UPDATE 2-Putin beefs up Kremlin control over economic policy

Mon Jun 24, 2013 5:29am EDT

* Belousov replaces Nabiullina as Putin's economic adviser

* Ulyukayev moves to Economy Ministry

* Staff rotation boosts clout of state interventionists

By Douglas Busvine and Maya Dyakina

MOSCOW, June 24 (Reuters) - Russian President Vladimir Putin appointed Andrei Belousov on Monday as his economic adviser, beefing up his Kremlin staff with an advocate of greater state action to revive the weak economy.

Belousov takes the place of Elvira Nabiullina, who has taken charge at the central bank, in a staff rotation that enhances the influence of interventionists and further sidelines liberals who advocate a more market-oriented approach.

"The reshuffle could be interpreted as strengthening the axes of economic power around President Putin," said Ivan Tchakarov, chief Russia economist at investment bank Renaissance Capital.

In Russia, economic policy is typically the preserve of the government, and not the Kremlin. Yet, a year into his third term as president, Putin has taken increasing strategic control, relegating Prime Minister Dmitry Medvedev to a technical role.

As economy minister, Belousov has come under fire from the liberal policy establishment for calling for the state to determine bank lending rates, which he argues would unblock the flow of affordable credit to the economy.

Belousov was replaced by Alexei Ulyukayev, who is moving from the central bank after missing out on the top job there. Nabiullina formally assumed her role on Monday after a year as the Kremlin's 'chief economist'.

At a meeting with Putin, Ulyukayev said the government's primary task would be to avert an economic recession and ensure the government can fulfil its spending promises to Russians.

The job moves, flagged in advance, set the scene for a shift towards a more activist approach to managing Russia's economy as policymakers seek to engineer a recovery at a time of still-high inflation.

"This is all being done to embark on a dynamic stimulus of economic growth," said Julia Tsepliaeva, a Russia economist at BNP Paribas in Moscow.

Belousov, 54, advised Putin during the latter's four-year term as prime minister - when Medvedev was president - helping put together an anti-crisis programme to nurse Russia through the global financial and economic slump.


Nabiullina, regarded as more dovish than her inflation-fighting predecessor Sergei Ignatyev, has nonetheless ruled out a dash for growth and warned that monetary stimulus could end in a toxic combination of stagnation and inflation.

"The long-term impact would in all probability be negative - we could end up with stagflation," Nabiullina, 49, told Reuters in an interview.

She did say that the central bank might cut interest rates in the third quarter of this year if inflation is clearly falling, but argued that for Russia to achieve higher rates of growth, deep structural reforms would be needed. These included cutting bureaucratic red tape and fighting state corruption.

As economy minister, Ulyukayev will be running Russia's 'ministry for growth', which is known for taking a more expansionist view than he has advocated at the central bank.

The staff moves underscore the marginalisation of the liberal economic establishment still informally led by former finance minister Alexei Kudrin, who quit in September 2011 in a row over public spending.

Kudrin tweeted his support for Ulyukayev: "He is a good specialist with rich practical experience and deep theoretical background." He did not comment on Belousov's appointment.

Speculation persists, meanwhile, that Putin's Group of 20 summit coordinator, Ksenia Yudayeva, will land a senior role at the central bank where she could bolster Nabiullina's authority.

Yudayeva, interviewed by Reuters last week, declined to comment on her career plans. She did, however, back Nabiullina's criticism of calls for a weaker rouble.

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