From Volume 6, Issue Number 8 of EIR Online, Published Feb. 20, 2007
Russia and the CIS News Digest

Putin Promotes Sergei Ivanov

Russian President Vladimir Putin held a government economic policy meeting on Feb. 16, followed by a session at the Ministry of Defense. During these meetings, he explained the personnel changes in the upper echelons of the Russian government, on which he issued decrees the same day.

Deputy Prime Minister and Defense Minister Sergei Ivanov leaves the Ministry of Defense, to become a First Deputy Prime Minister with responsibility for "coordinating not only the military-industrial complex, but also part of the civilian sector of the economy." Deputy Prime Minister Dmitri Medvedev remains as the other First Deputy Prime Minister, in charge of the four National Programs, which are for health care, housing, agriculture, and education. The promotion of Ivanov is relevant to the so-called "succession" question, i.e., the Presidential election of March 2008, but it also portends possibly major economic moves in the more immediate future. Putin said he expected Ivanov to guide "the expansion of the positive accomplishments in the military-industrial complex, into the civilian sector."

The new Minister of Defense is Anatoli Serdyukov, who has had no military career, except that after his conscript service he did officer training and retired as a reserve officer. For the past three years, he has headed the Federal Tax Service, including during the prosecution of Yukos Oil for tax violations. Putin told the Ministry of Defense meeting that, with a finance man in charge of the ministry, maintaining the military component of its activity will involve an upgraded role for the General Staff under Gen. Yuri Baluyevsky, as he said he had discussed with Baluyevsky already.

In addition, government chief of staff Sergei Naryshkin was elevated to the level of Deputy Prime Minister (making two of those, with Alexander Zhukov), at the request of Prime Minister Mikhail Fradkov. Naryshkin will handle foreign economic ties, especially with CIS member countries. Like much of Putin's team, Naryshkin comes from St. Petersburg with a background in high-technology industry. He is also an official of the state-owned oil company Rosneft.

Speaking at the Ministry of Defense, Putin said that Ivanov would be in charge of "one of the main directions" of government efforts, namely, "making our economy more innovative." For this purpose, he added, "it would be very important to combine the capacities of the military-industrial complex and the civilian sector of the economy." The expanded roles for Ivanov and Naryshkin leave some question marks over what clout such liberal economists as Minister of Economic Development and Trade German Gref and Finance Minister Alexei Kudrin will continue to have.

Some of the most far-reaching characterizations of Ivanov's new role were sounded at the ongoing 4th Krasnoyarsk Economic Forum, which opened in that Siberian city today under the title "The Industrial Basis for Russia's Development." Putin sent greetings to the conference, again stressing the need to shape "the investment and innovation climate" in Russia.

Expert magazine wrote that a highlight of the Krasnoyarsk Forum was the report by Vladimir Dmitriyev, head of Vneshekonombank (the government-owned foreign trade bank), which is serving as the core of the newly commissioned Development Bank. The latter is being established—the State Duma gave preliminary approval on Feb. 14—with capital of 70 billion rubles, which is only $2.7 billion, but Dmitriyev said that, in its first five years, the Development Bank's assets would rise from $8.9 billion to $41.8 billion, while its capital will rise to $6 billion. "He estimates that by 2011, the bank will have invested around $35 billion into infrastructure, the power industry, housing, agriculture, and the MIC."

According to a number of Russian commentaries, there is discussion about putting the state Investment Fund, and part of the infamous Stabilization Fund, under Development Bank supervision. Kremlin economic adviser Arkadi Dvorkovich, who was in Krasnoyarsk talking about a shift from raw materials emphasis to high-technology industries within five to seven years, told Bloomberg wire service, that the Development Bank would oversee the Investment Fund, which would have reached the $14.4 billion level by 2009. Last week, former Prime Minister Yevgeni Primakov predicted that 2007 will be the year in which the Stabilization Fund would be liberated for investment into the Russian economy; the fund is a now nearly $100 billion pool of earnings, mainly from taxation of oil and gas exports, which is set aside, or "sterilized" (held as foreign government bonds, or in Federal Treasury forex accounts, actually) in order to "prevent inflation," according to monetarist doctrine.

Will Russia Unilaterally Quit the INF Treaty?

The treaty on ground-based Intermediate-Range Nuclear Forces (ranges of 500 to 5,500 kilometers) was signed by the U.S.A. and the U.S.S.R. Dec. 8, 1987 and went into effect in June 1988. The treaty removed the SS-20 missiles with which the Soviets could reach all of NATO's facilities in Europe. Chief of the Russian General Staff Gen. Yuri Baluyevsky said in Moscow Feb. 15, that "it is possible for a party to abandon the treaty, if it provides convincing evidence that it is necessary to do so. We have such evidence at present."

"Unfortunately, by adhering to the INF treaty, Russia lost many unique missile systems," Baluyevsky said, in what Russia's RIA Novosti news agency wrote "could be interpreted as a strong warning to the United States, regarding U.S. plans to deploy elements of its anti-missile defense system in Poland and in the Czech Republic." Baluyevsky's remarks are situated as follow-up to remarks by President Vladimir Putin and Defense Minister Sergei Ivanov at the 43rd Munich Conference on Security Policy Feb. 10 and Feb. 11, respectively.

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