High inflation is crippling Russia's arsenal for combating its first recession in a decade, posing the biggest obstacle to modernizing the economy once the crisis is over, a senior government adviser said Friday.

"I believe the ultimate goal of the government is not only the anti-crisis policy measures but the post-crisis modernization of the economy," said Vladimir Mau, who heads the expert council that advises the government's anti-crisis task force.

"The two fundamental problems here are inflation and monopolization," Mau said in an interview, adding that unemployment was seen as a close third.

Consumer prices in Russia have risen 5.8 percent so far this year, and the government expects inflation for 2009 to hit 13 percent, little changed from 13.3 percent last year.

Mau said the experts were mystified why inflation was still high despite a stable exchange rate in recent weeks and a fall in commodity prices. He said the only explanation could be that inflationary expectations are deeply embedded in society.

"Inflation limits the tools of our anti-crisis policy. Many measures used in the United States and Europe are not available for us. We cannot carry out quantitative easing, we cannot use budget stimulus and we need to maintain high interest rates," he said.

Mau fears that renewed growth in commodity prices could stall the modernization drive and bring the government back into a complacency mode that characterized the last years of Vladimir Putin's presidency.

"During an economic boom, it is impossible to carry out a modernization policy," he said. "If prices for oil and gas are high, there will be no diversification."

Restructuring of the banking sector, making the ruble a regional reserve currency, social policy, the pension system and budget reforms are the top themes discussed by the council.

The experts favor the recapitalization of banks through the issuance of government securities as a means to fend off a bad loan crisis rather than creation of a "bad bank," because asset valuation poses a moral hazard problem.

"We believe that we should not create a special agency and buy out enterprises' debt but give the banks a possibility to increase their capital and create incentives for them to sort out their bad debt problems," he said.

Mau said it was not yet clear whether firms' debt payment delays were caused by temporary liquidity problems or a lack of demand for their goods, making it hard for banks to tell which companies would make reliable borrowers in the future.

"A resumption of loans to domestic enterprises is a long and delicate process. I would not apply any pressure on banks," he said.

He added that the situation with corporate foreign debt had improved a lot since the government decided to stop a state debt-refinancing lifeline, forcing firms and their creditors to the negotiating table.

With depressed global stock markets, creditors are unlikely to want to seize collateral because its resale value is low, and thus mass defaults can probably be avoided, he said.

The crisis poses the biggest intellectual challenge for economists since the post-communist transition in Russia, but Mau said there were few ideological differences among mainstream experts.

"I also find it difficult to name any obvious failures in the Russian leadership's handling of the crisis after a rather chaotic reaction in the first weeks ... aimed at supporting the domestic stock market," he said.