The Race to Be Putin’s Next Prime Minister Is Heating Up

How can Vladimir Putin avoid the political fallout that will inevitably come from firing Prime Minister Dmitry Medvedev? Facing corruption allegations and losing support within the government, Medvedev is quickly becoming a “suitcase without a handle” for Putin.

Presidential elections will be held in Russia in one year, and already there’s little question about the outcome: Vladimir Putin will enjoy a resounding victory. Prime Minister Dmitry Medvedev’s job, however, is far less secure, and in the lead-up to the election, Putin will have to make a decision about whether or not to bring Medvedev with him into his fourth term.

The competition for the prime ministership—and for the control over the country’s economic future that comes with the job—is already kicking into high gear, all the more so after the anti-corruption protests that took place across Russia on March 26. The opposition is fast making corruption the central theme of the 2018 election, and many activists are pointing the finger directly at Dmitry Medvedev. This is creating a surprising anti-Medvedev coalition made up of the opposition and large swaths of the political elite.

Both the regime and the opposition know that a political showdown is coming. In Putin’s last term, the ruling elite will either enter a period of decline or be forced to transform into something completely new. Combined with the decline in support for the regime, which had peaked after the annexation of Crimea, and the deterioration of the country’s socioeconomic conditions, the recent protests are already prompting various groups to fight for future political influence.

Everyone senses a new perestroika coming, making it crucial to seize the initiative now.

The recent protests were sparked by an investigation into corruption among high-ranking members of the Putin regime—chiefly, Medvedev—published by opposition leader Alexei Navalny’s Anti-Corruption Foundation. Paradoxically, because of the investigation’s revelations and subsequent protests, Putin has no choice but to stick with Medvedev for now—he cannot be seen as making a personnel decision based on pressure from below.

Still, the protests are turning up the heat on the regime. And indeed, the question of whether Medvedev will be dismissed is turning into a question of when he will be dismissed. Will it be a few months ahead of the election; right before voting day, as was the case with Putin’s dissolution of the Mikhail Kasyanov cabinet in 2004; or shortly after the election?

In some ways, this fall would be the optimal time to form a new cabinet because it would give Putin enough time to rebrand the government before the election. This is why the anti-Medvedev coalition is strengthening inside the government: to compel the president to throw Medvedev under the proverbial bus in the hope of maximizing short-term political dividends.

Thus, Putin faces a dilemma: how does he avoid the political fallout that will inevitably come from firing Medvedev, who is both one of the chief ideologists of the president’s 2018 campaign and the formal leader of Putin’s United Russia party? Medvedev is quickly becoming a “suitcase without a handle” for Putin.

If Medvedev is able to prove himself worthy by playing a significant role in shaping Putin’s campaign platform, it would be difficult to dismiss him—particularly before the election. But the scenario in which Medvedev keeps his post appears to be as improbable as it is desirable—particularly for businessmen and for liberals.

Much ink has been spilled over why Putin’s Russia cannot liberalize: the Kremlin lacks the political will for reforms; Putin does not trust liberals, who are seen as the ideological allies of the West; Putin is not willing to give the government autonomy; and he fears liberal (i.e., socially unpopular) reforms. All of this is true, but there is one important caveat: Vladimir Putin remains convinced that he is Russia’s main liberal reformer, making the question of why he needs help from other reformers a rhetorical one.

System liberals like Alexey Kudrin and German Gref are respected advisers to Putin whom the president calls on whenever he needs an alternative expert assessment. They are, in fact, the only group with anything close to an ideological monopoly on the formulation of the financial and economic components of Vladimir Putin’s government.

Maintaining a high key interest rate, trying to reduce the budget deficit, reforming healthcare and education, targeting inflation, and rejecting regulated interest rates in the real sector—all of these liberal initiatives are “red lines” drawn by the so-called “party of stability,” or those who favor macroeconomic stability over economic growth.

Whereas the system liberals have something of a coherent political philosophy, the dirigiste faction is focused entirely on political administration. The former group is looking for ways to liberalize Russia’s political and economic system, while the latter group hopes to pursue stricter regulation.

One representative of the dirigiste faction is state business ombudsman and Party of Growth leader Boris Titov, who on March 1 presented the final draft of the Stolypin Club’s “Growth Strategy” program. The main agenda of the Growth Strategy includes considerable relaxation of monetary and credit policy, harsher currency regulation, and the use of sovereign reserve funds to prop up the real sector.

Titov’s program is a major project that has been in the works for several years and focuses above all on the interests of the “real sector,” which seeks expanded access to state resources despite Western sanctions and economic stagnation. This lobby likely has its own favored candidate for the prime minister’s seat: Andrey Belousov, who has become particularly active recently in discussions about economic strategy and is the man behind Titov’s proposals.

The easiest solution to the “2018 quandary” would be to appoint a “technical” prime minister. It would be psychologically much easier to dump Medvedev, who would be less offended if he were replaced by a minor, obscure bureaucrat rather than by a longtime rival or ideological opponent.

Appointing a technical prime minister would also be in line with the recent state personnel trend: replacing political heavyweights with young technocrats. Putin likes working with individuals who see themselves not as “friends” or “comrades in arms,” but as loyal foot soldiers who do what they are told without asking unnecessary questions or taking advantage of their proximity to power.

Finally, a technical prime minister would free Putin from having to choose among ideologists of various strategies (liberal or dirigiste, populist or reformist). A technical prime minister would eliminate the need to debate development strategy, allowing the president to govern tactically, based on circumstances—the style of governance that Putin prefers.


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Power brokers in the Kremlin jostle to succeed Putin

President’s authoritarianism has barred the rise of any challenger

APRIL 11, 2017

The prime minister has denied the accusations but the focus on him “makes it much more likely that Medvedev will have to go”, says Tatyana Stanovaya, a political analyst at the Center for Political Technologies, a Moscow think-tank.

