Russian Economic Reform

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Serdyukov and Medvedev — normal?

Published on July 01 2012
Posted by: jeff

Russian language “Vedomosti” carried an article, “Пострадал за городки”, last week which was quite informative in a banal sort of way.

The article covered internal Medvedev-headed cabinet discussions on 26 June about transferring unused military property – social infrastructure and housing – to local government and regional authorities. This infrastructure is generally not in good-shape and the meeting discussed the transfer of money to local and regional authorities for its maintenance. Medvedev has earlier directed that a methodology for the calculation of these subsidies be prepared by 15 June.

«Есть методика?» Medvedev asks if there a methodology, but is told by Vice-Premier Dmitry Kosak that there are only some proposals from the Ministry of Finance that have not been agreed with others.

We are not told what the “methodology” is, but it seems that the money would come from the Ministry of Defence budget – which already has a “deficit” of funds – and its Minister, Anatoly Serdyukov, is clearly not happy. «То, что предлагает Дмитрий Николаевич [Козак] вместе с Минфином, абсолютно нереально!» He describes the joint proposal of Kosak and the Ministry of Finance as “absolutely unrealistic”.

Oleg Govorun, the new Minister of Regional Development, and Sergey Shoigu, the recently appointed governor of the Moscow Region, throw in their tuppence-worth on the inability of the regions to handle the situation without assistance. Finance Minister Anton Siluanov – speaking in the way of a typical finance minister – puts his view that assistance can only be provided to municipalities and regions for one year, and that after that they will have to find the funds themselves.

After further discussion, Medvedev orders that an agreed methodology be prepared within five days. According to the article, Medvedev added that those involved should take personal responsibility for lack of progress on this issue: “……..и представить предложения о персональной ответственности тех, из-за кого она до сих пор не принята”.

This is too much for Serdyukov, who retorts: «Давайте уволим кого-нибудь! Хорошее дело!» — «Тогда меня. Я не подписал методику, потому что я не вижу способов, как передавать дефицит». “Let’s fire somebody! It’s a good solution! Then fire me. I haven’t signed-off on the methodology because I don’t see how to transfer the (defence budget) deficit.”

Medvedev quickly indicates that he will not accept such an situation: “Медведев поспешных решений принимать не стал”. He says to Serdyukov:

«Нужно было звонить мне и говорить: я не утверждаю ее, потому что такая позиция. Если речь идет о нарушении ранее принятых поручений, докладывать лично мне или с вице-премьером зайдите». “You should have called me and said that ‘I am not approving it because I have such a position’. If we are dealing with a breach of earlier approved orders, report to me personally or come with the Vice-Premier.”

In my view there are several things to note about this discussion.

Firstly, as I have previously written on this site, the extent of Russian media reporting on internal government discussions and disagreements exceeds that in most English-speaking countries. (See “Russian ‘maneuvers’” article of 9 April 2012 in Expert Group 2 “Budgetary and Monetary Policy, Macroeconomic Parameters for Developing the Russian Economy” section of the right-hand column) I then wrote that in part, public exposure of internal government economic policy differences reflects less need for government discipline than when faced with an effective political opposition ever ready to attack (particularly as in the Westminster system used in Australia and the UK), and in part it is also a way of trying to influence the views of the president and prime minister. 

Secondly – and contrary to the feeling one might get reading some of the foreign English-language media –  there is an organized “process” of decision making in Russia and Vladimir Putin does not make all the decisions; although there is no doubt that Serdyukov would appeal to Putin on this issue if he felt strongly enough about it – and Putin would probably be more interested in getting a final decision than a “methodology” for reaching such a decision. In this sense, Russia is little different to most “Western” (at least English-speaking) countries. Different individuals, ministers and departments will quite often have different views and, sometimes, vigorously defend them. Defence departments always want more money and finance departments always want to contain spending.

Thirdly, some basic economic decisions are very similar to that in other countries. Apart from the size of the defence budget, there is the question of financial transfers between different levels of government. In Russia, as in many countries such as Australia this is a perennial and complex subject and is very unlikely to become less controversial and difficult in the future.

“Thanks Jeff”, you might say for this piece of “banal” blogging, and then add  – “So what?”

My answer is that when thinking about Russia and doing things in the Russia, it is best not to succumb to the sometimes almost hysterical Western media/commentator view. Start with “normal” and look for deviations (and there are some significant ones), but do not start with “abnormal”.

PS:  I suspect that Serdyukov will be more careful with the food than Marshal Voroshilov (a politburo member and Defence Commissioner). Khrushchev recalled a scene that followed the Red Army’s difficulties in invading Finland in March 1940: “Stalin jumped up in a white-hot rage and started to berate Voroshilov. Voroshilov was also boiling mad. He leaped up, turned red, and hurled Stalin’s accusations back into his face. ‘You have yourself to blame for all this!’ shouted Voroshilov. ‘You’re the one who annihilated the old guard of our army; you had our best generals killed!’ Stalin rebuffed him, and at that, Voroshilov picked up a platter with a roast suckling pig on it and smashed it on the table.”