* Fed, ECB bond buying will wear off in a year
* West has "exhausted" scope for deficit spending
* Russia economy would shrink by 3-4 pct with oil at $80
* Kudrin backs Russia's revised fiscal rule
* Putin's spending promises pose major challenges
MOSCOW, Sept 21 (Reuters) - Russia is on the brink of
stagnation and only has limited time to brace for an impending
global slump, former Finance Minister Alexei Kudrin told
Reuters.
Kudrin, a widely respected fiscal hawk who quit 12 months
ago, said "unprecedented" policy action taken by the U.S.
Federal Reserve and other major central banks might delay a debt
crisis by "maybe a year".
"As soon as these measures fade, the crisis could resume,"
Kudrin said in an interview on Friday before the Reuters Russia
Investment Summit, to be held in Moscow from Sept. 24-27.
Kudrin, post-Soviet Russia's longest-serving finance
minister, resigned after Vladimir Putin announced he would seek
a third Kremlin term and swap roles with Dmitry Medvedev, who is
now prime minister.
He remains influential, supporting opposition protests
demanding free and fair elections. But Putin has said the two
remain friends and Kudrin, 51, could return to government.
Kudrin made it clear that he would not serve under Medvedev:
the two have not spoken since their clash over public spending
forced his resignation. He criticised the government for failing
to pass reforms that would encourage investment in modernising
and diversifying the economy.
Debt-strapped western nations have "exhausted" their
potential to boost growth through deficit spending, said Kudrin,
taking a dim view of the latest round of quantitative easing
from the Fed and of the European Central Bank's plan for bond
purchases to help struggling sovereign debtors.
"We are on the brink of stagnation - economic growth in
Russia of less than 3 percent is stagnation," said Kudrin, who
spoke with a soft voice and a ready smile that belied the force
of his warnings.
"Today, reforms are not being carried out on a sufficient
scale ... This causes extreme caution on the part of investors.
"Russia is not getting the investments it needs, and without
these measures it won't get them in the coming years."
OIL CHANNEL
Kudrin is credited with restoring Russia's public finances
to health after the default and devaluation of 1998, running
fiscal surpluses and saving oil revenues in rainy-day funds.
But he grew increasingly disenchanted with the country's
policy course after the 2008 financial crash. Russia's economy
shrank by 8 percent the following year after oil prices tumbled
to $40 per barrel.
In Kudrin's view, the biggest economic risk to Russia - the
world's largest oil producer and ninth-largest economy - remains
a possible oil-price collapse.
Looking out of the window on a sunny day, he remarked that
with oil at $110 per barrel, people in Russia saw no need to
worry about the economy. That complacency was mistaken, he said:
"In an $80 oil price scenario, the economy would shrink by
3-4 percent," he said.
Russia's economy grew at a rate of over 4 percent in the
first half of the year but is slowing as export demand and
investment abate. Kudrin said it would be a mistake to use
Russia's strong fiscal position to bolster demand now.
"It's not the job of the state to stimulate the economy
through spending," he said. "The state should support growth
when the economy is shrinking at a rate of more than 2 percent,
not when it is growing by 4 percent."
FISCAL RULE
Kudrin did support the government's adherence to a rule
designed over time to reduce the oil price at which the federal
budget - which relies on oil and gas levies for half of its
revenues - would balance.
In its latest proposed version, the rule would require that
oil and gas revenues above a certain cut-off price be saved,
while the government would be free to spend non-oil revenues as
it considered appropriate.
The government's medium-term fiscal strategy, under which
federal outlays will remain flat in inflation-adjusted terms and
the budget would balance in 2015, was sound policy, said Kudrin.
"The fiscal rule and modest spending growth - those are the
right measures," he said. "We don't need to take any
extraordinary measures right now. Now we need to improve the
investment climate and make it as easy as possible to invest.
"What is getting in the way? A lack of political competition
and political will. The powers don't deny that they want to kick
start modernisation and investment. But they aren't listening to
the feedback from business."
Looking further out, Putin's commitment to ramp up spending
on Russia's armed forces and social spending have created
uncovered commitments that will fall due later in this decade.
The "real hit" will come later, Kudrin said.
(Reporting by Douglas Busvine; Editing by Jason Bush/Ruth
Pitchford)