Sunday, June 16, 2024

Belousov will bring economic rigour to Russian defence spending

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In his final public appearance as Russia’s defence minister on Thursday, Sergei Shoigu saluted Vladimir Putin atop Lenin’s mausoleum on Red Square, clad in a major-general’s uniform bedecked with medals.

Andrei Belousov, appointed as his successor on Sunday, is cut from a different cloth. A Soviet-trained economist, Belousov has never served a day in the army and has served Putin, Russia’s president, in various roles as a civilian adviser on economics.

Putin’s surprise tapping of Belousov to run the defence ministry indicates Putin wants a major shift in the handling of his two-year invasion of Ukraine, according to people who know both men, as well as Russian analysts.

A champion of statist industrial policy and a technocrat with no power base of his own, Belousov’s appointment indicates Putin wants closer control over Russia’s record Rbs10.8tn ($118.5bn) defence spending — and a pliant, no-nonsense official to do it, the people who know him said.

“He’s absolutely not corrupted. And that’s going to be very different from what we have now in the ministry of defence. Shoigu and everyone around him were really commercial guys,” a person who has known Putin and Belousov for decades said.

“Belousov [ . . .] won’t pretend to lead the army like a general with all these medals. He’s a workaholic. He’s a technocrat. He’s very honest, and Putin knows him very well,” the person added.

The son of a prominent Soviet economist, Belousov worked in academia before joining the government in 1999. He went on to serve in roles including minister of economic development, economic adviser to Putin, and most recently first deputy prime minister.

Throughout that time, Belousov consistently advocated for a strong role for the state in the economy and for stimulating its growth through state investment, low interest rates and soft fiscal and credit policies.

That often put him at odds with other top technocrats such as central bank governor Elvira Nabiullina and finance minister Anton Siluanov, whose hawkish monetary and fiscal policies helped Russia weather western sanctions.

“Belousov was among those who considered the state to be the primary driver of everything — and, at the same time, he analysed the same data as we did, unlike most other pro-state economists who simply juggled abstractions,” said Konstantin Sonin, an economist and professor at the University of Chicago.

When Belousov joined the civil service, “Putin’s soldier” took over the “macroeconomist” in him, according to Sonin, who is on the Russian government’s wanted list for his criticism of the Kremlin and who has known Belousov for over 20 years.

As his stature grew, Belousov became a prominent advocate for policies such as windfall taxes on Russia’s commodities exporters, particularly its metals industry, and capital controls.

“He’s not dumb. He’s got a mathematical mind, but his mentality is pretty Soviet. He has this silly idea of fairness. If someone makes a lot of money, then you have to take it away. It’s a bit like China for my tastes,” a former senior Kremlin official said.

Many in the patriotic community of “Z-bloggers” and pro-Kremlin, state-media war correspondents, who regularly called out corruption in the army during the first year of the war and blamed a lot of Russia’s frontline failures on poor management, welcomed the news of Belousov’s appointment. Praising his economic expertise, they presented him as a figure who would clean up the defence ministry.

“Belousov will conduct an audit of the entire financial-economic bloc of the defence ministry,” Russian war reporter Yuri Kotenok wrote on social media app Telegram. “He is more than well versed in this. A professional economist of the top level . . . and a statist.”

Konstantin Malofeyev, a devout Orthodox Christian tycoon who backs volunteer units fighting in Ukraine, said Belousov’s statist views meant the Kremlin would have more success producing arms for the war in Ukraine.

“The defence sector is becoming an absolute priority for all state policy. As it should be. And with the right planning, which is what our new defence minister supports, we’ll have both guns and butter,” Malofeyev wrote on Telegram.

Though Shoigu had retained his post after humiliating battlefield failures, his role had come under greater pressure recently thanks to corruption scandals in defence procurement.

Russian security services arrested one of his closest aides, deputy minister Timur Ivanov, on corruption charges last week, a sign that Shoigu’s days in the role were numbered.

Alexandra Prokopenko, a former central bank official, said Belousov’s appointment meant the cabinet and the defence ministry would co-ordinate spending more closely.

“Under Shoigu it looked like Sergei Kuzhegetovich [Shoigu] just went to the cabinet and came out with cash,” Prokopenko said.

“Belousov will be different. But military spending might go up rather than down. Belousov’s a prominent supporter of the role of industry in the economy, so he’s all for pumping the economy with cash via the defence sector.”

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