Ms Stanovaya believes significant political changes remain a long way off. “They will only happen when you start seeing an open split in the elites,” she says.

Today, the willingness to protest may be too nascent, and Mr Navalny too weak, to convince members of the political elite to join. Ms Stanovaya says: “Until that happens again, a lot more time is needed for dissatisfaction to gradually accumulate.”

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Tatyana Stanovaya, «Will a Truce with the West Lead to a Thaw in Russia? How the Kremlin’s Domestic Policy Will Change If International Tensions Lessen» Republic 23 Nov 16

In Russia foreign policy has always been the determining factor of domestic policy — the key parameter setting the mood of the Russian leader and his rhetoric. Vladimir Putin currently seems to be on a lucky streak: In the United States, whose policy exerts the greatest influence on Russia, the pragmatist and adventurist Donald Trump won the presidential election; in France very soon the «indifferent» President Francois Hollande could be replaced by a lover of Russia, the conservative liberal Francois Fillon; and Rumen Radev and Igor Dodon, who are friendly toward Moscow, have been elected in Bulgaria and Moldova. What will change in Russia if the bold expectations of a thaw in relations with the West do indeed prove justified?

Principles of Coexistence

Vladimir Putin’s policy has always been reactive. Moscow responds to NATO’s expansion with pro-Russian mobilization in the post-Soviet space and a collection of asymmetrical measures (Iskanders in Kaliningrad, military exercises, new missiles). To the Magnitsky Act [it responds] with Dima Yakovlev’s Law, to the revolution in Ukraine with the annexation of Crimea and the Donbas [Donets Basin], to the torn-up agreement with the United States on Syria with secession from the agreement on recycling plutonium. The crisis in relations with the West led to the growth of isolationist trends in Russia: the declaration of noncommercial organizations to be «foreign agents,» import substitution, a dramatic strengthening of the security agencies — the FSB [Federal Security Service], the Defense Ministry, and the Security Council, restrictions for Internet companies, the tightening of control over the media, and the toughening of extremist and antiterrorist legislation. Russia felt attacked, the elite thought in terms of the logic of a «besieged fortress,» and domestic policy was structured along the lines of «attack is the best form of defense.»

The mechanism of coexistence, whereby the West pushes and presses with varying degrees of toughness while Russia defends itself as best it can, was very dynamic but, in general, stable. Its operation was interrupted for a short time only during the brief «thaw» under Dmitriy Medvedev.

Logic might suggest that if the West now relaxes its pressure Russia can also move toward a more reasonable and less conflict-driven policy. If the United States had not seceded from the ABM Treaty there would not have been the crisis in relations in 2007 in connection with Washington’s plans to install missile defense elements in Czechia and Poland. If there had not been the revolution in Ukraine in 2004 it would have been possible to avoid the gas wars, and if the Ukrainian authorities had restrained themselves in February 2014 and managed to fulfill the agreements with the opposition, Crimea would be Ukrainian to this day and peace would prevail in the Donbas. If the United States had not tried to intimidate the whole world with the Russian threat and created the impression among the Russian leadership that Washington is ready to make every effort to bring down the Putin regime, the Levada Center would not have been declared a «foreign agent,» bloggers would not have been jailed, and Irina Yarovaya would have been mentioned in the media as a former Yabloko member and rank-and-file deputy from the party of power.

But is it really true that a slackening of pressure on Russia could lead to a change in Putin’s rhetoric and a thaw in foreign and domestic policy? The renunciation of pressure on Moscow is considered one of the main factors that would lighten the «mood» of the Russian elite. But in the past 16 years new factors have emerged that tend to strengthen the conflict-driven nature of Russian policy irrespective of the foreign policy context.

The Means Become the End

Russian foreign policy has always been constructed around the axis of Russia-US relations. Europe has been perceived only as a trading partner and the post-Soviet states as satellites. But even if Trump «closes down» NATO tomorrow, cancels the missile defense program, and signs every possible treaty with Russia, Ukraine is hardly likely to become our old partner and ally again, as it was, for instance, under Leonid Kuchma. Russia’s problem in the post-Soviet space is the lack of respect for the sovereignty of other states, whose validity the Kremlin is often in no hurry to recognize (unofficially, of course). The present crisis is based not only on the problem of geopolitical rivalry (the Kremlin is trying to prevent Ukraine’s Euro-Atlantic integration) and of relations between Putin and the «pro-Western» Ukrainian leaders. These problems were indeed the starting points: The desire to secure levers of influence on the strategic choice of the post-Soviet states was represented as Moscow’s requirement for guarantees of its own security. But what if, hypothetically, tomorrow NATO is no longer a threat — will Moscow renounce the use of its levers?

The problem is that as political, financial, reputational, and infrastructure resources are invested in the attainment of an end there is a gradual erosion of the distinction between that end and the means of achieving it. Levers of influence acquire their own significance and become to a significant degree an end in themselves as a resource that can be deployed and realized in a possible new crisis situation. The expectation that under Trump the United States will change its policy toward Russia and that Russia will abandon the conflict-driven tactics of «defense» may be erroneous: The fear of «tomorrow» on the part of Putin and his security entourage is shaped not by US pressure and Washington’s tough rhetoric but by a deep sense of their own vulnerability.

This is what it is necessary to understand when analyzing the possible changes in Russian political life. The cornered rat that Putin used to like talking about will not recover its sense of being protected if the aggressor takes a step backward. In recent years the sense of vulnerability among the Russian security elite (and they are the ones who largely determine the president’s mood) has increased dramatically, and their sense of being protected will never return even if «Trumps» are victorious in all the countries of Western and Central Europe. And the stronger this sense of vulnerability, the more guarantees Putin will want for himself and for Russia. And these guarantees will never be enough, because nobody will ever be able to grant them «in perpetuity.»

