[R-G] Alexei Kudrin: "Era of Empires Is Over in Global Economy"

[Yoshie Furuhashi]

<http://us.ft.com/ftgateway/superpage.ft?news_id=fto093020071401435938>
Era of empires is over in global economy
By Alexei Kudrin
Sunday Sep 30 2007 13:50

Afew days ago, a new managing director of the International Monetary
Fund was elected. He was the European Union's candidate, Dominique
Strauss-Kahn. Those who had anything to do with the matter understood
perfectly that once the EU and US had agreed between themselves, the
French candidate's victory was pre-determined. So a natural question
arises, which was raised several times during the closed
consultations, including in the press: why did Moscow propose an
alternative candidate, Josef Tosovsky, knowing that his chances of
success under the existing system of distribution of quotas,
determining the outcome of voting, were not high? I would like to
explain Russia's position.

In the second half of the 1940s, in the framework of understandings
following the Bretton Woods agreement, the US and leading countries of
western Europe came to the decision that they would control the
international financial system. More than half a century has passed
and much has changed in the world. The era of colonial empires is
past. The role of countries such as China, India and Brazil in the
world economy is growing and it is impossible not to take this into
account in the organisation of the global financial system. As far
back as 2000, the Italian finance minister warned that the system of
elections, whereby the US and western Europe agreed on who would lead
important international financial institutions, and the rest of the
world was left only to watch what was going on, was odd, and in the
long term, unstable. The Financial Times noted at the time that such a
procedure could not continue much longer.

The heads of the finance departments of Australia, Brazil and South
Africa, in July made clear that it was time to move away from the
principle that belonging to a particular nationality should be the
decisive factor in choosing candidates for key posts. Decisions about
who ought to lead them should be taken on the basis of professional
qualifications, experience and the ability to deal with the tasks
facing the IMF and the World Bank.

We proceeded exactly from this idea when we proposed Mr Tosovsky as
IMF managing director. He had experience of managing the economic
crisis connected with the collapse of the socialist economy and the
painless division of the Czech and Slovak currencies. This experience
is important in taking up the complex challenges posed to the Bretton
Woods institutions by today's financial markets. But for us in taking
our position on the IMF leadership the most important consideration
was how to take the key decisions connected with the activities of
this body. Our goal was to launch a serious discussion on how the
institutions called upon to ensure financial stability and stable
growth of the world economy should be organised. We managed to achieve
that.

Mr Strauss-Kahn set out his priorities if he became IMF managing
director in an article in September. They included adapting the fund
to a changing world, broadening international support for the fund's
leadership, increasing developing countries' quotas, and changing the
voting mechanism, rules and procedures of the fund to enable all
states to feel involved in decision-making.

It is difficult not to agree with these ideas. They have been
discussed for a long time. However, there has been little practical
movement in this direction. The tough world of finance believes in
actions, not words. We are counting on the new managing director to
bring to life the range of proposals he has put forward. The key
indicator everyone will follow with particularly close attention is
the redistribution of quotas in the IMF.

To manage crises effectively, the IMF and World Bank need to be
capable organisations. A prerequisite of their success is trust from
the world community and agreement from the overwhelming majority of
states with the rules by which they operate.

It is not difficult to understand that if one or other structure is
seen by a significant part of the world as ensuring the domination of
one country or group of countries over others, it will lose its
legitimacy. It will cease to be an effective instrument. We sincerely
hope that the new IMF managing director will be able to put into
practice his declared programme. Should he fail, we will have to
forget about the IMF as a serious global institution regulating
international finance.

The writer is deputy prime minister and finance minister of the
Russian Federation.

<http://mnweekly.ru/news/20070927/55279009.html>
27/09/2007 | Moscow News,$B-b(B38 2007
Cabinet Promotions Signal Changes

Putin announced the changes to a group of anxious journalists late
Monday evening. Finance Minister Alexei Kudrin was appointed deputy
prime minister while retaining his post in the Finance Ministry.
Dmitri Kozak, who was previously the presidential envoy in Russia's
volatile North Caucasus region and regarded as one of Putin's closest
allies, was appointed to head the Regional Development Ministry. Kozak
replaced Vladimir Yakovlev. While it was widely anticipated that
Yakovlev, as well as Health Minister Mikhail Zurabov and Economic
Development and Trade Minister German Gref would be sacked, their
replacements - especially the introduction of two women from financial
spheres in the cabinet - was relatively unexpected. Tatyana Golikova,
former Deputy Finance Minister, replaced Zurabov, who has long been
under fire for corruption and mishandling of possibly Russia's most
unpopular ministry. Former Deputy Trade Minister Elvira Nabiullina was
promoted to Trade Minister.

These appointments served to strengthen the position of Putin allies
Kudrin and Kozakov and their respective ministries, creating stronger
centers of power in the new government, analysts said. Meanwhile,
appointing two women with deep financial backgrounds to head the
volatile Health Ministry and Trade Ministries was seen as another step
in cracking down on corruption while bolstering a loyal and committed
executive apparatus.

Underlining Kudrin's position was a decree on executive power issued
by the president in wake of announcing the new cabinet, on Tuesday.
The decree creates two new agencies and rebalances the power of
existing ministries. These changes would give additional powers to
Kudrin, a source in the presidential administration was quoted by the
Kommersant daily as saying. Under the decree, he would "de facto
coordinate national priority projects, which would no longer be
controlled by the Economic Development and Trade Ministries."
Bolstering Kozak's agency was a decision to charge it with handling
the $4.4 billion Investment Fund, which would be used to finance
national priority projects.

Introducing Golikova, who is the wife of Energy and Industry Ministry
Viktor Khristenko, to the Health Ministry, Prime Minister Zubkov
commended her on "not having skipped a single step in her career
ladder," according to RIA Novosti. The appointment was followed by yet
another critique of the ministry, when the prime minister blasted
Pension Fund chief Gennady Batanov for failing to clarify what was
happening with the pensions to the public. Pension reform is widely
seen as one of the failures of the Health and Social Development
Ministry.

While relatively minor - much of the cabinet remains intact - the
changes do signal new "centers of power," thinks Vyacheslav Nikonov,
president of the Polity Foundation, who spoke Tuesday to a group of
Western businessmen in a meeting held by the Association of European
Businesses in Moscow. "What we see now in the reshuffle of the
government, the logic of restructuring is in a way to create stronger
centers of power which Putin will give to his closest allies," Nikonov
said at the briefing. As for Prime Minister Zubkov, Nikonov remarked
that "he has good chances to become president, but also remain prime
minister in the next term, as a counterbalance to the next president,
as the most loyal person to the president."

As for Kudrin, Nikonov explained that the Finance Minister was in fact
the one who promoted Putin in St. Petersburg. With these centers of
power slated to become "stronger and more independent" in the coming
months, Putin may actually be creating "a system of checks and
balances," the political analyst said.

The business community welcomed not only Kudrin's promotion but also
the inherent signal it gave - that the government's makeup was not
slated for any major change and that it would stick to the liberal
economic course it had adopted. "The people who are currently managing
Russia are in their mid 30's," said Nikonov. "So I don't expect any
great changes in the Russian elite. Putin's elite, these young guys
will continue running the country. So in my view their will be no
great reshuffle."

By Anna Arutunyan
--
Yoshie