In nautical circles it has always been said that rats leave a sinking ship. On pirate vessels, however, the custom was to make the better type of crewman walk the plank.
At the Ministry of Finance under Alexei Kudrin, there is no sign whatsoever of a sinking feeling. The ministry’s man now runs the Central Bank in a maneuver that reduces the longstanding rivalry between the two in the Finance Ministry’s favor. Reducing the friction also reduces an important check on the potential for misbehavior. The ministry also appears to have prevented the accounting chamber chief Sergei Stepashin from making good on his undertaking to scrub the vessel from top to bottom.
The State Duma is no closer now than it has ever been to exercising effective oversight of Finance Ministry operations, or subjecting ministry officials to civil and criminal accountability for their actions. The state prosecutors and courts have so far ignored the hearsay and brought no senior ministry official to book for malfeasance.
The cool tone of the announcement from Kudrin’s office this week that he had signed Deputy Finance Minister Valery Rudakov’s application to resign concealed a bitter struggle and made it appear that Kudrin had done nothing more than give his assent to Rudakov’s desire to slip into old age.
That’s the beauty of the plank, you see: Honest men look as if they choose to walk into oblivion. Not a word has been said about the implications of Kudrin’s move for Russian state policy in two major trade sectors – diamonds and platinum-group metals – in which Moscow is a market-maker.
Rudakov has maintained his customary joviality among his associates and silence in the press. Months ago, he began hinting that he wanted to leave the office of the Finance Ministry and resign as head of Gokhran, the state stockpile agency, when he reached the mandatory retirement age of 60 in June. None close to him quite believed this. What he was doing, they thought, was gauging what support there might be, inside and outside the government, for extending his appointment for another year or two.
The law requires the ministry to agree to such an extension, and there was a great deal of lobbying behind the scenes. It is in the nature of effective lobbying that policy arguments conceal the self-interests at stake. Kudrin, like his one-time patron at the ministry Anatoly Chubais, is as good at articulating the former as he is at delivering what his constituents want of the latter. During Rudakov’s tenure, Kudrin almost didn’t dare to speak about diamond and precious metals policy. By pushing Rudakov out, Kudrin has spoken very loudly indeed, taking sides he has yet to justify in public. The Kremlin’s silence is equally loud and equally one-sided.
When Rudakov realized he had lost, he walked. Those who wanted him out cheered. They have been preparing the plank ever since Rudakov was appointed in December 1999.
There was the North American diplomat, for example, who openly said he hated everything Rudakov stood for, and confidently predicted his removal two years ago. There was Almazy Rossii-Sakha (Alrosa), Russia’s dominant diamond-mining company, which has been facing reorganization by Rudakov, and is now breathing an audible sigh of relief. There was Norilsk Nickel, Russia’s leading mining company and the world’s largest producer of nickel and palladium. Rudakov had opposed deregulating the precious metals trade and allowing Norilsk Nickel unsupervised and untaxed export rights. As Rudakov cleared out his office, Norilsk Nickel announced it had won the right to trade platinum-group metals with international buyers outside the state marketing channel Rudakov had spent his time cleaning and strengthening, after a decade of corruption.
In circles where the term “reform” is most often bandied about by those who conceal their commercial interests, Rudakov has been portrayed as a dinosaur of the Soviet command economy, who was preserving cumbersome central bureaucratic control in defiance of everything liberal economists hold to be reasonable. The fact that he was appointed by then-Prime Minister Vladimir Putin with a mandate to clean up the corruption of Russia’s diamond and precious metals trade went unmentioned then. The fact that he succeeded is ignored now. It is difficult for the intentionally naive to understand that Rudakov’s policy of re-centralizing state control was the means to an end – conserving state assets for the state’s benefit.
For international banks that know the Finance Ministry’s reputation as a defaulter and which have been extremely reluctant to lend to either Alrosa or Norilsk Nickel, Rudakov represented an assurance of probity – old-fashioned perhaps, but bankable. In businesses as secretive as diamonds and platinum-group metals, that is more important than transparency.
Kudrin may claim that by releasing Rudakov, he has started the long overdue process of deregulating, liberalizing the diamond and precious metals trade. Those with concealed interests will endorse the minister for rejoining the real world, improving Russia’s chances of accession to the World Trade Organization, eliminating obstacles to free trade, etc.
International bankers know better than to believe this. They expect that Rudakov will be replaced at Gokhran by a competent technical specialist who has served as his deputy – and as his predecessors’ deputy – for many years. Policy-making power has never been in such hands. They will not gain it now.
The controls Rudakov built to protect the state’s interests also protected the international market from the abuses Russians in the diamond and precious metals business were responsible for between 1991 and 1999. Some of those abuses are well-known; some of the Russians who perpetrated them have been called to account. Except for those in the Finance Ministry who winked at and profited from everything that took place. Rudakov deserves recognition for putting a stop to it. Now that he’s gone, Kudrin is responsible if that past is released to dictate the future.