- The Washington Times - Friday, March 19, 2004

The re-election of Russian President Vladimir Putin has opened a brief window of opportunity to push through much needed but painful reforms, a top Kremlin economic policy-maker said in an interview.

Yury Isaev, top deputy to Economic Development and Trade Minister German Gref, said Mr. Putin’s strong political base, a growing economy, solid public finances, bureaucratic reforms and high world oil prices all make the coming months the time to act.

“We have a very rare and positive moment in Russia that will not last long,” said Mr. Isaev in a telephone interview from New York, where he was addressing a conference of American investors on the prospects for the Russian economy. “This could be a last chance for quite a while for us to move quickly to take advantage of the possibilities.”

Despite a budget surplus and solid economic growth in recent years, Mr. Putin’s economic team faces immense challenges in a number of sensitive sectors, from housing and real estate to energy and investment law. Alexander Baranov, vice president of the Russkiye Fondy investment group, has estimated that Russia needs only a fifth of the country’s 1,500 banks.

Assistant Secretary of State for European Affairs Beth Jones told a congressional hearing this week that U.S. officials have been encouraged by Mr. Putin’s decision to stack his second-term administration with prominent pro-market figures, from Mr. Gref and Finance Minister Alexei Kudrin to new Deputy Prime Minister Alexander Zhukov, who studied business at Harvard in the early 1990s.

“With a strong popular mandate and a sizable working majority in the [Russian parliament], President Putin is well positioned to press a program of substantial economic reform,” she said.

Mr. Isaev said last month’s Kremlin reshuffle, in which 13 of 30 Cabinet ministries and five of the six deputy prime minister slots were eliminated, will also boost chances for economic reforms.

“The old structure was very complicated and you had to go through a lot of signatures just to get anything done,” he said. “The decision-making chain is much, much shorter now.”

Mrs. Jones cautioned that U.S. and foreign investors remain wary of their legal protections in the Russian market, citing in particular the high-profile tax fraud prosecution of oil billionaire Mikhail Khodorkovsky. Many believe Mr. Khodorkovsky has been singled out for daring to challenge Mr. Putin politically.

U.S. lawmakers said the case was part of a larger troubling decline in civil rights and political freedoms under Mr. Putin. Analysts have said Mr. Putin’s desire for freer markets will clash with his desire for increased central political control in the coming years.

Mr. Isaev said Russia is anxious to boost Western investment in sectors beyond the oil and gas industries, but said outside critics should be “very cautious” in calling the Khodorkovsky case politically motivated.

“You have your Enron and Bank of New York scandals in the United States,” he said. “There should not be any type of business which can avoid paying its taxes. The rules should be equal for every player in the market.”

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