Tatyana Stanovaya, «Battle of Strategies» Politkom.ru Russian 16 May 16

 

After Aleksey Kudrin’s appointment as head of the Center for Strategic Research and the start of work on the long-term reform program, the «dirigistes», who are trying to drag the would-be reformer into apparatus infighting, have noticeably stepped up their activities.

Presidential aide Andrey Belousov told Vedomosti that the first session of the presidium of the Russian Federation Presidential Economic Council was planned for 25 May and it would look at measures to stimulate economic growth. Speeches by both Council Deputy Chairman Aleksey Kudrin and representatives of the Stolypin Club are also planned for the meeting. Meanwhile, business ombudsman Boris Titov, who is closely linked to the Stolypin Club and is also leader of the Party of Growth, is stepping up his activities, having drafted a high-profile report on the state of the business sector for Russian President Vladimir Putin.

Certain points of future government policy are already being actively discussed in the public sphere — predominately harsh, unpopular measures. For example, one measure for stimulating economic growth proposed by Economic Development Minister Aleksey Ulyukayev is to limit the growth in wages in the economy in 2016-2017 with subsequent compensation in 2018-2019. The fall in real after-tax income will be 2.8 percent in 2016 and 0.3 percent in 2017, and for pensions it will be 4.8 percent in 2016 and 2 percent in 2017. Also widely discussed was the news about the Finance Ministry’s pensions plan, which, in particular, envisions a rise in pension age to 65 years for both men and women, and also raises the question the viability of paying full pensions or the fixed part of the pension to working pensioners. It is proposed that the length of service required for early retirement by public sector workers who have the right to take their pensions early (teachers, doctors, and creative professionals) be gradually increased, so that this converges with the standard pension age. The Finance Ministry is also proposing cutting the index-linking of pensions in 2017, however it has not specified to what extent.

At the same time there are also attempts to «scrabble around» for alternatives to such politically dismal developments. Russia can realistically and must achieve an annual average growth in GDP of 4 percent in the medium term, presidential aide Andrey Belousov told Vedomosti: The main aim of the meeting of the presidium of the economic council planned for 25 May is to find the sources of this growth. Economic Development Minister Aleksey Ulyukayev will speak at the presidium, and there will be reports from the Stolypin Club and the Center for Strategic Research, Belousov stated. «Without adjusting for inflation, a 4-percent rate of growth will add more than R3 trillion to GDP and the treasury will receive R300-400bn, more than the government’s anti-crisis plan for 2016. Such sums are desperately needed for modernizing infrastructure and public services, and without additional injections of cash the public service infrastructure will degrade and social discontent will rise,» he told Vedomosti. That said he pointed out that the government had already reached the limit of cuts — further budget cuts this year are impossible, and in the medium term this is also not an option: Cutting areas of expenditure that have already been protected is difficult politically. The second option is to increase taxes — this is out of the question before 2018, it means the withdrawal of resources from the economy, he insists.

The preparations for the Economic Council presidium meeting are revealing a great deal about the mechanisms in accordance with which the Kremlin intends to manage the preparations for long-term economic decisions.

Of particular interest is the fact that Belousov himself, who had already proved himself in particular in organizing consultations between the business community and members of the law enforcement agencies, continues to play a dominant role in the council’s work. In terms of the apparatus, the Economic Council lies within his sphere of influence. The responsible secretary is Vladimir Simonenko, head of the Expert Directorate, who is considered to be Belousov’s man.

Belousov has the reputation of being an official who more or less shares the views of those who support using public investment, cutting lending rates, and increasing demand (which requires regular growth in the population’s income) to stimulate Russia’s economy. This point of view is much closer to that of the «dirigistes» and the Stolypin Club.

From the point of view of the apparatus, this means that here an escalation in the competition between Belousov and Kudrin is unavoidable. The Economic Council is an advisory body, which is supported in the administration by the Expert Directorate. Kudrin was given the post of deputy chairman, but he is not the only one. He shares this status with two other deputies: Economic Development Minister Aleksey Ulyukayev and Belousov himself. At the same time, an amendment was recently made to the statute on the Economic Council, saying that «the deputy chairs of the Council are the aide to the Russian Federation president with the relevant jurisdiction, the Russian Federation economic development minister, and a representative of the expert community». This means that Kudrin is the only deputy who does not hold public office. In addition, thanks to his position, Belousov has special responsibilities: He sets the agenda for meetings of the Council and the Council presidium; determines the focus of working groups and subgroups; handles organizational and other issues; deals with issues connected to the implementation of decisions by the Council and Council presidium, the activities of working groups and subgroups; exercises other powers to ensure the operation of the Council and the Council presidium.

Kudrin’s only real «apparatus» is the Center for Strategic Research, which has NGO status. But Kudrin’s political asset will be his direct access to the head of state, who holds the post of chairman of the Economic Council. This system for organizing the Council’s work will unavoidably set up competition not only between programs, but also between key figures working for the Council.

