Profile: Mikhail Prokhorov

Mikhail Prokhorov was born on May 3, 1965 in Moscow and is a Russian self-made billionaire. He made his name in the financial sector and went on to become one of Russia’s leading industrialists in the precious metals sector. In the summer of 2011 he led the Right Cause party. On December 12, 2011, Prokhorov said is planning to run for president in 2012.

Prokhorov graduated from the Russian Government Finance University in 1989, before joining the International Bank for Economic Cooperation, serving in a managerial position until 1992. He was briefly head of the board of International Finance Company (MFK) before managing the acquisition of Norilsk Nickel by Onexim Bank, of which he was then chairman. Prokhorov overhauled the company, selling off most of its non-mining assets and creating Polyus Gold from its gold assets.

In May 2007, Prokohorov launched a $17 billion private investment fund, Onexim Group, focused on the development of nanotechnology, including hydrogen fuel cells, as well as other high-technology projects and non-ferrous and precious metals mining. One of the fund’s key areas of development is the production of materials with ultra–tiny structures used in energy generation and medicine.

Prokhorov sold his 25% stake in Norilsk Nickel to aluminium producer Rusal in April 2008, in return for a large cash payment and 14% of Rusal stock. Just a few months later the Russian stock market crashed and Russian companies found their market value decreasing rapidly. Although Prokhorov’s wealth was dented by the exposure of his other assets, he weathered the crisis much better than most of his fellow businessmen.

In September 2008 Prokhorov’s Onexim Group purchased a fifty percent stake (minus one) in Russian investment bank Renaissance Capital.

Mikhail Prokhorov’s net worth was estimated at $18 billion by Forbes magazine in 2011. This makes him the third richest man in Russia and the 32nd richest man in the world.

In 2008 Prokhorov launched Snob, a Russian-language magazine and community in collaboration with Vladimir Yakovlev, founder of Kommersant. The project, which has since expanded into other international markets includes a Russian language magazine and online discussion space.

Prokhorov has supported a number of cultural and sporting institutions in Russia, including Moscow-based CSKA basketball, hockey and football clubs. In 2004 he founded the Cultural Initiatives Foundation, run by his sister Irina.

In May 2010 he became the first non-American to own a National Basketball Association (NBA) club, when he bought an 80% stake in the New Jersey Nets.

In May 2011, rumors circulated that Prokhorov was a likely candidate to head the Right Cause party. Pro-Kremlin in outlook, the party’s top job was previously turned down by Finance Minister Alexei Kudrin and First Deputy Prime Minister Igor Shuvalov.

In June 2011, Prokhorov was made leader of the Right Cause party. He threw his weight and considerable financial resources behind the party’s campaigning ahead of December 2011 State Duma elections, but was ousted from his position in September 2011 after a coup within the party. In the wake of his departure from the party he indicated that he still has political ambitions, but will not run in 2011 State Duma elections.

On December 12, 2011, Prokhorov said he is planning to run for president in 2012.

Russian ex-finance minister says may establish new political party

It is an ideal time for establishing a new Russian right-wing party as the country’s “political landscape” is changing, former Russian Finance Minister Alexei Kudrin said in an interview with Vedomosti business daily published on Monday.

New Russian party to be established

In the first interview after his scandalous dismissal, Kudrin, who fell out with the Kremlin and was sacked as finance minister in late September, said he was ready to participate in the establishment of a new right-wing party as liberal views in Russia historically had not found wide support.

“The demand on the creation of such a [political] structure is so high that it will inevitably be established…I am ready to contribute to it,” Kudrin told Vedomosti.

The ex-minister, who had previously dismissed reports that he might become the Right Cause party’s leader, said that President Dmitry Medvedev had repeatedly asked him to head the party.

“I said no…as I realized that the Right Cause with its ‘unclear people’ and significant control from the Kremlin will be absolutely powerless,” Kudrin said.

Some Russian media reported earlier that the Right Cause party, once headed by billionaire Mikhail Prokhorov, was allegedly neutered by pro-Kremlin figures concerned about Prokhorov’s emergence as a political force.

United Russia loses grip

Kudrin, who confessed he had not voted for the United Russia party at the parliamentary elections on December 4, said that the souring support for the ruling party is a “rational result.”

“The United Russia party is losing support…These elections showed the unusual situation when people want to preserve and discuss the fairness of the elections. In this regard, people are not satisfied with the results, there are too many flaws,” Kudrin said.

Kudrin confirmed that the ruling party had not met the people’s expectations because there were not any significant changes in its key oaths, including easing conditions for business, tackling corruption and restoring the judiciary system.

“United Russia is an experienced and pragmatic party…I think it will return to reality after populist statements,” Kudrin said, referring to Russia’s “changing political landscape.”

No talks to occupy premier post

Kudrin, who was sacked soon after the United Russia’s congress on September 24 where Prime Minister Vladimir Putin said he would swap jobs with President Dmitry Medvedev after presidential elections, was rumored to possibly occupy the premier’s post.

