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A woman walks by a panel made of cardboard boxes, displaying Russia�s President Dmitry Medvedev, left, and Prime Minister Vladimir Putin, at an innovation technologies exhibition in the city of Rostov-on-Don. (Stringer/Russia/REUTERS)
A woman walks by a panel made of cardboard boxes, displaying Russia�s President Dmitry Medvedev, left, and Prime Minister Vladimir Putin, at an innovation technologies exhibition in the city of Rostov-on-Don. (Stringer/Russia/REUTERS)

Dmitry Medvedev's battle with Kremlin Inc. Add to ...

Indeed, Russia's economy looks more like that of a Middle Eastern oil autocracy than a modern European state: oil sales fund roughly half the federal budget, while 70 per cent of federal expenditure goes on social spending and pensions. With its economy limping along since the 2009 collapse, economists reckon Russia's 4 per cent growth rate is far below what it could achieve if reforms were made that cut social spending and increased both state and private investment.

Mr. Medvedev has sought by stealth to gain leverage over economic policy. An otherwise unremarkable commission on modernization, created in 2009 and consisting of 23 people including five cabinet ministers, has been transformed into a "sort of parallel government" where Mr. Medvedev can directly issue instructions and quiz members on their fulfilment, according to Sergei Guriev, rector of the New Economic School in Moscow.

"Unlike other commissions, this one meets every month, and on time," says Mr. Guriev. "It provides Medvedev direct access to ministers which he wouldn't get otherwise."

Many of Mr. Medvedev's instructions to the government have fallen on deaf ears: the Finance Ministry under Alexei Kudrin, a close Putin ally, is legendary for its unresponsiveness, say a number of insiders and former officials. Mr. Kudrin is himself a respected reformer and economic manager, but clearly his loyalties lie with Mr. Putin rather than Mr..Medvedev, as do those of most of the cabinet. "The deputy ministers don't see Medvedev as their boss, they see it as Putin," says one economist.

Mr. Medvedev's 2009 order to establish a unified national payment system, to expand the use of consumer credit and debit cards, took 17 months before the Finance Ministry made it into legislation. The ministry maintains that the delay was due to problems in co-ordination with other ministries, not to lack of will or interest.

Persistently, Mr. Medvedev uses the commission to prod ministers into doing his bidding. At its last meeting on April 25, he took Andrei Fursenko, Education Minister, to task for poor co-ordination between academia and the private sector. "The ministry should work - not sleep but work seriously," he said, apparently noting that Mr. Fursenko had been nodding off during the four-hour long session. "Maybe you should do some 'doping'," joked the boyish-looking President - slang for a brisk shot of espresso or vodka to get the blood flowing.

He also admonished Mr. Kudrin, the Finance Minister, urging him to "work together with the administration, so the results are useful to all" - a swipe at Mr. Kudrin's evident lack of co-operation with the Kremlin.

Targeting the cozy relationships between cabinet ministers and state companies was the most noteworthy of 10 points on a reform agenda that also promises to strengthen corporate governance and weed out corruption by empowering whistleblowers. Outlined by Mr. Medvedev on March 31 at a meeting of the modernization commission in the industrial city of Magnitogorsk, it led not only to Mr. Sechin's departure from Rosneft but the resignation of Mr. Kudrin from the board of VTB, the state-controlled bank, though those close to him say the Finance Minister agreed with the President's action.

"Medvedev's decision clearly had a political aspect to it," says Alexei Makarkin of the Centre for Political Technologies in Moscow. "Most of the cabinet ministers covered by the decree were appointed by Putin, loyal to Putin, and Medvedev was interested in a way to weaken their influence." He says it was clear the man Mr. Medvedev was really going for was Mr. Sechin, leader of the group in Mr. Putin's circle known as the siloviki, literally "strong guys," with security backgrounds whom Mr. Putin brought with him into the Kremlin in 2000. Mr. Sechin's ousting was widely seen as a blow to siloviki power.

Yet while the episode allowed Mr. Medvedev to flex his muscles, it also demonstrated graphically the limits of his powers - namely that he is clearly not allowed to fire ministers, only to whittle away at their perks. And although Mr. Putin reportedly supported the new rules on state company boards, it is unclear where he will stand on replacing the ministers, some of whom have tried to nominate their replacements.

The frontrunner for Mr. Sechin's Rosneft seat is Sergei Shishin, a vice-president at VTB and a former general in the Federal Security Service who is rumoured to be close to both Mr. Sechin and Mr. Putin. "Medvedev's great idea has turned into a saddening fiasco. What difference does it make who sits on the board if he votes on orders anyway?" asks Alexei Navalny, an opposition blogger and activist shareholder.

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