Kudrin Promises the Return of Putin the Reformer

The main political sensation in Russia this week is Finance Minister Aleksei Kudrin’s statement that Russia needs fair and honest elections that would grant the authorities a mandate for executing difficult economic reforms (Rossiyskaya Gazeta, February 20). The nominally-dominant United Russia party expressed disapproval and suggested Kudrin should concentrate on his duties as the finance minister, while bloggers suspected him of cherishing the ambition of becoming the next prime minister (Kommersant, www.besttoday.ru, February 21). Sober voices argue that Kudrin remains firmly loyal to Prime Minister, Vladimir Putin, and has not actually said that the previous elections were dishonest, asserting simply that a new effort at boosting the legitimacy of the existing system is necessary (Vedomosti, February 21).

What is really striking about Kudrin’s keynote speech at the Krasnoyarsk Economic Forum is the explicit acknowledgement that the current economic policy is too generous and populist, and that there is no financial possibility to deliver on all social promises, to increase expenditures on defense, and to advance the plans for the modernization of infrastructure and the industrial base. Kudrin’s implicit bottom line is that President Dmitry Medvedev’s vision of “modernization” is not translated into any coherent economic policy, which currently sets the horizon no further than the elections in March 2012. The logical continuation of this line is that Medvedev’s proposition to expand state investments in “innovations” is unrealistic because Russia cannot afford to run budget deficits on the current level of oil prices, which is certain to nose-dive with the inevitable bursting of the bubble (Kommersant-Dengi, February 21).

Putin has cultivated a control-centered leadership style so this unexpected void in the economy where strong growth was taken for granted is disturbing, and he tries to re-establish control over the future. Much the same way as at the start of his “era” in 2000, Putin has gathered a forum of economic experts and challenges them to formulate their brightest ideas in the form of practicable prescriptions (Kommersant, February 17). The enthusiasm in the expert community is somewhat dampened by the appalling quality of statistics that the Roskomstat has been supplying in the last few quarters seeking to fulfill the political order on demonstrating that Russia has indeed overcome the crisis (www.gazeta.ru, February 21). One of the few easily observable economic facts is the acceleration of inflation, so despite Kudrin’s lamentations the target of 5-7 percent is going to be sacrificed for the sake of stimulating growth (Ekspert, February 21). But even a very probable 10 percent inflation cannot add another percentage of growth unless the money is invested, and no statistical tricks can hide the contraction of investment activity and continuing capital flight (Kommersant, February 18).

Economists know that Putin at this moment is not prepared to listen to any arguments on the need to cut social programs, and they are also aware that every proposal on streamlining the distorted state institutions would amount to an assault on entrenched corrupt interests (Kommersant, February 15). In fact, every reform idea now hits not the usual wall of bureaucratic resistance but the net of dirty intrigues and cutthroat squabbles. One high-profile example is the public row between the State Prosecution and the Investigation Committee about the patronage over the illegal gambling business in the Moscow oblast (Ezhednevny Zhurnal, February 21). Another is the demonstratively tough investigation of the financial books of Inteko, a real-estate corporation owned by Elena Baturina, the wife of Moscow’s former Mayor Yuri Luzhkov (Vedomosti, Moskovsky Komsomolets, February 18). Yet another is the severe but unexplained punishment of the Deputy Director of the Federal Security Service (FSB) Vyacheslav Ushakov, who was fired for “violation of ethics of the service” (www.newsru.com, February 21).

There is more to this back-stabbing than just the usual excitement on the eve of elections; the feeling of fin-de-siècle is seeping through the fences of walled communities and transmits from one elite group to another. Putin is trying to check this contagious worry and impress upon the wavering loyalists that he is charting the course of necessary changes that would not involve a redistribution of property or purges (www.gazeta.ru, February 22). This message is invalidated by Mikhail Khodorkovsky, who asserted in a recent interview that a large part of society would not accept Putin’s return to the Kremlin in 2012, which would mean an attempt to move back to the irreproducible past (Kommersant-Vlast, February 21). The harsh verdict issued in the second trial of Khodorkovsky and his partner Platon Lebedev in the last days of 2010 was supposed to signify Putin’s undiminished control over the law enforcement system, but the revelations of the crude manipulations of the court proceedings have turned the demonstration of strength into yet another crack in the monolith of Putinism (Vedomosti, February 18).

Kudrin is certainly not rising against his long-term master but perhaps trying to argue to the contrary that Putin’s comeback to the position of supreme and un-shared power with an overwhelming vote, which can presumably be easily organized, would reinvigorate the stagnant economy. What emerges, however, is confirmation that money will be in short supply for years to come, which for many “pillars” of the regime means that their personal fortunes will be taxed for all sorts of current political projects. Even the almighty Gazprom is squeezed and has to make gifts worth billions of dollars to quasi-independent producers like Novatek controlled by Putin’s shadow-friends Gennady Timchenko, Yuri Kovalchuk and others with even murkier identities (Novaya Gazeta, February 20).

Malignant growth of such clandestine business empires can only be interpreted by the majority of the political class as a sign of Putin’s either-or endgame. Putin is ready to hold on to the levers of power no matter what damage is done to Russia’s state integrity reducing Medvedev to irrelevance and squashing any political alternatives. He is also ready to deal with the breakdown of the crumbling kleptocracy not by taking a desperate last stance a la Colonel Qaddafi but by elegantly departing to a well-cushioned “island of stability.” This extra-smart policy planning hardly inspires masses of millionaires.