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Analysis: Putin Discards His Reform Allies

Health and Social development Minister Mikhail Zurabov (R) talks to Minister of Finance Alexey Kudrin during a ministerial council in the Moscow's Kremlin, 17 January 2005. Two left-wing political parties called for the resignation of the Russian government amid growing tension over its social reform program that has already provoked protests by elderly pensioners around the country. AFP photo by Itar-Tass/ Presidential Press Service.
Washington (UPI) Jan 24, 2005
The headline in the Moscow Times Monday said it all: "Liberal ministers take the blame." The three champions of aggressive free market -type reforms in the current Russian government appear being set up to walk the plank for their disastrously bungled welfare benefits reform.

In their place, President Vladimir Putin looks set to reshape his government with the strongest influence of the security services the country has seen in more than 20 years since the death of Soviet President Yuri Andropov in 1984.

The most widespread and angriest popular protests erupted across Russia just over a week ago over the proposed new welfare reforms. Elderly Russians took to the streets in their thousands to protest what they regarded as miserly increases in their threadbare benefits.

Putin appears to have been shaken, not just by the anger, widespread nature and scale of the disturbances but also by the fact that they were particularly intense in his home city of St. Petersburg, the second-largest in the country.

The Kremlin was further shaken last Thursday when a new poll from the Public Opinion Foundation found Putin's personal popularity had plummeted to only 43 percent compared with 65 percent a year ago. The poll was conducted among 600 respondents nationwide and had a margin of error of plus or minus 2.5 percent.

The protests, coupled with Putin's plummeting personal popularity and the enormous foreign policy defeat he suffered in seeing Ukraine come under the control of pro-Western President Viktor Yushchenko in its "Orange Revolution" of the past two months, is already causing a sea-change in domestic Russian politics.

Yushchenko visited Moscow Monday in only a day after being inaugurated as president of his own former Soviet republic, His visit was seen as a crucial one in which he and Putin would take each other's measure and see how far they could work together, trust each other and be able to live with each other's very different policies.

His visit could not have come at a worse time. Putin was already fiercely opposed to seeing Ukraine turn away from Russia to embrace Europe and the West, as Yushchenko has made clear he is going to do. But the pensions crisis, and his own plummeting personal popularity now look certain to push Putin into making a radical break with his remaining moderating, reform and pro-Western policies.

Until this point, for all the Western criticism thrown at him for his ruthless policies in Chechnya and his determined drives to bring television and radio broadcasting under close Kremlin control and to break the power of the billionaire oligarchs who seized control of the Russian economy after the collapse of communism, Putin has in fact been far more pro-Western and committed to Western-style economic reforms than he has usually been given credit for in the American and European media.

When he set up his new government under Prime Minister Mikhail Fradkov right before his landslide reelection with 70 percent of the popular vote in March 2003, Putin made clear the new government's main priority was to aggressively push ahead with economic reforms, and he restructured the shape of the government, giving exceptional power to a trio of "super-ministers" to get the job done.

But as so often happened before in the long sweep of Russian and Soviet history, carrying out ambitious administrative reforms, far from achieving their intended goals, instead buried them beneath masses of new bureaucratic chaos and complications.

And today, it is those three liberal, reforming "super-ministers" - Finance Minister Alexei Kudrin, Economic Development and Trade Minister German Gref and Social Development Minister Mikhail Zurabov - who have come forward and announced they were the ones responsible for the bungled benefits reform in order to take the heat off their embattled president.

There is more of an element of truth to these admissions than is usually the case in these circumstances. For while Putin certainly picked and promoted the three men, the pattern of their proposed reforms, putting economic growth, and currency stabilization in front of generous welfare benefits to the elderly and poor, certainly went against his own deeply held personal preferences.

Back when then-President Boris Yeltsin picked Putin to be his surprise choice as prime minister in August 1999, the very first thing the former secret police general did was to try and relieve widespread suffering across Russia by catching up on the arrears of regular wages to millions of long-suffering people from coal miners to teachers, doctors and nurses who had suffered under Yeltsin's feckless rule.

And even when he appointed his new reformist government under Fradkov last march, Putin repeatedly emphasized that the goal of the reforms was to cut poverty in Russian in half within a few years.

However, Putin also trusted in the detailed expertise of his new team, and they have badly let him down. On Friday, a shaken Kudrin for the first time ever dropped his longstanding opposition to using any of the windfall billions in extra oil revenues Russia has enjoyed this year to ease poverty around the country.

He said he would finally be prepared, as Francesca Mereu reported in The Moscow Times Monday, "to dip into the government's stabilization fund, a reserve account created to insulate Russia from the inflationary effects of windfall oil revenues, to pay for an emergency spending package for pensioners."

Zurabov had his own mea culpa to make as well. "In our self-confidence, and I confess this, we thought local governments would have analyzed the problem," he said according to the Moscow Times report.

Gref appears to be the minister most likely to take the fall first. In recent weeks, he has come to the point of publicly contradicting his own president in statements. When Putin restructured his government 13 months ago, Gref was given apparently more clout than anyone else.

But it is no secret within Moscow's ring roads that he was very unhappy about his president's drive to smash the giant Yukos oil corporation and the negative effect this had on business confidence.

Putin may, however, keep loyal and colorless Fradkov as his prime minister. Fradkov was Putin's effective tool in keeping the heat on the now-dismembered Yukos, whose core production unit -- Yuganskneftegaz, also known as Yugansk -- has now come under the control of the state-controlled Rosneft oil company.

And the government is also organizing a merger of Rosneft with Gazprom, the largest natural gas producing and exporting company in the world to consolidate state control of Russia's energy-producing sector.

The real beneficiaries of the coming government shake-up however, look certain to be, as Mereu noted in the Moscow Times, the siloviki -- the network of current and former senior security officers around the president who supported, and many of whom may have benefited from, the destruction of Yukos.

Kudrin, Gref and Zurabov "are seen as the main opposition within the Kremlin to the hard-line siloviki faction of serving and former security service officers," she wrote.

But the rising influence of the siloviki is not going to be limited to blocking economic reforms and increasing benefits for the poor and elderly. Their impact is likely to be strongly felt on Russian policy toward the United States and the West on a whole range of issues including Iraq, Iran and Putin's previously close cooperation with the Untied States in the war on terror.

An icy new wind is blowing out from the Kremlin. Kudrin, Gref and Zurabov are already feeling its winter chill. But many others soon will too.

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