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September 27, 2011 6:05 pm
Russia’s ousted finance minister has stepped up his confrontation with the Kremlin, lashing out at increased budget spending as risking the entire economy as nerves continued to fray over the backroom deal securing Vladimir Putin’s return as president.
Alexei Kudrin’s summary dismissal from his post as finance minister late on Monday after a public dust-up with Dmitry Medvedev, the incumbent Russian president, shocked investors who viewed the conservative as a guardian of Russia’s fiscal stability.
Speaking for the first time since his dismissal on Tuesday, Mr Kudrin sought to deflect talk of his prime ministerial ambitions and said he had already tried to tender his resignation in February over rising budget spending.
“For several months, despite my many objections, including public ones, decisions were taken in the sphere of budget policy that without any doubt increased risks for meeting the budget,” Mr Kudrin said in a statement.
“And these budget risks, connected most of all with increased spending in the military and social spheres, would inevitably spread to the entire national economy.”
Russia’s president fired Mr Kudrin on Monday after he said he would refuse to serve in any cabinet under Mr Medvedev, citing differences over budget policy. The latter had agreed to swap jobs with Mr Putin, the current prime minister, in a fait accompli announced at the weekend.
The rare public stand-off was viewed as a clash of personalities as tempers frayed over the leadership stitch-up, with Mr Kudrin seen as harbouring ambitions for prime minister himself. But analysts said Mr Kudrin’s fresh outburst betrays growing frustration over increasingly loose budget policy, which has seen the breakeven point for the Russian budget steadily soar to $120 per barrel of oil, increasing the Russian economy’s vulnerability to swings in commodity prices.
Mr Kudrin’s policies had included measures to create a national wealth fund from windfall revenues from high oil prices, but these reserves almost disappeared overnight when sharp falls in the oil price hit the Russian economy in 2008.
Standard and Poor’s, the international rating agency, said that while Mr Kudrin’s ouster posed no immediate risks for a review of Russia’s sovereign rating, “efforts to consolidate public finances, following strong expansionary measures during the recent economic crisis, could be complicated by Mr Kudrin’s dismissal”.
“The change in roles and personnel could make it more difficult for Russia to deal with challenges such as strengthening the country’s long-term growth potential,” it said.
Yevgeny Yasin, the respected head of Russia’s higher school of economics, said Mr Kudrin’s stance was a sign of a rare split in Russia’s political elite as tensions rose over the new power arrangement.
Attempting to steady investors unnerved by his sudden dismissal, Mr Putin quickly announced that Anton Siluanov, a respected career finance ministry official, would replace Mr Kudrin as acting finance chief, while Igor Shuvalov, the liberal first deputy prime minister, would take over Mr Kudrin’s responsibilities as deputy prime minister in charge of finance and the economy.
Russia’s money and stock markets appeared to take the news of Mr Kudrin’s dismissal in their stride on Tuesday with the rouble regaining some lost ground against the dollar. Analysts, however, said the central bank had embarked on strong interventions to prop up the rouble, with $2bn in interventions spent on Monday.
Nikolai Podguzov, head of fixed income strategy at VTB Capital, estimated that the central bank had sold around $6bn since the middle of last week, with $2.4bn sold on Monday.
Additional reporting by Courtney Weaver
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