Unnecessary Thaw

While Russia has been trying to defend itself against NATO, the American missile defense system, the «color revolutions,» and all the rest of it, new institutions and elites have emerged in the country that literally feed on opposition to somebody or other. «Chekists» [secret police], Orthodox activists, patriot deputies and senators, provocateur journalists, experts in exposes, ideologists: It will be extremely difficult for all of them, both morally and politically, to restructure themselves along peaceful lines. Added to that is the crisis in which money is issued only to those who crack down on threats to national security. No threat means no money, no new powers, no patriotic super-projects. Therefore even a thaw will not stop this internal trend, which was born as a consequence of the Cold War but subsequently began to live its own life with no foreign policy context.

There can be no doubt that Putin will receive tonnes of papers about Russia’s secret enemies in the Trump administration, malicious anti-Russian transnational corporations, conspiracies among American and European elites against «pragmatists,» and a great deal of everything else, including, of course, evidence of a revolution being planned in Russia. It is unlikely that anything can now stop the voluntary-coercive formation of the «Russian nation,» the attempts to shape a state ideology as an instrument of control by the authorities over the public. Regardless of Trump and his policy, nothing will stop the domestic wave of obscurantism and the fight for traditional values, which are counterposed to the «corrupt West» even if it happens to become different tomorrow. And if it does become different, this is of course only temporary: The period of the «thaw,» even if it happens, will be interpreted as a respite that will by no means necessarily be a reason to «build bridges,» but on the contrary, an opportunity to prepare for a new, post-Trump battle.

Even given the most favorable scenario for Putin, a great many factors have accumulated within Russia itself that will hinder a «thaw» and create tall barriers in the path of the lessening of the element of conflict in Russian foreign and domestic policy. And then much will depend on where the new leaders of the Western world set the limits of the acceptable. At the moment those who are described as «friendly» toward Russia are proposing moving from confrontation toward partnership, and Putin likes that. But partnership is always a question of the distribution of rights and duties, and here the objective disagreements are not going to go away. It will be necessary to make deals with Putin on the status of the Donbas, on guarantees for the opposition in Syria (which will still have to be divided into moderate and radical), and on global security issues, where Moscow will ask for no more and no less than a veto on the West’s decisions.

Not to put pressure on Moscow or to make concessions to it? That question will soon have to be addressed both by Trump and by the future president of France, whose friendliness is thus far only the result of fatigue with the previous conflict, and by no means an answer to the question of what strategy to choose with regard to Moscow’s geopolitical demands.

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Tatyana Stanovaya «What Will Putin Propose for New Term? What Lies Behind Plan for President’s ‘Successful End to Career'»[Republic 06 Dec 16]

More than a year remains until the presidential election, but Vladimir Putin’s unofficial election campaign seems to be getting under way already, no matter how hard Dmitriy Peskov tries to present this as Putin’s ordinary routine. Meetings with workers’ collectives and heart-to-heart conversations with «the people» — these are one of Putin’s favorite techniques, allowing him both to be seen and to boast a bit about his achievements. It is in such a setting that the first outlines of Putin’s future election strategy are emerging.

The question of what kind of Russia Putin intends to build during his fourth term (or fifth, depending on how you view Medvedev’s term in 2008-2011) is now becoming one of the most intriguing ones. There is no money in the budget; Rosneft, which has adopted the role of a responsible business company that feeds its pensioners, is dragging out its own privatization; and world oil prices are rising, but somewhat uncertainly and with no guarantee against a fresh collapse. The government has failed to come up with any economic policy over the past few years, and Putin had other things on his mind: Ukraine, Syria, Turkey, Trump, Fillon, Aleppo.

A means of rescuing the economy was found in the form import substitution, but this seemed somewhat petty and even vulgar. In late 2015 Putin timidly began returning to the topic of high technology and the need to reduce dependence on the fuel and energy complex. By late 2016, when hopes for a return of oil prosperity were bolstered by agreements with OPEC, the Kremlin began testing out an attractive new concept, combining the idea of an energy superpower from 2006-2007 with the modernizing agenda of Medvedev’s presidency. In 2007 the authorities said the fuel and energy complex would haul the Russian economy up to a leading position in the world economy, and in 2009 Medvedev promised that high technology would release Russia from the curse of oil. Putin himself is now trying to cross the hedgehog with the grass snake (technology plus oil).

The Eterno plant that Putin visited — a joint enterprise between the Chelyabinsk Pipe Plant and Rusnano — is a symbolic conceptual godsend in this sense. In 2017 Putin may present us with a new idea of a notional «nano-fuel and energy complex.» High technology plus pipes is the new recipe for a happy future for Russia — not only an energy superpower but also a country of innovation.

In this new Russia of the fifth term, the new workers are also nothing like those who promised to come from the Urals in tanks and dreamed of crushing the liberals and the «fifth column.» In 2012 the future president went in search of the workers’ support to Uralvagonzavod, to the shop where they make tanks, and where they see no alternative to Putin: This too was a symbolic message to all sorts of domestic and foreign audiences. In 2016 Putin as future president is appealing to young, modern workers in virginal clothes and sterile workplaces, looking as if they have only just left their desks at a prestigious educational institution. To them Putin recounts how he dreams of «successfully completing his career» and traveling. This is no longer the immortal national leader without whom there is no hope of progress, but the modern president of a civilized country who clearly envisages one normal option to be quietly ending his career, enjoying a carefree old age, and giving lectures in the world’s leading universities.

Putin’s recent address [to the Federal Assembly] was really strong on this score. «I want to end my career successfully» — that sounds like a verdict on the significant proportion of his entourage who have no intention of ending anything. Is the president preparing the elite and the public for the choice of a successor? If so, will Putin sit out his six years, or will he go early, like Yeltsin? Or perhaps he will not even contest the coming election at all, ceding to the temptation to go before it is too late?

