September 26th, 2011

As Putin announces his return to power, Medvedev dismisses finance minister for criticizing his economic policies

Former Finance Minister Alexei Kudrin

While Putin’s decision to return to the presidency was no shock to Kremlin observers, the dismissal of Finance Minister Alexei Kudrin has rattled market analysts across the continent.

On the heels of Putin and Medvedev’s announcement this weekend to swap posts for 2012, Kudrin, who had been mentioned as a possible prime minister candidate, threatened to quit his post. Monday he was fired for “insubordination,” and word of Kudrin’s departure rippled throughout the Russian economy, as the ruble fell to its lowest level against the dollar in more than two years.

Tim Ash, the London-based head of emerging market strategy at Royal Bank of Scotland Group, told Bloomberg News that Kudrin’s departure is “a body blow for Russia” and that he “cannot remember a time when we had such power struggles coming out to the fore under the Putin administration.”

“The market is clearly not happy with the idea that Kudrin is leaving the government,” said Kingsmill Bond, chief strategist at Citigroup in Moscow. “Putin’s return to president was fully priced in whereas Kudrin’s potential departure is a key area of concern.”

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