Is the president to blame?
The Kremlin and government officials are in a state of shock. For the first time, Prime Minister Mikhail Kasyanov has dared to bare his teeth at President Vladimir Putin. The government's new mid-term economic program isn't likely to make him overjoyed. Instead of the 5.8 percent growth figure it had set til 2005, the government now gives a figure of 5.9 percent not exactly a great leap forward. But Kasyanov recently said there would not be any great economic leaps forward because such leaps are "fraught with mistakes."
No one expected this. Kasyanov, who was supposed to be loyal and malleable, suddenly got up the courage to contradict Putin and to make Putin look like an irresponsible populist attempting to push through political promises without considering what the government can realistically do. In essence, German Gref and Alexei Kudrin, the authors of the government's economic program, proposed that Putin forget about his "more ambitious plans." This means that Portugal, which Putin had proposed catching up with, will remain out of sight.
Most observers predict Putin will be quick to put down this government rebellion, the first in his presidency. It's important for Putin to prove the people in the Kremlin understand the economy just as well as the egghead analysts in Gref's ministry. The alternative is to end up looking like the king in Antoine de Saint-Exupery's story, who ordered his unfortunate minister to turn into a seagull and, of course, was to blame when the minister couldn't manage to do so.
The counterattack from the Kremlin has already been begun by presidential economic adviser Andrei Illarionov, who hinted that Kasyanov and Gref could face swift dismissal if they don't manage to explain to Putin why they can't provide the 8 percent growth figure he is expecting. Illarionov reminded them it was Gref himself who promised 8-10 percent growth in his famous economic-development program in 2000. Illarionov said he couldn't understand why the government had changed the aims it had originally set itself.
Putin then dealt the rebellious ministers a harsh blow of his own. In a burst of martial spirit, he ordered the government to come up with money immediately to raise wages for the military and finance the experiment of moving over to a professional Army. The finance minister wasted no time in estimating that it would budget 23 billion rubles, but in order not to spoil the relationship with the military, he promised to somehow come up with the money.
Hence, Putin demonstrated to his constituents that he is demanding higher numbers not just to maintain the balance of political forces, and certainly not to satisfy his ambitions, but to allocate it to those important people such as the Army officers, who really need it.
There is no doubt now that Kasyanov will have a harder time suggesting that Putin is pushing for more out of populist reasons. The fact that Putin suddenly remembered about the military reform underscores his sympathies with Defense Minister Sergei Ivanov and the St. Petersburg power brokers Kasyanov's main ill-wishers.
Prosecutors stall economic growth
The emphatic support that Petersburgers offered Putin sharply contrasts with the psychological attack that Kasyanov and other Finance Ministry officials launched against law-enforcement agencies.
First, they made direct accusations in the press that the prosecutor's office, as well as the tax police and other law-enforcement agencies, are responsible for slowing down the economy.
Essentially, they are blaming the prosecutor general for the fact that Russia's GDP growth is failing to reach the 8 percent growth rate Putin is aiming for. They say the very fact that law-enforcement agencies protect Russian businesses leads to an increase in capital-flight rates and to a poorer investment climate in the country as a whole.
Today the press is anticipating a brilliant stunt from the creators of the economic-reform program. According to their logic, on the one hand, the president is pushing to increase the "magic" number to 8-10 percent, but, on the other, he himself through the law-enforcement agencies is making this goal unachievable. Putin, then, is dealing with a boomerang effect: The shot to the prosecutor actually backfires.
One persistent rumor in the corridors of power alleges that Kasyanov's new economic programs will have a clause that says law-enforcement agencies' excesses in the business sphere are the main impediment of economic growth. If the rumor proves true, it would be a clear indicator that Kasyanov and his "economic team" are planning to fight to the bitter end to defend liberal market reforms, defending them from the prosecutor general as well as from the head of state.
But the other version is simpler: Kasyanov's expected attack on prosecutors could simply be a response to a "bomb" that the law-enforcement agencies planted in his perfectly sound Slavneft privatization scheme. Everyone knows that during the elections for head of the company, the Kasyanov strongly supported Yury Sukhanov, widely known as one of Roman Abramovich's people. Just days later the court found Sukhanov's candidacy unsuitable because, as it turned out, while he was the company's vice president he sealed an agreement with Slavneft-Belgium to supply 2 million tons of diesel with an unjustified discount. Then, against the contract, the fuel was delivered to Slavneft's subsidiary Sibneft, which, it turn, resold it at market prices. As a result, the state lost as much as 150 million rubles.
The press has long been circulating the idea that Slavneft's privatization locked the horns of not only of Abramovich and Mezhprombank head Sergei Pugachyov, but also the "economics" and "law-enforcement" blocks in the government.
(Natalia Mironova is filling in for Ekaterina Larina, who is on maternity leave. E-mail Larina at firstname.lastname@example.org.)