“Nobody has discussed the premier post with me. The genuine reason of my leaving is that the previous incorrect decisions that were made would not be reviewed. I have no plans to fight with the consequences of the decisions that I was against,” Kudrin told Vedomosti, referring the Kremlin’s decision to increase defense costs, a move that Kudrin had sharply criticized.

The former minister also said that he had never been a close ally to Putin, but continued to respect him regardless “disagreements on several issues.”

Rule change good for banks but bad for savers

Finance Ministry plans to help Russian banks with their liquidity aren’t going to go down well with the country’s savers.

­The proposal would curb withdrawals from bank accounts, and would be added as a new line in all contracts between depositors and the banks. “The massive withdrawal of deposits before the repayment period leads to bank’s default on obligations to the creditors. This avalanche effect can lead to insolvency of a credit institution,” Ministry of Finance statement reads.

Russian banks have been suffering from a liquidity shortage during the current market turmoil and they have welcomed the move. The Ministry says the new law will provide a more stable deposit base for banks in the short term, as it will apply to existing deposits says Deputy Director of Sales at Promsvyzbank Fedor Os’kin, “in the wake of serious liquidity problems in banks the amendment to the existing law are inevitable.”

However it’s effect may be short lived, as banks will be anxious to retain customers. Thus Os’kin believes that “the law would probably loose its relevance after some time.”

The existing law obliges banks to payback depositor his money or part of them on request since all deposits have an option of “demand back deposit”. Stanislav Duzhinsky analyst at HomeCredit bank says this new measure will secure banks’ financial stability and prevent accidental withdrawal of deposits. “Banks will obtain guaranteed stability at some point and will be secured from competitor’s steps to halt banks stability through influence on social class by giving false information and using black PR” Duzhinsky says.

The debt crisis in the Euro zone as led to a liquidity shortage and increased rates on the interbank loan market. The increasing cost of money has forced banks to look for other sources of financing such as people’s savings. Over recent months State-owned Sberbank began by bumping depositing rates 1.5% to 7.25%. Other players have been forced to follow to remain competitive. Bank of Moscow and Raiffeisen went as far as increasing their rates as high as 10%. According to Central Bank data the volume of individual deposits increased by 11.2% – up to 10.920 trillion roubles in January-September still lagging behind the forecast for 22% growth by the end of the year. To comparer, the increase in deposits was 31.2% last year. 

Putin and his Russia don’t deserve the bad rap…

Putin and his Russia don’t deserve the bad rap.
In the right light, we see Russia and Putin have taken some undue heat. Here’s a look at some of the most serious accusations leveled at Putin and his Russia.

One of the rare good articles that came out of the Western Media. In fact as the comments on the article say:

Unexpected source of objective and truthful information about Russia…

One of the few decent articles about Russia…

Can’t believe that this comes from a person with an anglo-saxon name. What about a good old cold war spirit?

I totally agree with author. Only true facts and no russophobic fiction. Thank you for this surprising article!

Of course there is the regular dictator trash comments that always appear as if by magic…

But I was thinking the same thing as many of the comments and kept waiting for the finality of hate to appear. It never did appear and it was actually a good article…

I could not believe that someone got it from the Western press and even from the “The Christian Science Monitor”…

Who would have thunk it?

Kyle Keeton
Windows to Russia!

Article: Putin and his Russia don’t deserve the bad rap

Ex-Finance Minister: New crisis at the gate

“­The fuze is already burning,” says Russia’s former Finance Minister Aleksey Kudrin. He says the global economy is balancing on the brink of another recession and the second financial crisis is already upon us.

Talking at the International Sberbank Business Breakfast on Saturday, Kudrin took a pessimistic view of the future for the global economy.

 “The world has a chance to settle the crisis, but it is very slim,” he said.  Kudrin insists that the “battle for Greece has been lost”, and the focus should shift on bigger debtors such as Spain, Ireland and Portugal.  They will require another massive injection of around 3 trillion euro to keep them afloat. He advises European countries to join efforts.

 “The establishment  of  the United  States  of Europe  would  be  a positive  decision  and  would  signal  an  absolutely  new  level  of consolidation” which might help, Kudrin specified.

 Talking about Russia Aleksey Kudrin sounded more positive, saying the country is currently better prepared  for more turmoil, than  most developed countries, as the state debt is low, at 12% of GDP, and considerable gold and foreign currency reserves in Russia form a safety net.

 However Kudrin warned Russia may face budget problems at some point, as it was unlikely to enjoy sky high oil prices in the next 3 to 10 years, barely beyond some $100 bbl. “And the plans to increase military spending by 3% of GDP in the coming years are not secured by anything,” as it’s planned to come at a cost of reduced financing for other sectors, as well as keeping Russian budget with a deficit, ex-Finance Minister said.

