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.

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