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Russian tycoons' cuts dilemma

File Photo of Dmitri Medvedev
file photo
Depending on who you believe, President Dmitry Medvedev this week either asked a meeting of the country's top businessmen to back his reform program, or to back him personally for re-election in 2012.

Accounts of the meeting on Monday differ widely. Some participants say the president did not make an appeal for tycoons to take sides, while others suggest an attempt was made by leading reformers to stop Prime Minister Vladimir Putin coming back to the presidency next year.

The argument that business leaders have switched their allegiance from Putin to Medvedev is not proven, however. The following day, at Moscow's Ritz Carlton hotel, top business leaders showed their public support for Putin's efforts to create a customs union with Kazakhstan and Belarus.

But regardless of the correct version it is clear that the country's elite are stuck on the horns of a dilemma.

Of course, it's partly tied up with who gets the top jobs after next year's elections, who controls key industries and which team ends up with most influence. But mainly the country's elite are divided over the way forward for the economy and society as a whole.

There is a widespread view among leading businesspeople, economists and government reformers that tough austerity measures (including privatization of key assets and deeper cuts in social spending) should be carried out after next year's election. But they don't really know how to sell this program to the Russian people, it seems.

The different approaches can perhaps be summed up this way: One faction, the one promoting Medvedev, is openly calling for deep cuts in social spending. The other faction, which is more allied with Putin, seems to be advocating less deep cuts, and hinting that they should be carried out quietly, without any special fanfare.

Both factions are worried about the public reaction to a post-election cuts program, and neither seems to have great confidence in the way forward.

This indecision may explain why Medvedev apparently made an impassioned plea for support for his program. But it doesn't, as yet, give us many clues as to which side of the policy argument the business elite will come down on.

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