So much for speculation about an open war between the Medvedev and Putin camps following the former’s eye-catching 2 April directive on the removal of senior ministers from the supervisory boards of state-owned enterprises (SOEs): the presumed main target of this move, Igor Sechin (Putin’s right-hand man and deputy prime minister responsible for the energy sector), quietly resigned on 11 April as Chairman of Rosneft. I continue to see much positive potential for Russian assets in the present political cycle and negligible risk of serious destabilization. My specific view on Medvedev’s latest gambit is that:
On the first point, Medvedev is asserting his credentials as a second-term president. This natural outcome will be all the more likely if Medvedev himself pushes effectively in that direction. But this will require some political skill. On the one hand, Medvedev needs to demonstrate the expected qualities of a Russian leader to the general public, the elite and his patron – Putin. On the other hand, he cannot risk rocking the boat out of personal ambition. Medvedev’s goal and function is to continue his patron’s work of directing Russia’s post-Communist development (now under the slogan of “modernization”). So he cannot make a splash in the style of an ambitious opposition politician challenging for power; instead, he must remain a creature of the establishment.
These two requirements are not easily reconciled; but Medvedev made a good start in dismissing Yury Luzhkov as Mayor of Moscow last September. His latest initiative on the SOE boards likewise achieves this balancing act. It is a striking display of authority over powerful and entrenched officials who do not owe their positions to Medvedev – and many of whom were clearly taken aback by the move. At the same time, there is nothing new about this policy of replacing senior officials on these boards with government-nominated independent directors: there have already been several examples since 2008. So, formally speaking, Medvedev has done no more than insist on the systematic implementation of an agreed policy.
In practice, of course, this is an important reform. It cannot, however, single-handedly transform corporate governance in the SOEs (and hence in Russia as a whole). Its full impact will be felt only in conjunction with other key items in the new investment climate agenda laid out by Medvedev in his 31 March speech in Magnitogorsk. They include the call for accelerated privatization and for reforms in the big SOEs like Gazprom (e.g., transparent procurement procedures and top managers’ jobs to depend on 10 per cent annual opex efficiency gains).
Such points are likely to top the policy bill of a second-term Medvedev administration. At the same time, there is no doubt that they would also be pursued in a third-term Putin administration. In short, and reiterating the second of my two conclusions, this political cycle is generating positive policies. A striking instance is Putin’s trumping one of Medvedev’s signature anti-corruption initiatives by running with the idea of forcing officials not only to declare their incomes but to disclose their spending (thereby revealing acquisitions of real estate and other assets costing far more than would be affordable based on declared incomes).
A Medvedev second term would still be the preferable, as well as the more likely, outcome. Freshly empowered and free of the baggage of long incumbency, Medvedev would be better placed to implement the enhanced market-friendly reform agenda now taking shape. But the likely short-term negative market reaction to the announcement of a Putin third term would present a buying opportunity.
Medvedev is seeking to clinch the favourable political momentum. That much is clear from his statement in an interview with Chinese television ahead of this week’s BRIC Summit in Beijing: namely, that the decision on whether he would run for president again would be announced “in the near future”. Putin countered the very next day (13 April) by saying that there was no great rush. The tactical discussion here is whether the bureaucratic machine would be worse affected by continuing uncertainty or by one of the two leaders becoming a lame duck. The second view, which is Putin’s, implies – logically – that the announcement about the ruling establishment’s presidential candidate can be made only when decisions on the future shape of the government have been taken.
Judging from what happened at the equivalent stage in the last political cycle (2007), those decisions will be revealed at the pre-election congress of the United Russia party, which is scheduled for 21 September. That timing looks like a reasonable compromise between Medvedev’s “near future” and Putin’s preference for keeping all options open until the last minute.
With best regards,
Christopher Granville,
Managing Director, Russia & FSU Research
Trusted Sources
