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The worst results were achieved by United Russia in Nenets Okrug (48.7 %), St. Petersburg (50.3 %), Yaroslavl Oblast (53.1 %), Smolensk Oblast (53.9 %), and Moscow (54.1 %). After that, the governors of Yaroslavl and Smolensk Oblast were made to submit their resignation4, while the heads of Chechnya and Ingushetia, on the contrary, were rewarded by membership in the Bureau of United Russias Supreme Council. The majority of developed countries, as well as pan-European institutions (OBSE, PACE) either ignored the elections in Russia, or estimated them negatively. However, there were some exceptions. Thus, Frances President N. Sarcosy congratulated Putin with the victory of United Russia.

On the whole, the outcome of the elections to the Duma can be summarized as follows: United Russia has kept its constitutional majority in parliament, and the referendum to test confidence in Putin has indeed taken place with a positive result, although the methodology of its actual conduct has given grounds to doubts as to its legitimacy.

The elections outcome, just as it had been expected, did not produce any immediate constitutional developments. However, one week after the parliamentary elections, V. Putin made his long-awaited announcement namely, appointed his successor. Putins choice, while it can hardly be regarded as original, was to a certain degree unexpected he named as his successor First Vice Prime Minister of the RF Government D.

Medvedev. For a while in 2006, he was being enthusiastically displayed to public as a possible successor, but in 2007 his media coverage practically ceased, and in the last months forecasts pointed to V. Zubkov as the most likely candidate, closely followed by S. Ivanov and B. Gryzlov.

Medvedev graduated from the Department of Law of Leningrad State University, in the early 1990s joined the team of A. Sobchak, then Chairman of Leningrad City Soviet and later Mayor of the City of St.

Petersburg. From 1991 to 1996 he worked under Putin at the Committee for External Relations of St. Petersburg. After a short interlude in business, in 1999 Medvedev, together with his boss, resumed his career in civil service and became Deputy Head of the RF Presidents Administration. In 2003 he moved on to the post of Head of the RF Presidents Administration, and from late 2005 to that of First Vice Prime Minister of the RF Government supervising national projects. Since 2000, he has simultaneously been working as Chairman of the Board of Directors of Gazprom5. During his civil service, Medvedev showed himself as a not very brilliant, without a desire for global influence, but sometimes rather efficient lobbyist. Thus, for example, he helped to fight off the raider-type takeover of the timber holding Ilim Pulp engineered by the forces of a powerful oligarch O. Deripaska and his partners from the power structures. Besides, Medvedev won several other victories within the state apparatus in connection with appointments of governors or government officials. The results of Medvedevs constructive activity are controversial: on the one hand, there was noticeable progress in the implementation of a number of priority national projects, in particular with the development of appropriate infrastructure and the granting of awards in the spheres of public education and public health care. But his failures are no less obvious, the most serious among these being the national Having issued a ballot paper against the certificate, the member of the election commission, in violation of the law, does not take the certificate, leaving it instead at the voters disposal, after which the merry-go-rounder goes to vote in the next electoral district.

The heads of Moscow and St. Petersburg are too prominent figures to be removed in a moment, while Nenets Okrug, where the last governor elected by popular vote had been arrested and replaced by an appointed outsider from St.

Petersburg, has long been known for its inclination to opposition.

This post is important, but not the key one main powers belong to the companys managerial board, since headed by A. Miller.

project Affordable Housing in the course of its implementation housing, instead of becoming more affordable, became much less so due to an upsurge of housing prices.

When speaking of Medvedev, politologists emphasize several aspects. First of all, Medvedev is characterized as a liberal at least to the extent possible within Putins circle. Secondly, Medvedev is considered to represent the Gazprom group within the fuel and energy complex, which competes both with its main state-owned rival I. Sechins Rosneft and with private companies. Thirdly, Medvedev features as a representative of a certain community of St. Petersburg lawyers (RF Minister of Regional Development D.

