At the end of June, the Russian media reported that first deputy head of the Central Bank Alexei Ulyukayev was appointed as the new Economy Minister, while Andrei Belousov, who used to occupy this post, became the new presidential aide. Earlier this year, former presidential aide Elvira Nabiullina was approved as the new head of Central Bank by the State Duma. The Kremlin tends to keep the public in the dark regarding personnel decisions until the last moment, but in this case premature leaks indicate that Putin did not make these decisions easily. Political scientist Tatiana Stanovaya investigates the Kremlin’s approach to personnel sorting.
From left to right: Andrei Belousov, Elvira Nabiullina, Alexei Ulyukayev
The appointment of Elvira Nabiullina as the head of the Central Bank became known in March, when President Putin officially offered her the post. This nomination was anticipated. Nabiullina is known for her tough leadership style and has worked successfully as a loyal executive member of Putin's team. She has been considered a member of the so-called “party of economic growth”—a coalition of individuals that has lobbied for an increase in state investment, tax cuts, and the removal of administrative barriers for business. It is for all of these reasons that her appointment as the head of the Central Bank came as a complete surprise to all, including Nabiullina herself. According to Vedomosti, Putin asked Nabiullina what she thought about the Central Bank post for the first time in the second half of February. “Elvira was in shock,” said one administration official. According to the newspaper's sources, Prime Minister Dmitry Medvedev had offered the top Central Bank position to Alexander Voloshin, the former head of the presidential administration and currently leader of the international financial center project. However, Putin didn’t want a man too close to Medvedev at the head of the mega-regulator.
Ideologically, Nabiullina belongs to the group of economic liberals who are in favor of structural reforms, so her appointment was initially seen as a good sign. However, after Putin’s return to the presidency and the confirmation of Medvedev as prime minister, and amid tense relations between the Kremlin and the cabinet, Nabiullina took the Kremlin’s side. She was entrusted with not only overseeing economic policy, but also monitoring the government’s implementation of the presidential decrees that Putin had pledged to enact during his election campaign. Putin was very unhappy with the quality of the cabinet, and Nabiullina acted as Medvedev’s de facto auditor. Apparently her credibility increased significantly as a result of her work with Putin. “Nabiullina works quietly and hard, and will not fail—she is a professional economist and an experienced bureaucrat. It appears [Putin] decided to choose her based on these reasons,” an employee of the presidential administration told Vedomosti.
Nabiullina’s appointment is an indication that Putin is ready to ease his monetary policy. The Central Bank has always acted as part of a coalition with the “party of stability.” Alexei Kudrin was its previous head, followed by its current leader, Minister of Finance Anton Siluanov. In recent months, the Central Bank has been subject to constant criticism for its failure to open up development possibilities for the Russian economy. If before the Ministry of Finance was the main target of industry lobbyists, now the Central Bank has taken its place, especially as the bank is expected to weaken the ruble in order to maximize export profits.
Nabiullina’s appointment is an indication that Putin is ready to ease his monetary policy.
In this context, the appointment of former Economy Minister Andrei Belousov as the president’s assistant becomes clearer. Belousov, with his reputation as a leader and supporter of an active state role in the economy, was appointed as minister last May. Since then, as many Russian business publications have noted, his department has become the Ministry of Economic Planning but not the Ministry of Economic Development. With the departure of Ms. Nabiullina to the Kremlin in May 2012, Belousov’s department began its shift from the Ministry of Economic Regulation to the Ministry of Economic Planning and Forecasting, and many of its responsibilities were given to new structures, such as the Agency for Strategic Initiatives, or government commissions. Deputy prime ministers—including Curator of Industry Arkady Dvorkovich, First Deputy Prime Minister Igor Shuvalov, and, in matters of innovative development, White House Chief of Staff Vladislav Surkov—played a significant role in establishing the authority of the Ministry of Economy.
“The scheme of the Ministry of Economy in the government of 2008–2011, in which this department and the treasury department were absolute owners of two ‘keys’ to the main White House economic decisions, is no longer working. And Mr. Ulyukayev has to set the new scheme in the Central Bank, which is accustomed to a certain autonomy and independence and to a unity of views on a wide range of solutions,” Kommersant wrote.
