Putin Down but Not Out
By Lee Jackson, published December, 2011
The following is an excerpt from Issue XIII of the free weekly financial newsletter The Opportune Time:
Like the U.S., Russia will hold presidential elections next year. Current Russian Prime Minister (PM) Vladmir Putin, depicted below, is the frontrunner for the Russian presidency. However, earlier this month, Russia held parliamentary elections, which in essence are the American equivalent of Congressional elections. United Russia, the party of PM Putin and current Russian President (Pres.) Dmitry Medvedev, suffered a significant setback, and saw its approximately two-thirds State Duma representation shrink to a slim majority. The State Duma contains 450 seats, and is the lower house of Russia’s legislative body the Federal Assembly of Russia. United Russia entered the election with 315 State Duma seats, and exited with 238.
The Russian parliamentary elections have created considerable buzz, because PM Putin’s firm grip on power has shown cracks in its armor. Not only did PM Putin’s party lose a large amount of support, but evidence of ballot stuffing and other corruption during the elections also has sparked demonstrations of thousands of people in Moscow. Thus far, a few hundred demonstrators have been arrested, and PM Putin has responded to protester pleas by promising to shake up his cabinet next year.
While the Western media has been creating a storm out of the parliamentary elections in Russia, I do not believe PM Putin soon will be forced out of or voted out of office. Many political analysts expect PM Putin to reinvent his public image and to make concessions, such as government expenditures, to maintain his popularity inside Russia. Despite demonstrations, PM Putin still is the frontrunner for next March’s presidential elections, and he faces little competition from other candidates. Even with the entry of Russian billionaire Mikhail Prokhorov into the presidential race, I feel PM Putin is more likely than not to win reelection. Prokhorov does not have the same political connections at PM Putin. Some political experts even suggest the former mining executive has entered the race as a ploy to mitigate social backlash against the frontrunner. For example, Boris Nemtsov, a deputy prime minister under former Russian President Boris Yeltsin, declared Prokhorov’s purpose is to help Putin return to the presidency:
“Prokhorov’s task is to help Putin get elected. A billionaire would never have taken such a risk if he hadn’t had an agreement with Putin.” — Former Russian Deputy Prime Minister Boris Nemtsov
Nemstov’s words may refer to Mikhail Khodorkovsky, the former Russian oil executive, who was imprisoned allegedly due to political reasons the last time PM Putin was president. I expect PM Putin to return to the presidency in March. And unless PM Putin announces another running mate, I suspect current Pres. Medvedev will reassume his previously held office of prime minister. In my view, markets are overestimating the political risk associated with this month’s and next year’s elections in Russia.
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