Be that as it may, these words of Putin’s are far from empty rhetoric. A «successful end to a career» with the prospect of traveling and visiting various countries — that sounds like a significant political declaration, combining a reluctance to sit tight in the Kremlin until reaching a Brezhnev-like state, readiness to leave the country to a friendly successor, and an intention to preserve the sort of relations with the international community that will not obstruct free movement around the world.

But we should scarcely regard them as confirmation of the president’s imminent departure. Putin seems to be offering the public a sort of deal: my reelection in exchange for a subsequent peaceful handover of power to someone like me, with guarantees of continuity regarding both nanotechnologies and large-diameter pipes.

This rather engaging picture of the world also contains the imprint of our not particularly ideal reality. For example, Andrey Komarov, the major coowner of the Chelyabinsk Pipe Rolling Plant (ChTPZ), just last year was released from house arrest after 18 months of detention. Komarov was accused of attempting to give $300,000 to the leadership of the Promresurs Federal State Unitary Enterprise, on which depended ChTPZ’s inclusion on the list of enterprises participating in the country’s mobilization preparation. This entailed a tax concession, which was granted, but ChTPZ was not included on the special list. The Russian Investigation Committee argued that the transfer of money was documented, but the court ruled that evidence had been gathered in an inappropriate way. «A provocation by the siloviki,» anonymous sources said, not realizing at the time that a couple of years later such detentions would become one of the most powerful mechanisms for rotating Russia’s elites in 2016.

The alliance between distinguished businessman Komarov (who was also at one time a senator and United Russia member) and system liberal Chubays (Rusnano) to supply Gazprom and Transneft with supernanocomponents for megapipes — this is a symbol of our time.

Demand from the state companies, funding from a state fund, and political protection for the coming six years are guaranteed. The smallest detail is required to complete the picture — new pipelines to the east and west, in all directions, despite and in defiance of the whims of Europe, China, Japan, and Turkey. Herein, it seems, lies the cunning plan of a Putin who is prepared to retire as soon as the Eterno plant is closed, Gazprom’s and Transneft’s demand for pipes having been satisfied. This is the new strategy — or rather the well-forgotten old strategy — of the coming presidential term — to enmesh half the world with the warmth and security provided by Russian energy. Only then will it be possible to travel without fear of the consequences.

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Tatyana Stanovaya: «Why Did Sechin Need Ulyukayev’s Arrest? — Tatyana Stanovaya on Conflict Between Rosneft and Government» 17 Nov 16

Rosneft is one of the largest Russian companies and its head, Igor Sechin, is one of the most influential people in the country. Nevertheless, in recent years, many of the company’s decisions have encountered resistance from Russian ministers. The deal to purchase Bashneft, which took a year to go through, is just one examples of the manifestation of this conflict. Effectively, this is a clash between the weakest Russian Federation government in history, on the one hand, and a very influential corporation with siloviki sidekicks, on the other. Political analyst Tatyana Stanovaya debates the reasons for and consequences of this clash on the Carnegie Moscow Center’s website.

Economic Development Minister Aleksey Ulyukayev extorted a bribe, with threats, from Rosneft for assisting in the privatization of Bashneft, and Rosneft complained to the FSB about the minister. That is how events were presented to us. The largest oil company in Russia as the victim of a corrupt minister changing his position, probably depending on the size of the bribes offered. The problem is that it is possible to believe in the existence of a corrupt minister, but it is much harder to believe in money being extorted from Rosneft. Why Sechin needed Ulyukayev’s head is the main intrigue of the affair.

Liberators against Managers

Throughout 2016, we have seen work being completed on the construction of the FSB own security administration [USB], on whose initiative high-profile cases have been started against governors and mayors, and investigations directly or indirectly affecting heavyweights such as Yevgeniy Murov and Andrey Belyaninov (both lost their posts). The media have actively written about the work of the mysterious sixth department of the FSB own security administration, whose head until July 2016 was Ivan Tkachev.

In May, the process of the Economic Security Service [SEB] being taken over by the heads of the USB started – subdivisions, with which the USB supposedly had a competitive relationship. Sergey Korolev, a former head of the USB, became the head of the SEB. And Tkachev himself, who is ascribed the role of a new demiurge – a fighter of the corrupt regardless of their rank and merits – became head of the SEB K administration (banks and finance).

However, something unexpected then happened: the influential Gen Oleg Feoktistov, the deputy head of the USB, was sacked although it is he who had been tipped for the post of head of the USB – the most influential structure, and one that is essentially accountable to no-one. It soon became known that Feoktistov had moved to work as vice-president for security at Rosneft. Both Feoktistov and Tkachev were called «Sechin’s special forces» – siloviki particularly close to the head of Rosneft. Feoktistov’s appointment indirectly confirmed this.

Novaya Gazeta, citing its own sources (and the Russian Investigation Committee confirms this), is now reporting that it was Rosneft that initiated the case against Ulyukayev. Feoktistov collected the data, the newspaper wrote. Moreover, Tkachev, as the overseer of finance and banking activity, conducted the investigation.

Thus, Ulyukayev was added to this group’s list of cases – from the point of view of the defendant’s status, this is the FSB’s largest case. What do the proceedings involving Aleksandr Khoroshavin, Vyacheslav Gayzer, Nikita Belykh, Sergey Mikhalchenko, and Andrey Belyaninov have in common? Only the fact that their cases are being conducted by the FSB and the initiator of the prosecution is Igor Tkachev.

It is possible that the reasons for Ulyukayev’s arrest should not be sought in his own actions but in the actions of those who brought about his arrest. A division can be seen in the power vertical between two sectors: security agency and civilian. The chekists [security agency officials], having offered their services to Putin and received the conditional go-ahead for a purge, have started to form a political superstructure, an unofficial oversight body over the civilian administrative structure.

