On January 21 Russian President Vladimir Putin approved the personnel of the new government of Mikhail Mishustin. There are many new figures, including six new deputy prime ministers and eight ministers that did not work in Dmitry Medvedev’s government. Moreover, among the new faces are several people from the Federal Tax Service, which was formerly run by Mishustin to great affect.
The new government is clearly a temporary technocratic government that has the clear task of implementing the national projects over the next four years before Russian President Vladimir Putin stands down as president.
“Having replaced the prime minister and renewed the composition of the government mainly at the expense of pure technocrats, Putin de-politicised the work of the government as much as possible so that no one would consider the cabinet in the context of constitutional reform, transit of power and succession. The government is becoming technologically advanced in order to achieve efficiency in the implementation of national projects, including through the close theme of the digitalisation of management and social policy, as well as to ensure a significant increase in the economic growth rate,” Dmitry Badovsky, head of the Institute for Social, Economic and Political Research Foundation, told Vedomosti.
The new government is also the first under Putin to contain none of his old friends, following the departure of two of the president’s long-time associates dating back to his time in the St. Petersburg mayor’s office: deputy prime ministers Dmitry Kozak and Vitaly Mutko.
“Another hallmark of the new government is its relative youth. Five of the nine deputy prime ministers — i.e., all of Mishustin’s new deputies — are under fifty-five. Six of the eight new ministers are under forty-five. The oldest bloc within the government is still, inevitably, that of the security services. Putin barely touched that bloc, except to replace Alexander Konovalov, a proxy for former prime minister Dmitry Medvedev, with another Medvedev proxy, Konstantin Chuychenko, as justice minister,” said Tatiana Stanovaya in a paper for the Carnegie Moscow Centre.
Having said that, the new government has been drawn from the existing pool of bureaucrats and essentially the same team is in charge even if the chairs have moved when the music stopped.
Many of the new appointments are known to be apolitical and successful administrators who have marked themselves out for implementing key reforms. Other ministers that headed up important ministries, such as the digitisation of Russia, that have failed to succeed have been sacked. A few of the appointments to key positions, such as Andrei Belousov to the powerful post of first deputy Prime Minister, are clearly highly political appointments by Putin to maintain a few key levers of control over the new government.
The new appointments are widely seen as a preparation for government plans to open the taps and pump money into the economy to jump-start growth.
Belousov’s nomination supports this argument. He is an ardent advocate of state intervention in the economy, and he was reportedly appointed first deputy PM to “force” the national projects – that is, to make sure the conservative Finance Minister Anton Siluanov doesn’t block allocated spending, which he has been resisting until now.
Belousov takes over Siluanov’s former title of first deputy prime minister, which analysts are taking as change in direction from prudence to largess. Official figures show that the government underspent by RUB1.1tn ($17.7bn) last year from the plan, or 5.8% of the annual budget, ending 2019 with a 1.8% GDP budget surplus. The finance minister, it follows, lost his role as first deputy PM for not spending enough, argues BMB in a note.
The Bell has produced a nice graphic that shows who the key ministers are and just how much of the national project spending they are responsible for.
Russian Prime Minister Mikhail Mishustin distributed duties between his nine deputies, Prime reports on January 30.
First Deputy Prime Minister Andrei Belousov will supervise national projects, finance, foreign trade and counteraction to sanctions. He will also be responsible for the institutes of development, such as VEB.RF.
Chief of Staff, Deputy Prime Minister Dmitry Grigorenko will supervise the budget, tax and trade policies and alcohol sales. He will also control fulfilment of the national projects.
Deputy Prime Minister Viktoria Abramchenko is responsible for agriculture, fisheries, environment, land issues, real estate sales.
Deputy Prime Minister Tatyana Golikova will supervise the social policies, including demographics, migration, pensions and science.
Deputy Prime Minister Alexei Overchuk will supervise international relations and the integration in the Eurasian Economic Union.
Deputy Prime Minister Yury Borisov will supervise the military, the defence industry, the state defence order and military cooperation, law enforcement, industry and the energy sector.
Deputy Prime Minister Marat Khusnullin will be responsible for housing policies, mortgage and public utilities, roads and the development of regions and cities, Crimea and the Kaliningrad Region.
Deputy Prime Minister Dmitry Chernyshenko will be responsible for the digital economy, innovations, media, culture, tourism and sports.
Prime Minister Mikhail Mishustin has been hired to carry out the same revolution he implemented at the tax service between 2010 and 2020 for the whole country.
The tax service has known nothing but success in recent years, with tax revenues growing on average by 17% a year in real terms in 2017–2019 and nominal VAT revenues increasing by 17% in 2019, partly due to the 2 percentage point increase in the base tax rate and slightly higher inflation.
