Medvedev returns favour and nominates Putin as Russia PM

By bne IntelliNews December 11, 2007

Ben Aris in Berlin -

Presidential candidate Dmitry Medvedev has asked President Vladimir Putin to head up the Russian government as prime minister after the presidential elections in March, newswires are reporting. This comes as no surprise, as bne has been anticipating this option for several weeks now as the most attractive on offer for Putin to remain as a key player after he leaves office next year.

The key to making this option work was for the pro-Kremlin party United Russia to win a constitutional majority in the Duma elections on December 2. Chris Weafer, strategist at UralSib, summed up the first part of the operation as "job done" after United Russia won 315 seats out of the 450. It's now a highly disciplined party that will be an effective political tool in the hands of the new prime minister and the head of the party (a job Putin has so far not mentioned taking).

The second phase of "operation succession" that saw Medvedev named on December 10 as United Russia's - and Putin's - chosen candidate for the presidential elections went smoothly. Indeed, there is a definite sense of the events over the last two weeks being carefully stage-managed.

The consensus emerging on Medvedev's "appointment" as president is that "his main strength is his weakness." Like former economics minister German Gref, Medvedev draws most of his political clout from his personal association with Putin. He has not joined the Kremlin clique with ties to the security services, the Siloviki, nor does he have any government body of his own to control other than his nominal chairmanship of Gazprom, which is under the control of Alexei Miller - another Putin loyalist. Both Miller and Medvedev worked with Putin when they were all on the Foreign Economic Relations Committee together in the Anatoly Sobchak mayor's office in St Petersburg in the 1990s.

On the other hand, the other top contender for the job, First Deputy Prime Minister Sergei Ivanov, has a strong independent powerbase in the form of his close ties to the military and would be in a good position to mount a challenge to Putin from the president's office if he chose to do so.

Even so, both Medvedev and Ivanov (who was also on the Foreign Economic Relations Committee) are Putin allies and neither should be expected to challenge Putin. And that is the point. This whole deal depends on the elite - these three men - trusting each other and buying into the "Putin Programme" of continued economic growth and reform, albeit led very firmly by the state.

A vote for business

Investors have largely welcomed the nomination of Medvedev who is seen as the best possible option for business from the leading contenders. He represents continuity for the current reform programme. They will also likely applaud the choice of Putin as PM, though the RTS index made most of the political news gains from the Medvedev announcement and has so far not reacted to the PM news.

One new element Medvedev will probably introduce as president - and he was already suggesting this on December 11 - is that the Kremlin will finally start the administrative and social reforms it has put off for so long. The one attempt the Kremlin made at social reform - nixing pensioners free bus passes in the winter of 2005 - went disastrously wrong with the outbreak of extremely embarrassing demonstrations by old ladies. The Kremlin has since backed off from trying anything of the sort again until the elections are passed.

This is part of the reason why Putin has been pushing so hard for not only a victory in the Duma elections, but also a moral popular mandate that comes with huge wins. The Kremlin will probably now attempt to push through some painful reforms that will hit citizens in the pocket, as so far most of the renationalisations and financial sector reforms have had little or no direct impact on the people.

This double act of Medvedev-Putin is a very elegant solution to some of the big structural problems that Russia inherited from the adoption of Yeltsin's 1993 constitution. Below is the reproduction of an op-ed bne ran two weeks ago ahead of the Duma vote outlining the issue:

The really elegant solution to the problem of transferring power remains if Putin becomes PM at the head of a super majority in the Duma of United Russian deputies. In this case, Putin would still effectively run the country. He could change the constitution and shift Russia to a parliamentary democracy, but this is not entirely necessary if he has an ally as president as with a super majority in the Duma, the parliament is in a position to veto the president's decrees and override a presidential veto. So real power lies with the PM. The president can still sack the PM, but the Yeltsin-era showed this is not easy and can provoke a political crisis. And under all this is Putin's huge personal popularity, which is the real source of his political power and puts him head and shoulders above any other politician who would struggle to beat him in a direct confrontation.

But what makes this solution so elegant is that while currently the interests of the Kremlin and the people are perfectly aligned - everyone wants growing economic prosperity and a return of Russian national pride after the fall of the Soviet Union - these interests will diverge in the future once the fast growth slows and is unable to paper over the cracks caused by bad government. At this point the population will become more political and their interests will be increasingly represented in opposition parties' success at the polls.

This evolution of political consciousness is clear to everyone and is a function of the rise of the middle class that the Kremlin is working so hard to achieve. However, when the population does become political the Kremlin will be faced with a choice: hang on to power by tightening control further and so clash with the people, or gradually transfer more say to the voters. The problem with the current presidential republic is it is hard to smoothly transfer power to voters and there is no guarantee that whoever holds the job at the time will want to. By shifting more power to the Duma you have built in a mechanism for the political system to find a natural equilibrium more easily.

This would also remove the "Stalin problem," which is less widely discussed, but boils down to the fact that the Russian president is too powerful and with no checks on his power there is a very real possibility of another Stalin winning the job.

Bottom line is as PM, Putin would retain almost complete control for at least another 5 years (remember the talk of extending the term of the Duma's term earlier this year) but by putting the power back in the hands of the Duma, where is should be, he ensures that Russia can't run off the tracks again.

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