Russia plans reform after elections: Kudrin

He was addressing the concerns of investors who are staying out of Russia until they know who will be running the world's largest country and biggest oil producer, and want assurances that the next government will embark on reforms.

Some investors fear Vladimir Putin's return as president in March after four years as prime minister would mean stagnation for the $1.5 trillion economy, and see more chance of reforms if Dmitry Medvedev secures six more years in the Kremlin.

"There will, of course, be reforms," Kudrin told the Reuters Russia Investment Summit.

"I believe the next prime minister will without doubt have a certain amount of credit for carrying out reforms how much, more or less, will depend on many things including the elections results."

Touching on many investors' concerns about the state of Russia's economy, he underlined the importance of privatisation and reforms to protect property rights establish divisions of power at the top and continue developing the financial sector.

"We need to restart reform of the pension system, carry out reform of housing and communal services, create infrastructure," he said.

Kudrin, 50, also said taxes would have to be increased to make public finances strong enough to absorb the shock of a possible oil price collapse.

He made clear he thought reforms were irreversible and inevitable in Russia now, 20 years after the collapse of the Soviet Union.

Putin, 58, and Medvedev, 45, have not said which of them will run in the presidential election in March but Putin is likely to have the final say.

He is more influential than Medvedev despite ushering his protege into the Kremlin in 2008 because the constitution barred him from a third successive term. Few analysts expect a third candidate to emerge.

The uncertainty about which of them will be president for the next six years has helped fuel differences among investors and analysts over how they see prospects for reform in the nuclear power whose population is 142 million.

David Reid, Vice President of Blackrock asset manager's Emerging Europe fund, said he thought investors had grounds to be optimistic about Russia and made clear he expected a reform push after the elections.

"I think in the new environment there was strong political incentive to progress on various matters privatisation, WTO (World Trade Organisation) accession, oil tax reforms, changes in the monetary policy and currency regime," Reid said.

"We could hopefully look to the post election period and anticipate an improvement."

But some guests at the summit in the Reuters Moscow office said a big reform drive was unlikely whatever the outcome of the presidential election and the parliamentary vote on Dec. 4, which Putin's United Russia party is expected to dominate.

"I think all of this stuff is going to be incremental," one participant said on condition of anonymity.

Some investors and analysts see a clear difference between the policies of Medvedev and Putin.

"There is a decent likelihood that Medvedev would be more of a reformer than Putin would be, which I think is what this country needs," said Jacob Grapengiesser, a partner at East Capital asset management group in Russia.

Others say the differences are exaggerated, meaning policy will simply not change much after the elections.

"I don't think it does matter who is president because I think that the system of governance is very stable and there is a tremendous amount of consensus within the governing elite of the country," Jeff Costello, chief executive of JP Morgan in Russia, told Reuters Insider television.

"So whoever is president, I think the policies that have been clearly defining the last 15 years are going to continue no matter who sits in the Reuters

Liam Halligan, chief economist at Russia-focused fund manager Prosperity Capital, said the differences in the images projected by Medvedev and Putin were greater than their policy differences and they worked effectively as a team.

"Of course on balance Medvedev, on the touchy, feely side looks, a bit better," he said. "In the economics, broadly there is not that much between them."

Even so, Arkady Dvorkovich, Medvedev's top economics adviser, made clear there were still some differences even if the two broadly see eye-to-eye.

Responding to Kudrin's call to raise taxes after the election, Dvorkovich wrote on his Twitter feed: "No way."

Copyright Reuters, 2011