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Kudrin May Head Central Bank in Putin’s Return, Kostin Says

Former Russian Finance Minister Alexei Kudrin, ousted by President Dmitry Medvedev for insubordination, may regain policy influence as chairman of the central bank in a Vladimir Putin administration, VTB Group chief Andrei Kostin said.

“It’s quite a possibility, I believe,” Kostin, chief executive officer of the state-run lender, said in an interview in New York late yesterday. The appointment would “not at all” be a demotion, Kostin said. “The central bank governor is an independent person from anybody.”

Putin, a longtime Kudrin ally, said Sept. 24 that he would run for president in March elections and probably name Medvedev prime minister if he wins. Medvedev publicly clashed with Kudrin after the government’s second-longest serving minister criticized the president’s spending policies.

Kudrin, described by Kostin in April as a “financial guru,” oversaw the nation’s recovery from its 1998 default by reining in public spending and steering windfall energy revenue into rainy-day funds that cushioned the impact of the global credit squeeze that started in 2008. Europe’s sovereign-debt crisis and faltering global growth are roiling Russian markets.

‘Global Risks’

The ouster of Kudrin, who was also a deputy prime minister, is “negative” for the country’s bonds and the ruble, “especially given the global risks still present,” Goldman Sachs Group Inc. (GS) economist Clemens Grafe said by e-mail.

The cost of protecting Russian government bonds against default using five-year credit-default swaps surged, gaining 23 basis points to 332 basis points at the close yesterday, the highest level since July 2009, according to CMA prices in London.

The ruble slumped 1.2 percent to 32.42 per dollar yesterday, the biggest decline of the BRIC currencies, bringing its drop in the year to 5.7 percent. Ruble bonds were the only local-currency debt among the BRICs to deliver a loss yesterday, sliding 0.7 percent. The Russian currency gained 0.6 percent against the dollar today to 32.24, paring six days of losses.

Current central bank Chairman Sergey Ignatiev, 63, a former deputy to Kudrin at the Finance Ministry, received a maximum third four-year term from Medvedev in 2009. In Russia, the president appoints the central bank chairman, who must be approved by parliament.

Kostin said he doesn’t see “any possibility” that Putin won’t win a third presidential term in March elections and appoint Medvedev premier.

Pavel Kuznetsov, Kudrin’s spokesman, couldn’t be reached immediately for comment when Bloomberg called his mobile phone. Kudrin will remain as part of Putin’s team, Dmitry Peskov, Putin’s spokesman, told reporters Sept. 25.

“If Kudrin stays in government, the post of central bank chairman would be the most suitable for him,” said Mikhail Vinogradov, head of the St. Petersburg Politics Foundation research group and member of an advisory board at Putin’s United Russia party.

To contact the reporters on this story: Emma O’Brien in New York at; Henry Meyer in Moscow at

To contact the editors responsible for this story: Brad Cook at; Balazs Penz at

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