The news agencies have reported, citing their sources, that the FSB started investigating Ulyukayev more than a year ago, and permission to tap his conversations was obtained in the summer. Reports have also emerged that the FSB was tapping the heads of the Investigation Committee and the heads of the Economic Security Service. This is quite sufficient to assume that not only Ulyukayev was being tapped but also the other ministers, heads of state corporations, siloviki competitors, and the heads of the Presidential Staff.

After the start of the wars in Ukraine and Syria, the «security agency elite» in Russia began to pick up the levers of administration in the security sphere. The military consolidated their hold in the sphere of foreign policy, squeezing the diplomats out. In domestic policy, the security function in its broadest sense is monopolized by FSB generals linked politically to Sechin: first intra-corporate competition was neutralized, then the Investigation Committee was crushed.

Sechin and the FSB can be compared to a cable and electric current: the chekists are the charge, the energy; Sechin is the conductor who also determines the direction in which the current moves. Wartime and siege logic feed the legitimacy of the topic of security and its beneficiaries, which systematically and almost uncontrollably increases the tension in the system, and those who succeed in directing it correctly, gain new dividends. The security superstructure as a kind of safety device guarding the regime against internal vulnerability and provocations has been legitimized at the highest level, and it is particularly in demand in a situation where Putin is not in a position to deal with domestic policy. The scale is wrong. What price is he willing to pay for the effectiveness of this safety device? The same as for the stability of his regime.

But Was it Putin?

And it is against this backdrop that cooperation is being built between the weakest government in modern Russia and the most powerful and politically influential corporation – the company Rosneft. And let us now contemplate something that is hard to imagine: what if Putin did not give his direct and unequivocal consent to the sale of Bashneft to Rosneft? It seems that this scenario has been ruled out a priori as impossible. The sale of Bashneft is a political decision, and political decisions in the country are taken by just one man – the president.

But the Bashneft sale is shaky precisely because the deal did not get a public guarantee from the head of state. Putin distanced himself from it in every way he could in the public arena. You may recall that the president’s position was that «on the one hand» (Rosneft does not have the right to take part in the privatization), and «on the other hand» (officially, it is not actually a state company). The president himself, reading between the lines, was inclined to allow Rosneft to take part in the sale but he left the matter for the consideration of the Cabinet of Ministers. The president’s deliberate and, it would seem, provocative detachment could have been a sort of test for ministers.

At the end of September, the government unexpectedly changed its position. After a month had passed since the abandonment of the privatization, preparations for the sale of Bashneft were deblocked and Rosneft was allowed to take part. Less than two weeks later, Igor Sechin’s company completed the deal. A deal that «somewhat surprises» Putin, who explicitly admitted this on the VTB Kapital forum on 12 October.

Let us suppose that the government did not get direct and unequivocal instructions from Putin at all to sell Bashneft to Rosneft, and it was forced to make do with abstract advice along the lines of «do what is best for the budget». And Medvedev’s cabinet did what it thought best. Such a decision entirely suited Putin, however, the subject of the experiment, it seems, was not Bashneft but the government, which was taken for a ride on a merry-go-round, allowed first to defend a «normal privatization», and then pushed into an effective nationalization of Bashneft in Rosneft’s interests, if the latter is actually considered a state company. The striking flexibility and weakness of ministers in the Bashneft case, their willingness to abandon their previous position in an instant – that is one of the main results of the deal, a mechanism for self-abasement.

Wind Resistance

What is Rosneft’s main problem today in its relationship with the government? The company seemed to have got what it wanted even before Ulyukayev’s arrest. Bashneft was bought through an effectively constructed special operation, and a decision is being prepared on Rosneft buying back its own shares from Rosneftegaz. There was resistance, but it was overcome.

But let us now look at the situation from the other side. Rosneft has spent almost a year on getting the deal done. Putin, who did not wish to lobby directly and hard for the interests of Rosneft in the government, left Sechin to deal on his own with ministers, who did not mince words. Belousov called the sale of Bashneft to Rosneft «stupidity», Ulyukayev said that Rosneft was «an inappropriate buyer».

And this is just one item in the strained relations between the government and the oil company. Before this, there were a lot of other problematical areas: allowing private oil companies to develop the shelf, the seizure of Rosneftegaz’s dividends, the tax reform, the handover of a stake in energy companies to Rosneftegaz, and so on. For four years, Sechin accumulated dissatisfaction with ministers, probably irritated not so much by their stubbornness as their weakness.

Rosneft, burdened with huge debts and at the same time with a special state mission, has regularly met with resistance from ministers. There is neither ideology nor a desire to gain something here. Rosneft’s motives are to reduce the wind resistance – an integral part of a habitat where the government is a club of dull-witted idlers.

It is he, Igor Ivanovich Sechin, who is saving the Russian budget by overpaying with a 50 percent premium for Bashneft. It is he who spent months trying to breach virtual walls erected by ministerial bureaucrats, debating the market and reforms. The constant minor and irritating resistance could not help but evince the desire to strike once, so that they would think twice next time. Now that a minister has been detained in a Rosneft office, the company has acquired special status.

As Rosneft sees it, Ulyukayev could turn out to be the personification of the annoying government officials who Sechin has got tired of brushing aside. Let us now link the security resources he has at his disposal to the desire to put an end to this resistance once and for all. Right now, when Bashneft has been sold, when there is no longer anyone much to get in the way. And then there is also the crisis, which is aggravating confrontation within the elite.

Ulyukayev’s arrest is a consequence and not an end in itself. Moreover, the result of the proceedings is far from as easily manageable as it may seem at first glance. The privileged security agency superstructure that is gaining power over the civilian vertical has accumulated too much energy, under the weight of which it might collapse like a roof under the weight of snow. The security agency awning is putting pressure on the civilian institutions of governance, and there will be local collapses in various places. It is just that the Kremlin must understand that without new supports, it may sooner or later cover everyone, and this means that in the medium-term a big reform of the security services can be expected.

