Dmitry Medvedev confirmed as prime minister € cabinet test ahead

By bne IntelliNews May 10, 2012

Alfa Bank -

The Russian parliament has confirmed Dmitry Medvedev as the new prime minister, but the composition of the cabinet is not expected to be announced until May 14. We expect this announcement to be crucial to offset the negative implications of the recent protest activity, which is a risk for Russia's investment case.

Two recent political events - President Vladimir Putin's inauguration and Dmitry Medvedev's appointment as prime minister - suggest that the political landscape has most certainly changed. Putin's inauguration was preceded by a protest involving some 70,000 people (according to unofficial estimates) on May 6, which provoked a tough reaction from the police and resulted in some uncontrolled protest activities on May 7-9.

We did not expect the street protests to receive such support, and we also believe that the police reaction is likely to fuel a continued tightening of the environment. In addition, Medvedev was approved as prime minister with only 299 votes out of a possible 450, the smallest total by a prime minister since 1999. Both events damage Russia's investment case, which may only be offset by some positive surprises coming from the composition of the new Cabinet. We thus see this announcement, expected on Monday, May 14, to be a litmus test for the market.

If Medvedev reinforces the economic bloc by appointing available professionals, we expect this may largely counterbalance the negative sentiment related to the increase in protest activity. If on the other hand, the cabinet's composition remains largely unchanged, the increased protest activity is more likely to dominate market sentiment in the future.

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