Nezavisimaya Gazeta
Moscow Could Do with a More Compliant Premier in Ukraine
Russian-Ukrainian gas relations again deteriorated just days before the June 27 meeting between Prime Ministers Dmitry Medvedev and Mykola Azarov. However, there is still time for improvement prior to the mid-July meeting between Presidents Vladimir Putin and Viktor Yanukovych. Yanukovych is expected to appoint a more accommodating prime minister; speculation suggests it could be Viktor Medvedchuk.
Medvedchuk, who headed President Kuchma’s administration from 2002 to 2005, receded into the shadows after the “Orange Revolution.” In March 2012, he announced his return to politics as the head of a new public movement, Ukrainian Choice. His posters show him posed against the Russian flag.
On Wednesday he told the Russian NTV channel that Putin is the godfather of one of his daughters. This encouraged Ukrainians to assume that Medvedchuk’s family ties with the Kremlin could help Yanukovych settle problems with Russia.
Ukraine mostly wants Russia to cut gas prices. When plans for the prime ministers’ meeting were announced several weeks ago, Azarov said Russia was ready to consider Ukraine’s arguments. But a week before the June 27 meeting, his cabinet approved the annual budget that stipulates a reduction in gas imports to 27 billion cubic meters. They argue that Ukraine cannot buy more at the prices calculated by the “unfair formula” approved by Yulia Tymoshenko in 2009. The same day Gazprom CEO Alexei Miller said the contract was signed for 40 billion cubic meters. If Ukraine revises it unilaterally, Gazprom will take the issue to an international court, a Gazprom source said.
Yuriy Karamzin, an opposition deputy in the Ukrainian parliament, said in April that Russia would ultimately force Yanukovych to replace Azarov with Medvedchuk. “The authorities would do this to stop the country from defaulting,” Karamzin said.
Vitaliy Bala, director of the Ukrainian Situations Modeling Agency, said Yanukovych had been isolated. By opening the door to Russia, he could encourage the West to soften its position.
Kostyantyn Dykan, a leading expert at the Razumkov Center, said Medvedchuk’s approach would suit and even benefit Russia. He doubts, though, that Yanukovych would appoint a politician who is not a member of the Party of Regions as his prime minister. Bala argues that Yanukovych should think about his political future.
Some experts say the appointment of Medvedchuk would make him a strong rival of Yanukovych during the 2015 elections. Mikhail Pogrebinsky, director of the Kiev Center for Political and Conflict Studies, has ridiculed that idea. “Would Yanukovych choose a man who criticizes him as his prime minister? And even if he did, Medvedchuk would reject the offer.” Medvedchuk reportedly does not plan to participate in parliamentary elections this fall or seek a government post.
Medvedchuk told NTV that his goal is to show that not everyone in Ukraine supports current policies. While Yanukovych and the opposition are working for European integration, which 32 percent of Ukrainians support, 55 percent of the population would rather join the Customs Union and the Eurasian Economic Union.
Moskovskiye Novosti
St. Petersburg Economic Forum: Uncertain Prospects for Russia
Convened at a moment when the world economy is at a crossroads and no one knows what kind of world we will live in a few months from now, the St. Petersburg Economic Forum is a good opportunity for the new Russian government to take stock of where they stand economically in the face of a new wave of the global financial upheaval. It also allows them to think about what can be done to prevent the crisis from spreading to Russia.
Sberbank Head German Gref believes that the Russian economy is strong enough to enable the exchange rate of the ruble to return to 30 rubles per dollar as soon as the oil price rallies. Russia has sufficiently large gold and currency reserves to protect the ruble, he said.
The new Economic Development Minister Andrei Belousov warned that Russia could face a plunge in oil production and an inevitable drop in funding for the modernization of the social sphere.
Energy Minister Alexander Novak criticized the existing tax system, which could cause oil production to decline by 130 million tons within the next 10 to 20 years. To avoid this, the government must invest at least $1 trillion by 2020 for the development of new deposits. To stimulate production, his ministry will draw up new methods for granting tax benefits by the end of the year.
Finance Minister Anton Siluanov spoke out against increasing the tax burden within the next five years. Any further tax rises, like the 2011 increases in insurance fees, would be counterproductive. If any changes were made, they would only be to the benefit of taxpayers, he promised.
First Deputy Prime Minister Igor Shuvalov suggested that privatizing the remaining state property could be used to raise money for investments into healthcare and education and to cover the deficit of the pension system, which stands at 4% of GDP. It was a most difficult task for the government, he said. If the privatization plan doesn’t work, the government will resort to borrowing.
Former Finance Minister Alexei Kudrin called for austerity as an expedient in fighting the non-oil-and-gas budget deficit, which is likely to reach 12 percent. In response, Igor Shuvalov remarked that economic modernization was more important than having a deficit-free budget. It will be recalled that the current budget deficit amounts to a mere 0.1 percent of GDP. But that will only hold if the oil price reaches $115 per barrel.
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