Andrey Rudakov/Bloomberg

Kremlin Mandarins Feel Heat as Putin Said to Back Job Cuts

Updated on

As he gears up for campaign season, Vladimir Putin has a chance to signal to voters that even his own entourage is feeling the pain of recession.

Russia’s president has agreed to Kremlin job cuts as part of spending curbs in his bureaucracy of as much as 10 percent, people with knowledge of the plan said.

While Putin’s popularity remains near 90 percent, the public uproar over the lifestyle of top bureaucrats was a reminder of an an underlying irritation with cosseted officials. Putin’s spokesman Dmitry Peskov came under criticism for an expensive watch he flashed at his wedding last month. The first deputy chief of the presidential staff, Vyacheslav Volodin, also faced criticism for his property holdings.

“In a situation where everyone is discussing a bureaucrat’s half-million-dollar watch, this is an important signal at the beginning of an election campaign,” said Nikolay Petrov, a researcher at the Russian Academy of Sciences in Moscow. “It will have a symbolic effect on the public, who will be shown that the authorities are also suffering.”

Peskov said the watch was a gift from his bride, 2006 Olympic ice-dancing champion Tatiana Navka. He declined to comment on the Kremlin’s budget. The Finance Ministry didn’t respond to calls and e-mails seeking comment. Volodin told the RBC newspaper that it took 10 years to build his mansion and estate.

Deepening Recession

Putin more than doubled his own official salary to 7.6 million rubles ($118,000) last year, as the nation celebrated the annexation of Crimea.

The presidential administration’s 1,715 staffers make an average of almost 3 million rubles a year, about seven times the national average, according to the Federal Statistics Service in Moscow. Peskov, Putin’s spokesman, declared 9.1 million rubles of income last year, even more than his boss.

Russia’s Economy: Heading for a Deeper Recession?

With international sanctions over the conflict in Ukraine biting and crude oil down by more than half in the past year, Putin is preparing for a protracted slump. Last month, he ordered the Interior Ministry, which operates its own paramilitary force and oversees the police, to slash personnel by 10 percent to no more than 1 million. In an earlier round of cuts, Putin ordered most spending slashed by 10 percent, including his own pay.

More emblematic, though, is the belt-tightening inside the Kremlin, which offers some of the most prestigious, lucrative and secure jobs in all of Russian public service.

‘Bonuses, Privileges’

“People know that officials live much better than most Russians,” said Igor Bunin, the director of the Moscow-based Center for Political Technologies. “They have a whole system of bonuses and privileges, including apartments.”

Exactly how many Kremlin jobs will be eliminated hasn’t been decided yet, two people familiar with the matter said. Some of the savings may come from reduced wages and benefits.

Since Putin came to power 15 years ago, the number of federal bureaucrats has jumped to 1.4 million from 521,000 and the number of regional officials to 2.2 million from 1.2 million, government data show.

With a little more than a year before elections, the Finance Ministry says this workforce is bloated and wants to cut spending on it by 10 percent both this year and next, according to two other officials.

Given how government in Russia works, it’s difficult to say if the country has too many officials or not, according to Andrei Klimenko, director of the Institute for Public Administration at the Higher School of Economics in Moscow.

“In Russia, the state prevails, intervenes in everything,” Klimenko said in an interview. “That’s why we have such a huge number of bureaucrats.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE