Renaissance Capital -

Rencap, Russia

Tuesday, April 24, 2007

Regime change is fast becoming the major driver of Russian politics, business and, by extension, markets. While President Vladimir Putin remains firmly in control of the political agenda, speculation grows over who will succeed him, on what his successor will focus and what Putin intends to do in his retirement.

• With these concerns in mind, we have commissioned a poll to try and discover some answers: 1,600 people in 46 regions across Russia will be polled each quarter on their economic outlook and political expectations until the presidential elections in March of next year. This report is a summary of the results for the first quarter.

• Unsurprisingly, we find that Putin remains by far Russia's most popular politician, that United Russia should dominate the next parliament and that the democratic parties are a dead political force.

• More controversially, we find that a simple majority still believe that Putin will be the next president, despite his consistently stated determination to step down.

• We also find that if Putin is not in contention, the presidential race remains open, with many more people undecided than supporting either of the two front-runners.

• Dmitri Medvedev remains ahead of Sergei Ivanov in the polls, but the gap is only six percentage points. Medvedev is trusted more on the economy, while Ivanov wins on terrorism, corruption and international relations. Fortunately for Medvedev, the economy seems by far the most important factor in the minds of voters.

• Interestingly, however, Putin is recognised more for his achievement in creating political stability and improving Russia's standing in the world than for improvements in living standards.

RUSSIA’S PARLIAMENTARY ELECTIONS, 2 DEC 2007

United Russia, supported by President Putin, remains by far the most popular party ahead of the national Duma elections in Dec 2007.

The impressive showing of the newly created Fair Russia in regional elections in Feb 2007 may see them leapfrog the Communists into second place in December.

Even from a very low base, it is still clear to us that, of the second-tier parties, the Liberal Democratic Party of Russia (LDPR) is most associated with security-based issues, whereas the Communists are usually linked to potential economic health domestically and strength on the international stage.

Fair Russia is not strongly associated with any particular issue. This supports our view that its popularity derives from the implied backing of the Kremlin.

United Russia is obviously far ahead of the other main parties on all the issues: in our poll it scored 43% on the economy and jobs; 45% on international relations, 39% on fighting terrorism and 38% on fighting corruption.

It is clear that, in all likelihood, United Russia will regain control of the Duma in Dec 2007. Based on our survey results, the party would win 66% (296) seats in the Duma, with the Communists winning 14% and the other two parties 10% each.

The biggest potential upsets could be: 1) if Fair Russia beats the Communists to second place (we consider this a possibility); 2) if one of the four major parties does not pass the 7% threshold to gain seats in the Duma (very unlikely); 3) if one of the pro-democracy parties gains over 7% and wins a seat in the Duma (practically impossible)

United Russia has a solid favourability rating at over 66% with a negative impression from only 18% of the surveyed respondents.

United Russia is by far the most recognisable political party in the country, perhaps due to its extensive coverage on state television.

The party’s support is strong across the Russian demographic, reaching its peak with the 35–44 and the 45– 59 age ranges. The lowest support comes from the elderly, although total favourability in this group is still at 58%.

The party of power also has broad appeal across educational backgrounds with only the least educated section of the population below the 60% mark. We will see later in this report that a large section of this group is drawn to the Communists and LDPR.

However, the poorest section of society appears to be one of the strongest supporters of the party of power.

In terms of localities, United Russia seems to find its greatest support outside the two main urban centres.

Moscow and St Petersburg appear to be the most politically aware and party support is more fragmented in these cities.

United Russia has a 63% favourability rating but support is weaker than in the rest of the country. This suggests to us that, given a viable alternative, support may wane.

CPRF– Russia’s Communists: A fading force

The Communist Party of the Russian Federation (CPRF) has held onto second place but support seems to be fading fast:

unfavourable impression (44%) vs favourable (31%).

This slide may be due to a number of factors. First, there have been a number of assaults on its electoral position by the Kremlin (the creation of Rodina et al before the last Duma election).

Second, the party’s main support base tends to be among the aged. The CPRF has found it difficult to attract the young post-Soviet vote.

Third, higher levels of education and personal wealth are factors which have also affected the Communist’s support.

The Communist’s strongest support comes from the poorer, less-educated rural population. The position of the Communist party as second choice is under serious threat.

