MOSCOW, February 16 (RIA Novosti) Putin puts to rest lame duck theory - expert /President wanted to cut down on Medvedev's activity - source/New defense minister to bring order without reform/Arms race will resume if Russia withdraws from INF Treaty/China refuses to buy expensive Russian electricity
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Putin puts to rest lame duck theory - expert
The cadre reform announced by the president Thursday has, according to experts, two main aspects - one for domestic, and one for foreign consumption.
On the one hand, Putin kept intrigue alive regarding his succession, and on the other, he sent the West a clear signal that Russian politics are becoming more militaristic.
The latest government reshuffle is the most significant since November 2005, when two would-be heirs, Dmitry Medvedev and Sergei Ivanov, were first made deputy prime minister and deputy prime minister, respectively.
The reshuffle also has a direct bearing on their future.
"The president is putting to rest the lame duck theory," said Alexei Makarkin, deputy director of the Center for Political Technologies.
"It is a signal to the elite," he went on to say. "It indicates that Putin is still the one who will choose his successor. And it is a signal to the elite only, because society already looks to the president to decide who will rule, while the elite has become accustomed to regarding Medvedev as the main heir-apparent, and Ivanov as a stand-by. Ivanov's promotion demonstrated that Putin still holds the power of chief umpire, and that he will make up his mind later, perhaps in the fall or after the Duma elections."
"Until now, Ivanov has been seen as a one-track figure, but his new appointment has made him an overall politician," said Olga Kryshtanovskaya, director of the Institute of Applied Politics. "He has always been a member of a certain virtual politburo of people who came to power with Putin and whom he always consulted. If Medvedev belonged to that circle, then it was as a handyman, rather than as the author of new ideas."
A separate lesson has been given to the West. The appointment of Ivanov, one of the chief "hawks" of the Russian administration as first deputy prime minister and the one overseeing part of the civilian economy, is a sort of creative sequel to Putin's now famous Munich speech.
It was the defense minister who has lately been identified in the West with Russian militarism - sales of weapons and technologies to "rogue" countries, a determined struggle against U.S. and NATO expansion, criticism of American military strategy, and the threat of pulling out of a number of international agreements on disarmament.
President wanted to cut down on Medvedev's activity - source
At a meeting on economic problems in the Kremlin yesterday, Russian President Vladimir Putin announced drastic changes in the government. The news came as a complete surprise to officials.
"We expected to discuss the budget, but witnessed a sensation," said a source in the Kremlin administration.
A source close to the Kremlin said that Putin had long planned to cut down on the political activities of First Deputy Prime Minister Dmitry Medvedev and put him on a par with Defense Minister Sergei Ivanov.
Medvedev, who is responsible for national projects, has recently been very active inside the country and gaining authority in the West.
At the recent World Economic Forum in Davos, he discussed Russia's economic outlook and even addressed foreign political problems. His speech was received as that of Putin's successor.
Another source, also close to the Kremlin, said that the idea of the reshuffle was the president's.
Of the recent proposals by Prime Minister Mikhail Fradkov, which Putin decided to postpone, "there was only the promotion of Sergei Naryshkin, who had good relations with the premier, left."
The Armed Forces, for which Ivanov was responsible, are plagued by hazing, and there are regular reports of suicides and desertions.
"The president decided to take the heat off Ivanov," the first source said. "It is hard to move up from the Defense Ministry, as something bad keeps happening there," said a source in the defense industry.
The two first deputy prime ministers will now be responsible for the distribution of about half of the budget, said Vladimir Tikhomirov, an economist with Uralsib.
Ivanov's appointment shows that the key restructuring of the economy will be based on the achievements of the defense sector, while the aerospace, aircraft, shipbuilding and electronic industries will be the government's priorities, he said.
Ivanov could also control the globalization of Russian companies, access of foreigners to strategic industries and large mergers and acquisitions, said Yevgeny Gavrilenkov of Troika Dialog.
The first source said that Ivanov would be related to the diversification of the economy.
New defense minister to bring order without reform
The appointment of Anatoly Serdyukov, 45, the former head of the Federal Tax Service, to the post of Russian defense minister is an unexpected move whose consequences are easy to calculate.
The former furniture trader, Serdyukov has since 2004 been turning the Tax Service into a closed body, managed from the inside and separated from the government's influence. Under Serdyukov, the Defense Ministry is likely to see a similar evolution instead of reform.
Serdyukov's best-known achievement was the Yukos case. His subordinates' views of him vary from "strict, but just" to "he has disrupted the tax service."
According to a Moscow radio station, he is married to a daughter of Viktor Zubkov, head of the Russian financial intelligence agency.
The government does not hide the fact that, although formally subordinated to Finance Minister Alexei Kudrin, Serdyukov conducted an absolutely independent policy.
