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Policy behind Kudrin ouster

Alexei KudrinFinance Minister Alexei Kudrin's sudden ouster on the back of a fiery row with President Dmitry Medvedev this week is has revealed long-running divisions in the government that are often as personal as they are ideological, experts say.

And the fallout is likely to have an effect on the future government, where Prime Minister Vladimir Putin is expected to win the presidency and appoint Medvedev as the head of his cabinet. In a candid explanation circulated to news agencies after his ouster, Kudrin cited serious policy differences and ongoing plans to leave the government as the key reasons.

"In February of this year I discussed my desire to resign with the chairman of the government [Vladimir Putin]," he said in a note published by RIA Novosti on Wednesday. "Then it was decided that my resignation was not suitable, partially because of the critical situation due to the budget process being affected this year by the electoral process."

Still in the business

Putin on Tuesday appointed one of Kudrin's deputies, Anton Siluanov, as acting finance minister, and handed Kudrin's job of running the financial bloc of the government to First Deputy Prime Minister Igor Shuvalov, another of Putin's deputies.

Kudrin, meanwhile, was expected to remain involved in some key financial policy-making. Kudrin, as head of the National Banking Coun- cil and chairman of a presidential council on financial markets, will continue to oversee the creation of an international financial center in Russia, Kudrin's deputy, Sergei Storchak, was quoted by RIA Novosti as saying on Thursday.

But government officials were struggling to maintain the peace after the unprecedented sacking of one of Russia's most powerful politicians.

Veteran liberals like Anatoly Chubais, the head of Rosnano, were decrying the resignation as a "loss" that would only exacerbate the financial risks Kudrin was known to warn about.

"There are no professionals of this level left anymore in Russia, who are capable of working under current political conditions," RIA Novosti quoted Chubais as saying.

Others were more careful, with Economic Development Minister Elvira Nabiullina calling Kudrin a talented professional but adding that "it was difficult to work with him, but always interesting," Interfax reports.

But State Duma speaker Boris Gryzlov blamed the ouster on the Finance Ministry's policies. "This would have happened sooner or later since the interests of the country's development demand a more active and flexible financial policy," Interfax quoted him as saying.

Indeed, Kudrin's standoff with Medvedev over budget spend- ing has been evident for several months, with his muted criticism of Medvedev's budget proposals presented in June. Kudrin this summer grudgingly acknowledged the need to raise certain taxes after Medvedev ordered payroll tax cuts to benefit small business. But Kudrin's open refusal on Sunday to work under Medvedev if he were to become prime minister was
tied specifically to the president's increased defense spending ­ an apparently populist measure to help pay for apartments for military officers.

Since then, Medvedev, who told Kudrin angrily on Monday that he and not the prime minister would be making decisions until May 7, justified his decision to increase defense spending by $65 billion through 2014.

"We can't manage without defense expenditure," RIA Novosti quoted Medvedev as saying Wednesday. "[They should be] expenditures worthy of the Russian Federation ­ not some sort of banana republic."

Liberal party to blame?

The row brought another recent scandal to the fore ­ the collapse of the pro-business Right Cause party after its leader, billionaire Mikhail Prokhorov, was forced out in what he called a Kremlin-backed party coup.

Kudrin was widely touted as a possible leader for the party as late as this spring, shortly before Prokhorov was chosen to lead it in June. And Medvedev openly brought up the failed negotiations after he told Kudrin to resign on Monday.

"Alexei Leonidovich had the option of stating his position a lot sooner and decide on his political future. To join the 'right forces,' by the way. They invited him, but Alexei Leonidovich refused," Medvedev said.

In his response, Kudrin pointed out that joining Right Cause was never an option for him. "I never considered taking part in an artificial project that in fact discredits the liberal democratic idea," he said.

As early as last year there were talks under way to get Kudrin to head a right-wing party, possibly based on Right Cause, a source close to the presidential administration told The Moscow News on conditions of anonymity. According to the source, Putin at that time opposed the idea because he valued Kudrin as a finance minister, not as a political leader.

New configuration

Analysts pointed to an ongoing policy conflict between the Finance Ministry and Economic Development Ministry as one of the key reasons behind Kudrin's ouster. The ministries have differing conservative and liberal spending policies.

"The form of the sacking was unexpected, but not his departure itself," Dmitry Abzalov, chief expert at the Center for Political Trends, told The Moscow News. "One had a more conservative fiscal strategy of preserving funds and create safety nets like the Reserve Fund. The other espoused more spending on infrastruc ture."

The fact that Kudrin's job ­ as deputy prime minister responsible for the financial sphere and as head of the Finance Ministry ­ has been separated gives rise to a new government configuration where the liberal policy ­ with economic growth as its priority ­ will take the upper hand, Abzalov said.

But that is not likely to be permanent, he added.

And while the ouster clearly reflected a more personal side ­ with Kudrin's ambitions to head the cabinet after Putin coming to the fore ­ Abzalov said that the appointment of Kudrin as prime minister was all but ruled out, due to Putin's prior agreement with Medvedev.

"In a way, Kudrin was a victim of his own ambitions," Abzalov said.

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