 Kudrin’s 11 year management of Russia’s finances earned him a prudent reputation, praised for saving oil revenues in the Stabilization fund which helped the country get through 2008 crisis. He was sacked in September after a row with President Dmitry Medvedev when he publicly voiced his disagreements with budgeting policies.

Russia’s banks to bid for fresh government loans

Russian banks are asking for less money than the Ministry of Finance has actually offered, with the offer from the primary regulator almost tripling its previous one.

Russia’s Finance Ministry has agreed to lend 205 billion roubles to the country’s banks at an interest rate of 6.2%. The government offer exceeds what the country’s banks actually asked for the Ministerial statement reads.

“The auction ended with the banks asking for 180.65 billion roubles – a sum significantly lower than the primary offer of 205 billion roubles.”

The funds will be up for grabs via auction sale on Tuesday, and will have to be repaid by December 14.

The amount for each of five possible bids by one bank must not exceed 200 million roubles.

At the last deposit auction on November 1, the Ministry of Finance offered 55 billion roubles under a 7.68% interest rate for a period of seven weeks, up significantly from 10 billion roubles. After the auction closed, bids amounted to almost twice the value of the offer, reaching 95.212 billion roubles.

Following the outcome of the November 1 auction, the ministry said that it will continue to implement monetary measures to avoid money shortages in the system.

“To maintain the necessary level of liquidity in banks, which are part of the whole system and provide the corporate and private sector with money, we suggest continuing deposit auctions on a regular basis in an amount equal to paid back deposits by credit organizations in the current month.”

Out of 18 deposit auctions held since August, the demand has been below the ministerial offer only once. Dmitry Vinogradov, an analyst at UBS, says that such measures are reasonable.

“Given the high rate of credit growth, the volumes of deposits are still below what was expected, so it is the right time to provide banks with some additional liquidity.”

According to the Central Bank of Russia (CBR), the volume of private deposits increased by 11.2% to 10.920 trillion roubles over the nine months, against 22% expected for the whole year. Last year, the volume of deposits increased 31.2% year-on-year.

Vinogradov adds that “Nowadays we can see the rates are up, notably Sberbank has come up with a decision to raise rates. All this signifies liquidity problems.”

According to the Central Bank, in the 3Q 2011, the maximum deposit rate among the top 10 banks grew by 0.05% to 8.33%. Notably, Sberbank was the first to raise rates on deposits to 7%.

Vinogradov noted that the CB will avoid repeating the mistake of 2008 when it failed to put money into the system.

“The CBR now is very attentive and careful with all measures and both Ministry of Finance and CBR have enough funds and instruments to support the financial sector,”  Vinogradov concluded.

Russia could shoot $10 billion into sluggish Europe

Moscow could allocate as much as $10 billion through the IMF to help indebted European countries, says presidential aide Arkady Dvorkovich.

Though European debtors haven’t yet officially applied for financial assistance from Russia, Dvorkovich says if they file, “the relevant authorities – the Finance Ministry, Central Bank, government, and the president, whose approval will also be required- will consider the motion, and the possibility of rendering assistance, seriously.”

The presidential aide also noted that Russia would help through the IMF mechanism, with the international body ready to provide for a total of $1 trillion, where Russia could potentially contribute $10 billion.

“Their (money) use is reasonable. We are interested in European stability,” Dvorkovich said.

Indeed, in the era of globalization, when most markets are interconnected, the debt crisis in some European countries could turn systemic, as “a lion’s share of government debt in the troubled countries belongs to private banks, and default could make them go bankrupt,” explains Pavel Emelyantsev, Investcafe analyst.

The European Union is one of Russia´s closest economic partners, with trade turnover between January and August 2011 comprising 48.4% of Russia’s total foreign trade turnover to reach $254.8 billion. So, “there’s nothing surprising in the fact that our country is ready to support the stability of the European financial system by means of additional money injection,” Emelyantsev concluded.

Earlier, presidential aide Dvorkovich spoke about the possibility of Russia buying Spanish debt, with Greece and Cyprus also counting on money from Moscow. However, authorities in this country have always stressed that they needed Brussels to present a “concrete, understandable strategy to pull out of the crisis.”

Germany approves boosting of EU’s bailout fund

Another EU leaders’ summit has kicked off in Brussels aimed at taking concrete steps to deal with the Eurozone debt crisis. Ahead of that, German legislators agreed to support a massive expansion of the European bailout fund.

In one of the first decisions to emerge from the summit, big European banks will be required to raise their capital cushions to 9 percent of their risky investments. The recommendation to banks exposed to the unhealthy finances of Greece, Ireland, Portugal, Italy and Spain is to be put in effect by June 2012, the Associated Press reported, citing Polish Finance Minister Jan Vincent-Rostowski.

Moreover, a draft statement obtained by Reuters suggests the EU’s bailout fund will be increased “several fold.” The EU finance ministers are to agree the details of the scale up no earlier than in November. The enlargement of the European Financial Stability Facility (EFSF) might be achieved via cooperation with the International Monetary Fund.

