Mikhail Mishustin was largely unknown both in- and outside Russia until two weeks ago. The head of the Federal Tax Service since 2010, he was unexpectedly promoted to prime minister, replacing Vladimir Putin’s longtime deputy, Dmitri Medvedev.
Yet it was probably because, not in spite of, this political inexperience that Mishustin was chosen.
Amy Mackinnon and Reid Standish argue as much in Foreign Policy. They point out that Mishustin has no political base of his own, which means he poses no threat to Putin at a time when the latter wants to make sweeping constitutional changes.
Putin also wants to ramp up public spending to shore up his popularity and jump-start the economy. (Those usually go hand in hand.) Mishustin is an advocate of a more expansionary fiscal policy, so he fits the bill.
Mishustin has been given a $128 billion war chest to stimulate growth. The money will go to revamping infrastructure and modernizing Russia’s economy through so-called national projects.
Since the imposition of Western sanctions in 2014, after Russia annexed the Crimean Peninsula from Ukraine, the Russian economy has somewhat stabilized. Inflation has dropped from almost 13 percent to 3 percent. The budget is in surplus. However, GDP growth remains sluggish, hovering at just 2 percent.
Though Mishustin may, broadly speaking, have experience in tax and finance, modernizing the eleventh largest economy in the world is a beast of its own. Russia’s bureaucracy is still hugely inefficient. Consistent funding is never a guarantee. Valentina Matvienko, the speaker of the upper house of parliament, said last year that the national projects have received only 15 to 35 percent of their funding.
There is also a risk that higher public spending will stoke inflation, which would be especially hard on Russians if real incomes continue to fall.
Putin will be counting on the new program to succeed and preempt calls for regime change after seeing his approval rating drop from 81 to 64 percent in the last year.
He is eying not just a slowing economy but a shrinking country. Russia’s birth rate is 1.5 children per family. The government’s goal is to raise this to 1.7 by 2024 — the year Putin’s current presidential term expires — through various incentives:
- Low-income families will receive monthly payments of around $88 for each child aged 3 to 7.
- This sum will more than double, to around $176, by 2021.
- Families with three children or more will receive additional funds, which they can use to pay off their mortgage.
The government is also looking to build more nurseries and provide tax relief to small and medium-sized businesses.
This all looks good on paper, but Russian reality is a different matter.
Although the federal government is making significant sums available, governors — already financially strained — will have to implement many of the changes and absorb one-third of the cost of the business tax cut.
Big infrastructure projects in the past have lost a lot of money to corruption. The Russian economy overall remains dependent on oil and gas and therefore vulnerable to global shocks. Will a new prime minister, with $128 billion to spend, change that?