Kozak, Chairman of the Supreme Arbitration Court A. Ivanov), and sometimes even of the so-called family (R. Abramovich, A. Voloshin, etc. ) In this connection, the following can be said. The greatest liberal among Putins circle is Putin himself, if liberalism is to be estimated by appropriately demonstrated rhetoric. However, essentially the policies of either Putin or Medvedev can hardly be described as liberalism be it in the economic or in the political sense. It would be enough to recall Gazproms audacious takeovers in recent years (Sakhalin-2, Kovykta, Nortgaz, legislation on gas export monopoly, etc.), let alone the whole recent Russian history of private propertys transformation into a semblance of feudal fiefs held from the king on certain conditions. At the same time, in contrast to some of his colleagues in Putins circle (e. g., , S. Ivanov, V. Surkov, or former Procurator General V. Ustinov), Medvedev never attempted to resort to theoretic discourse in order to provide substantiation for Russias special way of development, preferring to speak of a democratic version of such development, according to which, in fact, this countrys political life is quite compatible with universally recognized democratic norms.

While speaking of Gazprom (where Medvedev is closer to Executive Director of Rosukrenergo K. Chuichenko, head of Mezhregiongaz K. Seleznev, and A. Usmanov who has grown, inside Gazprom, to its top ranks, rather than to A. Miller), one cannot but agree that the companys evident striving to acquire assets in the territories of countries where rule of lw is in full force is to a certain extent a guarantee against Russias ultimate descent into totalitarianism. It is also true that Medvedevs relations with the group of officials within Putins circle most closely identifiable as the embodiment of the economic or political lawlessness of the last few years (I. Sechin. N. Partushev, V. Surkov, R. Kadyrov) are far from perfect no matter whether it all has to do with different candidates to the post of president, or with purely business controversies. As for the version of Medvedev being supported by the family, we believe it to be quite groundless. Firstly, D.

Medvedev replaced A. Voloshin in a situation that was far from being friendly, and secondly, all those who in 2006 were identified as Medvedevs support group in 2007 already joined the support group of Sergei Ivanov, that is, were simply going with the flow of Kremlin gossip.

One important circumstance, by the way, could have been the easy-going way in which Medvedev survived the temporary exclusion from the ranks of successors this lack of ambition could be visualized as a valuable trait by V. Putin who wanted to keep, in some or other form, the status of co-ruler.

As for Putin himself, he was offered by Medvedev evidently by a previous agreement the post of Prime Minister in the event of the laters very likely victory in the presidential election. Putin acted very simply not being impressed by the dubious speculations of him becoming a national leader without any official status, he secured for himself the second constitutionally important post, which, no doubt, he is going to fill with the second-in-importance financial and symbolic content. At the same time, it would be wrong to say that Putin actually is going to remain the countrys leader, considering the once again confirmed policy of the Constitutions unchangeability one simply has to bear in mind that, according to the Constitution, a Prime Minister can be dismissed from his post by a presidents edict alone, without any need for parliaments approval. It would be correct to speak of an institute of co-rulers where, no doubt, Medvedevs role will be growing in prominence, and that of Putin diminishing. As for the stability of such dual power, it will primarily depend on the adequacy of the ambitions of both these figures, and especially Putins, whose main guarantee under conditions of a non-ideological regime will be unofficial human friendliness and his successors gratitude.

After the successors candidacy was finally determined, he received support from United Russia and A Just Russia, while from the formal point of view Medvedev had been nominated at the party in powers congress. On the other hand, the manner in which the party in power silently sealed V. Putins choice, is by no means an evidence, in our opinion, of any strengthening of party trends in the activity of Russian bureaucracy.

The commander of D. Medvedevs headquarters became Head of the RF Presidents Administration S.

Sobianin, and not the actual director of policies V. Surkov. This is yet another confirmation of the doubtful political future of Kremlins chief technologist V. Surkov, who was too obviously in favor of the scenario involving S. Ivanovs successorship.

