Reset or upgrade?

Last week, the Minchenko Consulting published its newest report on the dynamics of the so-called Politburo 2.0 – a circle of influential politicians and businessman that make up the informal decision-making body around the President. The report, which is a must-read for Russia-watchers, as always, made some insightful points and drew some interesting conclusions. One of these was a topic I touched upon in my last blog post: the increasing possibility of the dismissal of Prime Minister Dmitry Medvedev. Another main conclusion was that early elections to the State Duma seemed to be more and more certain in the wake of the recent corruption scandals.

In today’s Power Vertical Podcast, Brian Whitmore, Kirill Kobrin and I will discuss these conclusions, so just like each week, or even more so, you should absolutely tune in. Below, I’ll try to explain my points on whether there is an upcoming reset of the elite and what I think about the topic of early elections.

The Minchenko report makes the very important point that the current ‘de-Medvedevisation’ is a consequence of the former disproportionate strength that Medvedev’s associates gained under his presidency. Indeed, this underlines the point I made in an earlier blog post about the reasons why Medvedev seems to be weak at the moment. Minchenko also claims that the scourging of the liberals will stop once Putin reaches some sort of desirable balance, i.e. through appointing strong ‘conservative’ Vice-Premiers to the government. In this case, Minchenko claims, Medvedev had better accept the position of a technical PM. In my opinion too, a revamp does not necessarily have to mean the dismissal of Medvedev. There are a number of other battlefield sectors where this balance can be achieved.

Battlefields: Central Bank, Prosecution, energy sector

One of the most important battlefields is the Central Bank. The mandate of long-time governor Sergey Ignatyev, will expire in June. Vladimir Putin will soon name his successor, and will have to do it cautiously. While for a long time it looked as if the first deputy chairman of the bank, Alexei Ulyukayev, who shares Ignatyev’s commitment to monetary prudence, had been set to get the job, not so long ago another candidate, Sergei Glazyev has emerged as a contender. Sources of Reuters called the infamous economist who claimed to know about Europe and the United States weaving the plot against the Russian economy “a compromise solution”. However, this is clearly not the case: the words of Anatoly Chubais, the head of Rusnano and a leading market liberal, who refused to even call Glazyev an economist tell all about how the liberals and technocrats currently in charge of the bank think about Glazyev. But why does this matter?

In many ways, Russian politics has reached a critical juncture. Whoever gets to be the new head of the Central Bank will carry a strong indication on what the Russian government is about to do with the economy. Glazyev or someone else of his ilk is likely to lean towards the short-term goal of increased spending and economic stimulus to the detriment of fiscal prudence. Ulyukayev or another technocrat/liberal will carry on with the longer term goal of fiscal prudence that effectively keeps the real economy in its present state. From this point of view, the question is whether the Russian elite accepts the argument that a potential meltdown of the global economy which seems increasingly likely to happen, can cause much greater political harm to them as the present situation. Whether they think that they should accommodate Russian citizens with monetary easing now, even if this means they cannot do it later, when the situation turns potentially really bad.

Of course, this is only one side of the story, and it may not even be the most significant one. Surely, many in the extended government (or the Politburo 2.0) have business interests themselves. The bigger the monetary abundance is, the simpler it is to look for distributable wealth. Besides, the Central Bank seems to be in the middle of intra-elite scuffles lately. The outgoing governor of the bank, Sergey Ignatyev seems to have gained some enemies when he stated that out of the 49 billion USD that was taken out illegally from Russia last year (bribes, embezzled funds, etc.), about a half was administered by one specific group of people. This airing of dirty laundry that a couple of years ago would have been impossible, but has lately become almost a standard, probably targets law-enforcement agencies and the secret service. In short, it targets silovik power groups.

This highlights another important aspect of the battle over the Central Bank. Namely, that in the past couple of years a lot of “kompromats” (compromising material) have been piled up in certain drawers. To some of these drawers only the representatives of the liberal and technocratic elite have the keys and would, if needs be, use it. I touched upon this topic earlier in my blog post about the “kompromat bubble“. In short, even if Ignatyev or Ulyukayev do not strictly belong to the “Medvedev elite”, they certainly feel closer to it than to the siloviki.  It shouldn’t come as a surprise that Alexander Bastrykin, the head of the Federal Investigative Committee suggested the creation of a “financial police”, a body under the President (but probably stuffed with Bastrykin’s cronies) responsible for combating financial crimes. Similarly, the State Duma seems all but set to adopt an amendment to the law regulating the merger of the Central Bank and the main financial regulator that would put a representative of the government onto the board of the bank.

It is, of course, not only the Central Bank. There are other battlefield sectors too. One of these is the battle between the Prosecutor’s Office and the Investigative Committee. The creation of a single Investigative Committee to replace these two conflicting structures has been a hot topic since last year. Yuri Chaika, belonging to Medvedev’s circles seemed to have been losing this battle, but still, the reorganisation has yet to happen. On the contrary, Chaika does not seem to have given in. I’m not saying it will happen tomorrow, but it would certainly be a strange echo of history if we saw kompromat material with “человек похожий на Чайки” – “a person who looks like Chaika” appear in the Russian media (this was exactly how one of Chaika’s predecessors and his former classmate, Yuri Skuratov was discredited in 1999).

Then there is the energy sector, which, ever since the appointment of Arkady Dvorkovich, a staunch Medvedev ally to Vice-Prime Minister in charge for energy policy and the second rise of Igor Sechin, the siloviki’s almost almighty energy Tsar, has been a constant battlefield.

