MOSCOW (Reuters) – Russia risks being saddled with U.S. sanctions
for decades, curbing economic growth and preventing it from
regaining its status as a leading economic power, an adviser to
President Vladimir Putin said in an interview.
Alexei Kudrin told Reuters that the current proposed tightening
of sanctions in Washington should not have any serious impact.
But he called for a major structural reform program after the
2018 presidential election.
He said that was the only way for Russia to return to growth of
more than 2 percent a year.
Putin has not yet said whether he will run for re-election next
year, but is widely expected to do so and to win what would be a
fourth term as president.
Putin has tasked Kudrin, who has known Putin since they worked
together in the St Petersburg Mayor’s Office in the 1990s, with
devising a strategy to lift Russian economic growth after 2018.
Whereas Putin oversaw several years of growth in excess of 5
percent in his early presidential terms, the Russian economy
suffered two years of contraction in 2015 and 2016 and is
forecast to grow by a little over 1 percent this year. In May GDP
rose by 3.1 percent year on year, but that pace is not expected
The slowdown has put Putin under pressure.
Russian finance minister Alexei Kudrin speaks during an interview
with Reuters in Moscow.Thomson
U.S. lawmakers earlier this week voted to impose new sanctions on
Russia — on top of earlier penalties over its role in the
Ukraine conflict — and Kudrin said the mood in Washington meant
it would be difficult for U.S. President Donald Trump to ease
sanctions in future.
“In its current form the tightening of sanctions under discussion
wouldn’t seriously affect the Russian economy, there aren’t
serious changes with the version that exists. But the hope that
sanctions would be canceled in the coming years has now faded,”
“We are likely to end up with the story with the old
Jackson-Vanik amendment — even when all the conditions had
already changed, they couldn’t cancel it,” he said.
Jackson-Vanik, a 1974 provision to a U.S. federal law that
punished former Communist bloc countries for restricting human
rights, was only repealed in 2012 under previous U.S. President
Barack Obama. It was a major sticking point in relations between
Moscow and Washington.
Trump was widely perceived to be the Kremlin’s favored candidate
in last year’s U.S. presidential race, and his White House
victory raised hopes in Moscow that sanctions could be relaxed as
early as this year.
But Trump’s administration has since become bogged down in
investigations into possible ties between his campaign and
Russia. Trump has said his campaign did not collude with Russia,
which flatly denies allegations it meddled in the U.S. vote.
Window of Opportunity
Kudrin, who served as finance minister from 2000 to 2011, won
praise from foreign investors for building up Russia’s formidable
fiscal buffers during an era of high oil prices. He was one of
relatively few liberal voices among top officials.
He now heads the Centre for Strategic Research, an analytical
group founded on Putin’s initiative to draft policy ideas.
Kudrin said Western sanctions in their current configuration were
knocking off around 0.5 percent from Russian gross domestic
product, down from 1 percent in the year after they were
introduced in 2014.
Russia had a “window of opportunity” after the 2018 election in
which to enact meaningful reforms to counteract the effects of
sanctions, he said. But for now a populist camp around Putin
appeared to have the upper hand over those calling for reform.
President Vladimir Putin speaks to delegation members as he
awaits a bilateral meeting with French President Emmanuel Macron
(unseen) on the second day of the G20 summit in Hamburg, Germany,
July 8, 2017.REUTERS/Ian
“To what extent the president will use that [window], we don’t
know,” Kudrin said. “After previous elections that window for
reforms wasn’t used.”
Among the reforms Kudrin is calling for are greater public
control over law enforcement officials, raising the retirement
age, reducing government stakes in large companies, and improving
revenue collection from the shadow economy.
He said he thought the state should sell government stakes in
Russian oil companies in stages over the next six to 10 years,
and that it could sell a portion of its majority holding in the
country’s largest bank Sberbank in the same time period.
With such reforms, Kudrin said Russia could increase its economic
growth rate to 3-4 percent in five to six years, even with
sanctions staying in place.
Without reforms, Russia will not notice the damage from sanctions
before it is too late, he said.
“In the next six to seven years we could not notice the decline
in the areas of productivity and technological development. In
the end we will see it, because others will grow faster, but by
then it will be difficult to change something.”
(Reporting by Alexander Winning, Darya Korsunskaya and Andrew
Osborn; Editing by Jeremy Gaunt)
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