Actually, Medvedev did deliver a long political speech at the All-Russian Civil Forum, but he said little that was new, having just repeated the “stability” slogan, and stated that his priorities are “liberty, justice, civil dignity of man, his well-being and social responsibility”. There already exist both democracy and civil society, he declared, but with a certain unnamed national specificity. Developed countries beware of Russia for lack of proper understanding. it seems that the only innovative feature was an alarmist reference to corruption: “… Russia is a country of legal nihilism, no European country can boast of such a level of disregard of law. The struggle against corruption must be turned into a national program. … Corruption …has today an enormous scope.” To businesses, Medvedev promised that “we are going to follow a steady course toward free development of entrepreneurship [and] protewction of the property right.” Most of such declarations have little bearing on real politics, despite being repeated every year.
By the way, the first month of “successorship” was marked by a number of repressions of a symbolic character – the virtual closing-down of the educational British Council in Russia, “the Aleksanyan case”2, “the Morar’ case”3, “the Kozlovsky case”4, “the Arakcheev case”5. We are by no means claiming that D.
Medvedev is personally responsible for such episodes – moreover, they could well be contrary to his interests. Nevertheless, it is important to note that no “thaw” can as yet be felt in the air – although, perhaps, it would be nave to expect any such thing before Medvedev’s officially assumes the post of “successor” – that is, before May.
The year’s beginning was marked by two politico – economic scandals. The biggest of these was the detainment in Moscow of a person previously known as Semion Mogilevich (by now it has become known that he also carries a passport issued in name of Sergei Shnaider). Mogilevich is wanted by the police in several countries, including the USA, since the late 1990s on the accusation of large-scale fraud. At the same time he is believed to have been one of the shadow beneficiaries of RosUkrEnergo – an intermediary in export supplies of gas to Ukraine, because many posts in that company were held by former executives from its predecessor - Eural Trans Gas, in whose foundation Mogilevich had formally participated. Western media have often pointed to Rosukrenergo’s interesting connections, including the fact that Rosukrenergo is being supervised by head of Gazprom’s legal department, D. Medvedev’s former university “classmate” K.
Chiuichenko, but the usual answer has always been that Gazprom and its affiliations have no relation to Mogilevich. And now it has been revealed that Mogilevich has not only been hiding in Russia, but managed, while having been declared as wanted by the police, to change his surname by legal means and to live under this surname quite legally. The formal charges against Mogilevich are rather shaky. He is charged with tax evasion in respect to the chain stores “Arbat-Prestizh”, where he formally is neither a shareholder nor a responsible executive. It is rather easy to understand why the law enforcement agencies have become so interested in Mogilevich – Shnaider now, in view of a forthcoming presidential election, and this is yet another proof that so far the “successor”’s political weight is insufficient – he has been unable to prevent a scandal of such a scope.
One of Yukos’ managers, now in custody, in whose respect the European Court of Human Rights passed a resolution that he should immediately receive medical treatment; the resolution was simply ignored in Russia for nearly a month.
A journalist of the New York Times, who published her investigation of the Duma election campaign’s financing; she lived in Russia for a long period of time, applied for Russian citizenship, and was deported from Russia.
Coordinator of “Oborona” [“Defense”] movement, who several years ago graduated from a higher educational establishment with a military chair, was accused of evading the draft and drafted into the ranks as a private.
Lieutenant of the Russian Army, fought in Chechnya. Was charged with murdering civilians, pleaded not guilty, was twice acquitted by the jury for the absence of a crime in the act, then sentenced to 15 years of deprivation of freedom by a military tribunal. The sentencing of Arakcheev was demanded by the Chechen leadership on the grounds of the “will of the Chechen people.” The second scandal occurred within the Federal Service for environment protection, whose supervision is very important both for the mineral resources sectors and for the owners of expensive houses near Moscow.
