In 2014, Russia’s bloc of economic strategists was panicked by Vladimir Putin’s decision to annex Crimea and foment a war in east Ukraine, a move that led to western condemnation and sanctions against Russia that were seen as potentially ruinous.

But his adviser Andrei Belousov was a rare economist who publicly stood by his side, calling the damage manageable and western sanctions “insignificant” in terms of the Russian economy.

A decade later, Belousov, a Putin loyalist known to back government spending to stimulate the economy, has taken up the Kremlin’s biggest challenge: overseeing the defence ministry as military spending soars above 7% of Russia’s GDP and the Kremlin prepares itself for a long war in Ukraine.

“I think that the Kremlin sees the war as a war of attrition and a war of attrition is won by economics,” said Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center, who is an expert on the Russian economy and former adviser to the Russian central bank. “So a combination of industry and a pure economist who has a very strict and clear view of the leading role of the state within the economy can be the key to transform Russia’s heavily militarised economy into a real war economy.”

The appointment of highly trusted technocrats to manage the ballooning military and industrial budgets was “a sign that the war is the top priority for the Kremlin and that Putin truly believes that a war footing is sustainable for the Russian economy and we’ll … deal with structural problems later”.

Sergei Shoigu, the longtime defence minister and Putin’s occasional hunting and fishing buddy, has been shifted over to be secretary of Russia’s national security council. While the Kremlin has sought to avoid the image of a purge at the defence ministry, the shake-up comes shortly after a top Shoigu deputy was arrested on corruption charges, and Shoigu’s own reputation as defence minister has been tarnished by the Russian army’s poor performance in Ukraine. Ruslan Tsalikov, another Shoigu deputy, tendered his resignation on Monday.

One former defence official said Putin was holding Shoigu “hostage” by appointing him to the security council and “not letting him retire”. Meanwhile, the person said: “Putin’s thinking is: let the minister of defence be an economist, someone who understands how the budget works, can streamline financial flows.”

Speaking about Belousov’s appointment, the Kremlin spokesperson Dmitry Peskov noted that defence spending was rocketing, and suggested it could become dangerous to the state. “We are gradually approaching, for well-known reasons, the situation in the mid-1980s, when the share of expenditures on [defence] was 7.4%,” he said. “This is not critical. But this is extremely important and it requires special attention.”

Vladimir Putin and the former defence minister Sergei Shoigu (left), who has been removed from the job. Photograph: Mikhael Klimentyev/Sputnik/Kremlin Pool/EPA

Contemporaries describe Belousov as a highly religious technocrat who keeps Orthodox icons and religious books at his modest offices, where he had served as a deputy prime minister since 2020 (he briefly became acting prime minister during Covid-19). He is said to be trusted by Putin, whom he has worked for in government since 2008, and served as a Kremlin aide from 2013 to 2020.

A person who had worked for Belousov described him as efficient at planning years ahead, and an early proponent of the use of unmanned aerial vehicles (UAVs) who was “very receptive to innovation”.

“His main [advantage] is that he thinks years ahead,” said the person. “He is both someone with a vision but also a loyal servant. The Kremlin believes this war will be a long one, whether in a cold or hot form, and it is only logical to have someone who makes long-term plans.”

In government, he is seen as a highly competent official, a “number cruncher” who stood out among officials for his attentive and hands-on approach to his work as well as for “keeping a low profile”.

“I would explain partially that he’s not very liked by some colleagues or others in the government that he’s just a little different,” said another person who has worked with Belousov. “Ideological, committed, loyal, soldier to the state and to [Putin], but with a very peculiar servant of the state mentality. And again, deeply religious.”

Belousov’s nomination to the defence ministry was surprising to many in the government, as well as outside analysts. The military blogger Fighterbomber, who reflects the more hawkish interests among the Russian rank-and-file, quipped when hearing of Belousov’s nomination: “I have just one question. Who is that?”

Yet his nomination made some sense. He is familiar with the military-industrial complex, according to Prokopenko. And Putin has a tradition of choosing civilians to head the defence ministry, as evidenced by past ministers such as Anatoly Serdyukov and Shoigu himself, who came from the ministry of emergency services and never served in the military.

“Putin obviously was unhappy with how the war goes and the victory he has been trying to achieve is not yet in side so he should have been trying to make some changes,” said Konstantin Sonin, an economist and professor at the University of Chicago. “Putin has been extremely consistent in the way he picks up his new appointments: these people should be totally non-charismastic, never have their own political base. The reason he picked Belousov was basically the loyalty and the absence of personal charisma and ambitions. It’s the most important characteristic.”

Belousov was best known among economists for his belief in state-driven growth and industrial policy, said Sonin, who first met him during roundtables 20 years ago, and called him the “only sane and competent person” with such “extreme” views.

He also stood out for his lack of corrupt interests, said Sonin, compared with other Russian officials who had often turned their ministries into small fiefdoms that they control.

“He is like Putin’s soldier. He doesn’t have a base of his own,” said Sonin.



Source link