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Sunday, November 18, 2007

Challenge the Kremlin, Go to Prison. It's as Simple as That.

Robert Amsterdam reports that no sooner had Russian deputy Finance Minister Sergei Storchak (pictured) publicly criticized the Kremlin's effort to move its $150-billion stabilization fund into the Russian stock market in order to artificially increase its value than he was arrested on corruption charges, just like Mikhail Khodorkovsky when he started making noises about challenging for the presidency.

I would say I'm shocked by this headline, but it seems almost anything can happen in Russia near an election: "Russian Police Detain Deputy Finance Minister." It appears that Sergei Storchak, who oversees Russia's massive stabilization fund, was detained by police outside the Ministry the Finance as part of a third-party criminal investigation. With any arrest of a Russian official comes the speculation - is there a movement being organized against Finance Minister Alexei Kudrin by hostile factions among the Kremlin elite? Storchak was most recently in the news for voicing strong opposition to a proposal from the Bank of Russia to convert the Stabilization Fund to other currencies. To put it lightly, converting $146 billion dollars can dramatically transform an economy, making many winners and losers. Kudrin has no shortage of potential opponents - if so inclined, one can even look back as far as the Kozlov murder to try to find an Austro-Russian money-laundering conspiracy theory.

The latest curious news I recall Kudrin being involved in (apart from the workaday economic nationalism with that whole IMF deal) comes from last May, when the president surprisingly suggested that the Stabilization Fund should start dealing in domestic securities to pump up the stock market. Kudrin, who is often applauded for his sober management of Russia's petrodollars, openly disagreed with the president's reasoning, arguing that the proposal would hike inflation and trigger stock market speculation. Needless to say, it is not often when officials openly disagree with the president on record, yet Kudrin was promoted again last Sept. in a cabinet shuffle. We used to have a direct link to his speech from the Kremlin website, but now it looks like it has been mysteriously removed.

Long story short - does the Storchak arrest reveal a campaign against Kudrin by parties seeking access to the gigantic state piggy bank he so carefully guards? Back in April, the FT wrote "But Yaroslav Lissovolik, an economist at Deutsche Bank, says Mr Kudrin's reforms should at least steer Russia through coming elections without a pre-poll spending splurge, or candidates making ruinous promises." Perhaps not.

Surely more facts will rise to the surface very soon, but all we know for now is that nobody like this is ever arrested for the actual substance of the charges. There is definitely a much bigger story going on here. Yesterday it was Leonid Reiman, today it's Sergei Storchak. Which Russian official will fall tomorrow?


James said...

Actually, it was Kudrin who criticized the proposal to use the sovereign wealth fund to invest in domestic securities - and the arrest of Storchak is being seen as part of a larger campaign against Kudrin.

However that was a long time ago, and Kudrin has been promoted since then.

La Russophobe said...

Ha! There we go again, being too easy on Russia, assuming he must have at least done something directly to make the Kremlin angry. Apparently human life means even less to the Kremlin than even we imagine!

Not sure what you're talking about, the link to what Storchak said is from a week ago.