Wednesday’s summit, which was called after an earlier gathering on Monday failed to produce any concrete results, is still to focus on resolving Greece’s debt crisis, scaling up the EU’s bailout fund – and Italy’s staggering finances.

We need a deal tonight, and we need political agreement to the key aspects that are on the table,” European Commission spokesman Olivier Bailly said in Brussels.

Still, the summit may not provide the final figure on writing down the Greek debt, he added.

But before the meeting, German Chancellor Angela Merkel indicated that private investors should take a cut of at least 50 percent on Greek bonds. Such a “haircut” would imply for creditors a loss of 103 billion euros.

The chancellor also said the summit should deliver a solution, which will allow Greece to reduce its debt burden to 120 percent of GDP by 2020. At the moment, there are fears that Greek debt will continue mounting and may hit 190 percent of GDP in 2013.

Italy’s Prime Minister Silvio Berlusconi is set to deliver a letter offering details on the package of 54 billion euros ($75 billion) in austerity measures adopted by Italy in September to balance the country’s budget. Less than 24 hours prior to the summit, PM Berlusconi managed to push through retirement reform to knock the retirement age for all Italian workers from 65 up to 67 by 2025. 

In Germany, the vote to enlarge the bailout fund of the European Financial Stability Facility (EFSF) passed by a broad margin of 503 against 89 with four abstentions in the German Parliament. Germany is the only country where the Constitutional Court ruled that bail-out operations involving taxpayers’ euros must first gain legislators’ approval.

Still, this “massive vote in favor of fiscal sovereignty,” as Markus Kerber described it, gives Merkel a mandate to begin negotiations in Brussels – but not to conclude them.

For the time being, Germany has neither said yes, nor said no” to enlarging the bailout fund, said Kerber, a professor of political economy at the Berlin Institute of Technology.

Watch RT’s full interview with Markus Kerber

At present, the EFSF’s lending capacity is at 440 billion euros ($600 billion). The boosting discussed by the EU leaders in Brussels would send the fund’s lending capacity above 1 trillion euros ($1.4 trillion), but this has yet to be finalized. According to the Associated Press, the EU summit will consider scaling up the EFSF by offering government-bond buyers insurance against possible losses and by attracting capital from private investors and sovereign wealth funds.

Sacked minister offers economic rescue plan

Ex Finance Minister Aleksey Kudrin, fired recently for criticism of the leadership’s economic policies, has proposed a five-point plan that would help Russia to avoid a second wave of the Global Financial Crisis.

In an article published on Tuesday in Kommersant business daily, Kudrin, writes that a complex combination of internal political motives and the still relatively-favorable foreign economic situation tempts the Russian government to pursue a risky economic policy.

“[The government], however, does have the necessary instruments to correct this course. All it needs is to define its priorities. But there is almost no time left for doing this,” the fiscal hawk says.

He agrees that increasing salaries and pensions, upgrading the army and modernizing industry “are absolutely the right tasks” for a responsible government. Nevertheless, currently there are no conditions for these problems to be addressed all at the same time.

First of all, Kudrin suggests, the government should aim for a deficit-free balanced federal budget for 2015 at an average price of $90 per barrel of oil.

Secondly, it is necessary to determine the rule of spending gas and oil revenues since it influences a whole range of factors, including inflation and the currency exchange rate, and is also very important for investors. This rule must be cemented into the Budget Code and the government must not deviate from it, no matter what important tasks they face.

A third step, Kudrin believes, is reconsidering of military spending. The previously set goal of rearmament can be achieved in 15 years rather than 10. In addition, the government should not immediately double military allowances, but increase them gradually, while at the same time optimizing the number of the personnel.

Fourthly, as soon as next year, the Russian authorities should come up with a strategy for social and pension insurances. Kudrin did not rule out that it might be necessary to limit pension increase to inflation rate until the Pension Fund deficit is eliminated.

The fifth, and final point of his action-plan, is setting a goal to reduce the budget burden on the GDP. That means expense cuts and refraining from increasing taxes. It is also necessary to maintain a low inflation rate, aiming at bringing it down to 4-5 per cent in 2014 and then to 3 per cent.

Former Finance Minister, Deputy PM Kudrin was sacked last month after a row with President Dmitry Medvedev. Also striped of all his official positions in government bodies and international organizations in which he represented Russia, he has continued to be critical of the government.

Kudrin dismissed from government’s military and integration commissions

Russian Prime Minister Vladimir Putin dismissed former Deputy Prime Minister and Finance Minister Aleksei Kudrin from his posts in the government’s military-industrial and economic development and integration commissions on Monday.

Kudrin, who headed Russia’s Finance Ministry since 2000, resigned on September 26 after a public conflict with President Dmitry Medvedev.

 Kudrin was also dismissed from the government commission on budget projects, regional development and high technologies and innovations and from working groups on modernization and development of the military-industrial complex.