According to the updated statute on the Economic Council, it will meet no less than once a quarter. Previously the Council was effectively frozen: The last time it met was in January 2014, and the presidium last met in December 2013. This means that the last surge of activity was at the very start of the geopolitical crisis, after which came sanctions and the fall in world oil prices.

In his interview with Vedomosti, Belousov said that everyone agrees that there are resources available to stimulate economic growth. It is clear, however, that opinions about which resources and methods of stimulation should be used can differ greatly. The members of the Stolypin Club will oppose Kudrin’s position.

If you recall, the Stolypin Club was founded in 2006 on the initiative of Business Russia, which was headed by Boris Titov. In fall 2015 the club, which had been dormant for many years, was revived: The new lineup included PMEF [Saint Petersburg International Economic Forum] foundation president Sergey Belyakov, presidential aide Sergey Glazyev, Business Russia cochairmen Anton Danilov-Danilyan, and Sergey Nedoroslev, deputy VEB [Vnesheconombank] chairman Andrey Klepach, State Duma deputies, and others. The club positioned itself as a new expert platform, a union of «market realists», however de facto it was used to draw up the economic program for Titov’s future political party — «Growth Economy».

Titov is an ordinary member of the Economic Council and is not part of the presidium. Instead Business Russia is represented in the presidium by its president, Aleksey Repik — a successful manager from the pharmaceutical sector (P-Farm company) and a member of the Public Chamber.

The «Growth Economy» program has already attracted the attention of the prime minister: In February Dmitriy Medvedev gave the order to create an interdepartmental working group to work on this idea. Dmitriy Butrin, deputy chief editor for economic policy at Kommersant, wrote in his column that Titov’s program is «a textbook example of an economic policy chimera, which involves a combination of supersoft monetary policy (describing this program as Keynesianism is too weak a definition, given that presidential aide Sergey Glazyev was one of the authors), encouraging saving, an across-the-board countercyclical reduction in taxes, and a general deregulation of business. It is clear that such an idea will find many fellow travelers: In some ways it is of interest to presidential aide Andrey Belousov, in some ways to members of the RUIE [Russian Union of Industrialists and Entrepreneurs], in some to the [Russian] White House’s social bloc, and in some to the CPRF [Communist Party of the Russian Federation]. Every politician figures that once they have won, they will be able to neutralize the things that do not suit them in the chimera program, and develop their own idea.» Butrin interpreted (in his column in the New Times)  Medvedev’s interest in the «Growth Economy» program as his «political message» to those who expect Kudrin to rejoin the government: «The order to discuss the ‘Growth Economy’ program is a reminder to the relative ‘liberals’ in Dmitriy Medvedev’s government: There are candidates for your positions».

This results in a politically paradoxical situation, in which Titov, who is proposing a program that is contentious for the liberal community, is attracting as ad-hoc allies both Medvedev and Belousov, whose aim is to make the environment in which the report drafted by Aleksey Kudrin’s Center for Strategic Research is put forward more competitive.

Essentially the disagreements between the «dirigistes» and the conservative liberals (Finance Ministry, Kudrin) here appear to be insurmountable. Titov told Vedomosti that the Stolypin Club may support the idea of restoring the investment allowance and giving it not just to new businesses. Belousov pointed out that companies have large profits sitting in their accounts and a way needs to be thought of to motivate them to use this for investment. However, the Finance Ministry is opposed to tax breaks. Titov is also promoting his long-held idea of attracting cheap money into the economy, for example, a state guarantee for bonds at reduced rates. Titov also thinks that Central Bank can fill the market and inject money into the economy at low rates. But the experts surveyed by Vedomosti point out that «there is no such problem»: The money is there, but the projects are not. BKS economist Vladimir Tikhomirov said that we need reforms, an improved investment climate, reform of the court system, and, only as a secondary measure, a reduction in the cost of money via low inflation, which can only be ensured with a strict monetary policy.

At the same time, the fact that Titov’s activities are becoming noticeably more political may count against him. According to RBK’s information, he is to present President Vladimir Putin with a report which says that in 2015 there was the greatest increase in pressure on business since the last humanization of the Criminal Code. However, in his «live phone-in» in April Putin said that the number of checks is decreasing, and the situation for business has improved. In connection with this Presidential Press Secretary Dmitriy Peskov pointed out that representatives of business organizations, including the Chamber of Commerce and Industry (CCI) and the Russian Union of Industrialists and Entrepreneurs (RUIE), had made public «information that is rather different» to the business ombudsman’s figures. «There are quite contradictory figures. We need to see which information is closer to the truth,» Peskov stated. By raising issues that are really pressing for business (and the pressure on businesses is at the very least not decreasing), Titov, who needs to win favor before the elections, may in the end anger those at the highest political level, which will hinder cooperation with public bodies when discussing the program for the country’s development.

Aleksey Kudrin’s return «to power» may be difficult: Work within the Economic Council will be competitive in terms of ideology and the apparatus. The government opposes the growth in Kudrin’s influence, and his current status risks being insufficient for an effective discussion of questions of the country’s development. This is why a great deal will depend on how actively the president is willing to personally take part in the Economic Council’s work and to support Kudrin as the chief ideologue of the future economic course.

 

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