Volodin Will Oversee Russia’s Domestic Policy
The responsibility for domestic policy has been given to Vyacheslav Volodin, first deputy chief of the president’s staff, away from Vladislav Surkov and the government’s executive office. The news was announced at a meeting in the president’s executive office.
Surkov supervised Russia’s domestic policy for years as first deputy chief of the president’s staff under Putin and Medvedev. But in October 2010, Volodin was appointed deputy prime minister and chief of the government’s staff and took over many political issues. In particular, he supervised the Russian People’s Front and actively contributed to Putin’s election campaign. This made Surkov and Volodin rivals. The media regularly reported rumors about tensions between the two high-ranking officials.
That rivalry may continue after Putin’s inauguration, now that Volodin and Surkov have changed places. It is rumored that Volodin will try to use his position in the administration to influence United Russia, while Surkov will do the same using his close relations with Medvedev, who is expected to assume leadership of the party next weekend. The party even feared that reshuffles will result in Surkov’s allies getting the leading posts.
However, several Izvestia sources with close ties to the Kremlin and United Russia say it has been decided that Surkov will not supervise the ruling party or Russia’s domestic policy.
“A government member may help Medvedev work with political parties but the responsibilities have been divided: Volodin will oversee United Russia, because domestic policy is the responsibility of the president’s executive office,” a source said.
So Volodin’s allies among the United Russia leadership will not be replaced with Surkov’s people. “The key positions in the party are held by Volodin’s team and there are no grounds to expect any change,” a source in United Russia said.
It is also strongly rumored that Alexei Chesnakov, former deputy head of the Kremlin’s domestic policy department under Surkov, may be given a high post in the party. But Chesnakov has a good relationship with Volodin, whom he has recently started consulting, so his possible appointment to Untied Russia would not indicate Surkov’s influence.
High posts in United Russia can go only to several of Medvedev’s close allies, whereas the president’s executive office will supervise the party on a regular basis, said Oleg Matveichev, a former member of the president’s executive office. He thinks Medvedev is unlikely to address the party’s issues more often than once a month.
Experts say it is logical that Surkov has been taken off domestic policy issues.
“Judging by the structure of influence on the political process, the government is unlikely to keep oversight of the political process,” said Dmitry Orlov, coordinator of the People’s Club. “Domestic policy will be the responsibility of the president’s executive office; the government’s functions do not include supervision of this sphere.”
“Everyone wants to know who will supervise domestic policy. I think the choice will be made clear at the party’s convention,” said Mikhail Vinogradov, director of the St. Petersburg Policy Foundation.
Greece's Exit from the Eurozone May Lead to Recession in Russia
Greece's exit from the euro, already discussed at the official level, is fraught with recession, unemployment and the ruble’s weakening, Bank of America Merrill Lynch said in a report Friday.
The eurozone governments are discussing a policy response to what they have dubbed ‘Grexit,’ sources said citing a recent conference call of the Eurogroup Working Group of advisors to eurozone finance ministers. Officials in Greece denied that the EWG conference discussed that issue, saying that such rumors jeopardize the Greek government’s bailout efforts.
Investment bankers warn about profound implications of Grexit for Russia’s economy. “A disorderly break-up of the eurozone could push Brent crude prices to as low as $60 a barrel,” said Vladimir Osakovsky, an economist with the Russian office of BofA Merrill Lynch. Its consequences for Russia will include a recession, a 15 percent-17 percent depreciation of the ruble and a contraction of investment.
The dollar exchange rate may rise to 35 rubles. Investment will drop 7.8 percent in 2013 after a 1.9 percent rise this year. Exports will grow 1 percent, while imports will tumble 19 percent. Inflation will accelerate to 7.5 percent this year but will decrease to 5.7 percent in 2013.
The federal budget deficit will jump to 5.5 percent in 2013, forcing the government to use up its rainy-day funds and cut spending. With the oil price as low as $60 per barrel, the Reserve Fund will be empty in less than a year.
A break-up of the eurozone, will put pressure on Russia’s corporate sector. Dwindling profits and growing unemployment will lead to a fall in consumer demand, the BofA-ML economists said.
In a less pessimistic scenario – where Greece leaves the eurozone gradually over several years – Brent will stand at around $80, keeping the dollar rate at 33 rubles and Russia’s GDP growth at 1.5 percent.
There is also a third scenario, where the risk of a Greek exit remains but does not increase, Osakovsky explained. In that case, oil will cost $100 per barrel, and the dollar will remain at the current level of 31 rubles.
Merrill Lynch experts seem to be optimistic, as their basic forecast includes oil at $118 level for 2012 and GDP growth at 3.9 percent. In that scenario, Greece should hold a new parliamentary vote on June 17, form a coalition government, which should adopt an austerity plan and therefore continue to receive financial support and service sovereign debt.
Greece’s debt has reached $247 billion. The three creditors – ECB, IMF and EU - agreed in October to a €130 billion bailout, but the support program was suspended due to political uncertainty.
Yulia Tseplyayeva from BNP Paribas believes European leaders will try to keep Greece in the euro.
Former Finance Minister Alexei Kudrin said earlier that Russia will be able to balance its budget with oil at $120 per barrel. He did not rule out a sharp fall to $60, adding that Russia’s reserves will not last more than a year or two in that case.
Missile Launched in Russia a Snub for U.S.
An intercontinental ballistic missile developed for the Missile Strategic Forces was successfully launched on Wednesday from the Plesetsk Space Center in the Arkhangelsk Region. This launch, unlike most others, can be seen as a triumph for Russian missile developers, a victory that may equip our politicians with a weighty argument in their difficult dialogue with the United States on anti-missile defense issues.
Official information on the launch is scant. The Defense Ministry merely stated that “The Missile Strategic Forces and Aerospace Defense Troops have carried out a trial launch from a mobile unit. The dummy warhead arrived at the designated area on the Kamchatka Peninsula. The objectives set were achieved.”
The first test launch of the missile in September 2011 was abortive: the rocket fell within ten kilometers of the launch facility. The Defense Ministry reluctantly conceded failure, blaming the industry which “conducted launches as part of research work to develop new missiles.”
One cannot help but wonder which “new samples” these were. Usually we are told about the Topol-M, Yars and Bulava, which can be called “new samples” only tentatively. But neither the military nor the developers were in a hurry to give the details and, therefore, different stories circulated.
Experts at once dismissed the version that it was a fundamentally new development. Most agreed that the new missile “is a further development of the existing systems in service.” One of the leading experts on nuclear armaments told Moskovsky Komsomolets that it might be a hard-fuel missile of the Topol-M or Yars class with a payload increased to 1.5 metric tons and a firing range of 10,000 to 11,000 kilometers and fitted out with a new penetration aid. The improved characteristics might have been achieved by the upgrading of the engine or a more efficient solid fuel.”
Another expert told Moskovsky Komsomolets that “one of the missile’s new features is the use of a new fuel that cuts the boost phase time when the missile is most vulnerable to detection. The missile travels the boost leg of its trajectory so quickly that the opponent has no time to calculate its path and cannot destroy it as a result. Therefore, we can say our penetration capability will be seriously improved.
“For Russian politicians this means that their current fears of a global U.S. missile shield likely to undercut Russia’s strategic nuclear potential with time can soon be forgotten and laid to rest. Provided, of course, the new upgraded missile is not a one-off but will be supplied to the army in sufficient quantities to dismiss all fears about a U.S. ant-missile system, even if these fears are entertained only by our politicians.”
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