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Moscow warned hard line endangers economy

31 January 2008
Financial Times

Two leading liberal Russian officials yesterday warned that Moscow's increasingly aggressive foreign policy could damage inward investment, in a rare public show of dissent from Vladimir Putin's advisers.

Anatoly Chubais, architect of Russia's 1990s privatisation programme and head of its electricity monopoly, told a Moscow investment conference that Russia's confrontational approach carried risks in a worsening global economic situation.

"Maybe we should ask ourselves a simple question: How much does our external policy cost Russia? We might be able to pay the price in a good world economic situation, but can we continue to pay the price now?" Mr Chubais said.

"We can continue to persecute the British Council and demand the closure of its branch in St Petersburg," he said, referring to the dispute over the British cultural body. "But we cannot make peace with this."

Alexei Kudrin, finance minister and a deputy prime minister, warned in the same forum, organised by Troika Dialog: "Our dependence on global economic ties, on our exports, is felt so strongly that in the nearest future we need to adjust our foreign policy goals to guarantee stable investment."

The comments appeared to reflect deepening divisions within the government as competing factions jostle for position in advance of presidential elections in March.

Russia's foreign policy has become increasingly hawkish towards the west as Mr Putin, the president, has revived cold war practices, such as long-haul sorties by bombers, and clashed with the UK in disputes, including the row over the 2006 murder in London of Alexander Litvinenko.

Dmitry Medvedev, considered favourite for the presidency and Mr Putin's preferred successor, is seen by analysts as more western-friendly than other potential candidates. But it is unclear whether his emergence will bring serious policy changes.

Mr Kudrin told the forum that Russia's trade surplus of $135bn (€91bn, ?68bn) could disappear within two or three years as imports rise. Mr Chubais said it could disappear quicker if the global economy deteriorated. Speaking later to reporters, however, Mr Kudrin toned down his remarks, saying there were "no serious mistakes in our [foreign] policy". "Russia is just defending its interests," he said.

Europe's leading election watchdog has warned it will cancel its monitoring mission of Russia's presidential elections on March 2 - just weeks after it boycotted the country's parliamentary poll - unless observers can start work next week. The election arm of the Organisation for Security and Co-operation in Europeyesterday said that it wanted permission to send a core team of 20 observers to Russia next week. The Russian authorities have said observers cannot arrive before February 28 - three days before the poll. Russian election officials insisted the country was complying with international standards and effective monitoring would be "quite possible within the mandate" given to foreign observers.