Putin: Kudrin is “Stressed Now”

Greg White at the Wall Street Journal has a gloomy outlook on the Russian economy today, and it looks like once again that Finance Minister Alexei Kudrin (who has been subpoenaed to appear at the Khodorkovsky trial) has found himself at war with other elements of the government who are less conscious of the state budget.  Yesterday we saw some reports explaining why government spending has not be working to bail out the Russian economy, and today it looks like Kudrin is under additional pressure despite the news of rising oil prices (the argument is that the deficit has to be curbed to avoid sudden inflationary pressure).  Perhaps once the state’s money taps open up, a lot of people get used to receiving these funds, and resist any attempt to shut it off.

So far, Mr. Kudrin seems to have strong support from his longtime ally, Mr. Putin, who has often come down on the finance minister’s side in policy debates. But even Mr. Putin seemed dismissive when asked last month about Mr. Kudrin’s comments on the international economic environment. “Alexei Leonidovich [Kudrin] is stressed now,” Mr. Putin said.

Critics warn loosening the purse strings would fuel inflation, drive up interest rates and stifle efforts to develop new businesses to wean the economy from its dependence on oil.

Oil prices are complicating the picture. The government cut its forecast for crude prices to $41 a barrel early this year. But with prices now nearly $60, that is looking conservative.

“When oil was $40, it was easier for Kudrin to make his argument” about the need for spending cuts, says Yevgeny Gavrilenkov, economist at Troika Dialog, a Moscow investment house.