MOSCOW BLOG - Putin for president?

By bne IntelliNews May 18, 2011

bne -

Vladimir Putin is coming back as president in the March 2012 elections - or so everyone is saying after he announced in May that he was forming a new electoral bloc, the All-Russian National Front. But I don't get it. While it's clear this bloc is desperately needed if the Kremlin is to stand any chance of winning even half the vote in the Duma elections in December, I don't see why this necessarily means Putin will end up as president in the March 2012 elections. That is one of the options open to him, but it's not a given nor even likely.

Putin gave two important speeches that set off a cacophony of comment that he has "shown his hand" and will "definitely" come back as president next year. The first was his annual report, as prime minister, to the Duma on April 20. He used this occasion as an excuse to showcase the many (real) achievements that the government has overseen in the last decade and present his vision for a strong, resistant country that is not beholden to any "unjustified liberalism". A stab at President Dmitry Medvedev? More on this below.

The second speech was at the regional conference of the ruling United Russia on May 6 (which Putin heads, despite not being a member) where he presented the idea of floating a new All-Russian National Front election platform, which would be an alliance of a range of trade unions, women's groups, social organisations and other semi-political organisations (that have all shown themselves to be pro-Kremlin in the past.) It was this idea that really convinced the pundirazzi that Putin has presidential ambitions.

The first thing to understand is that, despite all the criticism, Russia is half way towards becoming a democracy: party politics really matter, even if they are not as important as in the West where they are the only thing that matters.

Put it this way: even the Kremlin knows the ruling party can't claim to win 90% of the vote as happened in Kazakhstan and Belarus recently - the people wouldn't stand for it. If the Kremlin organised this sort of result (which it is completely capable of doing), you would quickly have at the least mass demonstrations - doubly so these days, as the dissatisfaction with the government is palpable. Moreover, the Kremlin has made it abundantly clear on several occasions it dare not stoke the popular dissent fire - remember how fast it back-peddled when it tried to make OAPs pay for their bus passes a few years ago?

Instead, in Russia's "managed democracy" citizens don't have a free choice, but they have some choice and the Kremlin needs to convince a large amount of them to vote for the government (it removed the "against all" option off ballot papers at the last general election). And after a decade of economic recovery and rising living standards, a significant number of people are actually willing to vote for the powers that be. All said and done, both Putin and Medvedev are genuinely popular.

The rub is exactly how many people you can fool all of the time, to paraphrase Abraham Lincoln, and that is what is behind Putin's speeches: the number of people willing to be fooled is falling fast.

Follow the money

In business you can judge the success of corporate strategy by looking at the numbers; success is finely judged in terms of dollars, nickels and dimes, and as market forces mean that costs and demand are relatively stable and quantifiable, you can usually make extremely accurate forecasts of how a strategy will do.

Politics is a different matter. As the fundamental unit is not a dollar, but the whim of the voter on election day, the business of forecasting elections is a lot harder. Voters' decisions are one part rational (hiking pensions will win votes and so is predictable), and one part sentiment (climbing about in Siberia with your T-shirt off may win votes, but not necessarily). Politicians have to play on both these forces to get the job of their dreams.

And so do political commentators: a good op-ed will cover the rational aspects, but mix them up with the irrational elements and sprinkle in a good dose of old-fashioned rhetoric, wander off into ideology, paint character portraits and indulge in some mud raking. Politicians understand this and the great ones are masters of manipulating journalists' appetites to create an image they think they can sell to the public. That's why opinion polls and focus groups are so important in modern politics.

With its super majority in the Duma, the Kremlin has full control of the rational part of politics (pensions were hiked by 50% at the start of this year and teachers were the latest group to enjoy voting winnings pay rises). Moreover, with oil at over $100 a barrel, the government has plenty of money to buy lots of popularity. The difficulty is that it has lost the sentimental part of the vote so completely that the government can't even ensure it will win a simple majority in December.

United Russia as a party is bankrupt. Widely known as "the party of crooks and thieves", it no longer has any legitimacy with the masses. Indeed, according to bne sources in Nizhny Novgorod, United Russia came third in regional elections this March - not first as announced - and the election was actually won by the Communists. And this was after the ruling powers used every dirty trick in the book to push their cause. If the regional elections in March were a curtain raiser for December's poll, United Russia wouldn't even get a simple majority. In other words, the Kremlin is facing a political crisis of the first order.

The introduction of the All-Russian National Front is Putin's rescue plan. The timing looks about right too: six months is enough time to build up a campaign based on hype into a crescendo, but not so long that you have to build anything of substance.

Depending on the Duma

How important is it to the government to win not just a majority of seats in the Duma in December, but a constitutional majority - over 60% - that would allow the prime minister to change the constitution at whim? Based on the last Duma elections in 2007, it is of paramount importance.

United Russia easily won a large majority last time round (of course, by making full use of the gamut of administrative resources). However, it fell short of winning a constitutional majority by a few percentage points and statisticians convincingly showed that some 14m votes were stuffed into ballot boxes to take the party over the magic threshold. The Organization for Security and Cooperation in Europe (OSCE) said the elections were not up to international standards. Still, the fix was relatively small and so the elections passed off without incident.