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Tatyana Stanovaya, «An Organized Criminal Group Called ‘the Government’. What Kind of Signal Is Being Sent to Top Functionaires?» Republic 15 Nov 16

The arrest of Aleksey Ulyukayaev is a meaningful precedent for the opponents of Rosneft.

The report on the institution of criminal proceedings against Minister of Economic Development Aleksey Ulyukayev appeared at 02:33 hours on the night of 15 November. From this report, it also became known that the minister had been arrested. The arrest of a government minister is a precedent for Putin’s Russia, and the fact that practically no one had been prepared for this course of events proves yet again how little we know about the changing nature of the regime. On the other hand, it is obvious already now (and the Russian Investigation Committee has confirmed this) that the Rosneft company is behind the arrest.

On 12 October 2016, Russian President Vladimir Putin, answering a question about the privatization of Bashneft, unexpectedly stated that he had been «somewhat surprised» by the government’s decision to sell the company to Rosneft. Many people thought that this was coquettishness; after all, the president had approved the deal personally, and it was only after this that the entire privatization mechanism was launched. Meanwhile, Putin had not queried the decision itself, devoting, on the contrary, a great deal of time to the merits of the sale of one state company to another.

Whether Putin knew at that moment in time that Ulyukayev would be arrested, we are unlikely ever to discover. But the minister himself, to all appearances, had been working according to a routine schedule only last week. The most recent news about Ulyukayev had appeared on 9 November, when he completed a visited to Austria and gave a series of interviews on the most diverse questions, from privatization to the influence of the U.S. election on the Russian economy. His participation in the APEC summit at the level of foreign and trade ministers in Peru was scheduled for 17-18 November.

From the Russian Investigation Committee’s official statement, it follows that Ulyukayev was arrested in the act of receiving a bribe on 14 November. According to investigators’ information, Ulyukayev had demanded $2 million from the Rosneft company for signing a positive conclusion on the deal to purchase Bashneft. «It is a question of the extortion of a bribe from representatives of Rosneft, accompanied by threats,» the Russian Investigation Committees’ official spokesperson, Svetlana Petrenko, stated.

The initiative behind the decision to investigate Ulyukayev belongs to Rosneft — it was representatives of this company who had applied to the law enforcement organs in timely fashion, pointing to violations in the minister’s work, the Investigation Committee has disclosed. The investigation was conducted with the direct participation of Oleg Feoktistov, chief of Rosneft’s security service. Until August 2016, he had occupied the post of first deputy chief of the FSB USB [Federal Security Service Internal Security Directorate]. But in July, his protege, Ivan Tkachev, former chief of the FSB USB’s 6th Service, became head of the Russian Federation FSB’s K Directorate (banks and finances). It was Feoktistov and Tkachev whom The New Times magazine named as the main organizers and overseers of the «Sechin Spetsnaz» in the FSB. The dismissal from the FSB of the first of these [Feoktistov] was assessed as a demotion. But what is happening now causes one to doubt this: It is possible that what is being observed is the banal legitimization of the real state of affairs, in which Sechin is building more direct and firmer relations with the Chekists.

It is unlikely that Ulyukayev suffered precisely on account of the Bashneft privatization deal. This is suggested by at least two facts. The first is that the decision to allow Rosneft to buy the controlling package of shares in Bashneft was approved by Vladimir Putin personally in September. It was also then that the government once again greenlighted the process of preparing for privatization. The president’s decision contradicted the positions of virtually the entire «economic vertical hierarchy»: The participation of Rosneft in the deal had been publicly opposed by Igor Shuvalov, Arkadiy Dvorkovich, and Andrey Belousov. And among the rest — by Aleksey Ulyukayev. After Putin’s personal approval, Rosneft bought Bashneft without a competitive battle. Could Ulyukayev have prevented this by not issuing a positive conclusion? The question is rhetorical.

The second [Tkachev], RBK’s sources have revealed, began to investigate Ulyukayev more than a year ago, and therefore the organs’ interest in the minister appeared before his department’s conclusion on the privatization of Bashneft was required. Thus the true reason for the beginning of the tailing of Ulyukayev and the collection of information on him must have been something else, possibly something not directly connected with Bashneft.

It would appear that Ulyukayev simply turned out to be the most vulnerable link in the Cabinet of Ministers, but through the ostentatious punishment of the minister, Rosneft will be revenged for all the spokes that government functionaries put in its wheels. Moreover, Ulyukayev was not the most «hardened» offender. Minister of Natural Resources Sergey Donskoy (Rosneft accused him of lobbying for the interests of Lukoil), Arkadiy Dvorkovich (Rosneft has old scores to settle with him anyway, beginning with the well-known conflict around Rusgidro at the end of 2012), and Anton Siluanov, who continually encroaches on the dividends of Rosneftegaz, can be classed as no less «problematic.» But among them all, Ulyukayev looks like the only one who is politically unprotected and who possibly proved to be the most vulnerable to «carrot and stick» pressure.

At the same time, it should not be forgotten that the decision to sell Bashneft to Rosneft was collective. The Ministry of Economic Development prepared the draft government directive in which the recommendation to sell shares in Bashneft to Rosneft was given. The draft was ready on 9 October and was to have been signed by Prime Minister Dmitriy Medvedev. This, however, was a mere formality in the deal on the sale of Bashneft: A directive to purchase shares in the oil company had been given even before this — on 6 October, and had been signed by Igor Shuvalov, first deputy head of government. From the point of view of the formal procedures, the promotion of the deal depended on Shuvalov to a far greater extent than on Ulyukayev, who performed a merely technical function here. But political responsibility for the procedure lies with Prime Minister Dmitriy Medvedev personally (so far, all that is known of his reaction is that the premier is au fait with the situation regarding Ulyukayev’s arrest and has already discussed what is happening with the president).

