Putin Stays Committed to Free Markets

March 17, 2004
By Martin Sieff

Russian President Vladimir Putin has reshaped the Russian government in a streamlined, go-getting, fast reforming image to boost the nation's economy.

That is certainly Putin's self-proclaimed intent after he announced a major reform on Tuesday that was more notable for changing the structure of government than shaking up its personnel. "Putin appointed 15 new ministers, half of whom were in the previous Cabinet, and dismissed the most disliked government ministers," analyst Vladimir Fedorin noted in the Vedomosti business daily this past Wednesday.

Contrary to the fears of many Western pundits, Putin did not turn his back on free market reform. On the contrary, he strengthened the hands of its most fervent advocates in the previous government of Prime Minister Mikhail Kasyanov.

The three leading free market reformers in the old Kasyanov government, all of whom eagerly courted international investment in Russia, stay on under new Prime Minister Mikhail Fradkov, all of them with increased powers.

Fradkov announced Tuesday that veteran Finance Minister Alexei Kudrin and Economics and Trade Minister German Graf would retain the posts they held under Kasyanov.

Energy Minister Viktor Khristenko, 46, won Putin's confidence by reviving the long-plagued energy sector and making Russia the second largest energy producer in the world after Saudi Arabia. The president showed his approval by naming Khristenko to head a consolidated super-ministry that will coordinate all energy activities and construction projects for nuclear energy as well as oil and gas.

Khristenko is a free market reformer who wants to make Russia attractive for giant international oil corporations. He has also boosted Russian cooperation with Saudi Arabia and Iran to keep global oil prices relatively high but stable to maximize the revenues.  Now Khristenko will have the additional responsibility of reining in the traditionally maverick Russian atomic energy construction industry, which has long been a stronghold of anti-Western hardliners.

The cause of reform also got a boost from the elevation of free market economist Alexander Zhukov to the key position of first deputy prime minister. Like Gref and  Kudrin, he comes from Russia's second city, St. Petersburg - Putin's hometown.

Putin's selections are expected to reassure international investors and bankers that Russia will become more hospitable to them rather than less.

"There is ... the feeling that the next presidential term will stand out for its cooperation between the branches of power," Dimitri Kozyrev wrote for the RIA Novosti news agency. "The epoch of conflicting centers of power, different poles of influence and constant infighting has been left behind."

Putin announced his new, highly streamlined government Tuesday only five days before he won a second four-year term Sunday.

"The government's link with the Duma and the presidential administration is symbolized by the appointments of former Duma Deputy Speaker Alexander Zhukov as the only deputy prime minister and ex-deputy chief of the Kremlin administration Dimitri Kozak as the new government office head," Kozyrev wrote.

Putin Tuesday told top officials he had streamlined the Russian government to make it more dynamic and fast moving.

"Reorganization of the supreme executive body of power ... was prepared within the framework of administrative reform for almost two years," Putin said in a speech at the Kremlin to senior officials, according to an official transcript.

"The result of this has been a new, more compact government with one deputy prime minister and almost half the number of ministers," the Russian president said. "There were 30 ministers including the Prime Minister and now there are 17.  "The essential aim is ... in avoiding double-ups, to logically combine previously disconnected and isolated functions, to make new ministries more effective and influential and give them more dynamics and independence," he said.

Putin and their allies appear heavily influenced by the ideas of Andranik Migranian, a highly influential political intellectual and presidential advisor in the later years of president Boris Yeltsin. Migranian successfully predicted that China's remarkable economic growth would rapidly revive after the 1989 Tienanmen Square massacre and that Russia's would collapse if too much democracy was introduced too soon.

He argued that the Chinese model was the one Russia needed to follow, concentrating first on maintaining a strong central government devoted to the rule of law, the protection of property and the creation and maintenance of a real free market. Only this way, he argued, could a big enough middle class and prosperous working class with property stakes in society be developed, which is the essential precondition to making democracy work.

The pattern of Putin's new appointments this week suggests he has taken those lessons to heart.

Martin Sieff is chief news analyst for United Press International.  This piece is used with permission of UPI.