Putin’s Reformist Government—Will It Work?

Vladimir Putin first became Russian president in 2000—appointed by then–head of state Boris Yeltsin to succeed him. Last March, Putin was reelected in a landslide—winning over 76 percent of the popular vote (Interfax, March 19). On May 7, he was inaugurated for six more years as president. The same day, Putin reappointed longtime trusted cohort Dmitry Medvedev as prime minister. Medvedev served as Russia’s essentially pro forma president from 2008, but dutifully stepped down in 2012, allowing Putin to legally move back into the Kremlin, circumventing the constitutional restriction forbidding two consecutive presidential terms.

Constitutionally, the prime minister in Russia is also a vice president of sorts, immediately taking over as acting president if the latter cannot execute the duties and responsibilities of the office. That was how Putin became president after Yeltsin resigned on New Year’s Eve 1999. A snap presidential election must be held within three months after a prime minister takes over the Kremlin to confirm him or possibly elect someone else. This constitutional arrangement has made the post of prime minister a hotspot of Byzantium-style intrigue in Moscow. The presidency carries practically unlimited power in Russia, but the boss in the Kremlin could always suddenly be removed and replaced. Medvedev seems to pose a minimum threat by being sufficiently unpopular, shunned for timidly surrendering the presidency without any attempt to run for reelection. Medvedev was promptly confirmed as prime minister by the Duma on May 8, 2018. Putin attended the session and announced the main task of the new cabinet: to realize the special presidential ukaz (directive) signed on May 7, spelling out an ambitious six-year program of social and economic development, or national “breakthrough” as Putin tends to label it. This social and economic “breakthrough” must turn Russia into a modern and rich country with Western standards of life expectancy, education and medicine as well as a thriving economy. The reforms require an investment of some 25 trillion rubles ($410 billion), of which some 8 trillion ($131 billion) is additional expenditure, the source of which must be “found” (Interfax, May 8).

Other cabinet members in Russia are appointed by the president, they do not require parliamentary conformation and cannot be dismissed by the legislature. Under existing law, a new government must be put together a week after the confirmation of a new prime minister, but this did not happen by May 16. Only the revised structure of the new government was decreed by Putin, whereas a full list of cabinet member names was not (Kremlin.ru, May 15). Putin, his administration and Medvedev had months to figure out the new team; they did not need to worry about confirmation hearings or the opinions of a nonexistent opposition or the public, which has no say in matters of state. But still the wrangling has dragged on. Of course, eventually the new cabinet will be installed, but the continuing delays expose apparent deep internal divisions within Putin’s regime. A loose coalition of diverse interest groups seems to be pulling Russia in opposite directions.

The task of leading the planned social development “breakthrough” has been tasked to Tatyana Golikova (52), a former deputy finance minister under then–finance minister Aleksey Kudrin. The latter is apparently the main ideological force behind the proposed radical social, administrative and financial reforms. In the past, Golikova had also served as health minister, Putin’s aide in the Kremlin administration and, until May 17, 2018, as the chair of the Accounts Chamber—a parliamentary budgetary watchdog. Golikova is slated to become a deputy prime minister in charge of the social, medical and educational ministries and departments of government. Even without the cabinet fully formed, the government is planning, this week, to announce a highly unpopular social reform move—to begin substantially increasing the retirement age in Russia, which at present is set at 55 years for females and 60 for males. The retirement age increase has been strongly advocated by Kudrin and his think tank, the Center of Strategic Research (TsSR), which has been writing reform plans for Putin’s present six-year term (see EDM, May 3). The retirement age hike could help streamline the government-run pension system and decrease the need for budgetary pension subsidies, thus freeing money for “breakthrough” reforms (Kommersant, May 17).

The other potential source of additional income for the “breakthrough,” according to Kudrin’s reform plans, is a substantial cut in defense spending. Finance Minister Anton Siluanov (55), another former Kudrin deputy, is being promoted to become first deputy prime minister in the new cabinet while continuing as minister of finance—thus becoming a financial tsar of sorts. Siluanov has openly clashed with Defense Minister Sergei Shoigu—the designated leader of the so-called “party of war” in Moscow—attempting to curtail the spending demands of the powerful Russian military-industrial complex. In October 2017, Siluanov, in a public lecture, warned that overextended defense spending, combined with a fall in oil prices, led to the breakup of the Soviet Union, in 1991. He implied that present-day Russia may suffer comparable “serious consequences” (see EDM, October 26, 2017).

Kudrin has called for a de-escalation of the present confrontation with the West and cuts in defense spending as the only way to kick-start substantial economic growth in a stagnant economy. He has been advocating a substantial one-third cut in the number of state bureaucrats he believes are inefficient and corrupt. Kudrin has accepted Putin’s unofficial offer to take over the Accounts Chamber vacated by Golikova, which may give him an independent capability to oversee administrative, financial and social reforms. The chair of the Accounts Chamber is nominated by the Kremlin out of candidates provided by the Duma (lower house of parliament) and then approved by the lower house. The ruling United Russia faction in the Duma apparently does not agree with any of Kudrin’s reform plans, but can be expected to rubberstamp his appointment anyway, as ordered by Putin (Gazeta.ru, May 14).

The Kudrin-led reformers seem to simultaneously be taking on the impoverished masses by hiking retirement age, the military-industrial complex by defense spending cuts, and the all-powerful bureaucracy. It looks like a cavalier charge doomed for failure. As oil prices inch toward $100 per barrel, the need for painful, but overdue reforms may fade away as state coffers once again overflow with petrodollars. But without systemic economic restructuring, the next unexpected sharp oil price slump could end up knocking down the regime permanently.