Publication: Russia and Eurasia Review Volume: 1 Issue: 2

By Elena Chinyaeva

President Putin and Prime Minister Mikhail Kasyanov are engaged in an unexpectedly vocal dispute over the tempo of Russia’s development. The shouting match enlivens Russia’s internal politics but confirms as well the apprehension that the Russian elite has no clear vision of the country’s development. The core of the debate is the 2003 state budget.

On June 1, President Vladimir Putin sent his budget address to the State Duma, the Federation Council and the government. He was vague about his plans. The budget was balanced in 2000 and 2001, he said, and the 2002 budget calls for a surplus. For 2003, he stressed the need to cut expenditures to stimulate economic development. Noting the positive trend in growth (GDP rose 5.5 percent, 8.3 percent and 5.0 percent in 1999, 2000 and 2001), he nonetheless called the pace unsatisfactory. The government should aim for growth in the range of 8-10 percent per year, he said, and press on with reform. But he offered no concrete proposals, set forth no development priorities and gave no advice on how to complete structural reforms.

On June 13, the Ministry of Finance presented the first draft of the 2003 budget to the government. Its preliminary parameters are the following: inflation at 10-12 percent, a year-end exchange rate of 34 rubles to the dollar (now 31.50), a surplus of 99 billion rubles (US$3.15 billion) and economic growth of 4 percent. Aleksei Kudrin, the finance minister, emphasized that budget targets will be met regardless of world oil prices. Prime Minister Mikhail Kasyanov, speaking in the Duma, no less expressly stated that the current tempo of Russia’s development reflects the existing situation. Setting artificially high targets of development, he said, would only harm real prospects.

Differences between the president’s economic goals and the Finance Ministry’s budget reflect intense infighting in the corridors of power.

Just over two years have passed since Putin’s inauguration as Russia’s second president. One of his first initiatives was his drive to construct a “strict vertical of power”–with of course the president on top.

Putin has taken few dramatic, visible steps to achieve the goal. On the contrary, far too often his critics reproach him for indecisiveness and lack of a clear vision. Nevertheless, two years later, power in Russia appears so thoroughly consolidated in the presidency that internal politics has nearly disappeared. All the major political players have seen their roles reduced to expressing consent with the president.

So the disagreement between Putin and Kasyanov is both good and bad news. On the one hand, it suggests that internal politics is back, and as a healthy, open dispute over real issues, not just murky intrigues over patronage. On the other, it shows that the Russian ruling elite has neither a clear vision nor an agreed strategy for the country’s development.