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Putin’s new prime minister steps from tax office into limelight

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Via Financial Times

Russia’s parliament voted to confirm Mikhail Mishustin as prime minister on Thursday as part of a move that could help President Vladimir Putin extend his 20-year rule indefinitely.

Mr Mishustin — who 24 hours earlier was a well-regarded but little-known technocrat — will now have the task of satisfying the “demand for change” that Mr Putin acknowledged in his annual state of the nation address on Wednesday.

With Mr Putin’s ratings hovering near record lows, those plans include overseeing a Rbs25.7tn ($417bn) stimulus programme of “national projects” aimed at kick-starting Russia’s moribund economy, and a social spending package amounting to between Rbs400bn and Rbs500bn.

Speaking to lawmakers Mr Mishustin, 53, said he would prioritise raising living standards.

“People should be feeling real changes for the better right now, but it is far from happening everywhere,” he said, adding that Russia would need a “new quality of management”.

Other priorities would include turning the government into a “digital programme”, boosting exports, improving road infrastructure, repairing a damaged business climate and attracting foreign investment, said Mr Mishustin.

Lawmakers easily confirmed Mr Mishustin’s appointment, with 383 votes in favour, none against and 41 abstentions.

Mr Putin shocked Russia’s elite when he announced sweeping constitutional changes during his address on Wednesday, then accepted his cabinet’s resignation hours later. Analysts say the moves are aimed at ensuring Mr Putin retains power well after his fourth and final term as president expires in 2024. 

Prime Minister Dmitry Medvedev, a close ally who filled in for Mr Putin as president from 2008 to 2012, stepped aside in favour of Mr Mishustin, who has won plaudits for running Russia’s tax office since 2010.

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The appointment of a technocrat barely known outside policy circles surprised senior Russian officials and bankers — as well as Mr Mishustin himself, according to a person close to the Kremlin. “He had no idea it was happening. He sat there at Putin’s address with everyone else, and only found out after Medvedev resigned,” the person said. 

Mr Mishustin is “one of the best-qualified and most promising candidates,” Sberbank chief executive Herman Gref, a longtime Putin ally and leader of the Kremlin’s reformist wing, told reporters.

“He’s a manager with a capital M,” Mr Gref said. “He knows how to put a team together and build relationships, and he does it in actually the right way to get a result. He has done it many times in new places for him.”

Born in Moscow, Mr Mishustin studied system engineering at one of Russia’s top technical institutes, graduating in 1992 just after the Soviet Union collapsed. 

He joined the civil service in 1998 and a year later was appointed deputy tax minister, where he helped raise Russia’s catastrophically low collection rates through a digitisation programme. 

“Everything was on paper. It was impossible to sort through it,” a person close to Mr Mishustin said. “He set up an IT system that meant money could actually be collected for the state budget. That was all him.” 

Mr Mishustin then headed up Russia’s property management agency and special economic zones before leaving government in 2008 to become president of UFG Asset Management, a leading Russian fund. 

Two years later he returned to government as head of the tax office and set about a technology-driven overhaul of the agency. “We built the technology and are now becoming economists,” he told the Financial Times in an interview last year. 

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The revamp — which enables Russia’s tax officials to see every purchase receipt across the country within 90 seconds of a transaction — has won Mr Mishustin, a fluent English speaker, plaudits from tax professionals worldwide.

Mr Mishustin was an active member of the OECD’s information-sharing network and collaborated with western officials on thorny reforms such as adopting to US FATCA regulations on foreign tax compliance. 

Mr Mishustin’s real value to Mr Putin may be the way his job gave him deep insight into the Russian system, people close to him say.

“The tax office is a unique job because you see the macroeconomy, you see every little small business, every single person if you want. It’s totally transparent. All federal, regional and local issues are obvious,” one said. 

Even as a civil servant, Mr Mishustin understood the rules of Russian politics. Last year, he told a friend that even when talking about tax he had got to be careful about the man at the top, while pointing at a picture of Putin. 

“He has done a very successful job turning the tax office into a modern, much less corrupt, technological agency, but it took him quite a long time,” the person close to the Kremlin said. “Being prime minister is a different story. You cannot spend a lot of time working on issues in one agency. You have to spin 10 different plates at once. Making him a success will take a lot of effort.” 

But Mr Mishustin is also a skilled navigator of the corridors of power and has strong relationships with liberal figures as well as members of Mr Putin’s inner circle, people close to him say. A keen ice hockey player, he sits on the board of CSKA, Moscow’s top club in the sport, alongside some of Mr Putin’s closest confidants. 

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“People tend to underestimate how politically sharp he is,” said a senior executive at a state company. “The beauty of hockey is that it enables people to make quality decisions at a very fast pace. I played hockey with him and am quite sure he will be able to project this quality in his new capacity.”

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