Liberal Democratic Party of Russia (LDPR)

Like the Communists, the right-wing LDPR is viewed largely negatively (with over 50% of respondents having a somewhat or strongly unfavourable view).

The LDPR’s negative ratings are now the highest of any of the main parties; however, its supporters are often the most politically active and therefore most likely to vote.

Much like the Communists, the LDPR tends to take the core of its votes from among the poor, under-educated and rural population, although its support does seem to penetrate deeper into these groups than the Communists.

Increasing nationalist sentiment in Russia, especially with reference to immigrants from the FSU, perhaps, being the cause.

Another key differentiating point between the right-wing LDPR and the left-wing Communists is that LDPR voters come from the opposite end of the age spectrum. Their strongest favourable rating (32%) is from the 18–24 age range.

Fair Russia: The unknown quantity

Fair Russia was only formed at the end of 2006 amid rumours that the deputy head of the presidential administration, Igor Shuvalov, was behind its creation. Shuvalov is often seen as the political architect of ‘managed democracy’ in Russia.

The party is led by Sergei Mironov, the leader of the upper house of the Russian parliament, the Federation Council.

Mironov is the most senior politician yet to publicly call for Putin to remain president after 2008.

Fair Russia was the only party, other than United Russia, to win control of a regional Duma during elections to the local parliaments in February this year. After this event, many observers suggested that it could potentially take second place in the national parliamentary elections at the end of the year.

The overall perception of Fair Russia is interesting for two main reasons: 1) its high favourability ratings; and 2) its low recognition by the population.

The party’s support is evenly spread among the demographic groups. A large number of respondents said that they have a ‘somewhat favourable’ view of the party or do not know it. It could be argued that these numbers are therefore ‘soft’ and might collapse under pressure. On the flip side, there is a great deal of opportunity to turn ‘somewhat’ or ‘don’t know’ voters into strong supporters.

2007 parliamentary elections: The end of the pro democracy movement in Russia

There are three main forces within Russian’s pro democracy movement: the two long-standing liberal parties, Yabloko and The Union of Right Force (SPS), and the newly formed People’s Democratic Union led by Mikhail Kasyanov, a former prime minister under President Putin.

All three parties are struggling for recognition and support.

The first two suffer because of their association with disliked oligarchs such as Anatoly Chubais and their prominent position in the Yeltsin government. The Peoples Democratic Union has simply not got off the ground in terms of popular support.

The point is often made that, as a unit, these groups might be able to get over the minimum threshold. However, even as a unified party, it appears they will have to work very hard to make it over the 7% hurdle into parliament.

PRESIDENTIAL ELECTIONS, 9 MAR 2008

President Putin remains by far Russia’s most popular political figure with over 50% of people saying they would vote for him. His personal favourability rating is at around 80%.

Even when the current president is taken out of the picture, the two main potential successors only score in the low-tomid teens and a large number of voters still say they don’t know how they would vote if Putin was out of the race.

A large number of voters (29%) still believe that the president will win the 2008 elections and therefore, presumably, that the president will change the constitution to allow for this.

While Putin continually and resolutely claims that he will not stay on as president, just the fact that there is still wide public support for this outcome will hinder any chances of a possible successor gaining momentum.

President Putin still leads the field on all of the main issues which people feel are important. Most notably on the issue of Russia’s role on the global stage, the improvement of which is singled out as the current administration’s greatest achievement.

When Putin is taken out of this picture, the field is broadly divided. Sergei Ivanov, one of the two first deputy prime ministers believed to be a contender for the presidency, leads on the issue of fighting terrorism and does generally well with regard to security issues.

The leader of the right-wing LDPR, Vladimir Zhirinovsky, also does well on hard-line issues such as terrorism and corruption. His often harsh rhetoric is likely responsible for this.

The Communist leader, Gennady Zyuganov, and the other first deputy prime minister and presidential hopeful Dmitry Medvedev, lead on questions regarding the economy.

Economic issues are seen as the top priority for the next presidential administration and a strong showing on these issues leaves Medvedev in with a good chance.

Mikhail Kasyanov, the former prime minister turned leading candidate of the liberal opposition fails to make an impression on any issue. The high number of respondents who say they have not heard of him means that making any impression prior to the election is going to be an uphill struggle for Kasyanov.