The regions have benefitted from growth in profit and personal income tax revenues. Mishustin’s tenure at the tax service saw real VAT revenues and personal income tax revenues increase by annual averages of 5.5% and 2% respectively. All this was achieved amid the introduction of various income tax benefits and despite the fact that earnings in Russia rose slower than inflation from 2014.
This growth will most likely continue in the coming years. Mandatory labelling of goods and monitoring of individuals’ transactions will increase compliance with other taxes too, both federal and regional.
But the tax service’s success has contributed to the slowing of economic growth, as Mishustin has admitted; it is not ideal for tax revenues to grow thirty-three times faster than GDP. He told Vedomosti at the end of last year that the VAT increase was good for the budget, but bad for business.
First deputy prime minister
Andrei Belousov leaves the role of advisor to the president on economics and was appointed first Deputy Prime Minister, making him the third most powerful man in Russia. This post was previously held by Igor Shuvalov, who went on to head VEB, which is in charge of Russia’s infrastructure investment in the national projects.
The Bell reports that the appointment was a surprise to Mishustin and imposed on him by Putin. Analysts speculate that Belousov’s appointment is a lever of control imposed on the new prime minister by Putin. Belousov is the author of the RUB25.7tn ($390bn) investments planned for the 12 national projects and Mishustin was clearly hired to implement them. Belousov was also behind the decision to hike VAT by 20% at the start of 2019.
Belousov is also friends with Artem Avetisyan, the initiator of the case against US fund manager Michael Calvey and his colleagues at Baring Vostok that landed some of Russia’s best known fund managers in jail.
Belousov is a tough statesman and believes in a “ring of enemies” around Russia, his colleague said in an interview with The Bell a year ago: “In 2014, he was the only one from Putin’s economic circle that supported the annexation of Crimea.” The economist Kirill Tremasov calls Belousov the main ideologist of the policy of recent years, which can be reduced to the idea of replacing of private investment with state investment. He is a supporter of state spending to boost the economy by tapping the National Welfare Fund (NWF).
Belousov criticised CBR governor Elvira Nabiullina last autumn for lowering the key rate too slowly, and even proposed his own option of reducing rates to 5% from 6.5% in November. The government cannot cut taxes now, so lowering the Central Bank rate is the only way to stimulate economic growth, he said then.
Deputy Prime Minister
Tatiana Golikova is one of the few ministers to keep her job and remains deputy prime minister with responsibility for the social sphere. Another technocrat, she rose to prominence as the former head of the Audit Chamber, now run by her former boss former Finance Minister Alexei Kudrin. bne IntelliNews previously profiled her “Tatiana Golikova and the beancounters in the Audit Chamber of Secrets.”
She was given the social sphere portfolio in 2018, which will account for a third of the national project spending, or some $100bn over the next seven years. In many way this is the most important of all the national project tasks, as her actions will directly affect (and presumably improve) the life of the majority of Russians. She is seen as a no-nonsenses nuts and bolts administrator.
Deputy Prime Minister
Dmitry Chernyshenko is the new deputy minister for Culture, Tourism and Sport who has been the head of Gazprom Media. He was previously head of the Sochi 2014 Olympic bid committee, where he first came to the president’s attention. He later headed the Volga Group holding that belongs to Gennady Timchenko, a close associate of Putin. But Chernyshenko is also a friend of the new prime minister, Mishustin, who happens to be a member of the board of the CSKA Moscow hockey club, while Chernyshenko was president of the Kontinental Hockey League. The two men are also neighbours when at their dachas outside Moscow.
Deputy Prime Minister
Marat Khusnullin is responsible for housing policies, mortgage and public utilities, roads and the development of regions and cities, Crimea and the Kaliningrad Region. In his first act Khusnullin proposed a nationwide residential renovation program at the end of January, copying the Moscow-city renovation program launched in 2017 at a cost of RUB3 trillion. Moscow’s program is focused on replacing 8,000 buildings constructed in the 1950s and 1960s. However, there are a further 32,000 such buildings in 14 other major Russian cities. Analysts say this initiative is a watch factor for the nearest future to check to what extent the stability of the Russian federal budget may suffer from the ambitious program to accelerate economic growth.
Anton Siluanov lost the post of First Deputy Prime Minister that he had since 2018 but stays on as Finance Minister. The fact that Siluanov has remained in the government is a good sign for financial markets, say analysts: most likely, he will continue to defend the budget rule, and while it is in force, he advocates increasing state spending moderately and cautiously, unlike many in government.