On September 25, Kudrin said that he would not serve in a new government that could be formed by Dmitry Medvedev after presidential elections in 2012. The Russian president suggested that Kudrin resign within a day if he did not agree with the presidential policy. Kudrin said that before taking a decision, he would consult Putin. Later, it was announced that the president had accepted his resignation.

Last week, the prime minister said that despite “the emotional failure”, Kudrin would work in their team.

Kudrin has kept his positions as chairman of the National Banking Council and the presidential council on financial markets, which tackles the formation of the International Financial Center in Moscow.


Russia may help Europe out of crisis

Russia does not rule out the possibility that it may help Europe overcome the crisis when it declares its final strategy, Russia’s presidential economic advisor Arkady Dvorkovich announced on Monday.

­“We are waiting for the European countries to announce a specific and comprehensible strategy to come out of the recession. If they need Russia’s aid or the help of the BRICS countries, we are ready to offer it,” Arkady Dvorkovich stated on Monday. However, he pointed out the existence of such a clear strategy is a precondition for any help Russia may deliver.

Earlier former Finance Minister Aleksey Kudrin and Foreign Minister Sergey Lavrov met with Ms. Salgado, Spain’s economy and finance minister. They discussed that and whether Russia would be involved in buying Spanish debt paper.

World stock markets, however, perked up on Monday after a weekend meeting of the leaders of France and Germany provided a promise of action on Europe’s debt crisis. The Italian stock market was also up.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said on Sunday that a comprehensive response to the debt crisis would be finalized by the end of the month, including a detailed plan to ensure European banks have adequate capital.

Greece meanwhile awaits the next tranche of 8 billion euros, about to be released by mid-November or the country will run out of money.

Cyprus wants 2.5 bln euro loan from Russia

Cyprus plans to get a 2.5 billion euro loan from Russia, Cyprus Government Spokesman Stefanos Stefanou said on Wednesday.

The loan for 4.5 years may be granted at an interest rate of 4.5 percent and the credit line may be opened in January 2012, Stefanou said, adding that country’s cabinet of ministers hoped to get the loan as soon as possible.

Debt problems in neighboring Greece have posed challenges for Cyprus’ economy. Finance Minister Kikis Kazamias has said that the country would not ask the European Union for financial support despite calls from some Cypriot politicians to request assistance.

This September Russia’s former finance minister Alexei Kudrin said that Russia and Cyprus nearly reached agreement on a loan.

Government submits three-year draft budget to parliament

The Russian government has submitted its draft 2012-2014 budget, drawn up by former Finance Minister Alexei Kudrin, to the State Duma lower chamber on Friday.

Acting Finance Minister Anton Siluanov will present the bill to the Duma, the government’s plenipotentiary in the lower chamber Andrei Loginov told reporters.

The first reading is scheduled for October 21, the second on November 18 and the third on November 22.

Budget incomes are expected at 11.789 trillion rubles in 2012, 12.715 trillion rubles in 2013 and 14.101 trillion rubles in 2014, while spending may amount to 12.658 trillion rubles in 2012, 13.720 trillion rubles in 2013 and almost 14.580 trillion rubles in 2014.

The federal budget deficit is forecast at 1.5 percent of gross domestic product in 2012, 1.6 percent of GDP in 2013 and 0.7 percent of GDP in 2014.

The bill is based on the price of Urals oil blend of $100 per barrel in 2012, $97 in 2013 and $101 in 2014. Consumer price inflation is expected at 5-6 percent in 2012, 4.5-5.5 percent in 2013 and 4-5 percent in 2014.

Finance Official Murdered in Podolsk

Finance Official Murdered in Podolsk

Published: September 28, 2011 (Issue # 1676)

MOSCOW — In the second high-profile murder in the Moscow region in a month, the official who oversaw the finances of the city of Podolsk — the region’s third-biggest municipality — was gunned down in her home on Monday.

Vera Sviridova, 53, was shot in the head in her private house in the nearby village of Svitino sometime before 8 a.m., regional investigators said in a statement.

Her body was discovered by her personal driver, a spokeswoman for the region’s Investigative Committee told She added that Sviridova lived alone and apparently let the murderer in herself, switching off the door alarm.

Investigators believe Sviridova’s murder was linked to her professional activities, though they did not rule out robbery, the spokeswoman said. A case was opened on murder charges, which carry a maximum sentence of life in prison.

Sviridova held her job since 1996, with a two-year break in the early 2000s, city lawmaker Pavel Maximovich told She handled Podolsk’s finances, but was not involved in decision making, he said.

Finance Minister Kudrin Resigns Amid Controversy

Finance Minister Kudrin Resigns Amid Controversy

Published: September 28, 2011 (Issue # 1676)


Former Finance Minister Alexei Kudrin gesturing at a meeting on military salaries chaired by Medvedev earlier this year.

MOSCOW — In answer to President Dmitry Medvedev’s angry call for his resignation in front of television cameras and his Cabinet colleagues, Finance Minister Alexei Kudrin couldn’t help but invoke the name of Vladimir Putin.

