Russian Prime Minister Convinced Putin

“The election is just ahead, hmm... I need to show an ambitious blue print. “(President)

“No, Mr. President. We should concentrate on steady structural reform rather short term growth.”(Prime Minister)

Russian President Vladimir Putin, who made a ‘hot’ public pledge to double Russia’s Gross Domestic Product (GDP) by 2010, shifted his stance, convinced by Russian Prime Minister Mikhail Kasyanov, and said, “It may be painful for the time being, but we have to reform first.”

The Russian government confirmed next year’s budget that will be submitted to the parliament next month, as well as a long term economic program yesterday,

The most noticeable change is that Putin has virtually withdrawn his pledge to double Russia’s GDP that he promised.

In order to keep his promise, Russia should maintain growth of 7 percent or more every year by implementing growth-driven policies.

However, Prime Minister Kasyanov convinced Putin to refrain from seeking inordinate growth but to focus on reform and solidify its inner strength by reforming monopolized sectors, broadly accepting an open economy and foreign investment, reducing taxes, stabilizing prices on commodities and supporting small- and medium-sized businesses.

Kasyanov has a firm belief that unbalanced growth-oriented policies will eventually cause inflation in the foreseeable future and drag down its potential for economic growth and weaken its economy after 2006.

“Prime Minister Kasyanov who has been mentioned as a likely candidate for the reshuffle after the presidential election, acted according to his firm conviction rather than seeking temporal popularity.

It takes a lot of courage to challenge Putin, who also has strong charisma and is even referred to as “Tsar” since he is the president of Russia where the president holds mighty power.

The Kremlin, however, is now at a loss having the general election in December and the presidential election early next year. Kommersant, the best selling economic daily in Russia, put the picture of President Putin with stiff look in an article on the top of the front page with the title “Delay of Doubling GDP; Reform Rather than Growth.” In contrast, the paper, put a picture of Kasyanov smiling in the same article.

Ki-Hyun Kim kimkihy@donga.com