Siluanov has been a prudent and cautious finance minister, who is in interested in the details and has transformed the make-up of the budget to make it less dependent on raw material extraction. He worked closely with Mishustin to boost tax revenues as part of the overall plan to revitalise the budget.
While Siluanov has been demoted by losing his first deputy prime minister title, he remains a key figure in the new government and trusted by Putin. Putin made clear during his state of the nation speech on January 15 that macroeconomic stability remains of the utmost importance. For achieving a strong fiscal foundation, Putin praises Siluanov.
Furthermore, the government reshuffle has strengthened the Ministry of Finance. Putin signed a decree on Tuesday transferring Rosimushestvo, the federal agency responsible for managing state-owned companies, to the Ministry of Finance from the Ministry of Economic Development. Rosimushestvo is one of the main administrators of government revenue, and its transfer to MinFin will allow Siluanov to more actively centralise dividend policy and privatise SOEs. This hardly indicates that the finance minister has lost Putin’s trust.
Rosimushestvo is responsible for the management of federal property and owns a number of large corporations, including: 45% of Rostelecom, 88% of grid company Rosseti (Russian Grid), more than 61% of power company RusHydro and 78.5% of pipeline operator Transneft.
In October 2019, the deputy head of the Ministry of Finance, Alexei Moisseev, who kept his job, told the agency that the state needed to reduce its share in all these companies, with the exception of defence companies, to no more than 50%. Siluanov also supports a large-scale privatisation programme and suggested that the Ministry of Economic Development prepare a list of companies that are not key for the country to be sold. Now Siluanov will be in direct control of this process.
The change of control over the state property will also probably lead to an increase in dividend payments to the budget. In October 2019 Rosimushestvo prepared a list of potential dividend payments by state-owned companies that was considerably less than the Ministry of Finance’s own estimates. One of Siluanov’s biggest successes has been to force the largest state-owned enterprises (SOEs) to pay 50% of their profits to the state as dividends despite determined resistance by the leading managers – some of the most powerful people in the country.
Economics Development Minister
Maxim Reshetnikov is the new Minister of Economics. He is the former Deputy Mayor of Moscow for Economics (2012–2017), and has been the Governor of the Perm Territory for the last two years, a post he has to leave now. He will have a difficult time in his new post, previously held by Maxim Oreshkin, as he has to counter the economic stagnation and boost the real income of the population – a task Oreshkin failed to achieve.
Reshetnikov is new to federal level government but, like Mishustin, is seen as a technocrat and effective administrator. He may also have some authority problems, as the Ministry of Economy is traditionally subordinate to the Ministry of Finance and the Central Bank.
As the governor, Reshetnikov defended the financial freedom of the regions, Vedomosti notes, and he advocated an increase in the share of income tax allocated to the federal budget (from 2 to 3 pp out of 20%), an increase in the regions' own revenues, and the immutability of the rules for them, or the payment of compensation if the rules are changed.
Minister of Communications and Digital Development
Maksut Shadaev becomes the new communications and digital minister. He is the former Minister of Rostelecom, the state-owned telecoms company that runs Russia’s phone network.
It is still unclear which of the deputy prime ministers will oversee the industry, but most likely it will be former deputy head of the Federal Tax Service Aleksey Overchuk, reports The Bell, who was responsible for the highly successful digitalisation of the tax service.
Both officials have strong track records, Shadayev as a "practitioner," Overchuk as a "diplomat and organizer," according to The Bell.
Another young technocrat, he has worked with heavyweights ranging from former communications minister Leonid Reiman to First Deputy Chief of Staff Sergei Kiriyenko, for whom he acted as a consultant on issues regarding social networks.
The previous Minister of Communications and Digital Development, Konstantin Noskov, left the government, as did Deputy Prime Minister Maxim Akimov, who was also responsible for the digitisation of the Russian economy, which also failed.
Sergei Lavrov stays in the job he has held for 16 years. He is widely believed to have been asking to leave but he has been so effective Putin has kept him on.
Sergei Shoigu stays on as Defence Minister. Shoigu has overseen the modernisation of the military that started in 2012 and has reached a point where Putin believes Russia’s military is strong enough to act as an effective deterrent to possible military attacks by the US. Shoigu is one of the most popular politicians in Russia and is a possible replacement for Putin in 2024 as president.
Olga Lyubimova is the new minister and unlike her predecessor is seen as an independent who will support the humanitarian and theatrical environment, and has been welcomed by those from the arts world.
Lyubimova is the former head of the Culture Ministry’s film department and made her career working in media focusing on the Orthodox religion, but she is still perceived as a more sober professional.
