On March 9, just five days before his landslide election, Russian President Vladimir Putin announced a major restructuring of his government. In a televised address to the nation, President Putin unveiled the new government structure and leaders, saying that the changes will end government conflict of interest and root out corruption.

The most substantial restructuring is the reduction of ministries from 23 to 14. The other former ministries have been made into federal services and put under the new ministries. For example, three former ministries -- Transportation, Railways and Communications -- have been combined into one Ministry of Transportation and Communications. Viktor Khristenko lost his old position as Deputy Prime Minister, but was appointed Energy and Industry Minister, with oversight of not only oil and gas but also construction, arms production and nuclear power industries.

But the restructuring has not in reality shrunk the size of the federal government. The number of federal institutions has actually grown from 56 in the old government structure to 76 in the new.

"The new government is generating discussion and speculation among the political elite, but it really has little impact on the average Russian citizen,” says PBN's lead lobbyist Alexander Shelemekh. "One can only hope that, in the long run, the current reshuffle of personalities will be followed not merely by declarations of priorities, but rather by clear and meaningful practical steps to change the life of the average Russian for the better.”

The latest transformation of the Russian government began with the firing of Prime Minister Mikhail Kasyanov in late February and the appointment of his replacement, Mikhail Fradkov, on March 1. Fradkov is a little known, but widely respected, government technocrat. He was a former head of the country's tax police and most recently Russia's Ambassador to the European Union in Brussels. His is also a former trade minister and is likely to make Russia's admittance to the World Trade Organization one of his personal priorities. (Russia is the only major economy not a member of the WTO.) Unlike others in Putin's inner circle, he is not a St. Petersburger -- he comes from Samara.

Prime Minister Fradkov will have direct oversight of a new financial super-agency. The Federal Financial Markets Service will report directly to Fradkov and will supervise the auditing industry, private pension funds and stock exchanges. It will also inherit the financial market functions of the defunct Anti-Monopoly Ministry.

There is also only one Deputy Prime Minister in the new government as opposed to the six under the old. Alexander Zhukov, as sole Deputy PM, is responsible for implementing many of the new government reforms. At the first meeting of the new Cabinet last Friday, the new Deputy PM briefed ministers for 45 minutes on how the reorganization would be implemented. Harvard-educated, soft-spoken and fluent in English, Zhukov is a proponent of Western-backed economic reforms.

The reorganization is also thought to be the brainchild of Dmitry Kozak, the new chief of staff of the cabinet. Kozak held this position in 1999, when Putin recruited him from St. Petersburg where he was a practicing lawyer.

To the relief of most foreign investors and capital markets participants, Putin's economic team remains largely unchanged. Alexei Kudrin kept his post as Finance Minister and also gains control over the Tax Ministry. German Gref stays as Minister for Economic Development and Trade. Both Kudrin and Gref are largely credited for Russia's economic recovery from the 1998 ruble devaluation.

However, a new player will lead the government's foreign policy. Sergei Lavrov, Russia's former UN ambassador, is now Foreign Minister replacing Igor Ivanov (who is now the head of Russia's Security Council). Lavrov has a good reputation in the West. Defense Minister Sergei Ivanov, the President's close friend who many think could be Putin's successor in 2008, kept his job.

But many former ministers only changed titles, not responsibilities. For example, former Press Minister Mikhail Lesin and former Culture Minister Mikhail Shvydkoi will take deputy posts in the new Culture and Press Ministry. Former Communications Minister Leonid Reiman and former Transportation Minister Sergei Frank will become deputies to Transportation and Communications Minister Igor Levitin.

The size of the government -- which has grown dramatically and steadily under President Putin -- is also likely to remain unchanged under the new structure. Prime Minister Fradkov, at a news conference on March 10, said: "Staff could end up being cut, but this is not the goal" of the reorganization. The aim is to make government more transparent and efficient without increasing the number of staff, he said.

The new government will consist of three tiers – 14 ministries, 33 federal services and 26 federal agencies. The ministries will shape policies and pass regulations to supplement laws. Federal services will supervise the observance of laws and regulations. Federal agencies will render state services and manage federal property, including state-owned enterprises.

See the Moscow Times Government Organization Chart

Email Sasha: alexander.shelemekh@pbnco.com