So what we have is nothing less than an organized criminal group headed by Medvedev and with the participation of Shuvalov (who said right from the beginning that the best buyer for Bashneft would be Lukoil), Dvorkovich, Belousov, and Ulyukayev. Rosneft’s interest in all of them changing their position on the subject of the privatization of Bashneft was very powerful, especially in view of the fact that, until September, Putin had been in no hurry to intervene in the conflict. In theory, in view of Sechin’s contacts in the FSB, more than one minister could been come under investigation by the siloviki. «Having entered into a criminal conspiracy and abusing its official powers, the criminal group began to exert pressure on the leadership of the Rosneft company with the aim of encouraging it to commit corrupt actions» — this could have been the Investigation Committee’s press release last night. And in theory, the investigation still has a broad scope in which to develop the «case.»

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Tatyana Stanovaya, «Five Intriguing Points About Russian Presidential Election. When, How, and Why Putin Will Be Reelected for Fourth Term» Republic in Russian 14 Nov 16

Never before has an upcoming Russian presidential election seemed so routine and insignificant — especially against the backdrop of such a dramatic campaign in the United States. It is expected that Putin will be nominated, competition for him will be provided by a pool of «system» politicians with a combined rating of 30 percent, the people will give their 70 percent, and Putin will again become head of state after the first round of voting. Boring, predictable. All the Kremlin has to do is ensure that everything works smoothly, the voters turn out, and the nonsystem opposition does not play any dirty tricks. But this attitude to the election is mistaken: Everything to do with the campaign will prove momentous for the Putin regime and for the country.

Intriguing Point No. 1. Cost of Victory

Vanquishing the vanquished is not the most interesting task for a political leader who has already gone down in history and far outstripped a political class in which he can see no equals. The task of choosing sparring partners for Putin will be far from the mere formality that it might seem.

The upcoming election at first sight most resembles the election in 2004: At that time the Kremlin also had the task of reelecting Putin in a predictable, moderated, and very comfortable campaign. The parliamentary parties chose not to nominate their leaders against the president, restricting themselves to politicians from the second rank. The CPRF [Communist Party of the Russian Federation] was represented by Nikolay Kharitonov (who received almost 14 percent), and the LDPR [Liberal Democratic Party of Russia] by Oleg Malyshkin (2 percent). Gennadiy Zyuganov’s and Vladimir Zhirinovskiy’s stand-ins had to help Putin maximize his result and at the same time protect their own party leaders against electoral defeat in a plebiscitary campaign. Only Sergey Mironov from the Party of Life ran himself, ending up with 0.75 percent. The only person who contributed any intrigue to the political game was Sergey Glazyev, who in effect foisted himself on the Kremlin as a legitimate candidate, and who even then was actively cultivating contacts with the security agencies (his support group included Sergey Pugachev, the now-persecuted «Orthodox oligarch»). It proved easier and more comfortable for the Kremlin to hang on to Glazyev than to let him «break away.» With his 4 percent, he was of little interest to anyone. Finally, the liberal nominee at that time was Irina Khakamada, who lost the support of the Union of Right-Wing Forces and Yabloko, which were entering an acute political crisis, but on the other hand did receive the support of Yukos and achieved a result of slightly less than 4 percent. In the context of a peak in the antioligarchic trend in Russia, she proved to be the best rival for Putin from the right wing.

Who Putin’s rival will be this time remains a mystery. Should the leaders of the CPRF, LDPR, and Just Russia run, or will they nominate stand-ins? Will there be a right-wing candidate? Will anyone from among the nonsystem liberals be admitted? So far the only person to have declared himself ready to run is Grigoriy Yavlinskiy, whose participation will probably be advantageous to the Kremlin: He will add legitimacy to the campaign and will not take much away. On the other hand, participation by stand-ins from the parliamentary parties seems unlikely. The only reason such a scheme was tried out in 2004 was that it was the first election in a newly established regime and the «national leader» had yet to prove himself, so it was suggested that the «old men» should not interfere. In 2012 there was a different problem — the problem of the legitimacy of Putin’s campaign in the midst of mass protests. The campaign seemed much less of a plebiscite than in 2004, and rejecting the services of stand-ins was essential for the victory to appear legitimate.

In 2018 the participation of Zyuganov and Zhirinovskiy again seems logical, but for different reasons: Replacing them with stand-ins would obviously turn the campaign into a puppet show. After Crimea, Ukraine, and Syria, for Putin to compete in an election against stand-ins would seem to be beneath his dignity. Perhaps the coming presidential campaign will be built around the idea of an appeal by Putin to the «Russian nation» for a renewal of his mandate. It would be ideal if there were also participation by «sympathetic» rival candidates who would propose to work toward Putin’s objectives, with adjustments for their own ideological frameworks. In such a way as to ensure that Putin again stood out against the general background as the most sensible and competent candidate.

Intriguing Point No. 2. When

There is a serious debate under way about an early presidential election. There are two hypothetical options: moving the election to March 2017, and creating a single voting day for the regional and presidential elections, next October, for example. An early election is being talked about directly by Aleksey Kudrin, who regards this as an essential condition for a speedy start to structural reforms, the cost of which will be a probable fall in the head of state’s rating. The option of a March vote already seems unlikely for practical reasons — too little time remains. But a vote in the fall of 2017 should not be ruled out: In that case much will depend on how Russia gets through January and February, and whether there are any sudden blows to the economy or unforeseen cataclysms. But even this relatively likely scenario faces three obstacles. The first and most important one is that the regime is currently unprepared for any kind of structural reforms. The experience of the peaks of the crisis in November 2008 and late 2014, when feelings of panic really could be observed among the elite, showed that even a sharp surge in uncertainty and the expectation of probable economic collapse does not prompt Putin to make reforming decisions. Things have to be bad for a really long time before the political will for changes arises. And it is far from certain that these changes will be liberal reforms rather than a further tightening of the screws and strengthening of state regulation. So, if the election is shifted, it will not be for the sake of reforms but in order to guarantee victory in the first round. The reason for a shift, therefore, is less likely to be a crisis than social destabilization or a fall in the regime’s rating, for example.

