September 1, and schools and universities across Russia were holding their traditional ceremonies to launch the academic year. Finance minister Aleksei Kudrin, addressing freshmen at the ministry’s own Budget and Treasury Academy, said that Russia’s $23.7 billion repayment to the Paris Club on August 21 means that “we’re not faced with the risk of default in the near future”.
It’s a long time since a Russian finance minister could have said that with such confidence. The repayment – which saved Russia about $12 billion in interest payments, and helped persuade Standard & Poor’s to upgrade long-term sovereign paper to AA- this month (September) – brought to an end a period of modern history that started in the 1980s, when falling oil prices, and agricultural and industrial stagnation, forced the soviet government into borrowing to finance food imports.
Those debts helped turn the screws that hastened the fall of the USSR. In the chaotic 1990s, Russia’s renewed borrowing paved the way to financial meltdown in 1998. Only from 2000 did the renewed surge in oil prices, and the resultant economic growth, turn Russia from a net debtor with the rest of the world to a creditor. Macroeconomics made the change – but the stability associated with president Vladimir Putin’s autocratic regime, and Kudrin’s sturdy fiscal management, also made a difference. “This is absolutely beneficial for Russia,” Kudrin tells Emerging Markets. “It will reduce Russia’s risk profile and impact on credit ratings.”
Claiming that Kudrin single-handedly made the repayment possible would be as accurate as saying that Russia’s economic growth is all Putin’s doing. But his refusal to be blown off course by other ministers’ whims – or to dip into oil revenues for their pet projects – has helped.
Kudrin is anything but a political liberal, and has supported Putin’s war in Chechnya and incursions on media freedom. His economic liberalism has limits, too: he has embraced the Kremlin line on building “national champions” for industry. But post-soviet Russia’s longest-serving finance minister has produced results: the stabilization fund, which by this month had accumulated $64.7 billion of sterilized oil revenues; sound conduct of the ruble exchange rate, leading this year to ruble convertibility; and capable fiscal management that has arguably fended off the most virulent strains of “Dutch disease”.
Kudrin was born in 1960 and graduated from Leningrad State University in 1983. In 1990-96, he worked in the St Petersburg mayor’s office under Anatoly Sobchak, a key pro-western reformist of the Yeltsin years. There Kudrin met Putin, and when the latter became president in 2000, joined the gang of St Petersburgers moved into key positions. He has stayed on the inside, balancing the influence of the “siloviki” with a financial sobriety that the markets love. —Simon Pirani