Alexei Kudrin goes public against Putin’s plan

The two men were friends for decades, even serving together along with Dmitry Medvedev in Saint Petersburg city government. Mr. Kudrin served as Russia’s Finance Minister for more than a decade and twice as a deputy prime minister under Vladimir Putin.

Russia’s former Finance Minister, Alexei Kudrin.

Well-known around the world as a respected economist, Mr Kudrin has championed a free-market economy and cautioned both Putin and Medvedev against populist spending initiatives. His credentials as a pro-market democrat have never been in question. However he and then-president Medvedev had a spat which happened on a live network TV/Radio broadcast and Mr. Medvedev ordered him to resign.

Most commentators said that as soon as Putin became president that Kudrin would rejoin the government. That not only didn’t happen, but Kudrin joined forces with the opposition protests, much to the embarrassment of Mr. Putin who still considered Mr. Kudrin to be a close family friend.

So when Mr. Putin unveiled his widely anticipated investment plan for Russia’s Far East, Kudrin came out swinging against it. Those with a financial and investing backgrounds generally concede that Kudrin is right.

Under the Putin Far East Plan already nicknamed as the  “Far Eastern Republic,” the government’s Economic Development Ministry will create a mega state corporation to develop Russia’s depressed eastern Siberia and the Far East.

Who will be in control of this mega corporation?  President Putin of course. This special corporation will bypass parliament and local governing authorities and answer to none other than President Putin himself. Covering 16 regions and over 60% of Russia’s territory, the state corporation will have the power to award mining licenses which means the ability to bypass the state bidding process required everywhere else in the country. This includes areas like Sukhoi Log, the country’s biggest gold deposit.

Mr. Kudrin says that “The creation of such a market player capable of implementing any private project, considering the state’s administrative resource and using special preferences, means that any other investor in this area must be aware that at any moment another player with special preferences, special administrative resources and special access to finances may come to the market.”

As widely respected Russian watcher Robert Amsterdam noted, In rapid succession, the government leaked a plan to create a ‘super agency’ to develop the Russian Far East; President-elect Vladimir Putin vowed to spend $17 billion a year for new and improved railroads, and Vladimir Yakunin, president of Russian Railways, promoted a think big plan — a rail and tunnel link connecting Russia and the United States. (Read Amsterdam’s entire article here.)

Kudrin says that Putin’s plan for Far East develop will make the situation worse instead of better. Now even some officials from the current Russian Finance Ministry are raising objections to the plan according to Russian news agency RIA Novosti.

Members of the Putin team continue to court Kudrin to return to the government but over the past weeks the former finance minister has become more strident in his comments, and recently told opposition Echo Moscow radio, “These elections have, let’s say, drawn a line under a certain period, when we need to say we need political reform.” 

Mr. Kudrin also told listeners, “I am not ready to agree with the words of  Medvedev or Putin that Russia has an established political system.”