The ultra-patriotic previous Culture Minister, Vladimir Medinsky, managed to fall out with literally everyone during his controversial tenure.
Science and Education Minister
Valery Falkov becomes the Minister of Science and Education. He is a man from the provinces and has been plucked from his job as rector of a good university, where he was seen a dynamic and effective rector. Russia’s higher education was in collapse in the 1990s, but another of Putin’s unsung successes has been to turn that around and Russia’s top universities have re-entered the global top 100 rankings and are rising again.
Minister of Agriculture of the Russian Federation
Dmitry Nikolay Patrushev was re-appointed Minister of Agriculture. He is the son of Nikolai Patrushev, the former head of the Federal Security Service (FSB) between 1999 and 2008, after which he became the secretary of the Security Council. Previously Dmitry ran Rosselkhozbank for eight years, the state-owned agricultural bank, that funds many of Russia’s farms, until he was appointed Minister of Agriculture in 2018. His first job was with VTB bank in 2004 and in 2006 he graduated from the FSB Academy, after which he returned to VTB as senior vice-president.
Minister of Energy of the Russian Federation
Alexander Novak stays on as Energy Minister and is expected to maintain the same policies of recent years. Russia’s deal with OPEC+ will continue.
Novak came up from the local and regional governments before he became a minister and has been leading the energy ministry since 2012.
He has been a key figure in the talks between OPEC and its leader and largest producer, Saudi Arabia, and the Russia-led alliance of non-OPEC producers in cutting deals to reduce oil production in recent years.
Minister of Health of the Russian Federation
Mikhail Albertovich Murashko
Minister of Natural Resources and Ecology of the Russian Federation
Dmitry Nikolayevich Kobylkin
Minister of Industry and Trade of the Russian Federation
Denis Valentinovich Manturov
Minister of Education of the Russian Federation
Minister of the Russian Federation for the Development of the Far East and the Arctic
Alexander Alexandrovich Kozlov
Minister of Sports of the Russian Federation
Oleg Vasilyevich Matytsin
Minister of Construction and Housing and Communal Services of the Russian Federation
Vladimir Vladimirovich Yakushev
Minister of Transport of the Russian Federation
Evgeny Ivanovich Dietrich
Minister of Labour and Social Protection of the Russian Federation
Anton Olegovich Kotyakov
Maxim Oreshkin, the former Minister of Economics, takes over from Andrei Belousov to become the president’s advisor on economics, a powerful role that sets policy. He is well respected member of the liberal camp and was already close to Putin.
In 2019 he got into a row with CBR governor Elvira Nabiullina over the pace of spending and rate cutting. He is an advocate of reducing the role of the state in the economy and supports cutting taxes, which will make him a counterweight to Belousov, who holds the opposite views.
Vladislav Surkov quit as presidential aide in charge of Russia’s policy in Ukraine. He left because of "a change of course in the Ukrainian direction." His official role was curator of the presidential administration’s department for co-operation with the CIS, Abkhazia and South Ossetia since 2013. Russia’s interests in Abkhazia and South Ossetia expanded significantly under Surkov. He was also heavily engaged in the self-proclaimed Donetsk and Lugansk People's Republics. Surkov began working in the presidential administration in 1999, taking the post of deputy head of the presidential administration and championed the policy of “managed sovereignty”. In 2008-2011, he was the first deputy head of the presidential administration. In 2011-2013, Surkov worked in the government, holding the post of Deputy Prime Minister.
Dmitry Kozak, a former Deputy Prime Minister, takes over control of setting Ukrainian policy in the presidential administration from Surkov, according to Aleksey Venediktov, editor-in-chief of Echo of Moscow. Kozak is one of Putin’s main go-to men to implement policy and a problem solver. In the noughties he was in charge of revitalising Chechnya following two wars. He famously wrote a report saying all of the $1bn the Kremlin sent to Chechnya to rebuild the economy had been stolen by the local administration that was leaked to the press.
Among his first foreign policy projects, Kozak led efforts to create a federation government in Moldova granting Transnistria the ability to block Euro-Atlantic integration, which collapsed in 2003, the eurointegration.com.ua news site reported on January 27. Kozak is likely to want to avoid making the same mistakes, namely proposals that were too extreme, that caused Russia to lose its anchor on Moldova.
Heads of state organs
Vitaly Mutko, a former Deputy Prime Minister, was appointed the CEO of the supervisory board of Russian national housing development institution DOM.RF on January 29.
Igor Shuvalov, a former First Deputy Prime Minister, retains his job running state development bank VEB.RF that he took over in 2018. VEB is responsible for spending the national projects money for infrastructure.