The Service’s head S. Sai handed in his resignation, stating that he did not wish to work together with his deputy O. Mitvol. Mitvol also resigned, saying that he was being prosecuted for his active standpoint, which usually had lost its importance after licenses had been transferred to Gazprom’s structures6. Indeed, later on Sai was forced to leave, but he was replaced not by his belligerent deputy but by a former official from St.
Petersburg, V. Kirillov. Thus, one of the main executives of “velvet nationalization” still kept his post in the government.
In January, Russia suffered a painful failure on the international arena, at the very last moment being deprived of the right to put forward its candidate, Senator M. Margelov, to the post of the PACE’s head7. This was partly compensated for by success on the economic front: Russia was able to settle the “meat conflict” with Poland, and the new Polish government called off its objections to the signing of a new agreement on Russia-EU cooperation8, which it had been torpedoing for more than a year. The rumors as to the appointment to the post of Russi’s representative in NATO of the Rodina party’s former leader D. Rogozhin, who remarked that he “had always disliked the opposition’s role”. This was a rather successful move on the part of the authorities, since it both removed a domestic opponent and placed an active supporter on the diplomatic front.
And finally, regional federal army headquarters declared in January that the greater part of the territory of Ingushetia was to be turned into a “zone of counter-terrorist operation”. The trigger was the preparation for a republic-scale meeting of the opposition against the Republic’s head M. Ziazikov – disguised, however, as a ‘meeting in support of Putin’s policy”. Special-police units from neighboring regions – Chechnya and North Osetia – were moved into the Republic. The meeting was called off for the time being, but nevertheless the authorities thereby admitted that the Republic was faced with an extraordinary situation – the local units of the Ministry of Internal Affairs could no longer ensure the performance of their main functions.
Inflation, Monetary and Credit Policy P. Trunin As of December results, the CPI stayed a high level, having reached 1.1 per cent as compared with 0.per cent in the relevant period of the preceding year. Therefore, consumer prices have increased by 11.9 per cent in 2007,whereas the CPI in 2006 9,1 per cent. Herewith, foreign currency assets were being accumulated in the country, the volume if which amounted to USD 476.4 bln. In December, the situation in the RF inter-banking market has been completely stabilized as a result of the funds inflow, allocated by the Russian government for Institutions of Development financing and the Bank of Russia measures, aimed at expansion of liquidity reserves, accessible to the Russian credit organizations.
The consumer price index in December made 1.1 per cent (against 0.8 per cent in December 2006 (see Fig. 1.). The greatest contribution to the prices growth in November (+ 1.6 per cent), like in previous months, was made by an upsurge of prices for food stuffs. Herewith, the agreement of the government with the leading trade networks to freeze prices for socially significant goods, signed in October, apparently provided some effect on the inflation rates: the growth rate in food prices in December fell down to +1.6 per cent per month from the level of + 3.3 per cent per month in October. Nevertheless, those measures will apparently have only short-term effect and the prices rates will move upward again as soon the as the restrictive measures are cancelled9. In December, the highest growth rates were noted in fruit and vegetables (+5.per cent), milk and dairy products (+2.5 per cent), butter (+2 per cent). Prices for granulated sugar went down in December by 1 per cent.
In December, high rates of growth were observed also in regard to non-food items, which average nationwide prices have increased during the month by 0.7 per cent (+0.5 per cent in December 2006). The highest growth rates were noted in December for motor gasoline (+3.6 per cent), knitwear (+0.8 per cent), clothes The oilmen were not alone in applying to court with an action against Mitvol – Governor of Moscow Oblast Gromov, foe example, did the same.
Traditionally, the election is based on the principle of rotation among the PACE factions, but two of the largest factions – the European People’s Party and the Left Socialists – had this time purposefully changed the procedure so as to deny Markelov, nominated by the small faction “European Democrats”, the possibility of becoming the PACE’s head.
However, it cannot be entirely ruled out that Lithuania or the United Kingdom will raise their objections.
