Vladimir Milov

Expert of Free Russia Foundation, Russian opposition politician, publicist, economist and energy expert

The Current Russian Government Will Become a Textbook Example of Administrative Stagnation

Dmitry Medvedev’s new Administration has already been dubbed “the stagnation cabinet” and for a good reason. Despite some rotations, the new government is dominated by well-known bureaucrats who have hopped between various positions within the Putin system for years but have never established themselves as agents of change. There simply are no reformers or rabble-rousers in this cabinet, and consequently, no reasons to expect substantial changes in economic policy. The overwhelming majority of officials from the previous administration have kept their posts, just like Medvedev himself, who has long become the national symbol of stagnation and imitation of competent economic management.

At the same time, certain shifts within the government do offer clues on exactly what kind of adjustments of the economic management style we should expect in the coming years. Let’s discuss this in detail.

The most glaring change is the dramatic beefing-up of the fiscal component of the cabinet. The opposition of the fiscal hawks to all development proposals had figured prominently in all of the previous administrations. As a rule, all breakthrough proposals require either lower taxes or increased spending for purposes of development. The fiscal hawks are categorically against such proposals, as a balanced budget is their foremost priority. This is exactly what type of standoff shook the Kasyanov government in early 2000, when Kasyanov and Gref sought to lower the taxation burden, but Finance Minister Kudrin was opposed.

The most striking feature of Medvedev’s “old new” cabinet is the unprecedented power of the fiscal hawks; they are probably the most powerful they have been in the past twenty-five years. First of all, the government now has a de facto shadow Prime Minister — Anton Siluanov — who has not only been given the powers of a First Vice Minister and now is in the supervisory position over everyone else in the government but has also kept his full control over the powerful Ministry of Finance, the very agency that regulates the state financial flows.

Siluanov will inevitably grow stronger due to the weakness of Medvedev himself, who is by far less proficient financially, and to the new arrangement where Siluanov will oversee the political process of budget negotiations with the Duma lobbyists — he would always have the pretext of telling other agencies: “apologies, you will have to take a hit on this issue due to the current political situation.” A balanced budget and growing reserves to fight off inevitable future crises are the traditional priorities of Siluanov. That means we should anticipate an increasingly restrained discussion of spending increases and, conversely, very lively discussions of tax hikes.  Such fixation on balanced budgets and reserve growth is not great news for Russia’s weak economy.

Siluanov is not the only bad news. Tatyana Golikova, the new public-sector czarina, in fact, is yet another fiscally rigid official who has spent years overseeing the budget process at the Ministry of Finance. That fact is even more important than the widely-publicized business interests of the Khristenko-Golikov family in the pharmaceutical industry, — it’s hard to imagine Golikova aggressively demanding dramatic increases in spending for health and education.  The opposite is more likely.  Against the backdrop of the bureaucratically weak Ministers Skvortsova and Vasilyeva, who were retained in their posts, we anticipate new waves of public sector “optimization”.

In that regard, a telling appointment is that of the new Minister of Science and Higher Education Mikhail Kotyukov. The appointment came a few days after the announcement of the abolition of the Federal Agency of Scientific Organizations (FANO- ФАНО) and the creation of the new Ministry. The scientific community was jubilant— finally, the benevolent President had responded to the pleas of the learned men and fired from the FANO the squad of heartless boys with no real science background who were intent on consolidating their control of the budgets and properties of the scientific sector.  But their glee was short-lived, for appointed to the post of the new ministry was precisely the head of the much-hated FANO Mikhail Kotyukov, barely over 40 years of age, who has spent most of his career in finance and has no background in science. This was a sophisticated way for Putin and Medvedev to spit into the face of a scientific community. To put it bluntly, the “old new” Medvedev Administration will basically finalize the process of cashing out Russia’s social services and science — and that explains the current appointments very well.

One should not expect a comprehensive policy of human capital development when everything is administered exclusively by finance cadres with a very different way of looking at things. Veronika Skvortsova can be an award-winning doctor three times over, but we have already seen her real position within the decision-making process. In that regard, the situation has gotten even worse.