Moreover, the Finance Ministry and the Tax Service had to set up a special commission for interaction whose goal was to develop a common view on tax issues on which the two agencies had disagreements.
According to unofficial sources, Serdyukov solved important issues while bypassing Kudrin and turning directly to Putin's staff aide, Viktor Ivanov, who, according to the paper, had a decisive role in his appointment to the service in 2004.
Yesterday, Putin did not conceal that Serdyukov would have to pursue financial and administrative rather than military goals in his new post. He would have to "rationally spend huge - at least for this country - sums," he said.
Since early 2006, several audit bodies have been inspecting the efficiency of budget spending and accounting in the Defense Ministry.
Apparently, the president has received their reports. Most probably, the ministry's inability to fight corruption during state purchases and the inefficiency of its supervisory bodies played a role in the choice of Ivanov's successor.
Under Ivanov, the ministry's budget increased almost fourfold, from 214 billion rubles ($8.16 billion) to 822 billion rubles ($31.34 billion).
Now, Serdyukov will have to adjust accounting and establish control over spending.
Until now, there has been no order in that area. The efforts of the head of the economic and finance department, Lyubov Kudelina, have not been enough.
Now, the new minister will address the military economy, while military issues will be dealt with by the General Staff.
Nezavisimaya Gazeta, Vremya Novostei
Arms race will resume if Russia withdraws from INF Treaty
Moscow will inevitably withdraw from the 1987 Soviet-U.S. Intermediate-Range Nuclear Forces (INF) Treaty unless the Pentagon abandons plans to deploy an anti-ballistic missile system near Russia's borders.
Analysts said U.S. actions and Russia's response will revive the arms race.
Generals have followed the Russian and U.S. presidents on the warpath. On Thursday, General of the Army Yury Baluyevsky, head of the Russian Armed Forces' General Staff, said Russia could unilaterally withdraw from the INF Treaty, and that this would depend on the deployment of the U.S. anti-ballistic missile system in Europe.
Sergei Ivanov, who resigned as Russia's Defense Minister Thursday, called the INF Treaty a "Cold War relic," and said the elimination of all medium-range missiles was the most serious national-security mistake.
The Kremlin believes Washington's intention to deploy missile interceptors in Eastern Europe provides it with a serious pretext for withdrawing from the INF Treaty.
The United States may find itself in a situation similar to the one Russia faced after the former withdrew from the 1972 ABM Treaty.
Colonel General Viktor Yesin, former head of the Russian Strategic Missile Force's Main Headquarters, said the move is a very dangerous one, because the United States could re-deploy its ground-launched cruise missiles from Central Europe to the Baltics.
Consequently, they would reach Russian strategic installations more quickly, Yesin said.
He said many other countries already had shorter-range and medium-range missiles, and it would be imprudent for Russia not to follow suit.
Yury Solomonov, general designer of the Moscow-based Institute of Thermal Technology, said that if a political decision is made, Russia's defense industry would be able to produce missiles with a range of up to 5,000 kilometers (3,000 miles).
A source in the defense sector said there would be no problems with shorter-range missiles. "We are already making Iskander tactical missiles with a 300-kilometer (190-mile) range," he told the paper.
China refuses to buy expensive Russian electricity
It was learned yesterday that Russian electricity exports to China were stopped February 1.
China has refused to buy electricity from Russia after the price almost doubled. At the same time, Russia's generating monopoly, RAO UES, is working on a large-scale program of electricity exports to China, which could now turn out to be unnecessary.
RAO UES was supposed to supply about 1.4 billion KWh to China this year. Now, the supply operator, Inter RAO UES, will face sanctions for failing to honor the contract.
"We have spare capacity," said Viktor Myasnik, CEO of Far East Energy Company, "but the price our Chinese partners want to pay for electricity is a little lower than the one on the generation market. Our consumers should not and will not subsidize electricity consumption in China."
Nevertheless, RAO UES is mounting efforts to get the program for the construction of large generation capacities in the Far East to supply electricity to China endorsed.
The project, it said, will boost the economic development of East Siberia and the Far East, bringing in about $1 billion to the budget annually. Apparently, those calculations are based on a high electricity price. But as there is no agreement on it so far, the entire project may fall apart.
Sergei Sanakoyev, head of the Russian-Chinese Center of Trade and Economic Cooperation, said that bilateral relations in the generating sector should be market-based, and demand should lead to supply.
"So far, there is no demand, and that is why they want to buy electricity at a price almost lower than its cost," he said. "There should be enormous justification for the construction of power plants and grids in Russia meant to supply China. That is not the case now, so there is no point in exporting electricity."
So far, government policies have not been favorable for the RAO UES project, he said.
"Russian companies are building hydro and thermal power plants in China. Moreover, we are building nuclear power plants for them. So why are we so surprised that they do not want to pay much for our electricity?"