In a second snub to Medvedev in three days, Kudrin made it clear that he would have to consult with Prime Minister Putin — who has admitted to affectionately referring to his long-serving finance minister as “Lyosha” — before he would resign.

Late Monday night, Putin sent Kudrin’s resignation letter to Medvedev, who signed it.

The surprise ouster of Kudrin, who was appointed finance minister in 2000 and is widely admired for his fiscal conservatism, marks the culmination of a rift that has emerged at the heart of the government.

But there are few who believe that Kudrin’s career is over. Appointed as finance minister by then-President Putin in 2000, Kudrin has close links to the Kremlin’s ultimate power broker whose announcement that he would seek a six-year presidential term in the 2012 election was greeted by cheers at a United Russia convention on Saturday.

Putin and Kudrin worked together in St. Petersburg under Mayor Anatoly Sobchak and they are long-term friends. Putin referred to Kudrin as “Lyosha” in a book of interviews published in 2000.

“Kudrin will remain in Putin’s circle. The man who has a land burning under his feet needs a trusted professional,” said Boris Nemtsov, a former deputy prime minister who worked with Kudrin under the late Prime Minister Viktor Chermomyrdin.

Nemtsov said by telephone that Kudrin might become chairman of the Central Bank or Putin’s adviser on the economy.

The announcement of Kudrin’s resignation comes at a sensitive time for Russian markets. Investors last week watched the MICEX plunge 12 percent and the RTS 16 percent.

“Just as Putin is the people’s champion, Kudrin is the investor’s champion. They will not be happy with his departure,” said Chris Weafer, chief strategist at Troika Dialog. “This will be of greater concern to the markets than the reversal of the tandem.”

Medvedev confronted Kudrin, who was also a deputy prime minister, at a televised meeting in Dmitrovgrad in the Ulyanovsk region about Kudrin’s declaration on the sidelines of a World Bank and IMF gathering in Washington on Saturday that he would not serve in any Cabinet led by Medvedev as prime minister.

“Such statements appear improper … and can in no way be justified. Nobody has revoked discipline and subordination,” Medvedev told Kudrin, who, apart from a small pout, remained impassive as he was lectured.

Medvedev said that if Kudrin was not satisfied with the Kremlin’s agenda, “you have only one option and you know what it is — to resign.”

Kudrin responded that he would make the decision only after consulting with Putin.

“You can seek the advice of whomever you want, but as long as I’m the president, such decisions are made by me,” Medvedev spat back.

Medvedev accepted the resignation of Kudrin, 50, hours later.

“The president signed the resignation in accordance with the appropriate procedures and as advised by the prime minister,” said Natalya Timakova, Medvedev’s spokeswoman.

Despite Kudrin’s airing of his disagreements with Medvedev over the weekend, the events appeared to unfold with a speed expected by few.

Timakova had told reporters on Monday morning that the Kremlin did not expect any changes in the government until after the December parliamentary elections, Bloomberg reported.

Kudrin, who has confessed to enjoying playing hockey in his youth, was seen as positioning himself for the prime minister’s portfolio in an interview published in Kommersant last week.

“It’s a clusterf—,” said one Moscow-based investor, who asked to remain anonymous because of the sensitivity of the issue. “It’s very poorly prepared — Kudrin was expecting to become prime minister, and Putin clearly decided otherwise.”

A senior United Russia official, Andrei Isayev, said Kudrin “did not understand that now is the time not for personal ambition, but for a consolidation of strength for the resolution of the country’s problems,” according to a statement posted on the party’s web site.

Kudrin has also lost some important battles in recent months, including his failure to get the Cabinet to use a $70 base price for a barrel of oil in the latest budget.

Kudrin has been a staple of the Russian political scene since he became first deputy finance minister in 1997. Following his appointment as finance minister in 2000, he has built a reputation on his fiscally conservative stewardship of the Russian economy.

His tenure saw budget surpluses from 2000 to 2008, and he overcame political pressure to stash away more than $200 billion in gold and currency reserves during a period of climbing oil prices.

Russia’s credit ratings unaffected by recent political events

Neither Vladimir Putin’s intention to seek a return to the Kremlin, nor the dismissal of Finance Minister Alexei Kudrin have affected Russia’s sovereign credit ratings, Standard Poor’s said on Tuesday.

Kudrin was ousted on Monday after invoking Medvedev’s wrath by saying he would decline a job in a future Russian government that Medvedev is likely to head. Kudrin cited disagreements with the president on economic policies, in particular, on considerable defense expenditures, as the reason.

The statement came after Medvedev and Prime Minister Vladimir Putin unveiled their plans on Sunday to exchange offices after next year’s presidential elections. Medvedev is expected to replace Putin as the leader of the pro-Kremlin United Russia party and become the country’s prime minister.

“In our view, none of these developments has any immediate impact on the sovereign credit ratings,” Standard Poor’s said in a statement.

“We currently expect no significant departure from current economic and fiscal policies and expect Russian state capitalism and the close links between politics and business to remain unchanged,” the statement added.

