Kudrin honoured by Euromoney at IMF/World Bank meetings in
FOR MANY YEARS, Alexei Kudrin was known as a survivor. As the
oil price climbed to dizzying heights, bringing up with it the
Russian economy, the soft-spoken finance minister battled
endless attempts to reach into the country’s
suddenly deep pockets and spend as if there were no
Sunday, October 10, 2010
Today, looking back on a
financial crisis that ravaged – but far from destroyed
– the Russian economy, the view is very different.
Kudrin is being hailed as a fiscal manager of the highest
order. Not just in the west, where his championing of the free
market and fiscal prudence long made him a darling of foreign
investors, but also inside Russia, a country that has not taken
kindly to reformers in the past.
"Kudrin was proved
completely right," says Roland Nash, managing director of
Renaissance Capital. "He said we need to save the oil price
windfall. No one really believed him and there were huge
amounts of pressure from all sides to go out and spend, and he
managed to say no."
Instead, Kudrin created a
stabilization fund designed to prepare for rainy days. Today,
its reserve fund stands at Rb1.23 trillion ($39.5 billion) and
its National Welfare Fund at Rb2.67 trillion.
"If Russia had gone into
the crisis without its stabilization fund and massive reserves,
it would have been 1998 all over again, only worse," says
Alexander Kliment, an analyst at political risk consultancy
Eurasia Group. "It would have been a catastrophe."
Instead, Russia entered
the crisis with nearly $600 billion in foreign reserves,
allowing it to manage a 30% decline in the rouble. The
stabilization fund enabled Russia to pay off its foreign debt
early and later acted as a multibillion dollar cushion that
helped Russia weather the financial crisis.
"A statue should be
erected to the guy in Moscow," Nash says. That’s a
glowing view that’s long been held by westerners
investing in Russia. Since making his way into the halls of
power in the late 1990s, Kudrin has been one of the few voices
championing an open investment policy and diminished government
Born in Soviet Latvia,
Kudrin, who turns 50 this year, began building his career in St
Petersburg, taking a PhD in economics from Leningrad State
University, the alma mater of both prime minister Vladimir
Putin and his protégé, president Dmitry Medvedev.
He began serving in the
city government’s economic departments as the
Soviet Union began to crumble, just as Putin was called upon to
head its foreign investment committee. Yet it was Kudrin who
was called to the Kremlin first – serving as deputy
head of the presidential administration in August 1996 before
being appointed deputy finance minister months later. He has
held the title of finance minister since May 2000, making him
the longest-serving finance minister in the G8. Since September
2007, he has held the post of deputy prime minister as
always been smooth sailing. Kudrin’s bespectacled
visage and reserved demeanour belie a toughness needed to
battle a powerful Kremlin contingent bent on scuppering liberal
reform and ensuring that state rent-seeking remains high.
In November 2007,
Kudrin’s deputy, Sergei Storchak, was arrested on
charges of fraud and embezzlement – a move seen as a
direct attack on the finance minister. Storchak was released
one year later, the charges dropped without explanation, as the
financial crisis began to unfold and Kudrin’s star
started to rise once again.
Yet Kudrin’s political fate is far from sealed.
Election season, in so far as it can be called that, has begun
in Russia. Parliamentary elections are set for late 2011 and a
presidential vote is due to be held in March 2012. Kudrin
himself acknowledges that the worst might lie ahead, as the
ruling United Russia party, headed by Putin, seeks to spend its
way to electoral popularity.
elections, there is always a desire to show that the
government is doing a lot. It’s hard to
So far, he seems on
track, winning basic cabinet approval for the 2011-13 budget, a
conservative plan that envisages a relatively small rise in
spending as Russia seeks to close its first budget deficit in a
decade. Yet several rounds of parliamentary approval –
and time for political meddling – lie ahead.
Praised also for his
commitment to tax and budget reform, to Russia’s
desire to join the World Trade Organization and to the
continuing privatization of the country’s
state-owned heavyweights, it’s his cautious
approach and restrained spending that wins the most plaudits.
For some, that’s a worry.