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The Russian Business Monitor

Mikhail Fradkov, prime minister of the Russian Federation since 2004, handed in his resignation on September 12. Addressing President Vladimir Putin, Fradkov ascribed his decision to the need to give Putin complete freedom "in decision-making, including appointment decisions" during the forthcoming parliamentary and presidential campaigns. Putin accepted Fradkov's resignation. "You may be right, you know," he said. "We should all give some thought to how we can make the government and administration system correspond to the needs of the electoral period better."  

Highly-placed sources in the Russian oil industry claim that Fradkov may become the head of an oil corporation - after Rosneftegaz is converted into a corporation. Fradkov convened an emergency Cabinet meeting yesterday and, already in the capacity of the acting prime minister," seemed quite contented. 

President Putin wasted no time in nominating a new prime minister. Needless to say, the candidate the Duma is expected to endorse on September 14 is from St. Petersburg. In fact, he was once Putin's direct subordinate.  

Viktor Zubkov was born on September 15, 1941. His rise to the pinnacle of power was not exactly straightforward. Once a common locksmith, he aspired to a higher education and was admitted to the Faculty of Economics at the Leningrad Agriculture Institute. Zubkov eventually became director of a major collective farm upon graduation. He joined the civil service when Mikhail Gorbachev's perestroika began and became deputy chairman of the Leningrad Regional Executive Committee. In the Yeltsin era (1992), Zubkov was assigned to the Foreign Relations Committee of the St. Petersburg administration, the administrative unit headed by Putin. He was promoted to head the St. Petersburg Tax Inspectorate a year later - much to his own surprise. 

His career executed another turn in 1999 when Zubkov decided to run for governor of the Leningrad region. His gubernatorial campaign was engineered by one Boris Gryzlov, an obscure PR specialist then who is Duma chairman nowadays. Zubkov handled money-laundering as the head of the Russian Federal Financial Oversight Service years later. It was under Zubkov that Russia was dropped from the FATF blacklist it had been put on in 2000 as a country that never fought legalization of criminal income. Liquidity crisis in the financial market became a corollary, intentional or not, of Zubkov's activity. It was fomented by his announcement that list of money-laundering banks was being compiled.  

Zubkov's colleagues and subordinates regard him as a demanding but adequate administrator. "We know Zubkov as a thoroughly efficient administrator, sometimes even overly tough," said Vladimir Tyulpanov, speaker of the St. Petersburg municipal legislature. 

Mikhail Barschevsky, Civil Force leader and representative of the government in the Supreme Court, maintains that "Zubkov's promotion draws the next-president intrigue even tighter." Barschevsky himself does not perceive Zubkov as the next head of state. "He is not a public figure, and his full-time promotion will take more time than is available," Barschevsky said. "His work at the Russian Federal Financial Oversight Service has made him privy to information not even the Federal Security Service (FSB) knows. It is Zubkov who knows who costs how much - literally and figuratively." Barschevsky believes that Zubkov's professional experience will come in particularly handy in the forthcoming campaigns. The regime will certainly make use of it as an asset. After all, the war on corruption may become the central issue of the forthcoming campaigns (the presidential administration for instance intends to establish a special anti-corruption body by the end of the autumn). The former head of the structure colloquially known as financial intelligence service, a man thoroughly experienced in the war on corruption, will be nearby to help the next president come in first in the race.  

However, odds are some other non-public figure will become the next president of Russia. The rumors that Zubkov would become the next prime minister and Anatoly Serdyukov the successor began circulating in the establishment six months ago. Two sources in the oil industry and business circles confirmed it to RBC Daily independently of each other on September 12. 

All the same, there remain some valid arguments for the assumption that Zubkov will be the next head of state. Not exactly a young man any more, he is unlikely to try to reshape the political system to suit himself. He is just the type of man Putin needs. Also importantly, Zubkov does not belong to any faction at the top. "Zubkov is perfect from the standpoint of a parity of forces in the Kremlin," said Political Conjuncture Center President Konstantin Simonov.  

At any rate, the Cabinet spent the day on September 12 trying to decide how the new prime minister should introduce himself to the Duma. Fradkov himself departed right after the emergency meeting, leaving Sergei Naryshkin to coordinate the effort. Naryshkin even convened a number of meetings and consultations. According to our sources, one of the meetings directly concerned Zubkov's address to the Duma later on September 13. As it turned out, nobody in Zubkov's inner circle in the financial intelligence service knew about his forthcoming promotion until the last possible moment, and that included his speech-writers. It was necessary to decide - and without delay - what his speech at the Duma should concentrate on today (war on corruption versus national projects). Eventually, it was decided to discuss both subjects. Zubkov will meet with the Communist faction at 9 a.m., the LDPR at 10 a.m., and United Russia at noon. 

The planned Cabinet meeting on September 13 will be convened and chaired by acting prime minister Fradkov. Fradkov's press service quoted him as saying: "The core of the government is good enough for the next Cabinet as well."  

 

Published: RBC Daily, September 13, 2007  


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Analytical series “The Fuel and Energy Complex of Russia”:

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Arctic: Soviet-type Gigantomania or Breakthrough Project?
State regulation of the oil and gas sector in 2018, prospects for 2019
Gazprom on Path to New Reality
Looking for Best Tax Treatment of Oil and Gas: Fiscal Experiments Continued
The subject of taxation became the absolute hit of 2018. The government once again decided to rewrite the rules of the game. President Putin’s new inauguration decree served as the main pretext. It turned out that about 8 trillion roubles extra was necessary for the new national projects announced. The Cabinet did not take long to decide where the funds should be taken. The result was acceleration of the so-called tax manoeuvre started as far back as 1 January 2015. It suggested shifting the tax burden to the wellhead: the effect on the state budget of gradual abandonment of the export duty will be more than compensated for by quicker growth in mineral resources extraction tax (MRET). The laws on tax reform have already gone through the parliament and will take effect as of next year. This means nothing good for companies.

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