Russia – Who will be Mr Putin’s successor?

January 17, 2007

This post might stray away a bit from my usual “economic globalisation” angle. However, as it is a side-effect of my current work for a global media institution on a new Russian project for international portfolio investors, I consider this post to broadly enter into the realm of this blog. It can also be seen as an example of how, despite economic globalisation, which Russia has embraced, and to contradict globalisation’s usual critics, national politics follow their course uninhibited…

I never dreamt of becoming an analyst for an investment bank. However, if you have a position which includes observing Russian politics it must be sometimes very exciting. I received a piece written by an anonymous analyst from the presitigious Russian investment bank Aton Capital. If I may, this guy (or, less likely, lady) is obviously having a lot of fun. My source is a subscriber’s newsletter from the new online and paper magazine A very amusing (or scary) piece that summarises a lot in the current situation in Russia. The international community fears a lot of chaos in the run-up to the succession to Mr Putin… Speculation is mounting, some even think there might be early elections… But I’ll let you appreciate:

Aton, Russia – Wednesday, January 17, 2007

The pre-election marathon is about to start in Russia, leading up to parliamentary elections in December 2007 and
presidential elections in March 2008. No one has any doubt that the elections will go according to the planned scenario.
But if the parliamentary elections are lacking in intrigue (with the pro-Kremlin United Russia likely to win the majority of seats, in alliance with the Liberal Democratic Party or Fair Russia), the candidacy of the president’s successor remains a mystery, certainly outside the Kremlin walls, and perhaps even for Vladimir Putin’s inner circle.

For external observers, the only indicator of this or that politician’s chances to take the president’s place are popularity ratings. The official registration of candidates begins only at the end of December, but it is difficult to imagine that the uccessor coming out of the blue. Two months is obviously not enough to ensure the election of the desired candidate – even with the current level of state control over the process. Therefore the Kremlin will likely try to introduce the desired candidate to the electorate ahead of time. In this way, their appearance in the media and recognized public popularity polls could provide people, even those without inside information, an indirect signal how to recognize their new president.

The political discovery of 2006, without any doubt, goes to First Deputy Prime Minister Dmitry Medvedev. In the beginning
of the year Medvedev, fresh from swapping his position as deputy head of the presidential administration for a seat in
the government, was not even in the top ten most popular Russian politicians. By December, according to various
research institutes, he was firmly in place near the top of the list. For instance, the latest poll conducted by the
influential Levada-Center research group and published in Vedomosti shows that 8% of respondents name Medvedev “Man of the Year.” This is second after Vladimir Putin, who took 35% in the poll. We should note that over the last three years
(2003-2005), second place belonged to Vladimir Zhirinovsky (6%-12%). This year he must be satisfied with fourth place
(5%), with Defense Minister Sergei Ivanov (also considered one of Putin’s possible successors) taking third place with 7%.
The results of the poll conducted by VTsIOM for Kommersant are no less interesting: Medvedev jumped to third place (17%) from 75th a year earlier. Ivanov (16%) and Zhirinovsky (14%) took fourth and fifth places respectively, although their
achievements are somewhat less impressive (in 2005 the politicians took eighth and sixth places respectively). The
second most popular person in the country is singer Alla Pugacheva (26%) – unlike Levada, VTsIOM did not limit its
respondents to naming only politicians.

BUT DOES THIS MEAN MEDVEDEV IS THE MOST LIKELY CANDIDATE FOR PRESIDENT? OUR ANSWER IS NO. The results of the oll only show how easy it is popularize a politician who yesterday was known only to a narrow circle of fellow bureaucrats and businessmen. Medvedev himself has not changed much, but his position has, giving him the opportunity to appear on television screens and newspaper pages more often, especially on topics that interest the public, such as budget spending. But this quickly won popularity can be lost just as quickly – the Kremlin has only to put its money on another candidate, appoint him to a senior post (prime minister, for example), and ensure that he has access to media, which is not at all difficult considering
that most of it is controlled by the current government. In fact, going only by poll results, the Kremlin could benefit from betting on Pugacheva, who, according to VTsIOM, has a firm hold on second place with no support from the presidential administration at all.

WE THINK THAT PUTIN’S REAL SUCCESSOR WILL BE UNOFFICIALLY INTRODUCED TO THE PUBLIC NO LATER THAN 2Q07, given that it takes at least six months to make a new candidate known to the population. Apart from Medvedev, we see potential candidates among President Putin’s close circle including Deputy Prime Minister Sergei Ivanov, Presidential Administration Head Sergei Sobyanin, Russian Railways CEO Vladimir Yakunin, and Rosoboronexport CEO Sergei Chemezov. We wrote about these people in more detail in our 2007 strategy report, Ahead of election focus on stock selection. It must be said, though, that one cannot exclude a scenario where Putin presents the electorate with another surprise, and puts forward an unexpected candidate. Watch the ratings – they will help you recognize the successor!”


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