Standard and Poor’s upheld Russia’s ratings at BBB/A-3 with a stable outlook for its foreign currency debt and BBB+/A-2 with a stable outlook for local currency issues.

It said, however, that the political changes “could make it more difficult for Russia to deal with such challenges as strengthening the country’s long-term growth potential by improving the business environment, competition, and the productive infrastructure.”

Kudrin’s dismissal as well as Russia’s dependence on oil coupled with a possibility of a further global economic decline could also complicate “efforts to consolidate public finances, following strong expansionary measures during the recent economic crisis,” the statement said.

Putin said on Tuesday that First Deputy Prime Minister Igor Shuvalov will oversee financial issues in the Russian cabinet while Anton Siluanov will become acting finance minister following Kudrin’s dismissal. Both appointments had been approved by Medvedev, he said.

Profile: Anton Siluanov

Anton Siluanov was born April 12, 1963 in Moscow. First employed by the Russian Finance Ministry in August 1985, Siluanov was named acting finance minister in September 2011, replacing the outgoing Alexei Kudrin.

In 1985, Anton Siluanov graduated from the Moscow Finance Institute, specializing in Finance and Credit. Upon graduation he joined the finance ministry of the Russian Federal Socialist Republic, working initially as an economist and then a senior economist.

Between March 1987 and May 1989, Siluanov completed military service in the Soviet Army. He then returned to the Russian finance ministry, serving in roles from lead economist to consultant and deputy department head up until February 1992.

Siluanov continued his rise in the Finance Ministry throughout the 1990s and was deputy director of the Budget Management Division from 1992 to 1997.

In the late 1990s he was appointed director of the Macroeconomic Policy and Banking Department of the Finance Ministry, serving in this position from October 1997 to July 2003. In March 2001, he was also made a member of the board of the Finance Ministry.

Siluanov’s first tenure as deputy finance minister was between July 2003 and May 2004. He then served as director of the Inter-Budget Relations Department for six months, before being reappointed deputy finance minister in December 2005.

Following Alexei Kudrin’s resignation in late September 2011, Siluanov was appointed acting finance minister on September 27, 2011.

Main news of September 27


* Ukrainian state prosecutors insist on the seven-year jail term for the country’s ex-premier Yulia Tymoshenko

* The deployment of strategic missile defense systems in various parts of the world will alter the international security configuration, Russian Foreign Minister Sergei Lavrov said

* Deposed Libyan leader Muammar Gaddafi said on Tuesday he was still in Libya and was ready to die a martyr’s death



* Prime Minister Vladimir Putin on Tuesday appointed stands-in for Alexei Kudrin, who was dismissed as finance minister earlier this week over criticism of President Dmitry Medvedev

* Defense and national security expenditures will always be high in Russia, President Dmitry Medvedev said

* The dismissal of Russian Finance Minister Alexei Kudrin foreshadows an era of startling new developments for the country, tycoon and possible presidential candidate Mikhail Prokhorov said



Rebellious Russian Finance Minister Resigns

MOSCOW — Russian Finance Minister Aleksei Kudrin has resigned from his post just hours after a heated public exchange with Russian President Dmitry Medvedev, who ordered him to do so.

Kudrin, who was also deputy prime minister, confirmed to Russian news agencies that he had stepped down. Kremlin spokesperson Natalia Timakova said Medvedev had accepted his resignation.

The news capped a dramatic day in the upper echelons of Russian power that saw Medvedev demanding Kudrin’s resignation for saying publicly that he could not serve in any future cabinet headed by Medvedev.

At a meeting of senior officials in Dimitrovgrad on September 26, Medvedev told Kudrin that “nobody has revoked discipline and subordination.”

He said that if the finance minister disagreed with his policies, he had “only one option, and you know it: to resign.”

Medvedev added that, “anyone who doubts the policy of the president or the government, anyone who has other life plans, is free to submit their resignation to me … I’m going to be making all the necessary decisions up until May 7 next year.”

A surprisingly defiant Kudrin said that he would consult with Prime Minister Vladimir Putin before taking any action, but Medvedev ordered Kudrin to make his decision by the end of the day.

“You know what?” he told Kudrin. “You can consult with whomever you want — with the prime minister — but as long as I am the president, I make such decisions myself.”

Putin made no public comment about the row between Medvedev and Kudrin, who is said to be a leading member of his inner circle. But for the resignation to reach Medvedev’s desk, he would have had to sign off on it.

Medvedev’s clash with Kudrin erupted after the finance minister told journalists on September 24 that he would not continue serving in a new government headed by Medvedev if Putin wins the 2012 presidential election and returns to the Kremlin.

Earlier that day, Medvedev had endorsed Putin as the ruling United Russia party candidate in that election, and Putin suggested that he would name Medvedev as his prime minister.

“I do not see myself in the new government, and it is not just that I have not been offered the job,” Kudrin told journalists. He added that “differences of opinion” would prevent him from joining such a government even if an offer were forthcoming.