Consistent with this overall picture is the reappointments into the “old new” financial block of two ministers — Siluanov and Oreshkin.   Before the new cabinet was announced, a broad range of forecasts was floated that Putin may surprise everyone with appointing into the government new strong cadres with a mandate to resuscitate economic policy.

Dirigistes had hoped for the appointment of their own gurus; traditional in-system liberals for Kudrin’s appointment. But it is clear now that Putin is quite content with the people who keep the government piggy-bank under control and keep feeding us fairy tales about the growth which is not even on the horizon.

Of course, there are a number of other odious appointments offensive to those who understand our country’s problems even a little. For example, Mr. Kobylkin, under whose governorship the Yamalo-Nenents Autonomous Okrug witnessed the first epidemic outbreak of anthrax in 75 years, has been appointed the Minister of Environment and Natural Resources. Medinsky, with his plagiarized dissertation, has kept his Minister of Culture position. Everyone has heard about Mutko and the Ministry of Construction.

However, the most scandalous appointment, of course, is that of Dmitry Patrushev, the son of former FSB Director and closest friend of Putin Nikolai Patrushev, to the post of Minister of Agriculture. Must we highlight the fact that Patrushev Jr. has only worked in agriculture for…. never! He has never worked in agriculture, not a single day. He has worked in banking, and not very successfully: the Rosselkhozbank (the Russian Agrarian Bank — Россельхозбанк) which he headed since 2010, has not managed to get out of the red, despite numerous promises of the management, and is now one of the largest recipients of government subsidies. The reason — reserves backed by bad debt which consume all of the bank’s interest profits. To put it bluntly, loans were generously issued for random projects and now the taxpayers (that is you and me) are bailing them out.  By the way, my personal theory on Patrushev’s appointment to the Ministry of Agriculture is that he was removed from the Bank because he simply was not up to the job, and the Ministry of Finance got fed up with constantly having to bail him out. So, it was an honorary discharge, of sorts. However, considering the high-powered daddy Dmitry Patrushev, this is definitely not the end of his career.

Therefore, the new edition of Dmitry Medvedev’s Administration — is not just a stagnation cabinet, but also a parade of egregious incompetence as well as the first in history barefaced attempt to introduce the corrupt practice of appointing the sons of the new high nobility to ministerial posts (I am struggling to recall such an impudence, frankly).

At the same time, we should note that the numerous forecasts of anonymous Telegram channels foretelling the strengthening of Igor Sechin’s position in the new Administration have not come true. Not only has Sechin not realized any gains, he has lost ground. For example, even the new head of the Ministry of Environment Kobylkin is much closer to Novatek (Новатэк) and Gazprom, but definitely not to Sechin himself, in contrast to the previous head of that agency Sergey Donskoy. It is hard to say whether Donskoy was a “Sechin man” in the full sense of that term, but the obvious trend is definitely not to the advantage of the head of Rosneft.

Sechin’s frenemy ArkadiyDvorkovich has left the government. However, Dmitry Kozak who replaced him as the Energy Czar is not any closer to Sechin. Another obvious opponent of Sechin, Prime Minister Dmitry Medvedev, has managed to wrangle an important position of the Chief of Staff for his college classmate Konstantin Chuychenko, despite Medvedev’s conspicuous lack of competence.

However, overall, it would be fair to say that Medvedev’s Cabinet is consistent with Vladimir Putin’s view of the situation. He is content with everything, he does not want any radical changes, he does not want any reforms. All that he is after is further fiscal consolidation. Putin is satisfied with fairy tales about economic growth told him by the Ministry of Finance and Ministry of Economic Development. An old joke comes to mind: “Experts say people’s incomes are growing. — But our income has not grown! — Clearly, you are not the experts!”

He is unwilling to undertake any serious attempts to change the situation, just as he is unwilling to alter fundamentally the existing balance between the power clans.

It’s difficult to come up with a better illustration of the term “stagnation” (or in common parlance, zastoy) than the composition of the new Medvedev Cabinet. In some distant future, this Administration will become the textbook example of regulatory stagnation

This Article first appeared in Russian at the Insider’s site