On January 31, 2008 the validity term of the Agreement on Prices Freezing was extended till May 1.
and underwear (+0.8 per cent), tobacco (+0. per cent), as well as detergents and cleaning agents (+0.7 per cent). No downgrading was observed in any type of non-food items.
Commercial public services have grown in price in December by 0.9 per cent (+0.7 per cent in Decemebr 2006). The utmost growth was observed in regard to public transport (+3.8 per cent), health-care and resort services (+1.3 per cent), housing utilities (+1.1 per cent), healthcare services (+0.9 per cent), as well as fitness and sports (+0.9 per cent).
Therefore, consumer price growth rate has somewhat decreased as compared with November, though it was still higher than in 2006. In January 2008 the RF Ministry of Economic Development and Ministry of Finance have presented to the government a Work Plan on suppressing consumer prices growth rate for 2008. Measures, included in the Plan, are aimed primarily at development of trade infrastructure, enhancement of control measures over prices for the products of monopolies in natural resources and competition promotion. Undoubtedly, such proposals are reasonable and potentially capable to provide positive effect on the inflation rate in the country.
Undoubtedly, such proposals are sound and can positively influence the inflation rate in the country.
However, it is not clearly articulated in the plan, what measures of fiscal or monetary and credit policy could reduce the inflation in the short term. It is clear that at the current phase of political cycle, it is hardly feasible to reduce government expenditures, whereas high oil prices and potential capital inflow create all grounds for the expansion of monetary offer and inflation growth in 2008.
At the same time, we believe the following measures could help to restrain inflation in 2008:
1. Avoid the growth of social spending over the level of estimated budget for 2008;
2. Restrict growth rates of tariffs for housing utilities by measures of administrative regulation in the range of 10-15 per cent;
3. Avoid growth of the total non-interest federal budget expenses in excess of the estimates, specified in the three-year financial plan. Apply more strict measures to suppress excessive monetary offer;
4. Observe compliance with the existing legislation, according to which surplus revenues of the federal budget should be forwarded to the National Welfare Fund and Reserve Fund, rather than addressed for expenditures;
5. Restrict external loans for government institutions and enterprises with substantial government participation and replace them with domestic borrowings.
In December 2007 the basic consumer price index10 amounted to 0.9 per cent (against 0.7 per cent in the relevant period of preceding year). In our understanding, this fact is quite a natural consequence of turbulent expansion in the monetary offer in the past year, as well as an upsurge of prices for food products, observed in autumn.
Within December 2007, the volume of monetary base (in broad definition11) has been increased by RUR 862.9 bln to the amount of RUR 5513.3 bln (+18.6 %).
Let as consider the dynamics of monetary base in broad definition by components.
The volume of cash in circulation, including the cash balances of credit institutions, as of January 1, was RUR 4.12 trillion (+ 13.1 per cent as compared with December 1), the correspondent accounts of credit institutions with the Bank of Russia made RUR 802.2 bln (+18.4 per cent), mandatory reserves – RUR 221.bln (- 0.5 per cent), banks’ deposits with the Bank of Russia – RUR 270.3 bln (+ 108.9 per cent), the value of the Bank of Russia’s bonds held by credit institutions – RUR 100.7 bln (+ 291.2 per cent). Therefore, there was noted further growth of commercial banks reserves with the RF Central Bank, which has started in November, based on the assets, allocated by the government to the Development Institutions. Stability retention in the interbank market in 2008 will be largely determined by the dynamics of budget expenditures, as well as an inflow of private capital and export earnings to the country.
Basic index of consumer prices is an indicator of the inflation level without regard to seasonal price reduction (fruit and vegetable products) and to administrative measures (tariffs for government-regulated services, etc.). It is estimated by the RF Statistics Service The RF monetary base in broad terms with no regard to the cash issued by the Bank of Russia and the balance of Compulsory Reserve Accounts on credit organizations in national currency, deposited in the Bank of Russia, taking into account the assets of correspondent accounts and bank deposits, allocated in the Bank of Russia..
The Growth Rate of the CPI in 2002 - 2007 (% per month).