In other words, the department lost its authority and its power under Belousov, who had no notable achievements in the post. Instead, he argued actively with the three “giants” of the Russian economic elite. At the recent St. Petersburg Economic Forum, he tried to convince Nabiullina, German Gref, and Ulyukayev that the Central Bank has to be responsible for economic growth and that it is important to weaken the ruble in order to stimulate it. Realizing that power is unequal, Belousov decided to use a method that is well known in today’s Russia: he spoke about hostile U.S. interests. “In Japan, economic growth was halted at the request of the U.S. and its allies through the yen’s revaluation. And now Japan is seeking growth recovery after suffering currency devaluation. And it's not the only example. Remember how diligently the United States sought China's revaluation of the yuan!” the former Economy Minister said. In other words, anyone who opposes weakening the ruble is an “agent of the [U.S.] State Department.”
The shift in Belousov’s position on the emigration of influential Russian economist and former rector of the New Economic School Sergei Guriev is indicative. In late May, Belousov approved Guriev’s decision, noting, however, that there was no political motive for his departure and that the former rector had had every opportunity to defend himself from inquiry that many said was politically charged. However, according to the media, Alexei Kudrin, German Gref, and Igor Shuvalov went to Putin to try (unsuccessfully) to protect Guriev. These reports confirm the seriousness of the repressive machine that is being used to process “the case of experts.”
At the same time, Belousov spoke positively about Guriev as a highly professional and decent man. Observers assumed that Belousov didn’t want to spoil his appointment as the president’s assistant and lose the trust of the liberal community. But the strategy of pleasing everyone didn’t work. After a month, Belousov finally distanced himself from Guriev. “As they say, God will judge him for what he did. I do not approve of him, to be honest,” the news agency PRIME reported Belousov as saying. Asked by reporters about the seizure of Guriev’s correspondence, Belousov said, "Oh my God, so what? A five-year correspondence was seized, because of what? You see, there is nothing terrible.” Belousov admitted that the incident was unpleasant but said that it was not a reason to leave the country. “The Western media serve it up that way, they make Sergei a political refugee, but I don’t see it this way,” Belousov said.
The Ministry of Economy lost its authority and its power under Belousov, who had no notable achievements in the post.
Belousov’s position that there is “nothing wrong” with seizing a witness’ private correspondence for use in a criminal case probably convinced the Kremlin that their decision to transition him to work for the government was correct. According to some media reports, the head of Rosneft, Igor Sechin, was involved in Belousov’s transfer. Objectively, Sechin is now probably more interested than anyone else in weakening the ruble, but his ability to influence economic policy through government channels was limited. At a recent meeting with reporters after the official press conference announcing his new appointment, Belousov was asked what he thought of Sechin. “You know, I always treated Sechin with great respect, and now I can say this because he is not my boss, in contrast to the recent past. This is a man who knows how to take risks, and he is focused firmly on solutions. This rigidity scares people, but it brings results. That is the most important thing,” said the minister, choosing his words carefully. According to URA.Ru sources, Belousov’s transition into the Kremlin is not the last reshuffle. We can expect others. “The government is very much weakened; teams are displaying their players,” a source explained.
Some people really want to see the government weakened. However, the appointment of Alexei Ulyukayev as the new Economy Minister strengthens the cabinet’s economic team. This may be one of Putin’s most positive personnel decisions in the past year.
Ulyukayev is one of the most influential and respected Russian financiers. He has often expressed views on the Kremlin's policies that are overtly critical. “We are still an excessively centralized state. And our thinking is also centralized. And so we have a higher probability of making mistakes. As you know, generals are always preparing for the last war. We have a general's system—the vertical of power. There is the general on the top; beneath are colonels, majors, captains. The general is preparing for the last war, and he sends a signal to prepare for the last war to the rest, and they perform. That is why we will always be later than any other country,” he said in an interview with Slon last March.
The appointment of Alexei Ulyukayev as the new Economy Minister may be one of Putin’s most positive personnel decisions in the past year.
Ulyukayev, unlike Belousov, is in favor of stimulating the economy through market methods: the development of competition, structural reform, the reduction of administrative barriers, and improvement of the investment climate. However, current political conditions mean that the main question is whether he will be allowed to implement what he wants. He faces risks from all sides and, above all, from within the government itself, which is extremely weakened politically. Ulyukayev has to achieve economic growth while working with a cabinet that is expected to resign soon. He will have to fight alone with industry lobbyists who require more and more resources to build their mega-corporations.
Another threat comes from the Kremlin, where Belousov is building his circle of influence. Traditionally, presidential aides have not played a large role in determining economic policy; that area is the prerogative of the government. However, this largely depends on the personality of the aide and the political environment. There is no doubt that Belousov’s transition to the Kremlin is another step toward the creation of an alternative place in the presidential administration for developing state economic and industrial policy.