As for the presidential election itself and the authorities goals, the answer will become evident in a months time. The main issue, in brief, is this: whether V. Putin truly needs the highest vote for his successor and, consequently, the highest legitimacy of the election, or, on the contrary, both the vote and legitimacy should feature far less prominently. However, even if the latter is true, it would be technically very difficult to ensure a limited vote during the election.

From the point of view of the elections legitimacy, the issue of access to it of a democratic candidate M. Kasianov (beside G. Ziuganov and V. Zhirinovsky who, as candidates from parliamentary parties, are registered automatically) - remains no less important.

Budgetary and Tax Policy O.B. Kirillov In November, the growth in federal budget expenditures has expressly exceeded the revenues. The increase in expenditures happened largely due to the two factors: the reduced backlog versus the estimated budget and the forthcoming elections of the Deputies to the State Duma and the RF President.This was also based on the significant irregularity in revenues, administered by the Federal Tax Service. As a result, the share of this category of revenues in GDP has exceeded for the first time in 2007 the relevant indicator of preceding year. In November, the Central Bank of Russia has proposed to perform the exchange operations with the RUR portion of the Stabilization Fund in foreign currency in the open market. This is explained by irregular budget spending during the year, by the elections to the State Duma and the approaching elections of the RF President. It should be noted that a significant mitigation of fiscal policy in view of general political trend has accelerated the growth of prices at the end of the year.

A remarkable event in November 2007 in the budgetary sphere was a significant excess of federal expenditures (31.31 per cent of GDP) over the revenues (22.36per cent of GDP), resulting in a substantial deficit (8.96 per cent of GDP) (see Figure 1). Such a significant deficit is unusual to the Russian federal budget, but we have predicted the substantial increase in budget expenditures at the end of the year in the previous survey. A similar situation was observed in 2005. In that year, in September and December the federal budget deficit amounted to 0.29 per cent and 0.99 per cent of GDP respectively. However, it is worth noting, that the share of deficit in GDP was significantly lower than in November 2007.

20% 15% 10% 5% 0% -5% -10% -15% Fig. 1. Deficit(-)/Surplus(+) of the RF Federal Budget in 2005-2007 (per cent in GDP) % Despite the explicit growth of expenditures of the RF budget in November6, in general, within JanuaryNovember of 2007 revenues have still exceeded the expenditures (See Table 1).

Table 1.

Basic Parameters of the RF Federal Budget in 2005-2007 (% in GDP) January- January2005 November 06 November Revenues 23,7% 23,12% 23,5% 23,67% Expenditures 16,2% 15,09% 16,2% 17,47% Deficit ()/ Surplus (+) 7,5% 8,02% 7,4% 6,20% Source: RF Ministry of Finance, RF Treasury, IET estimates.

There are two major reasons for dramatic growth in federal expenditures at the end of 2007. First, the mitigation of fiscal policy in the framework of the current political cycle in anticipation of the parliamentary and presidential elections. Second, the irregular budget expenditures during the fiscal year and as a consequence, the growth of expenditures at the end of the year.

We have considered the execution of the federal budget on cash basis as compared with the budget estimates for the first three quarters of 2007 in detail in the preceding survey. Now we would like to note again, that in general, the execution of the federal budget on cash basis, in terms of revenues, as well as expenditures, in the course of the year has gradually approached the budget estimates for the relevant period. At the same time, while the revenues in the third quarter of the year have exceeded the budget estimates, the expenditures fell behind the planned value by 16.2 per cent. It is worth saying, that the explicit growth of national budget expenditures has boosted up the inflation rate at the end of 2007.

Attention should be paid to the comments of Alexei Kudrin, the Minister of Finance, on the irregular execution of the federal budget in terms of targeted programs and national projects. He has stated, that the quotas of the federal funds for the government authorities were disclosed for the period after January 1, 2007.

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