyond its means." He was particularly unhappy with the Kremlin's pre-election spending promises, including the government’s decision to raise pensions and give tax holidays to some businesses. Kremlin-approved defense spending, he said, will gobble up 20 trillion rubles ($659.1 billion) over the next ten years, and there is no guaranteed source of paying for it.

Kudrin told Reuters on Tuesday that Russia's next government will have to raise taxes to make its public finances strong enough to absorb the shock of a possible oil price collapse. Kudrin also warned that after parliamentary and presidential elections in the next few months, Russia would have to reform pensions to put them on a sustainable footing, and find a way to finance big increases in defense spending, Reuters reported.

"Kudrin practically presented his reform program yesterday," Vedomosti said of the finance minister's latest revelation. "He did not rule out raising taxes. He said there's a need to reform public utilities, the protection of property rights, a more judicious arbitration of disputes, reduction in the state's involvement in business, cuts in costs of public administration and an increase in the power and greater independence for the regions and municipalities."

A Kudrin premiership will inject sanity and prudence into Russia's hard-to-reform economy, said Mark Urnov, a political analyst with the Higher School of Economics. "He's a good professional. And I suppose that if he becomes the prime minister, it will be good for the efficiency of the government as well," Urnov said. Kudrin has a love-hate relationship with business lobby groups, such as the RSPP and Opora Rossii, who are worried about his tight grip on liquidity. But, whatever the opinions of the various business lobby groups, Kudrin's policies have been salubrious to the health of the economy, Urnov said. "Without him, Russia will be wallowing in a huge debt and budget deficit with dire consequences for the economy," Urnov said.

Russia’s pro-Kremlin United Russia also appeared receptive to an impending Kudrin premiership. While State Duma deputies from the party have always criticized the finance minister, Vedomosti cited a party stalwart as saying that Kudrin would have an easy time getting the party’s endorsement as prime minister if he is appointed by Putin, who heads the party. "We are willing to consider him," said Yury Shuvalov, the deputy head of United Russia's top organizing body. "We're not ready to declare a vote of no confidence in the finance minister just yet, more so because he proved himself as capable of resolving difficult problems during the crisis years. It's about time we listen to him."

Some analysts, however, have ruled out the prospect of Putin coming back to the Kremlin in 2012. "Kudrin is not the type of guy given to political intrigues and backdoor maneuverings. That is not his style," said Yury Korgunyuk, a political analyst with Indem, a think tank. "My sense is that his statements were taken out of contest. At any rate, Kudrin is the type of guy who will work under any president – a fiscal hawk is always in demand." Korgunyuk believes that Prime Minister Vladimir Putin had had a solid agreement with President Dmitry Medvedev to run for a second term way back in 2007. "That was part of the initial agreement and there's no evidence to suggest that anything has changed."
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