MOSCOW (Mineweb.com) – There is a popular, if bawdy Russian anecdote about an over-confident rabbit in a village, on a fine day….
One morning the little fellow wakes up, stretches, and as was his custom in good weather, he goes outside his front-door to scratch his private parts. When he reaches into his pants, however, he discovers there’s nothing there. He falls down in shock. Told in rhyme, this outcome almost always produces peals of laughter from a Russian audience.
The announcement of the new Russian cabinet of ministers has produced something comparable by way of shock, if not of amusement. For these are a group of fellows who have been selected on the principle that they won’t be tempted to reach into their private parts, much less confuse them with the welfare of the state or the Russian people. If you realize that under former president Boris Yeltsin, these posts were auctioned off, obliging their incumbents to spend their terms paying off their creditors, and hiding what they could for themselves, the second-term cabinet appointed by President Vladimir Putin is a first in Russian political history.
The deftness with which Putin and his advisors have managed the appointment process has been as great as the silence in which they were able to work. But they have also taken no chances.
Mikhail Fradkov is the weakest prime minister since Yeltsin picked Sergei Kirienko to lead the country over the financial precipice of 1998 without quailing. But Fradkov is not weak in that fashion. As a man and a policymaker, he learned to keep his head down at the Trade Ministry, and avoid challenging those of his superiors, like Anatoly Chubais, who were determined to wreak havoc with the national trading interest for the benefit of their Russian and American friends. When Putin appointed Fradkov to head the economic security section of the Kremlin Security Council in 2000, he became more assertive. As Tax Minister, he accumulated all the methods and evidence that, one day perhaps, might be mobilized to break up the concentration of wealth that is now known as the oligarch system. It remains to be seen whether Fradkov will apply the same methods and evidence that have so far been mobilized against Yukos’s shareholders to the other oligarchs whose tax avoidance and offshore trading schemes are just as familiar, and just as vulnerable as Mikhail Khodorkovsky’s – those of Roman Abramovich, Oleg Deripaska, Mikhail Fridman, and Vladimir Potanin, for starters.
The transfer of Dmitri Kozak from Putin’s personal office to head the staff of the prime ministry is one of the ways the president will ensure that Fradkov isn’t intimidated in pursuit of the state’s new purpose; nor that ministers will be able to slip into legislative effect the cashout favours the oligarchs are desperate to have approved in a hurry. When he was deputy prime minister in the autumn of last year, Alexei Kudrin was able to promote an amendment to the state secrets law that would allow Norilsk Nickel to divulge its hitherto secret production numbers, as well as its unmined reserves and stockpiles. The measure was enacted in record time, and Putin signed it into law so quickly, it appeared that there hadn’t been time for the Kremlin or the prime ministry to think twice about Kudrin’s rationale, or review exactly what benefits it conveyed. Four weeks ago, the Kremlin woke up, and blocked the disclosures from occurring until Putin will get around to signing a decree that noone had thought necessary, or legally required, until then.
The hidden benefit of the measure for both Potanin and Mikhail Prokhorov, co-owners of Norilsk Nickel, is that it enables them to meet the London or New York stock exchange disclosure rules that apply, if Norilsk Nickel shares are to be floated on a foreign stock exchange, or if Potanin and Prokhorov have in mind to cash out in favour of a foreign investor, much as Mikhail Khodorkovsky was planning a year ago. A planned issue of Interros convertible bonds, worth about a billion dollars to Potanin and Prokhorov, was aborted days after the Kremlin veto, as western banks and bond-buyers realized that Norilsk Nickel shares, to which the value and security of the Interros bonds was to be tied, may be heading for a Kremlin-ordered review.
Inside Norilsk Nickel, executives report, the silent order went down the ranks – take no initiative, borrow no money, hedge no sales, keep your head down.
Kudrin has now been demoted twice in the new government lineup. He has lost his deputy prime minister’s rank, and although his Finance Ministry has been enlarged to include the old tax ministry, both have been placed under direct Kremlin supervision.
This is another of the innovations Putin has introduced – the rearrangement of the bureaucratic reporting lines so that, not only the security ministers, but also the heads of finance, economic development and trade, agriculture, natural resources, and energy and industry, report directly to the President.
For this supervision to be a powerful engine of policy initiative, and oligarch control, Putin must expand his Security Council, especially on the economic front which Fradkov once directed. The removal as Secretary of the Security Council of Vladimir Rushailo, a Yeltsin leftover and reputed conduit of oligarch lobbying, was a precondition; it has now been done. Igor Ivanov moves over from the Foreign Ministry to chair the new council.
The single-interest ministries, which catered to the special-interest lobbies, have been stripped of their independence. The oil lobby has lost its minister, Igor Yusufov, whose appointment in 2000 was intended to put distance between the government and the oil majors, and relieve the pressure for further easy privatization of state oil, gas, and pipeline assets. Yusufov proved he wasn’t up to the task. By contrast, Victor Khristenko, demoted like Kudrin, is more malleable, and he has been retained, albeit with the understanding that he’s to get up every morning and show the Kremlin what is in his constituents’ pants. Also, to signal that the President’s new economic policy is aiming to diversify away from oil, Khristenko’s portfolio will require him to balance energy against industry.
The only trace of the old Yeltsin divide-and-rule method for running the government is to pit the handful of ministers the western media like to call liberals – Kudrin, Khristenko, and German Gref- against each other, and against two newcomers, Igor Levitin and Yury Trutnyev.
Levitin, a 20-year veteran of military logistics, has been named to head a new ministry consolidating railways, other transportation, and telecommunications. He was one of the quietly effective Kremlin-appointed group which has supervised the anti-corruption drive and reorganization of the national rail system. Levitin has been quickly interpreted in the Russian press as a pawn in the hands of his most recent employer, the steel oligarch Alexei Mordashov, at whose transport unit Severstaltrans Levitin has worked since 1996. This is unlikely; but the new control system Putin has installed should remove any temptation Mordashov may have to exploit his man.
Yury Trutnyev – whose family name in Russian suggests bees rather than rabbits – has been placed in charge of the vast array of territorial licences and capital commitments through which Russia’s oil, gas and mineral companies generate their wealth. This is a subject on which Putin himself knows far more than any head of state in Russian history, having been expertly tutored by the faculty of the St.Petersburg State Mining Institute, headed by Vladimir Litvinenko. Litvinenko’s influence in combating the tactics of oil majors like Yukos, Tyumen Oil Company, and Sibneft, and his views on the future direction of Russia’s mineral and precious metal miners, are likely to remain powerful in the Security Council’s deliberations. Should Trutnyev, an oilfield engineer by training, and the former Mayor and former Governor of Perm think differently, Kozak, the new chief of the cabinet staff, is bound to set him straight on putting his public part before his private ones. In Russian terms, this is revolutionary.