Kudrin, the longest-serving finance minister in the Group of Eight leading industrialized countries, has earned respect in the West as a principled, fiscal conservative who was particularly successful in guiding the country’s economy during the boom years of Putin’s two terms as president, from 2000 to 2008.

His immediate and public refusal to serve in a Medvedev cabinet comes amid wide speculation by political observers that Kudrin was expected to be tapped to head the government if Putin decided to run for president again.

Differences Over Military Spending

Moscow-based analyst Vladimir Pribylovsky told RFE/RL’s Russian Service that many relative liberals in the Russian political elite had placed their hopes in Kudrin in recent months as it seemed Medvedev’s star might be fading.

“Over the past year, the clans and groups that had been pushing for a continuation of Medvedev’s presidency grew weaker and part of them reoriented themselves toward Kudrin and the idea that the main organizer of possible reforms and changes and the easing out of conservative groups would be Kudrin,” he said.

“And the idea looked like this: Putin as president, Kudrin as prime minister, and Medvedev would be out, say, as head of the Constitutional Court. That version is still possible, but only in a much longer-term perspective.”

Many in Russua were surprised at the Putin-Medvedev announcements even though both men had apparently made the decision together “several years ago.”

Among the policy issues that are believed to divide Kudrin and Medvedev is the president’s decision to boost military spending by $65 billion over the next three years.

Kudrin, by contrast, recently warned that with global energy prices expected to decline in the coming years, Russia would likely have to raise taxes and tighten its belt after the current election season. Kudrin also criticized the government’s plan to reduce business insurance contributions and raise pensions.

Kudrin Responsible For ‘More Than Half’ Of Russian Economic Success

Economist Yevgeny Yasin credits Kudrin with much of Russia’s economic achievement in the Putin-Medvedev years.

“I think that more than half of the success that we have had in the last 10 years is due to Kudrin,” he said. “His stubbornness, his lack of posturing or a desire to win popularity, his ability to make responsible financial decisions always won high marks from me.”

“But now events have developed like this. Maybe he wants to prevent some turn of events or maybe it is just emotion and they will talk to him, calm him down, give him a medal and he will keep working. Perhaps in a different role.”

Many observers agree with Yasin that Kudrin’s announcement — given his close relations with Putin — does not mean that he is leaving the ruling elite.

Former Prime Minister Mikhail Kasyanov, who is now a leader of the Party of People’s Freedom opposition movement (known by its Russian acronym PARNAC), believes it is still unclear whether Kudrin really wants to leave the government or whether he is pushing Putin for more power.

Unwavering Personal Loyalty To Putin

“He has already served as finance minister for 11 years; he is tired of it,” he said. “He wanted either to leave or to get a new job, a promotion. And naturally, he wants to be prime minister.”

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“I think that that would not be a bad option for Putin…With his announcement that he does not want to work for Medvedev, Kudrin is expanding and laying out for Putin his terms for further work.

“The main thing is that he won’t serve under Medvedev, who has no authority for him. Although another possibility, I think, is that he could move to the side and head the Central Bank, which is formally a relatively independent organization.”

Other observers argue that the case for Kudrin to be made prime minister is so strong — including his long and unwavering personal loyalty to Putin — that such a move still cannot be ruled out. Kasyanov told RFE/RL that he certainly does not expect to see Kudrin in the ranks of the political opposition.

Pribylovsky is also skeptical that Medvedev will actually be named premier. “It really isn’t obvious that Medvedev will become prime minister, and if he does, for how long?” he said. “Everything is in the hands of God, that is, the hands of Vladimir Putin.”

Kudrin’s reaction to the Putin-Medvedev announcements is one indication that even leading figures in the country’s ruling elite were not aware of this decision, which Putin said he and Medvedev had made together “several years ago.”

Presidential economics adviser Arkady Dvorkovich posted on his Twitter account that the developments were “no cause for joy.”

Written by RFE/RL correspondents Robert Coalson and Richard Solash based on reporting by RFE/RL’s Russian Service

The Power Vertical Podcast — Putin: The Sequel

The Power Vertical

Russian Finance Minister Alexei Kudrin (left) attends a meeting of the Modernization Commission headed by President Dmitry Medvedev in the city of Dimitrovgrad, just hours before his resignation.

The fallout from Vladimir Putin’s announcement this weekend that he will return to the presidency in 2012 with Dmitry Medvedev becoming his prime minister has already begun. Finance Minister Aleksei Kudrin announced his resignation today, a day after he told reporters he would not serve in a government led by Medvedev and just hours after a testy public exchange with the president.

In the latest edition of The Power Vertical podcast, I discussed the Kudrin scandal and what we can expect from Putin 2.0 with Kirill Kobrin, managing editor of RFE/RL’s Russian Service.


Power Vertical Podcast — Putin Special
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Tags: podcast, Putin, Medvedev, tandem, 2012, Aleksei Kudrin