Russian finance minister quits after Medvedev spat

September 26, 2011 - 1:20 PM
Russia Elections

Russian President Dmitry Medvedev waves as he leaves the podium after his speech during a United Russia party congress in Moscow on Saturday, Sept. 24, 2011. Russian President Dmitry Medvedev has proposed Vladimir Putin as presidential candidate for 2012, almost certainly guaranteeing Putin's return to office. Medvedev made the proposal Saturday in an address to a congress of United Russia, the pro-Kremlin party that dominates Russian politics. (AP Photo/RIA-Novosti, Yekaterina Shtukina, Presidential Press Service)

MOSCOW (AP) — Russia's influential finance minister resigned Monday following a televised confrontation with President Dmitry Medvedev, who had angrily demanded that Alexei Kudrin immediately explain his criticism of Medvedev's policies or step down.

The open tension within Russia's leadership follows the announcement over the weekend that Prime Minister Vladimir Putin plans to return to the presidency next year and Medvedev would then take his old job as prime minister. Russia will have a presidential vote despite the backroom maneuvering, but Putin is sure to win it.

The departure of Kudrin is likely to unsettle investors. He has been finance minister since 2000 and his tight hold over the budget has been seen as the key to Russia's economic stability.

"It is difficult to see how Mr. Kudrin's resignation can be anything but market-negative," said Neil Shearing, chief Emerging Markets economist at Capital Economics Ltd in London. "With oil prices starting to slide and financial markets still jittery, now is not a good time for the government to lose its arch-fiscal hawk."

Speaking over the weekend, Kudrin said he would refuse to serve if Medvedev was made prime minister because of disagreements over policy, including plans to substantially boost military spending.

Addressing Kudrin on Monday, Medvedev called the minister's remarks "irresponsible chatter" and "improper," especially since they were made in the United States while the minister was in Washington for meetings of the International Monetary Fund and the World Bank.

"If you disagree with the course set by the president and being implemented by the government, you have only one choice: Resign," Medvedev said.

Kudrin said he would decide only after talking to Putin.

"You can seek the advice of whomever you want, but as long as I'm president, such decisions are made by me," Medvedev retorted.

The Kremlin said Medvedev signed a decree on Kudrin's resignation. Kudrin confirmed that he had quit in brief remarks reported by state news agencies.

Kudrin has been widely credited with helping Russia weather the 2008-2009 global financial crisis. During Putin's presidency from 2000 to 2008, Kudrin stashed some of the revenue from Russia's oil exports in a stabilization fund, despite strong opposition from other ministers who wanted to spend the money. But when the financial crisis hit and oil prices sank sharply those savings proved crucial in reducing the blow to Russia's economy.

Some market analysts speculated that Kudrin's departure could have a greater effect on Russia's economy than the 2012 presidential election itself.

"It is unlikely that Mr. Kudrin's replacement will share his predecessor's credentials and clout," Shearing wrote in a note to investors.

Before last weekend, Kudrin had been mentioned as a possible prime minister under Putin if Putin returns to the presidency.