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S&P calm about Russian finance minister's resignation but economists, investors jittery
MOSCOW (AP) ' The departure of Russia's influential finance minister and the impending power swap between President Dmitry Medvedev and Prime Minister Vladimir Putin won't have any immediate impact won Russia's economic policies or its debt rating, Standard & Poor's said Tuesday.
The U.S. ratings agency was one of the few calm voices that sought to play down the importance of the resignation of Alexei Kudrin, who has been Russia's finance minister since 2000.
Investors and analysts, however, warned that it would be hard to find a replacement who would be as effective in vehemently opposing the populist spending so beloved by Russian politicians.
Kudrin was forced out Monday after a public spat with Medvedev after Kudrin refused to serve in any government if Medvedev was prime minister. Many suspect Kudrin had hoped himself to be named prime minister under Putin.
A darling of investors and post-Soviet Russia's longest-serving finance minister, Kudrin was widely credited with softening the blow of the 2008-2009 global downturn in Russia with his conservative fiscal policies. During Putin's presidency from 2000 to 2008, Kudrin set up a rainy day fund to stash away some of the revenue from Russia's oil exports. The idea angered many in the government who sought higher spending, but ultimately proved to be an invaluable cushion.
S&P said in an emailed statement that recent days' events would be unlikely to result in a "significant departure from current economic and fiscal policies." The agency said it expects "Russian state capitalism and the close links between politics and business to remain unchanged."
The agency, however, voiced concern that a government reshuffle could make it difficult for Russia to "consolidate public finances" and boost long-term growth by "improving the business environment, competition, and the productive infrastructure."
Russia markets, buoyed by higher oil prices and surging stocks worldwide, seemingly paid no heed to the landmark resignation. The MICEX benchmark index was up 2.5 percent at 4 p.m. Moscow time (1200 GMT) and the ruble was 0.8 percent higher.
The 50-year-old Kudrin has been credited with several landmark reforms, including having Russia introduce a flat income tax and scrap its sales tax. He was also the driving force behind Russia's efforts to pay off its international debts, reducing the country's debt from equal to its annual GDP to zero now.
Boosted by strong oil prices and Kudrin's prudent fiscal policies, Russia did not run a single budget deficit from 2000 through 2008.
Despite the S&P statement, analysts warned that Russian financial policies had to be affected because Kudrin's authority in Russia was unparalleled.
Sergei Guriev, a prominent economist and rector of the New Economic School, told Gazeta.ru that Kudrin has three "unique qualities."
"He's a professional, he can defend his principles and he enjoys good relations with the prime minister," Guriev said. "It's going to be hard to find a person who would have all of these qualities."
Kudrin is known to have harbored political ambitions and hoped for a prime minister's seat after Russia holds parliamentary elections in December and a presidential election in March. Earlier this year, he called for a "fair and free election" in Russia, which he said was essential for the country's development.
The finance minister was also displeased with Medvedev's decision to raise budget military spending by 1.3 percent of the gross domestic product.
Kudrin had previously voiced his differences with Putin's ruling United Russia party as well as with Medvedev and Putin. But the finance minister was one of the rare people that his boss, Putin, respected enough to listen to his advice.
Some analysts said the decision would reflect badly on Medvedev.
Vladimir Milov, former deputy energy minister and opposition figure, wrote in an opinion piece in the Moskovskiye Novosti paper that "the firing of an efficient finance minister in a grave financial and economic situation and with the authorities' obvious inability to reverse it is an unexplainable decision."
Ovanes Oganisyan, vice president at the Moscow-based investment bank Renaissance Capital, said in a note to investors that "the bench is quite short" for Kudrin's replacement.
The likeliest candidate for Kudrin's job is Health and Social Development Minister Tatyana Golikova, who served as deputy finance minister for eight years. Golikova's work as the health minister, however, has been criticized and she has faced accusations of corruption.
Oganisyan said the finance minister's position will be key in the new government "considering the fiscal challenges that Russia may be facing in upcoming years, including a weak economic growth environment and growing budget deficits."
Medvedev's economic adviser Arkady Dvorkovich, who witnessed Medvedev's spat with Kudrin and is among candidates for the job, wrote on Twitter that "Kudrin did Russia a lot of good," but Kudrin's insubordination was too much. "There was no other choice in that situation; the president gave his reason," he tweeted.
Observers from liberal newspapers voiced surprise Tuesday that Medvedev would fire ministers for disagreeing with his opinion rather than for failing at their jobs.
The Vedomosti paper noted that Transport Minister Igor Levitin has been able to keep his job despite mounting criticism, accusations of corruption, and several deadly plane crashes and ferry accidents in recent months.