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Kasyanov Gets Soviet in Pension Fund Spat

By Victoria Lavrentieva

Moscow New, Tuesday, Apr. 8, 2003.



Mikhail Dmitriyev

Criticism of the government's pension reform program is driving Mikhail Kasyanov Soviet.

The prime minister, in an act political observers say hasn't been committed since the country went capitalist, sent an "official warning" to First Deputy Economic Development and Trade Minister Mikhail Dmitriyev on Friday for "multiple public disagreements with the government's position on pension reform."

Observers say the warning, which accused the outspoken Dmitriyev of "not fully matching his professional requirements," reflects the high-stakes battle brewing between vested interest groups -- both inside and outside the government -- over changes to the pension system, which handles more than $20 billion per year.

"Such archaic methods of administrative punishment were often used in the Soviet times, but even then it was not at the governmental level," said Dmitry Orlov, deputy head of the Center for Political Technologies.

Orlov said he was surprised that the prime minister would resort to such public chastisement unless Kasyanov felt it would be politically impoverishing to himself to fire Dmitriyev.

"Otherwise Kasyanov already would have," he said.

Dmitriyev has clashed openly with Pension Fund chief Mikhail Zurabov, who enjoys Kasyanov's support, by aggressively lobbying the government to introduce more controls over the fund and create competition in the market for nonstate pension funds.

Dmitriyev was also one of the main critics of Kasyanov's decision to appoint Vneshekonombank, or VEB, the government's foreign debt agent, as the official pension agent too. Critics like Dmitriyev say VEB has a conflict of interest as it invests pension money in government bonds.

In the latest issue of the weekly newspaper Moskovskiye Novosti, Dmitriyev criticized Kasyanov for essentially putting the cart before the horse. Kasyanov, he wrote, with only two weeks' notice and without the approval of the ministries involved in pension reform, signed a decree appointing VEB as the official Pension Fund agent. In contrast, the Cabinet must approve at least 10 legislative acts before the July 1 target date for tenders to be organized among private pension fund managers and "none of them has been approved yet," Dmitriyev wrote.

Similar criticisms were voiced in a recent report by the World Bank, which said that VEB's appointment as agent should only be temporary because it prohibits competition. In their current state, Russia's financial and administrative systems cannot guarantee necessary safeguards to pensioners, the World Bank concluded.

One economist involved in the government's pension project said the public warning to Dmitriyev shows how vulnerable Kasyanov is to public disputes concerning social issues, especially with elections just months away.

"Kasyanov considers all social questions to be a sacred cow and will not allow anyone to influence the opinion of the most important part of electorate," said the economist, who asked not to be named.

The warning was also a pre-emptive strike to dissuade Dmitriyev from going public with his criticisms of administrative reform, considered a necessity by the Kremlin and political and economic experts alike.

"The problems we faced during pension reform show the urgent need to reform the administrative system, which in fact threatens to block any new initiatives," Dmitriyev wrote.


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