Ex-PM warns of economic chaos, revolution in Russia

BRUSSELS Thu Apr 16, 2009 5:47pm BST

BRUSSELS (Reuters) - Russia could face economic chaos and even revolution unless the government acts swiftly to reform and relax political restrictions, former Prime Minister Mikhail Kasyanov said on Thursday.

Kasyanov, who now leads an opposition party, told a seminar in Brussels that by the end of this year inflation could reach 15 percent, toxic loans could rise to 30 percent of all loans and unemployment could reach 10 million.

The government may also have to seek help from the International Monetary Fund "in the near future," he said.

Kasyanov, leader ,of the People's Democratic Union, predicted Russia's reserves would be swiftly swallowed up financing an increasing budget deficit and the government would soon face problems financing military and police pensions.

"It will happen in reality in a period of one year, but if the financial crisis races, it will be in a shorter period," he told Liberal Democrat politicians in the European Parliament in a speech delivered in English.

"This scenario would lead to social crisis," he said. "We are against any revolutions, but this situation, this policy would lead Russia to such a development as revolution."

Kasyanov said Finance Minister Alexei Kudrin had already started talking about the possibility of raising money on the international capital markets by the end of this year.

"I believe it will be very difficult to raise money internationally on the capital markets...and an approach to the International Monetary Fund would be a case, although not today, but in the near future," he said.

Kasyanov called on the government to implement reforms and relax political restrictions so people felt they were "part of the country." He said he was not optimistic it would do so.

"There are some signs that the authorities have chosen a second way, coming to disaster," he said. "This could be very soon...as little as a year ahead of us, because of the simple reason that all resources will disappear."

Russia's $1.7 trillion economy, which is highly dependent on oil, is facing its worst crisis after a decade of rapid growth and is heading into recession. More than 1 million people have lost jobs since the start of December and unemployment is at a five-year high.

The government has forecast the economy will shrink by 2.2 percent this year but says growth might start as late as in 2011, the year when higher social tax levies kicks in.

But Kudrin, the finance minister, said on Wednesday Russia should not expect a return of the favorable conditions it has enjoyed in the recent years for "five, 10, 20 or 50 years."

Management of the economic crisis has put the relationship between President Dmitry Medvedev and his mentor, Prime Minister Vladimir Putin, under scrutiny by Kremlin watchers and investors after speculation they could be drifting apart.

(Editing by Katie Nguyen)