Graham Stack and Nicholas Watson -

Russian President Vladimir Putin nominated on Wednesday, September 12 the head of the Financial Monitoring Commission at the Ministry of Finance, Victor Zubkov, to replace outgoing prime minister Mikhail Fradkov, suggesting he is breaking with the previous system where the PM's office was used as a springboard for the presidency and prefers maybe two or three strong presidential contenders.

Conventional wisdom had it that whoever became premier would be the prime contender to replace Putin next year when his second term expires, not least because the new man would be seen by the electorate as the immensely popular president's anointed successor. Therefore, it was a surprise to many that Putin has chosen a relative unknown in Russian politics rather than the powerful First Deputy Prime Minister Sergei Ivanov or the other frontrunner, the other first deputy prime minister, Dmitry Medvedev.

Only hours earlier, the Russian daily Vedomosti, in a typical example of how it often only gets half the story right, was reporting that Ivanov would be appointed PM as soon as today. Elsewhere in the media, a dark horse candidate was never ruled out, though an oft-quoted name was Sergei Naryshkin, who was elevated to deputy PM in February.

So what is Putin up to? It appears the president is breaking with the system used by the late former president Boris Yeltsin, where the PM's office was used as a springboard to the presidency. According to analysts, while the next prime minister certainly has a good chance in the presidential elections in 2008, the Kremlin prefers to have two or three strong competitors instead of a single hand-picked candidate, which will burnish Putin's democratic credentials and deflate some of the criticism about authoritarianism he would have received had he simply appointed a successor.

"The next presidential campaign is likely to have elements of a race, as the Kremlin might allow two or three candidates from its inner circle to compete between themselves," say analysts at Raiffeisen in Moscow. "Putin wants to avoid the style of Boris Yeltsin who hand picked him in the year 2000. So he will keep his cards close to himself and we might see more surprises before March 2008."

If, as some suspect, Zubkov is being lined up to remain as PM after the elections, it suggests Putin is attempting to make changes to the power structure, where a team is created to support the new president rather than the new president having to rely on the power of the presidential office to consolidate his hold on power.

"Our first reaction to this particular PM is that, while he is now among the frontrunners, we do not see him as the likely successor. More likely, we see him as another means of cementing some stability during the period of power transfer, a PM who will serve under both the current and the next president," says Roland Nash, head of ressearch at Renaissance Capital.

The appointment of Zubkov is telling in another aspect. As head of the Financial Monitoring Commission, which is commonly called "financial intelligence," Zubkov was behind the government's successful drive to fight money laundering and its eventual success in getting Russia removed from the Financial Action Task Force on Money Laundering's (FATF) "black list." Having such a "financial" man as the PM underscores the Kremlin focus on the importance of the stock market and its desire to see most of the assets in "ZAO Kremlin" - the financial-industrial-military conglomerate that the Kremlin is building - carry out IPOs over the next decade.

Even so, analysts are quick to point out that Zubkov, whose nomination as PM the Duma will most likely confirm on Friday, should not be ruled out of the presidency. When Putin was nominated as PM in August 1999, the consensus was that there was little chance of him ever becoming president. With that in mind, it makes some analysts wary about drawing a similar conclusion over Zubkov.

The early years

Zubkov’s early years are noticeable for their complete lack of promise. He was born in a village in the Sverdlovsk region of the Urals two months after Nazi Germany invaded the Soviet Union. At the age of 17 he went to work in a metallurgical plant in a town in the Arctic region of Murmansk. From 19-24 he studied at an agricultural college near Leningrad, now St Petersburg. He served two years in the Soviet army, and then worked for the next 17 years in collective farms in the region around Leningrad, in low-level administrative capacities.

He was 44 years old and stagnating on the farm when Mikhail Gorbachev came to power, and everything started to change. It also started changing for Zubkov, for this is the point where his career took off, as Gorbachev embarked on a wholesale sweep-out of the gerontocracy and the mass promotion into leadership posts of the then 40-somethings. This means Zubkov is a man who owes everything to Perestroika.

Immediately, in 1985, Zubkov moved from managing a collective farm to working in the Leningrad region Party apparatus, where, propelled by Perestroika, he rose rapidly to become first deputy chairman of Leningrad region by the early 1990s.

His move to St Petersburg came about when he was appointed adviser on agricultural matters to legendary reformer and St Petersburg’s first mayor, Anatoli Sobchak. Then in 1992 he was appointed deputy chairman of the St Petersburg committee of foreign economic relations - headed by the 13-years-younger Vladimir Putin - and of which practically the entire staff at that time now mans the Kremlin.

Added to their professional ties is the unconfirmed rumour that Zubkov used his ties in the Leningrad region to help Putin acquire a dacha in a prestigious area of natural beauty.

Similar to Putin, and like so many other people at that time, Zubkov seems to have completely reinvented himself overnight, somehow transforming himself from a collective farm manager into a financial expert. In 1993, he moved to the office of the Federal Tax Service in St Petersburg, and soon became its head. He worked there until 1999.

If Perestroika gave him his first big break, and Sobchak his second, then his third, and biggest, was the election of Putin to the presidency in 2000. In the summer of 1999, on Putin being named prime minister, Zubkov became the head of the St Petersburg directorate of the Tax Ministry, and then in late 2001, deputy head of the Ministry of Finance, with a remit for financial monitoring. And this was more or less, allowing for administrative reorganisation, the post he has held to the present day with apparently great success: His greatest achievement being Russia’s removal from the list of countries accused of being soft on money laundering. In 2007, it was widely rumoured that he would soon quit his post for the peace of retirement. But it seems now there was one last big break waiting for him.

The story has yet one further curious twist. When Zubkov moved to the Tax Ministry in St Petersburg, his son-in-law, Anatolii Serdyukov, then director of a large furniture store in Petersburg, moved to take a lower-ranking job in the same office - despite, presumably, the sharp drop in income this must have entailed. Soon after Zubkov’s move to Moscow, the son-in-law then was promoted to head of the Tax Ministry directorate in St Petersburg. In 2004, Serdyukov, having served no more than four years in the Tax Ministry, also moved to Moscow after being named head of the Russian Federal Tax Service - and in January 2007, to worldwide astonishment, he became minister of defence of the Russian Federation, and vice commander-in-chief of the Russian armed forces.

Thus, Putin’s two most surprising appointments of this last full year in office involve one family. And the most surprising thing is the father-in-law has out-trumped the son-in-law.

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