"Russia's domestic policy was the weakest point in 2004"

The Economic Analysis Institute headed by President's Economic Advisor Andrey Illarionov published a report concerning the economic situation of the year. The report turned out to be rather harsh containing plenty scandalous statements.

Against the background of the conflict between Prime Minister Mikhail Fradkov, Economic Development and Trade Minister German Gref and Economy Minister  Alexey Kudrin as concerning doubling GDP, Andrey Illarionov said Russia's economy was slowing down. Economic results of the year prove the fact. Economists say that cash income of the population increased by 14.5 per cent in 2003 while this year's increase made up just 9 per cent. He added, the 2004 inflation is even higher than last year.

The president's economic advisor also strongly criticized the Russian domestic policy. The BBC Russian Service is citing Illarionov as saying that today Russia is a different country from the political and ideological points of view. He said Russia was developing according to “the Venezuelan model”.

The report once again demonstrated that Andrey Illarionov sticks to the liberal market values. According to the president’s economic advisor, Yukos and Vympelkom, the companies attacked by the authority all the year long, were “the best”. The same characteristic was given to businessman Mikhail Khodorkovsky, journalists Shakirov and Parfenov, deputy Vladimir Ryzhkov.

Andrey Illarionov said selling Yuganskneftegas to Baikal Finance Group by auction, Rosneft’s purchase of Baikal Finance Group and operations to merger or separate Rosneft and Gazprom were “the fraud of the year.” He also said it was an absolute mystery where the buyer of Yuganskneftegas might get money.

The economic advisor emphasized that officials not related with economy must not interfere with economic issues. “The Yukos scandal has demonstrated there is no rules of play at all; rules are being continuously adjusted to momentary interests,” Andrey Illarionov said.

Andrey Illarionov also touched upon the failure of the Russian foreign policy in Ukraine. He said colleagues in the government acted rather tactless and insulting to make Yuschenko’s triumph evident even though at first many people objected to his candidature.

The president's economic advisor said he was not afraid of losing the position because of his harsh criticism. BBC is citing him as saying that it would undermine the governmental stands to say everything is OK and the present-day policy is promising for the country. “Being the president's economic advisor I do what I believe to be effective for the country,” Andrey Illarionov said.

What does Illarionov mean saying Russia is following “the Venezuelan model”?  It is important to know expert opinion to understand the statement. Director of the Union for Support and Development of national gas and oil servicing companies Yeugeny Shesterninov supposes the president's economic advisor means that Russian oligarchs invest rather foreign projects than Russia. If so, Yeugeny Shesterninov adds that Illarionov's statements contradict the results of the meeting between Russia President Putin with the Venezuelan president. In Vladimir Putin's presence, LUKOIL signed an agreement on investing a Venezuelan project. “Oil production is hampered and frozen in Russia while Russian companies invest the process in Venezuela,” Shesterninov said. At the same time he added that “it is easier to invest and earn profits there.”

Head of the consulting and analytical department with Interfin Trade Khalil Shekhmametyev says the results of the year are quite evident. “The official statistics proves that this year's results are worse than those fixed last year. The economic growth made up 7.3 per cent, but the showing made up 6.5-6.9 per cent in 2004,” the analyst says.

As for “the Venezuelan model”, Shekhmametyev thinks Andrey Illarionov means the domestic policy. The analysts says: “The domestic policy is rather unusual when majority of the population seem to be supporting the official president, but at the same time the opposition is strong enough.” Khalil Shekhmametyev doubts that Illarionov's statement means Russia is turning into a source of resources for the West.  The analyst explains the economic slowdown in 2004 with the fact that interests of the business and the elite now disagree with the interests of the Russian leader. “Some progress has been achieved in normal development of the country, but I say Russia's domestic policy was the weakest point in 2004,” Shekhmametyev said.

Sergey Malinin

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Author`s name Andrey Mikhailov