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Russians Show Mixed Reactions to Cabinet Shake-Up - 2004-03-10

Investors in Moscow's stock market reacted positively to the announcement of Russia's new cabinet Tuesday, but the reaction from political observers was mixed.

The stock market got a lift from the announcement that economic reformers Alexei Kudrin and German Gref would remain in their posts as heads of the Finance and Economic Development and Trade Ministries.

Chief economist Roland Nash of Renaissance Capital brokerage in Moscow says President Putin's new cabinet picks were just the kind of sign investors were looking for to inspire their confidence in the Russian market.

"The market both yesterday and today has reacted positively," he said. "The market is very sympathetic towards Russia at the moment and was looking for a positive government to be unveiled. And I don't think they were disappointed. So, it was met with a renewed burst of optimism for Russian assets."

Mr. Nash says President Putin, in confirming Prime Minister Mikhail Fradkov's choices, placed the emphasis on efficiency. He says, in Mr. Putin's terms, that means the government will implement the Kremlin's policies - namely, economic reform and further centralization of political power. Stability, Mr. Nash adds, is always a factor investors will rally around.

But not everyone is happy with the new streamlined government, which will now have 17 ministers instead of 30, and just one deputy prime minister, not six as former Prime Minister Mikhail Kasyanov had.

The director of the independent Center for Current Politics in Russia, Constantin Simonov, says the cabinet overhaul was aimed at strengthening President Putin's control over it.

Mr. Simonov said with fewer ministers, it will be easier for Mr. Putin to control their actions. He says to strengthen his grip on power, the president appointed his campaign manager and long-time friend, Dmitry Kozak, to be the new cabinet's chief of staff.

He says with his ally at the top of the cabinet bureaucracy, Mr. Putin will be able to keep a close watch over Prime Minister Fradkov.

The new cabinet is scheduled to meet for the first time on Thursday.