A Rosy Picture for Moscow?

A Rosy Picture for Moscow?

Nixon Center luncheon on Friday, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin discussed his country’s prospects for continued economic success and political stability.

At a luncheon hosted by The National Interest and The Nixon Center today, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin shared his thoughts on the political and economic futures of his country. Peter Robertson, vice chairman of Chevron Corporation, opened the proceedings and welcomed the deputy prime minister, stressing the importance of the commercial relationship to bilateral Washington-Moscow ties. Robertson also noted that foreign direct investment in Russia has grown by 45 percent during the past three years.

Since he is still serving as finance minister, much of Kudrin's remarks naturally focused on the state of the Russian economy, where he cited reason for optimism. Saying that 2007 has been a good year, he reported increases in investment and solid growth. Inflation last year was also relatively low (down to 9 percent from 20 percent in 2000), though Kudrin did say that high oil prices and significant inflows of capital would push that number up to about 10 percent this year. He also mentioned recently-enacted reforms to liberalize the movement of capital as further evidence of progress.

Nonetheless, Kudrin argued that Russia's economy faces a number of significant problems. One was the increasing value of the ruble relative to the U.S. dollar, which strengthened by 68 percent last year-posing a problem for Russian businesses. Another was keeping government expenditures in check. Public spending has been increasing due to the upcoming elections, he said, saying that this was a "lesson" for leaders. Kudrin also identified excessively high oil prices and increasing levels of foreign direct investment as potentially pernicious, warning against "euphoria." Still, he expressed confidence that stability in the Russian government would lead to good management of the economy, predicting growth through the next three years.

Conversation then turned to a "main priority" for Russia: gaining membership in the World Trade Organization (WTO). Arguing that this step was "very much needed both for Russia and its partners", Kudrin thanked the American business community for its support and spoke of the more level playing field for Russian products that would result from accession to the trading organization. Among the "most important issues" in WTO negotiations has been intellectual property rights, Kudrin said. He noted that Russia has already met the minimum intellectual property requirements of the WTO, making its standards equal or better than those of a number of WTO member states.

After a break for lunch, the Deputy Prime Minister answered questions from the audience. Asked about the rise of "sovereign wealth funds", he spoke of the need for transparency and monitoring. When pressed about the reasons for his confidence that Russia would be able to continue its successful economic policies when the outcome of parliamentary and presidential elections is unknown, Kudrin responded by saying that President Vladimir Putin and his government have been good stewards of the economy. Predicting that the United Russia Party will enjoy a resounding win in the forthcoming elections, he noted that Putin would exercise real influence over that party and this would ensure that the same successful economic policies of the present will continue beyond 2008.

Editor Nikolas Gvosdev of The National Interest then asked whether Moscow was enacting a policy of support for corporate "national economic champions." Kudrin replied that this was not the case in Russia more than in any other country, citing a global tendency in recent years towards development of major companies capable of competing effectively on both domestic and international playing fields. However, he did say that the government had identified several key industries-shipbuilding, aerospace, nuclear energy and the military sector-as critical areas where the government would play a leading role.


Andrew E. Title is an apprentice editor at The National Interest.