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. Last Updated: 07/27/2016

Government Says No Action Is the Best Policy

If you're a frustrated Western businessman trying to make sense of Russia's political and legislative madhouse, a government minister has the answer: Don't bother -- the government policy is to do nothing. "The government is promoting a no-action policy," Deputy Finance Minister Sergei Alexashenko said in an interview Tuesday. "This is the best policy for the government now, and the economy is moving in the right direction of its own accord." Alexashenko offers an unusual insight into the mess of Russia's day-to-day economic management which has left many bankers and businessmen puzzled. Examples abound. First Deputy Prime Minister Oleg Soskovets tells journalists one morning the government has no plans to delay new import duties on foodstuffs. The same day the taxes are delayed. Finance Minister Sergei Dubinin says a 23 percent investment tax will not be imposed. Economics Minister Alexander Shokhin tells a business luncheon the next day that the tax is in effect. "How can you possibly take these ministers seriously?" asks an American businessman. "You just have to ignore what they say." At a recent securities conference, panicky fund managers cornered privatization boss Alexander Chubais on a rumored clampdown on brokerage houses. One produced a copy of a draft decree. "Don't worry," the young, clean-shaven minister said. "I see dozens of such decrees every day. They mean nothing, really." One might be tempted to think that the Russian government is rudderless and ministers rarely get together to discuss policy. But Alexashenko says it is all very simple: "Soskovets says something, and Shokhin says something else. Central Bank Chairman Viktor Gerashchenko, meanwhile, is playing his own game -- but nothing happens at the end of the day." "It's a game with a zero sum but it's not a bad policy. It's better than having chaotic decisions implemented all the time. The seasoned business people out there know this and don't really care about all these conflicting, competing statements." So who is in charge of the Russian government? "Prime Minister Viktor Chernomyrdin," Aleksashenko says. "When he was first appointed, many people thought he wasn't the best choice. But now, everyone in the government listens to him." Bankers say there is no coordination between ministers, who report to Chernomyrdin but hardly consult each other. They lack policy-making experience after 70 years of central-command economy and rule independently, issuing contradictory regulations and misinterpreting decisions of other bodies. As a result, chaos rules Russia's markets. Laws, decrees, and taxes are unclear at best and in conflict with each other. But in the meantime, a real "laissez-faire" approach is emerging and the markets are moving ahead of the government. Even Boris Fyodorov, the monetarist finance minister who quit in January over disputes with Chernomyrdin, could not find much to criticize: "The government hasn't done anything wrong, but then it hasn't done anything either," he said. A no-action policy may be safer than an aggressive one with risks. "If the government does anything, it risks enormous confrontation on all fronts," said a Western economist. "The government is walking a tightrope but the cost of not doing much is less than radical reform." "The economy is gradually developing, there's a lot of ground-level activity. Today's no-action policy is not a bad policy at all."