COMMENT: Waiting for succession in Moscow, with some trepidation

By bne IntelliNews July 10, 2007

Ariel Cohen in Washington -

A recent trip to Moscow provided an insight into how the Russian elite views the impending presidential succession. The key word is impatience; the other is trepidation.

Speaking on condition of anonymity, one prominent Russian media mogul says that when the two presidential frontrunners, Dmitry Medvedev and Sergey Ivanov, come home and shut the door, "they and their families are irritated with uncertainty. So are their relatives, friends, friends of the relatives and friends of their friends." They've had enough of the guessing game. And so have many of Russia's wealthiest businessmen, the so-called oligarchs.

Moscow, as any other world capital, lives on connections, formerly known in Russian as blat. Business deals are facilitated based on favours owed and favours done.

Ivanov - the next man?

Since 2003, Russia has reached an equilibrium of sorts. Even though the state continues to slowly tighten its control over a number of sectors – oil, gas, shipbuilding, shipping, aircraft construction – this is still a world in which the business community knows who can do what, and whom to call when. All this may change if/when a new team takes over in March of 2008.

The stakes are high. First, who will control of the gigantic state energy companies – Gazprom, Rosneft, RAO UES – to name just a few? Second, the able economic team currently in charge of the budget and finances – Ministers Alexei Kudrin and German Gref, and Chairman of the Central Bank Sergey Ignatiev – may change, with unpredictable consequences for those who are dependent on special budgetary, tariff and tax arrangements. Finally, regulatory regimes may change, with profound effects for the bottom line.

"If Putin stays, this will be the best – nothing would change," says the media oligarch over a sushi dinner in a popular Moscow hangout. "Paradoxically, what would be next best for me is for (Prime Minister Mikhail) Fradkov to become president... I have all the connections and this would require the least of effort to restructure."

The paradox he refers to is political: Fradkov is seen as a conservative, but the oligarch considers himself a liberal and has higher expectations from the succession of First Deputy Prime Minister Medvedev.

He is echoed by another oligarch high up in the non-ferrous metals business. "My connections in the Kremlin, in the White House [Cabinet of Ministers], in the [security service] FSB and in the tax department took years to build. It cost me a lot of effort. Now the landscape will change with new, untried people coming over (to the Kremlin). This will require more hard work to keep the business afloat and profitable."

A prominent banker, who has political aspirations, complains that the Kremlin severely limits party politics. "They want me to fund a specific party, but they do not allow me to feature prominently on national television," he opines. "All they want is my money, not my ideas." Still, he plays the game, as he knows a refusal to fund the party would be viewed by the powers that be as an act of disloyalty, with serious consequences for his business.

Reliable successor

No one I talked to among the top echelons of the elite thought that Vladimir Putin will stay in the Kremlin. But he needs a successor who he can rely upon - and who can deliver.

"The key issue is trust and ability. Putin needs absolute trust that his successor will stand by arrangements and promises they agree on in advance. However, he also needs a strong enough successor who can hold powerful bickering factions in line, but who is not strong enough to dismiss Putin and deny him influence – or worse," says the media tycoon.

Most of the oligarchs interviewed believe Putin will continue to play a prominent national role after 2008. "He is too young, too healthy, and too interested to just fade away," a metals magnate says.

Among Putin's post-2008 options they mention are:

-- President of the Sochi 2014 Olympic Committee, which will handle a $15bn budget;

-- Leadership of the United Russia Party, which is currently the largest in the Duma and which may receive a constitutional (2/3) majority in the Duma in the December elections;

-- Command of the Security Council (whose authority is ill-defined in the Constitution and can be easily expanded);

-- Chairmanship of the Constitutional Court, which may become an important arbiter of inter-agency disputes). Appointment to the chairmanship of the Constitutional Court is for life, and the location is in Putin's beloved St Petersburg;

-- Revival of the State Council, which can meet monthly to discuss important policy issues and can be made more powerful, as its authority currently is also not clearly defined.

My favourite is chairmanship of the unified Gazprom-Rosneft-Rosatom board. If created, this would be the largest energy company on earth, with an estimated market capitalization of $1 trillion. Putin exhibits a rare aptitude for energy strategy, facts and figures. However, earlier attempts to merge Gazprom and Rosneft have defied even his considerable power.

In one respect, the media oligarch says, it really doesn't matter in the end who the successor is, because all the candidates are pragmatic nationalists, who will deal with the West economically while keeping political controls at home.

Ariel Cohen, Ph.D., is Senior Research Fellow at the Heritage Foundation

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