In any of these policy fields, the influence of liberals and technocrats may fall victim to the de-Medvedevisation before Medvedev himself does. In fact, if Putin does intend to keep Medvedev as a technical PM, he might want to break his wings. If Minchenko is right about the appointment of Vice PMs, Dvorkovich might be among the first to fall. After all, giving the energy sector almost entirely to the siloviki seems much less risky for a solution than putting them in charge of prosecution or handing them the keys to the Central Bank’s vault. Those are policy areas where Putin might want to maintain the existing conflicting structures.

A real successor, early elections, or both?

However, when it comes to Medvedev’s future, other questions arise. First of all, it’s not clear at all whether Medvedev is ready to accept to be a technical Prime Minister. This is understandable: he surely agreed to the “castling” in 2011 because he expected something in exchange, most probably the (nominal) continuation of tandemocracy, which could eventually grant him the presidency, once Putin chooses to leave for good. And since then he clearly has not seen things going his way: if he wants to play along, he is facing the choice of being a technical PM and agree to the further gradual erosion of his political weight or stepping down. In a situation like this, he might choose to fight.

This is all the more so, as Vladimir Putin seems to have started looking for a real successor. As I blogged earlier, the casting of a prospective new Prime Minister is closely connected to the question of whoever succeeds Putin. As Minchenko puts it, should anything happen to Putin, the Prime Minister in office would be an automatic successor. What adds the unpredictability factor to the story is that while many suspect that the present might be Putin’s last term, no one knows exactly when the Putin era ends. However, when it does end, the person at the right place wins. Pretty much like a Russian roulette, if you excuse me for this threadbare metaphor. Putin is well aware what his close associates have in mind about his succession, and surely he does not intend to deliver a verdict soon. The longer the elite is busy fighting among themselves, the less they think about challenging the President himself. Therefore, appointing a Prime Minister, who is also a successor, seems unlikely at the moment. And when it comes to technical Prime Ministers, the question, again, is whether Medvedev is willing to play Putin’s game.

But the Minchenko report brought a new element into the discussion about Putin’s relations with the elite, by claiming that in the wake of the recent series of corruption scandals, Putin will soon dissolve the State Duma and call for early elections, partly to appease social tensions, partly to cleanse the ruling elite. To me, the whole story looks much more like the escalation of the ‘kompromat war’ I mentioned above, and as such, an attempt to weaken the administrative resources of United Russia and more importantly, its present leader, Dmitry Medvedev. Quite unsurprisingly, the people who lauded the fight against corruption in connection with the recent cases, or said that it might spread on to, say, the Federation Council were mostly adversaries and possible replacements of Medvedev: Sergei Ivanov, the head of the Presidential Administration and Valentina Matviyenko, the head of the Federation Council. The question is: knowing this, is Putin tempted to call early elections?

While I agree that a thorough cleansing of the ranks of United Russia could bring benefits, there are a number of factors that make early elections a not so convenient option. First of all, Putin does not like electoral campaigns. In a passage of Boris Yeltsin’s Midnight Diaries, the late president recalls a meeting with Putin in 1999, before the latter’s taking over as head of state, when Putin was complaining about the unease he feels when having to conduct an electoral campaign. It may be a small detail, but sometimes small details matter a lot.

There are more practical reasons not to call early elections too. The State Duma has yet to adopt the electoral reform initiated by Putin at the beginning of this year. It would be odd for Putin to waste an opportunity to alleviate the political risks stemming from early elections. As I argued before, just as a mixed electoral system helped to prop up a weakening governing party in Ukraine, it might help United Russia score a more legitimate victory than it did in 2011, even though the popularity of the party is ailing.  Many say – Minchenko included – that an electoral failure of United Russia may be a plausible pretext to fire Medvedev. While I don’t contest the truth in this statement, I do think that this would be similar to firing cannons on mosquitoes. Putin does not need a failed election to get rid of Medvedev, if he really wants to. A lost election just wouldn’t be worth it.

This brings us to another reason why early elections might not be the best idea. Surely, the Kremlin could come up with an alternative governing party – I have also mentioned this possibility before – to make up for the possible losses of United Russia and canalise the political energies of certain segments of the population. It just seems unlikely that it can do it in the near future: A Just Russia, put together a year before the 2007 elections, scored worse than one of its predecessor parties, Rodina. The 2011 project, Mikhail Prokhorov’s Right Cause failed to make a breakthrough in opinion polls even before Prokhorov left the party. I have no doubts that by 2016, spin doctors would be able to put together a new party or promote an existing one for the purpose of minimising anti-systemic votes, but definitely not quicker than that. Yes, there is already an All-Russian National Front, the brainchild of the Kremlin’s leading spin doctor, Vyacheslav Volodin that may be able to conquer the layer of the population that likes Putin but dislikes United Russia. And there’s Prokhorov’s Civic Platform. However, the Kremlin has apparently been too cautious or too undecided to give them green light.

Last, but not least, holding early elections this year would deprive Putin of an established custom. Minchenko points out in his report how one of the President’s favourite strategies is to score a “victory in advance”: in 1999, his appointment as Prime Minister practically assured his election as president the next year. The same job was done by the imprisonment of Mikhail Khodorkovsky in 2003-04, Putin’s running on the top of United Russia’s list and winning a constitutional majority in the Duma in 2007-08, and the “castling” in September 2011. If Russia holds early elections this year, the mandate of the new Duma will end in 2018, thus, especially if United Russia loses the election, Putin would be bereft of one very important opportunity to establish his successor politically before the 2018 presidential election.

Let me repeat: we have arrived to a critical juncture, in many ways. And it is up to the Russian elite, and not only Putin to decide where everything is going from here. Nuances will matter.

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