A New Prime Minister with a New Politburo
by Anders Aslund, Peterson Institute for International Economics
Op-ed in the Moscow Times
September 26, 2007
© Moscow Times
President Vladimir Putin’s appointment of Viktor Zubkov as prime minister came as a complete surprise. Although 85 percent of the Russian population had never heard of him, and at 66, he has had a lot of time to make himself known, the State Duma approved his nomination with an overwhelming majority. Most of the discussion has centered on the possible presidential succession, but since the prime minister is Russia’s top economic policymaker, we need to consider what Zubkov may mean for the country’s economic course.
Although Zubkov has kept such a low profile, key facts are known. His outstanding achievement is that he organized the exclusive Ozero dacha cooperative. Zubkov awarded Putin and many of his key cronies with dachas in the early 1990s. Now, Zubkov received his own reward.
Zubkov’s second achievement was that he worked for almost two years as Putin’s first deputy for foreign economic relations in the St. Petersburg mayor’s office, a notoriously corrupt part of an awfully corrupt office, as documented by a liberal Petersburg politician and former St. Petersburg Duma deputy, Marina Salye, who has since disappeared. At that time, if not before, Zubkov came to know all the secretive figures in Putin’s company—notably KGB men Igor Sechin and Viktor Ivanov. By turning to Zubkov, Putin has further narrowed his base.
Admittedly, nothing in Zubkov’s curriculum vitae suggests that he has worked directly for the KGB, but since late 1993, he has worked for two dubious institutions: the Federal Tax Service and the Federal Financial Monitoring Service—or, as the Russians say, “financial intelligence.” Although Zubkov has done nothing to build modern Russia, he has collected fine files on Russians’ international transactions.
Nonetheless, Zubkov is not known to have done anything significant to cleanse Russia’s dirty finances. That task fell upon the late Andrei Kozlov, the former first deputy chairman of the Central Bank. Vedomosti notes that the most evident example of Zubkov’s professional activities was the run on Guta Bank, which resulted in its demise and quick takeover by Vneshtorgbank (VTB), and the run on Alfa Bank, which appeared to be completely unjustified.
As Russia’s chief financial inspector, Zubkov has met many people, and the various opinions of him are strikingly similar. Zubkov is a Putin loyalist and is even on first-name terms with the president. He is an old-style communist official, who did a party career rather than a KGB career, maintaining fairly communist views. He is the missing link of the stagnant and cynical Brezhnev period that has played so little a role in Russian politics.
In addition, Zubkov belongs to the Sechin–Viktor Ivanov group. But he might form an independent group with his son-in-law, the furniture trader who became defense minister without merits. He seems both austere and cautious, not arousing personal enemies. Although he is surrounded by massive corruption, Zubkov himself is not identified as evidently corrupt, though such suggestions should be taken with a great caution in this corrupt and authoritarian society.
Our next key is the new government, which the all-powerful Putin has appointed. During Putin’s second term, the government has done next to nothing. Incredibly, he has only made three personnel changes in his government.
The only strong reformer in his old government was Economic Development and Trade Minister German Gref, and he has been sacked. Admittedly, he was replaced by his former first deputy, Elvira Nabiullina, who has a wonderful reputation. Her critical shortcoming, however, is that she is polite and soft, while Gref is a ferocious fighter. She is likely to lose the many good fights that Gref undertook.
Mikhail Zurabov had a terrible reputation as health and social development minister, and what is most shocking is that Putin ever appointed him in the first place. The social sector is the most ignored and backward in Russia today. Rather than making a serious appointment to replace Zurabov, Putin selected the wife of Viktor Khristenko, who is the industry and energy minister.
Zubkov and his son-in-law, Serdyukov, staged a real comedy when Serdyukov resigned as defense minister, citing his relation to the new prime minister. But Serdyukov’s conundrum lasted just one week. Putin’s Russia has become a country of family clans, as Vlast magazine recently showed. Young men, think of what Putin’s daughters will do when they grow up!
At long last, Putin sacked his old nemesis, Vladimir Yakovlev, the former governor of St. Petersburg whose unjustified longevity in government only raised queries about his serious kompromat, or incriminating material, on Putin. Dmitry Kozak, Putin’s old chief legal adviser, is a positive addition to the government, although the judicial reform he designed was demolished by Putin through the Yukos affair.
Before the last presidential election in 2004, Putin made all Cabinet changes before the election, making clear to the Russian people that their votes did not count. Presumably, he has done the same thing this time around. Putin is telling us that he wants another do-nothing government. Frankly, that is the most positive message we could hope for.
A big change during Putin’s second term is that substantial power has moved from the government, the governors and the parliament to the new “Politburo,” as the top of the presidential administration is so appropriately called. Nothing in the formation of the new government suggests that this unfortunate trend will be halted. Whatever little Zubkov has said, his future policy line appears quite clear.
There is one important positive element: Finance Minister Alexei Kudrin is staying on, and he was even promoted to deputy prime minister again. Kudrin is Russia’s best guarantee of macroeconomic stability and sanity.
The ouster of Gref, Russia’s only strong advocate of membership in the World Trade Organization, means that Moscow is unlikely to join that organization for years, as long as Putin and Zubkov are in power and oil prices stay high.
Zubkov’s nomination speech to the Duma focused on industrial policy in a very communist vein. He also focused on building up the military-industrial complex, emphasizing aircraft and the shipyard industry. If he does not change his tone, he is likely to dig Russia into an industrial grave. Moreover, Russia’s devastating renationalization campaign is likely to continue.
Frankly, all Zubkov talked about was more state control and state support of virtually everything—not least the countryside. But this is expected, given his knowledge and experience as an old sovkhoz director; Zubkov knows very well how to waste state resources. Is that really what modern Russia needs?
Zubkov did mention the need for a law on corruption in his speech to the Duma, but his statement was exceedingly vague. How could it be otherwise? If he were truly serious about fighting corruption, he would not have accepted the reappointment of Putin’s worst cronies to his government.