That won't be the case this time round. United Russia is a political zombie and the fix will have to be on a massive scale if it is to win the constitutional majority again on its own (the regional elections in March were clearly a travesty). And if the Kremlin attempts to pretend that United Russia has won a landslide, it will be taking a very big risk.

The Front is an aggressive move to fix this political problem. Everything will depend on the plan's success and there are several possible outcomes at voting time:

1. Kremlin's party proxies win a clear constitutional majority and ZAO Kremlin continues business as usual.

2. Kremlin's party proxies almost win a clear constitutional majority and there is some fixing, but it is small enough that no-one gets too upset.

3. Kremlin's party proxies win a simple majority and there is massive vote rigging to give them a constitutional majority. This may or may not end up in popular protests, but will certainly bring down more international condemnation and also raise political tensions.

4. Kremlin's party proxies win a simple majority and the Kremlin accepts it. In this case, Russia takes a giant step towards real democracy and President Medvedev's vision of a modern Russia.

What will Putin do in each of these cases? In the first scenario, there is no reason why Putin should not stay on as PM. He has control of the levers of real power in Russia and also of the day-to-day running of government. And same is true in the second case for the same reasons.

His choice is more difficult in the third case, as while he still controls all the reins of power, he will head essentially an illegitimate government. If the people rebel against the election, then Putin will be held personally responsible. This would destroy his personal popularity, which is the cornerstone of his hold on power, and hence he will also become vulnerable to attacks by the oligarchs and other Kremlin factions. The temptation to leave the PM's job and take back his old job as president would be high.

The dream scenario would be where the Kremlin accepts a simple majority and Putin stays on as PM, relying on his popular mandate to keep him in his job, rather than the constitution where he has the ability to strip the president of his powers if Medvedev tries to sack him. Then the rest of the world should shout "Hosanna!", as Russia would have taken a giant step towards true democracy.

But the dream scenario is unlikely. The Kremlin has made it clear it will allow more political pluralism (that was the whole point of hiring Medvedev as president rather than Sergei Ivanov in 2008), but only when Russia becomes more prosperous. The Kremlin has also made it abundantly clear that it wants to make this transition slowly.

Both Medvedev and Putin have explicitly said they are afraid of repeating the mistake of perestroika , where Mikhail Gorbachev enacted political reform before economic reform, and when his mild economic reforms failed, the whole loosening process spun out of control. Putin's plan is to do the economic reforms first and when Russia is prosperous, then to start on the political changes.

The other half

And what of Medvedev? The press is leaping on any contradictory comment the president makes as evidence of a "split" between the two men, speculating that Medvedev might mount a "real" challenge to Putin in the 2012 presidential race.

Commenting on Russian politics over most of the last two decades has all been about understanding the personalities. However, while the 1990s were all about raw power, the naughties were about policy; a lot more people are involved in running Russia these days and the debate they are having matters. As party politics develop, pundits are having a difficult time of kicking old habits and seeing Russian politics as anything but a scrap between "bulldogs under the carpet."

It is not impossible that Medvedev has developed a taste for power, but it seems more likely that he has been carefully chosen to bolster the Kremlin's appeal to the electorate. Russian society is rapidly dividing into the those that yearn for the certainties of the past - the old and state employees - and those with their eyes on the future - the young, the entrepreneurs and the emerging middle class, some 100m people by some counts. Putin cannot appeal to both groups at once, but by setting up Medvedev as the modernist reformer, he gives the broadest sections of society a candidate they can believe in, while keeping the actual power within confines of the Kremlin's control.

However, it is possible that Medvedev could be ousted. Over the last four years, a liberal camp of businessmen and government officials has grown up around the president who want to go faster. With per-capita GDP at $15,900 at the end of 2010, according to the CIA Factbook, Russia is prosperous and the Kremlin could start easing its control now, but it appears Putin is not ready yet (and this may turn out to be his greatest political misjudgement).

In order to defang this alternative power centre, there are persistent rumours in Moscow that Putin will stay on as PM, but put someone else in as president - new Moscow Mayor Sergei Sobyanin has been mentioned as a candidate. But is this group a real threat? The liberal businessmen have by definition made their fortunes by not playing the government game. Given that Putin has successfully contained massive state interests like Rosneft and Gazprom, surely a collective of supermarket owners is not going to pose a threat? Moreover, their main ability to make mischief would be to persuade Medvedev to sack Putin, but it is widely assumed that Medvedev himself remains a member of Putin's group, not his own.

Medvedev opened his own election campaign with a similar big press conference on May 18, where he dodged the candidacy question but spent two hours laying out his position on Russian policy. Given that the two men are now following a very similar media campaign, with different but complimentary messages, the chances that things will remain as they are following the dual elections seem much higher.

Nevertheless, Russia's elite is clearly extremely nervous and the capital flight of 1990s has returned in the last six months. There was $9bn of real inbound foreign direct investment in (FDI) the first quarter of this year, but $19bn of outbound FDI - double the amount a year earlier - which strongly suggests Russia's top dogs are putting something aside just in case. Bottom line is that like the last election cycle, the Duma elections, not the presidential elections, will be the crucial event and everything hangs on how successful Putin is in persuading enough Russians to vote for this All-Russian National Front coalition to give it a fig leaf of legitimacy.

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