EXPECTATIONS were high last week as Alexei Kudrin, a former finance minister and the informal leader of a moderate liberal camp in the Russian establishment, outlined his proposed economic programme in a packed Moscow auditorium. Russia’s top economic officials occupied the front row. Foreign ambassadors sat behind. Journalists stood in the aisles. The setting was the Gaidar Forum, a symposium named after the architect of Russia’s market reforms in the 1990s. The date, Friday the 13th, was perhaps unfortunate. Nine months ago, as Russia’s recession deepened, Vladimir Putin drafted Mr Kudrin to come up with a new economic strategy. The former minister, who oversaw strong economic growth in the early 2000s, resigned in 2011 in protest against a massive increase in military spending. Since then he has acquired cult-like status among Russian liberals. A personal friend of Mr Putin, he is a counterweight to the hardliners of Russia’s security services, and has stayed inside the system rather than becoming a dissident. Although he holds no formal position, he is seen as the most senior liberal courtier in the Byzantine world of the Kremlin.

Mr Kudrin’s verdict was grim. Russia, he said, is at a low pace of economic growth even compared with the period of stagnation in the 1970s and 1980s that led to the Soviet collapse. The reasons go well beyond low oil prices and Western sanctions: “The main problems lie within Russia and they are structural and institutional.” Russia lags far behind in technology and innovation, and faces a severe demographic slump. The key problem is not a lack of intellect or business talent, but state inefficiency and dysfunctional institutions. “In our country the state dominates everything, so you have to start with reforming the state,” Mr Kudrin said.

Mr Kudrin made it clear that the technical tinkering favoured by the Kremlin cannot pull Russia out of its economic trough. Reforms must involve fundamental changes to the system, particularly to the judiciary. Courts must provide justice even when that requires ruling against the state or security services. To convince his boss, Mr Kudrin framed his strategy in terms of national security and global prestige—one of the few subjects Mr Putin seems to care about. “Unless we become a technologically advanced country we face a problem of diminishing defence potential and a threat to sovereignty,” he said.

Mr Kudrin presented Mr Putin with a choice. If the government does nothing, and provided oil prices do not fall, he estimates Russia’s growth rate between now and 2035 will hover in the vicinity of 2% (see chart). If it implements Mr Kudrin’s reforms, growth rates will top 4%—enough gradually to close the income gap with Western economies. Yet from the Kremlin’s point of view Mr Kudrin’s reforms are risky: they threaten to destabilise Russia’s centralised, cronyistic political system.

The government is already trying to cut public spending from 37% of GDP down to 32%, creating a fight for shrinking resources that was evident at the forum. A day before his speech, Mr Kudrin moderated a panel composed of Russia’s most successful and powerful regional governors. The president of the Muslim republic of Tatarstan complained of excessive centralisation and a lack of trust from Moscow. “To rule any territory, you need money and cadres,” he said. Last year Moscow cut 8bn roubles ($134m) from his budget, about 5% of his annual spending.

Instead of granting economic freedom and rewarding regional initiative, Moscow, fearful of separatism, keeps the regions dependent on hand-outs from the centre. “God forbid if your budget revenues are growing: you will immediately lose subsidies and be forced to finance other federal projects,” said Anatoly Artamonov, the governor of the car-making region of Kaluga. “Transferring most executive powers to the regions is long overdue,” said Sergei Morozov, the governor of the Ulianovsk region.

For Mr Putin, however, the risks of comprehensive reforms, such as decentralisation, could be greater than the benefits—especially when he faces no immediate pressure, at home or abroad. A source close to the Kremlin says the president is confident that he has earned the unwavering support of his people and no longer needs to reinforce his standing through stellar economic performance. Despite two years of recession, Russians have adjusted to falling incomes without much protest. Meanwhile, Donald Trump’s election in America and the growing wave of nationalism in Europe have convinced many in the Kremlin that things are going their way.