VZCZCXRO0561
PP RUEHDBU RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHMO #0880/01 0961404
ZNR UUUUU ZZH
P 061404Z APR 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 2763
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 MOSCOW 000880 
 
SIPDIS 
 
STATE FOR EUR/RUS, EEB/IFD 
TREASURY FOR TORGERSON AND WRIGHT 
DOC FOR 4231/MAC/EUR/JBROUGHER 
NSC FOR ELLISON 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PINR RS
SUBJECT: PUTIN'S LECTURES DUMA ON GOR'S ANTI-CRISIS MEASURES 
 
REF: A. MOSCOW 859 
     ¶B. MOSCOW 621 
 
¶1.  (SBU) Summary:  In an address widely believed to have 
been postponed so as not to conflict with last week's G-20 
London Summit and the meeting of Presidents Obama and 
Medvedev, Prime Minister Putin presented his first annual 
report to the Duma.  Putin devoted much of his hour-long 
speech, which included a numbing amount of statistics and 
which was accompanied several times by tepid applause, to 
itemizing all the social programs (including pension support) 
that the government would finance, despite the strains on the 
budget.  He justified steps taken to date by the GOR to keep 
banks and the corporate sector afloat, but cautioned that the 
budget was intended to stimulate "business activity" and 
encourage innovation, not simply keep inefficient enterprises 
going.  He again denied any blame for Russian current 
economic woes and predicted that 2009 would be a difficult 
year.  While most of his speech contained no surprises, Putin 
gave unequivocal notice to banks and corporations that they 
would have to sink or swim on their own as social spending 
would the state budget's priority.  A "question time" in 
which each of the four political parties represented in the 
Duma were allowed to ask Putin three questions, was not 
broadcast nationally, perhaps to show his continued 
invulnerability.  End Summary. 
 
-------------- 
Little Fanfare 
-------------- 
 
¶2.  (SBU) On April 6, Putin gave his first annual report to 
the Duma in his capacity as Prime Minister.  The speech, 
originally slated for April 2, was delayed, many believe, so 
as not to steal the limelight from the G-20 conference and 
the meeting between Presidents Obama and Medvedev.  By most 
accounts, the Putin speech was a lackluster performance, full 
of mind-numbing economic statistics from 2008 and punctuated 
by sporadic lukewarm applause from the Duma deputies. 
 
¶3.  (SBU)  Putin outlined his "development budget", promising 
to lower inflation from 13 percent to 8 percent in the next 
three years and reduce the budget from 8 to 3 percent of GDP 
by 2011.  He took great pains to assure his audience that all 
social obligations to Russian citizens would be met.  He 
vowed, for example that pensions would be increased (indexed 
to inflation) while acknowledging the difficulties of raising 
social taxes on business during a time of crisis.   Likewise, 
he promised that the crisis would not interfere with people's 
long-term plans to get an education or purchase a home. 
 
------------------------------------ 
Defending GOR's Anti-Crisis Measures 
------------------------------------ 
 
¶4.  (SBU) Putin insisted that all the decisions the GOR had 
taken to date to address the economic downturn were correct. 
He scolded Duma deputies for calling the corporate and 
banking recipients of GOR support "fat cats" and implored 
them to be more understanding.  He emphasized that the 
gradual, "managed" devaluation of the ruble had led to the 
currency's stability and benefited ordinary citizens and 
manufacturers.  Putin further explained how the flat income 
tax was better for the GOR's revenues (it kept taxpayers out 
of the shadow economy) and why rail tariffs, among others, 
could not be frozen (the reduced income would discourage 
investment). 
 
---------------- 
No More Handouts 
---------------- 
 
¶5.  (SBU) Putin emphasized that enterprises should not expect 
any more handouts.  The 2009 budget was a "budget of 
development".  As such, it was intended to stimulate new 
business activity and innovation, but not perpetuate 
inefficient enterprises.  He warned that if businesses could 
not restructure themselves and succeed commercially, then 
they should be allowed to fail.  At the same time, while he 
reassured the Duma that that the government would protect the 
employees of failed enterprises and provide job re-training, 
this is the first time that the GOR has articulated the 
notion that not every factory would be helped. 
 
 
MOSCOW 00000880  002 OF 002 
 
 
------------------------- 
Ending on a Positive Note 
------------------------- 
 
¶6.  (SBU) Although Putin reiterated the GOR mantra that 
Russia was "victimized" by rapid capital outflows late last 
year and the precipitous drop in foreign demand for Russia's 
commodities, he refrained from placing the blame for Russia' 
economic ills on the United States.  He noted the progress 
Russia had made in promoting the Southstream and Nordstream 
pipelines, but commented wryly that "not everyone wants to 
see the Russian Federation increase its exports".  Putin 
concluded that while the crisis was far from over, Russia 
continued to export its commodities, and the nation's 
reserves were gradually being replenished, thereby ensuring 
that the country would remain one of the largest economies in 
the world. 
 
---------------------------------------- 
"Question Time" Not Broadcast Nationally 
---------------------------------------- 
 
¶7.  (SBU) Perhaps to protect Putin's omniscient image of 
invulnerability, state-controlled television did not 
broadcast the "question and answer" period pursuant to which 
the four parties represented in the Duma asked questions they 
had already submitted to the Office of the Prime Minister. 
Most of the questions concerned cuts in social programs.  The 
KPRF's Aleksey Ponomarev asked Putin about U.S. culpability 
for the current economic crisis, but Putin replied that the 
situation was difficult throughout the world and then set 
about repeating his proposals for restructuring the economy 
and financial system.  After Putin's presentation, KPRF 
faction leader Gennadiy Zyuganov state that three current 
government ministers -- Defense Minister Anatoliy Serdyukov, 
Finance Minister Aleksey Kudrin, and Education Minister 
Andrey Fursenko -- are not fit for their jobs. 
 
------- 
Comment 
------- 
 
¶8.  (SBU) The upbeat conclusion of Putin's speech reflects 
the sense that the economy has stabilized in recent weeks: 
oil prices have edged up and the ruble is stable.  Some of 
Putin's advisors maintain that the economy has reached bottom 
and a recovery is expected by the end of the year.  On the 
other hand, there are warnings, emanating from Finance 
Minister Kudrin among others, that this may be a temporary 
phenomenon with a second banking crisis looming on the 
horizon.  A prudent husbandry of GOR's limited reserves 
appears to be the order of the day, with the GOR unable to 
maintain social spending and simultaneously bail out Russian 
companies facing major payment problems this year, including 
potential defaults. In his speech, Putin sent out the word 
unequivocally that the GOR no longer intends to bail out 
private companies.  End Comment. 
BEYRLE