Putin Signals Plan to Hold Onto Power

Bloomberg
Posted: 2007-10-01 18:58:05

Oct. 1 (Bloomberg) -- Russian President Vladimir Putin, barred by the constitution from seeking a third straight term in office, unveiled a plan to stay in power by becoming prime minister.

``To become the head of government is quite a realistic proposal,'' Putin told a congress of the pro-Kremlin United Russia party in Moscow today. He said he'll lead the party's list of candidates for parliamentary elections in December. Russian stocks surged after the announcement.

The plan allows Putin, 54, to continue exercising control over the nation while adhering to the form, if not the substance, of a democratic transition. Last month Putin appointed as prime minister a long-time associate, 66-year-old Viktor Zubkov, instantly elevating him into the small field of potential presidential successors.

``We'll have a new president, but he won't chart his own course,'' Sergei Markov, a political analyst who has worked closely with the Kremlin, said in a telephone interview. ``It will be Putin's course,'' said Markov, director of the Moscow- based Institute of Political Studies.

Putin has overseen eight straight years of economic growth as gas and oil production has boomed, while reasserting government control over the energy and other industries, clamping down on political dissent and tightening controls on the media. He's pursued a more aggressive foreign and defense policy, restarting long-range bomber patrols and upgrading Russia's intercontinental ballistic missiles.

`Czar'

Mikhail Kasyanov, a prime minister for four years under Putin who joined the opposition after being fired in 2004, warned that the Russian leader was becoming an absolute ruler like the emperors who ruled the country before the 1917 revolution.

``This is a symbol for the people that the person who sits in the Kremlin is a czar,'' Kasyanov, who is to run in the March presidential vote, said in comments posted on his Web site. ``De facto Putin is going to keep all the presidential powers. This will prolong the current political crisis which will lead the country along the path to destruction.''

Putin's plan is ``ultimately a matter for the people of Russia,'' White House spokesman Dana Perino said, adding that the U.S. urges Russia to conduct its elections ``in a manner that is free, fair and democratic.''

The president's announcement, which came after the close of regular stock trading in Moscow, lifted Russian stocks that trade in London. The Russian Depositary Index, which includes Russian global depositary receipts in London, jumped almost 1 percent on the news, even though the Micex Index and RTS Index closed the day lower.

`Reform Program'

``If power devolves from the presidency to the premiership, this means that Putin's policies and reform program will probably be continued, so the companies which have done well out of this administration will fare well in the next,'' Julian Rimmer, head of sales trading at UralSib Financial Corp. in London, said in an e-mailed note to investors.

Putin said he would accept the premiership under two conditions: United Russia wins the parliamentary elections and the next president is a ``respectable, capable, effective and modern person whom I could work with as a team.''

Putin, Russia's most popular politician, has said he'll endorse a candidate he thinks is best qualified to succeed him. Opinion polls show voters would choose Putin if he could run again, so his endorsement is viewed as a near-guarantee for election.

``The assumption is that the relatively aged Zubkov, if he runs and wins the presidency, will assume a subservient position to Putin, given the latter's huge store of political capital,'' Timothy Ash, an emerging-markets analyst at Bear Stearns & Co. in London, said in an e-mailed research note.

Unbroken Growth

Putin, in office since 2000, has popularity ratings of more than 80 percent after eight years of political stability and unbroken growth. That contrasts with the economic and political chaos of the 1990s, under late President Boris Yeltsin, who took over after the collapse of the Soviet Union in 1991.

The Russian leader has established tight control over political and economic life in Russia by relying on close allies who worked with him in the Soviet-era security service, the KGB, or in the mayor's office in his home city of St. Petersburg in the 1990s.

``By building up support of United Russia in parliament Putin will eventually become invulnerable, untouchable by the president; the ruler of Russia,'' Alexander Rahr from the German Council on Foreign Relations in Berlin said in a telephone interview.

Still, Stanislav Belkovsky, a former Kremlin adviser who heads the Moscow-based Institute for National Strategy, said he fears a struggle for control between Putin and the new president under a dual power structure.

``Putin is committing a big mistake, breaking with 1,200 years of Russian tradition,'' Belkovsky said in a telephone interview. ``It's the first step to a national catastrophe,'' he said.