Another difficult obstacle to shifting the election is the sluggishness of the decisionmaking system. Of course, Putin likes to make use of special operations, and everything could be presented to us at the last minute. But for this, too, things would have to be really «tight.» And that leads on to the third obstacle — Putin’s personal psychological resistance to the scenario of an early election: This option seems legally sly and politically weak. Moreover, for the time being there are no weighty grounds to say there are any real threats to the president’s victory in March 2018.

Nevertheless, the decision on the timing of the election will be a sort of test of the regime’s ability to adapt to a new political phase, the phase of maturity and finiteness. Holding the election at the appointed time will indicate that the regime is in a state of inertia, but bringing it forward would be a sign that the system was being prepared in advance for transformation.

Intriguing Point No. 3. Movement in Unknown Direction

Probably the worst headache for Kremlin functionaries is thinking up Putin’s election platform, formulating his agenda. The history of Putin’s regime teaches that the political leader and his agenda do not proceed together, but one behind the other, and it is Putin who leads the way. The nature of the president’s political leadership rules out any strategy. Strategy for him is what takes shape according to the circumstances (first a plane is shot down, then there is enmity with Turkey). So his agenda has to be devised by thinking up various attractive targets for achieving goals (such as, for example, creating 25 million «highly productive jobs» by 2020). And the target is an end in itself, which entirely deprives the president’s agenda of any conceptual policy content. It is always a collection of slogans that aim to achieve an electoral and sociological result but do not constitute elements of a state policy.

This gives rise to another intriguing aspect of the 2018 election — the desire by various elite groups to take part in formulating the campaign program, with a view to then occupying the posts of those who are going to implement it. The ambition of the elites is, in a political-administrative sense, to tie the election to the country’s future course. This indicates the start of the active phase of the contest for the post of premier. Many people have already prematurely consigned Dmitriy Medvedev to the scrap heap, assuming that the completion of Putin’s third term will mark the end of the government chairman’s career. It is supposed that his successor will be whoever does best in the competition to formulate a presidential campaign program. But there is just one important point here: So far, the leader in this race is none other than Medvedev, who has secured for himself the leadership of the specially created Council for Strategic Development and Priority Projects. This does not guarantee him anything, of course, but the main surprise of the 2018 campaign could be nothing less than Medvedev’s reappointment. This cannot be ruled out, at any rate. The zeal of the reformers may scare Putin more than the feebleness of a predictable premier.

Intriguing Point No. 4. Beginning of the End

Unless the rules of the game are changed, Vladimir Putin’s next presidential term will be his last. He will have a full six years, of course, but these will be six years (all other things being equal) of growing elite fears about post-Putin Russia. Whereas in 2004 the president clearly still had plenty of room for maneuver and a mass of options for retaining power, in 2018 everything looks more complicated. There is the additional factor of the gradual obsolescence of the regime, the finiteness of resources, and — pretty importantly — age. In 2018 Putin will be 66, in 2024 he will be 72. It is not critical. For example, Alain Juppe, the Republican favorite in the French primaries, is 71, he is full of energy and ready to spend five years in the Elysee Palace. But at 72 Putin will have to either change the Constitution and the structure of the regime and stay put, or appoint a successor. Both scenarios upset the established order of things and increase instability and risk, and that is extremely unpleasant for gerontocrats.

It is important to understand that 2014-2017 was a period when Putin’s regime was blossoming and working at full strength. This will be followed by degradation, the speed of which depends on the financial and economic situation, conditions in the world energy market, social factors and moods, the state of the elite, and the depth of a geopolitical crisis that is becoming ever more complex. Putin’s rating may remain high for a long time, but this will be more like the rating of Soviet leaders in the empire’s declining years, and the cost of preserving stability will grow. Uncertainty about the transformation of the regime will be an extremely strong source of pressure on the elites.

Intriguing Point No. 5. Successor and Amendment of Constitution

What makes the situation unique is that Putin will not be able to repeat the 2008 trick. The scenario of a «retractable successor» is totally ruled out. Not for reasons of age: It is possible to imagine that in 2022-2023 Putin takes early retirement, having chosen a «stand-in» who in turn will change the Constitution and enable Putin to return once again in 2028 (for a reduced presidential term of four years). Let us suppose that at 76 the president is full of energy and health. But this scenario is hampered by a totally different problem — the «Medvedev factor.» The 2008-2012 successor almost got knocked out of the game, having constructed an anti-Putin elite coalition and set his sights on a second term. It was an extremely difficult psychological moment when it seemed the country had almost slipped out of control. It will be incredibly hard for Putin to bring himself to repeat that.

So, toward the middle of the fourth term the question of how to transform the system will arise: by changing the Constitution to suit Putin, by choosing a successor, or by creating new institutions that enable the «national leader» to remain at the pinnacle of power, having ceded what is formally the top job to a nominal figure. This source of intrigue lies beyond the horizon of the 2018 election, but historically it is so close that all decisions now being made will be viewed, consciously or unconsciously, through the prism of the «final term.»

The coming presidential election is a prelude to the resolution of the strategic problem whereby the regime does not yet have an institutional foundation for extending its term of office. It is Putin personally who will have to resolve this, and in this context the «resources» of the 2018 campaign will play a significant role: The legitimacy of his victory, the quality of the campaign, the robustness of political leadership (including as displayed in the role of arbiter), managerial competence — Putin’s ability to accumulate capital in these areas will determine whether he succeeds in adjusting the system to suit himself, or whether the system itself dictates Putin’s future.

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