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. Last Updated: 07/27/2016

Kasyanov Given Chance to Prove His Mettle

Just one year ago Mikhail Kasyanov was an obscure, behind-the-scenes mover in the Russian government. His only prominent job was the unthankful task of leading talks with the London Club of private creditors, to whom Russia owed $30 billion in Soviet-era debt.

Even after he became finance minister in May, when Kremlin infighting saw his predecessor Mikhail Zadornov leave the government, his public profile remained low key, as First Deputy Prime Minister Viktor Khristenko made all the economic running.

All that got turned upside down Monday when acting President Vladimir Putin tapped him as his right-hand man in government, now the No. 2 post in the nation.

Kasyanov's promotion was greeted by many investors who think it will lead to more liberal economic policies. However, some analysts warn that it is far too early to say what the sudden rise of the career technocrat, who entered the Soviet government as a state planner, would mean.

"The markets have reacted to his appointment positively, but he might not always do what the markets want," said Arnab Das, an emerging market debt strategist with JP Morgan in London.

"Kasyanov has always come across as somebody with a very clear strategic vision, as a can-do technocrat," Das said.

Das pointed out that the new job represents a challenge to someone not before picked as a potential high flier.

"He's always seemed to be a strong character and a powerful talker. But this will now be a test for Kasyanov to see if he can run the government at a time when Putin will be engaged fully in a military and election campaign," he said.

When he was appointed as prime minister on Aug. 9 last year Putin was similarly plucked from technocratic obscurity and rapidly became a tearaway success as prime minister.

While Kasyanov remains a mystery in many regards, one of his old colleagues, former First Deputy Finance Minister Oleg Vyugin had words of praise for Kasyanov.

"He very successfully led financial policy to bring good results for the end of [last] year," Vyugin said.

According to official Finance Ministry data, Russia ended 1999 with a primary budget surplus of 2 percent even though it has been waging an expensive military campaign in the Chechen republic and has received just $640 million in loans from the International Monetary Fund. Kasyanov was promoted to Finance Minister in May last year.

"Even though beforehand he was only known as a strong specialist in debt negotiations, he has proved his worth by sticking to the tight fiscal program for this year," Vyugin said.

When Kasyanov was leading debt talks with the London Club of Commercial Creditors he was very insistent that Russia was not going to change the status of the debt and alter sovereign immunity, said Das at JP Morgan.

"Russia paid for that move then by not getting any debt reduction. But in the meantime Russia was able to selectively default, opening the way only now for the possibility of a change of status," he said.

Das said the fact that Kasyanov took a tough position on London Club negotiations to often maximize the amount Russia could squeeze out of creditors showed he would follow an independent line.

Born in Moscow in 1957, Kasyanov's first job in 1978 was as a senior technician and researcher at the Soviet Institute of Industrial Transport. He first entered the government in 1981 as a leading economist in the foreign economics department's state planning section.

Kasyanov was also a top official in the Finance Ministry when Russia was creating its restructuring plan for state treasury bills, or GKOs, in the wake of the 1998 financial crisis. Many Western investors slammed the debt swap scheme as confiscatory.

But nevertheless his promotion Monday sparked a market rally.

"His appointment seems to be a sign that Putin wants his own stamp on the government. That he wants a government of technically proficient experts rather than one filled with politically motivated appointees," Das said.

However, some politicians have accused the Finance Ministry under his command as being overtly secretive.

Yabloko member Viktor Gitin said that when Duma deputies earlier this year asked Finance Minister Kasyanov for basic information about Russia's debts - for example, how much was owed to whom and when payments were due - Kasyanov refused, arguing that the ministry couldn't afford to make photocopies or send faxes of relevant documents.

Kasyanov has also been accused several times of skimming off profits on debt deals and misusing the information he held as chief Soviet era debt negotiator from 1993 onward for his own gain.

Russian weekly Versia once dubbed him "Misha 2 Percent," alleging that he had been involved in manipulating Soviet-era debt prices for commercial ends.

According to Gitin the debt market was turned into a treasure trove for a few closely guarded but well-connected companies that raked in profits from trading in Soviet era debt. One scheme saw the purchase of old Indian debt at bargain prices and then swapped for goods to import into Russia duty free.