What does the return of the former finance minister and deputy prime minister of Russia mean for Russian business and political forces inside the country, as well as for the West?

Alexey Kudrin entered the post-Soviet history of Russia as one of the few reformers who managed to go beyond dreaming of utopian projects and actually achieving certain results. Photo: RIA Novosti

The recent return to the political elite of Alexey Kudrin, former Russian finance minister and deputy prime minister, has no single, simple explanation. There are many reasons for his return, and just as many consequences.

It is obvious that this has nothing to do with the upcoming parliamentary elections in September 2016. Rather, it is aimed at Russian presidential elections scheduled for the spring of 2018.

It is unlikely that Alexey Kudrin possesses some special knowledge or carefully hidden ideas for managing the Russian economy, which upon his return to the Kremlin, he will disclose to Vladimir Putin, and then start monitoring their implementation. Instead, Vladimir Putin’s decision to bring Alexey Kudrin back to the center of economic management of Russia is a symbolically important event.

Alexey Kudrin entered the post-Soviet history of Russia as one of the few reformers who managed to go beyond dreaming of utopian projects and actually achieving certain results. As finance minister, he managed to implement measures, borrowed from the neoliberals, to improve the tax system, balance the budget, reduce inflation, stabilize the ruble, and force businesses to pay taxes to the state budget.  

Now, after almost 15 years since the main phase of reforms was undertaken during the first presidential term of Vladimir Putin (2000-2004), it should be noted that the leading reformers of that era (in addition to Alexey Kudrin, these included German Gref and Dmitry Kozak) do not play any key roles in the government of today. It is also important to note that their reforms in 2000-2004 occurred during a period of rising energy prices, a favorable international political situation, and the conclusion of the war in Chechnya.

Nevertheless, for many Russian business leaders and representatives of foreign states interested in cooperation with Russia, Alexey Kudrin remains perhaps the only symbol of successful market reforms. Perhaps just as importantly, he was never personally involved in any corruption scandals, his professional qualities are known throughout the world, and public opinion in Russia is positive towards him.

With these traits, Kudrin favorably stands apart from most of his opponents, the main one today being Sergey Glazyev, advisor to the Russian president on regional economic integration. Glazyev’s economic solutions, including fiscal expansion, low refinancing rate for the Bank of Russia, smooth ruble devaluation and increased protectionism in foreign trade, do not meet the urgent and long-term needs of the Russian economy. So much so, that one can have serious doubts as to whether any of the top government decision-makers has even looked at these policies.

Beyond the presidential administration - in the Bank of Russia, as well as in the Federal Assembly, among representatives of the ruling United Russia Party - Glazyev also has very few supporters. Therefore, it should be recognized that Glazyev should not be considered as the main opponent of the possible growing influence of Alexey Kudrin.

Will Alexey Kudrin be able to form a team in the Kremlin? This depends largely on the results of the parliamentary elections in September 2016. We can assume that, should the United Russia Party lose its majority position in the State Duma, which would be followed by the resignation of the majority of ministers in the government, and among the deputy prime ministers, we could once again meet Alexey Kudrin. He will lead the economic bloc, and will try to resume implementing reforms in the national economy left behind in 2004, and now gradually starting to revive.

However, the current pace of reforms, which is weak and inconsistent, is very slow. Neither President Vladimir Putin nor national business leaders are happy with this, of course, except for those sectors with an interest in protectionist policies, and those benefiting from the current sanctions war between Russia and the West.

Recommended: "What the Russian economy needs to do next to avoid stagnation"

However, if United Russia shows acceptable electoral results, and remains the leading political party in Russia, then the new ministers will be chosen from its ranks, and in such a scenario, there will be no place for Alexey Kudrin in the top political leadership of Russia.

Thus, calling Kudrin back to the Kremlin is a complex phenomenon, sending a number of messages, both inside Russia and abroad.

Message to Russian business: Sergey Glazyev now has an opponent in the Kremlin, in the person of Alexey Kudrin, and therefore, announcements made by Glazyev should not be taken as ultimate truths.

Message to the political forces within the country, primarily to United Russia: In addition to opponents from the left side of the political spectrum, represented by the Communist Party of the Russian Federation and the Liberal Democratic Party, you may now have a strong opponent on the right, where to this day United Russia felt quite safe.

Message to foreign business: The reforms will continue, the Russian economy is not rejecting modernization, and the man who remains a symbol of successful liberal reforms of the early 2000s has now been invited back to the Kremlin.

Message to Western leaders: Russia sees its future as a liberal economy open to foreign markets, the guarantor of which could be Alexey Kudrin. This corresponds to the long-term interests of Western countries as well. Therefore, the economic sanctions that are destroying many sectors of the economy, as well as undermining the living standards of Russians, should be removed, and there should be a return to the status quo ante, which existed before the arrival of Vladimir Putin in the Kremlin in 2012.

There is no doubt that within the Russian political class, they understand well the reasons for Alexey Kudrin’s return to the Kremlin. However, whether Western politicians and business leaders will be able to read Vladimir Putin’s message, we will find out very soon.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.