PUTIN MAKES MINIMAL CHANGES TO CABINET

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 004713 SIPDIS SIPDIS E.O. 12958: DECL: 09/25/2017 TAGS: PGOV PINR ECON RS SUBJECT: PUTIN MAKES MINIMAL CHANGES TO CABINET Classified By: Charge d'affaires Daniel A. Russell: 1.4 (b,d). Summary -------------- ¶1. (C) Late evening September 24, President Putin announced the long-awaited cabinet re-shuffle requested by Prime Minister Zubkov. There were few structural changes to the new cabinet unveiled by Putin and much continuity, with government veterans Elvira Nabiullina and Tatyana Golikova replacing Economic Minister Gref and HEALTH Minister Zurabov respectively. Southern Region Polpred Dmitriy Kozak has been returned to Moscow as successor to Regional Development Minister Yakovlev. Aleksey Kudrin retained his Finance Ministry portfolio and was tapped to become the GOR's fifth Deputy Prime Minister. Putin also announced that Minister of Defense Serdyukov would retain his job. (Serdyukov had tendered his resignation when father-in-law Zubkov was picked to be Prime Minister.) The reconfigured Cabinet kept modernizers in key economic positions and, mirroring Zubkov's own appointment, brought competent Putin loyalists to the fore. End summary. Zurabov Out, At Last -------------- ¶2. (C) The relatively minor changes announced by Putin September 24 remove from the government ministers who had become the target of frequent criticism by the media, the public and, occasionally, Putin himself. HEALTH Minister Zurabov's ouster had been widely expected since the Duma unanimously concluded that the Ministry's work was unsatisfactory and proposed splitting it into separate ministries last April. Over the past year, a major corruption scandal, charges of financial mismanagement, and major disruptions in the GOR's free prescription medicine distribution program had dogged Zurabov, in addition to further allegations of social insurance and pension fund corruption. Zurabov is expected to return to the insurance company --MAKS-- that he founded, or join his wife at the firm Octopus, a major distributor of medical equipment. ¶3. (C) Although Zurabov's dismissal was no surprise, the appointment of Deputy Finance Minister Tatyana Golikova to replace him was. Golikova has been Deputy Finance Minister since 1999, where she was considered a strong financial controller and budget planning specialist. Golikova had managed the annual budget negotiations with the Duma. Previously, Golikova had held various positions in MinFin's budget department. She married Minister of Industry and Energy Khristenko in 2004. Gref Replaced by One of His Own -------------- ¶4. (C) The departure of German Gref was also not unexpected. His skepticism about social spending reportedly irritated Putin, and the President on a number of occasions aired his unhappiness with Gref in public. Gref enthusiastically welcomed his successor, Elvira Nabiullina, and indicated that he planned to work in the private sector. ¶5. (C) The 44 year-old Nabiullina is well-known to Embassy officials, who worked extensively with her when she headed the Center for Strategic Studies and in her capacity as head of the Experts Council for the G-8 Steering Committee during Russia's 2006 G-8 Presidency. Most recently, Nabiullina had headed the National Priority Projects' Experts Council that reports directly to First Deputy Prime Minister Dmitriy Medvedev. Kozak Returns to the Center -------------- ¶6. (C) The firing of Minister of Regional Development Vladimir Yakovlev also had been long rumored. Yakovlev, like Zurabov, had frequently been the target of attacks by Duma deputies, regional elites, and ex-Prime Minister Fradkov, especially over his administration of the GOR's housing programs. Following his 1996 victory in the St. Petersburg mayoral race over Putin patron Anatoliy Sobchak, Yakovlev had worked briefly as Deputy Prime Minister and Polpred in the Southern Regions before becoming Minister of Regional Development in 2004. ¶7. (C) Dmitriy Kozak's return to Moscow has revived speculation that he is being positioned as a potential successor to Putin. Many observers suggested that Kozak's new appointment rescued him from the prospect of presiding over a continuing deterioration in the security of part of MOSCOW 00004713 002 OF 002 the North Caucasus. On the same day that he named Kozak Minister, Putin also signed a decree that expanded the Regional Development Ministry, giving it authority for coordinating the Fund for Realizing Housing Reform, and allowing the Ministry to tap the GOR's investment fund for state support of housing and other regional projects. ¶8. (C) In addition to retaining his Minister of Finance portfolio, Aleksey Kudrin was selected to join Sergey Ivanov, Medvedev, Naryshkin, and Zhukov as Deputy Prime Minister. The financial community here has welcomed news of Kudrin's elevation, seeing in it a sign that Putin remains committed to macroeconomic stability as the elections approach. Kudrin has an excellent working relationship with Zubkov. Effect on WTO -------------- ¶9. (C) Nabiullina also is personally committed to WTO, and according to the Ministry's Chief-of-Staff plans to replace Gref as the leader of a Russian business delegation to Washington next week. For now, it seems to be business as usual at MEDT, with a WTO team en route to Geneva September 25 for scheduled WTO discussions on IPR. Two New Committees -------------- ¶10. (C) In addition to expanding the responsibilities of the Ministry of Regional Development, Putin announced September 24 the formation of two standing committees, on the fishing industry and youth matters. Both had been repeatedly created, then disbanded in the past, and their creation this time around will likely make little difference. Comment -------------- ¶11. (C) The shape of the new Cabinet stresses financial control --Zubkov's watchword, and Putin's too-- as his term comes to its end. Also foregrounded are family and clan ties. In addition to the Serdyukov - Zubkov and Golikova - Khristenko pairings, bringing Kozak back to Moscow adds to the ever-expanding list of insiders who worked with Putin in St. Petersburg. It also did not go unnoticed here that two women now occupy key positions in the new Cabinet. Some commentators have suggested that women are less likely then men to be corrupt (Valentina Matvienko anyone?),and Communist Party Deputy Ivan Melnikov saw in the appointments of Nabiullina and Golikova a ploy that would lead to less criticism of the government. ¶12. (C) The relatively minor scale of the September 24 shakeup has fostered rumors that more sweeping structural, and possibly personnel, changes will follow the December Duma elections, with some commentators here arguing that Putin/Zubkov could not risk a more thoroughgoing reform in the already dysfunctional Ministry of HEALTH with voters on their way to the polls. ¶13. (C) The changes announced by Putin September 24 were a minimalist approach to rid the cabinet of its weakest, or least palatable ministers as the election season begins. The professionals chosen to replace the battle-weary Gref, the discredited Zurabov, and the incompetent Yakovlev should give Zubkov a better team in the waning days of Putin's presidency. Russell