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Russia’s Kudrin Won’t Serve Under Medvedev Amid Spending Dispute

Sept. 25 (Bloomberg) -- Russian Finance Minister Alexei Kudrin, who steered the world’s biggest energy exporter to amass a $200 billion rainy-day fund over political opposition, won’t serve in a government with President Dmitry Medvedev as prime minister because of disagreements over military spending.

Medvedev, 46, who succeeded Prime Minister Vladimir Putin as president in 2008 because the constitution forbids serving more than two consecutive terms, said yesterday he will back his predecessor’s second bid for the presidency and may take over the leadership of the government.

Kudrin, 50, who presided over budget surpluses between 2000 and 2008 and has helped cut state debt to less than 10 percent of gross domestic product after the country’s 1998 default, said late yesterday in Washington that Medvedev’s push for a 2.1 trillion ruble ($65 billion) increase in defense spending through 2014 creates “additional risks for both the budget and the economy as a whole.”

Russia’s second-longest serving minister said that he hasn’t been approached about working under a Medvedev-led Cabinet and would “definitely” refuse should he be asked.

“I don’t see myself in the new government,” Kudrin told reporters in the U.S. capital, where he was attending the International Monetary Fund annual meeting. “It’s not just that no one has offered me it, but I think that the disagreements that I have won’t allow me to join that government. I just think that today that’s an option that has to be ruled out.”

Effective Team

Putin, 58, said yesterday that Medvedev would, with popular support, “form a new, effective, young team, and head the government of the Russian Federation to continue work on modernizing all aspects of our life.”

The announcement that Putin and Medvedev may swap jobs was made at a congress for their United Russia party in Moscow yesterday. Kudrin said that he was disappointed the additional military spending wasn’t discussed at the conference, adding that the increase is equal to the amount allocated for all education spending this year.

The increased expenditure makes it more likely Russia will remain dependent on high oil prices to balance its budget and fuel its economy, Kudrin said, adding that Putin will probably be more active in “conducting reforms.”

“I have a series of disagreements with Medvedev on economic policy, above all on significant military expenditures,” he said.

To contact the reporter on this story: Scott Rose in Washington at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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