Putin Appears to Be the Big Winner

APPrime Minister Vladimir Putin gesturing as he introduces the beaming members of his Cabinet to President Dmitry Medvedev in the Kremlin on Monday.
Occupying the Kremlin chair he sat in for eight years as president, Prime Minister Vladimir Putin on Monday gave a first clue of where power will lie during the presidency of his protege, Dmitry Medvedev.

Putin broke with standard practice and not only remained in the left-hand seat, but also spoke first when presenting Medvedev with his new Cabinet.

Indeed, Putin appears to be the big winner in the new government, surrounding himself with a close-knit circle of loyalists and confidants who will ensure that he remains in control of the country, observers said.

"They're a bunch of wonks," James Fenkner, head of Red Star Asset Management, said of the regular ministers. "In this Cabinet, the most important person is the prime minister."

The other big winners on Monday were government liberals, who scored decisive victories with the appointment of Igor Shuvalov, the Kremlin's liberal economic aide, to first deputy prime minister, and the reappointment of Alexei Kudrin as deputy prime minister and finance minister, observers said.

The big losers were the siloviki, whose hawkish rhetoric has alarmed the West and whose fierce infighting rocked the final months of Putin's presidency. Several of its key members -- including former First Deputy Prime Minister Sergei Ivanov, the Federal Security Service director, and the Federal Drug Control Service chief -- were demoted.

The wild card in the shakeup will likely be Igor Sechin, Putin's hawkish former deputy chief of staff who was made deputy prime minister. Sechin is believed to head a faction of the siloviki.

Most important, investors said, the government revamp promises to provide continuity in economic policy by balancing the liberal and hawkish interest groups off each other.

"You've got the same kind of checks and balances in Putin's government as you had within the circle of power around him in the Kremlin," said Roland Nash, chief strategist at Renaissance Capital. "The more business-minded economists and some of the more security-minded conservatives are balancing one another."

The liberal combination of Shuvalov and Kudrin, as well as reappointed Economic Development Minister Elvira Nabiullina, is balanced by the more hard-line views of Sechin, Ivanov and former Prime Minister Viktor Zubkov, now a first deputy prime minister.

The role awarded to Sechin, believed to be the "gray cardinal" of Putin's administration, had been keenly watched as a means of interpreting the power of the security services in the new government. Sechin, also chairman of state oil giant Rosneft, is now tasked with overseeing strategic industries -- a role that thrusts him into a position of public accountability for the first time.

"It's great," Andrew Somers, president of the American Chamber of Commerce in Russia, said of the appointment. "It'll let us see what he looks like."

"Sechin ... has been moved to a new front line where Putin expects breakthroughs and will demand a lot from him," said Alexei Mukhin, analyst with the Agency of Political Information.

Longtime Putin allies got top jobs in the Kremlin, with Sergei Naryshkin named chief of staff, Vladislav Surkov named his first deputy and Alexei Gromov another deputy.

Whereas investors overwhelmingly praised the retention of Putin's economic team, security analysts read into a wider reshuffle among key members of the country's security team.

Vladimir Ustinov, who was replaced as justice minister by Alexander Konovalov, former presidential envoy to the Volga Federal District, appears to be the biggest loser in this very much expected personnel decision, political pundits said.

"Medvedev doesn't want to be held responsible for the sins of the others," said Andrei Soldatov, a security services analyst.

Ustinov was a key figure in the legal onslaught against Yukos and its former CEO, Mikhail Khodorkovsky. He also led other politically tinged legal campaigns during his six-year tenure as prosecutor general under Putin, Soldatov noted. Khodorkovsky accused Sechin of orchestrating the campaign against him.

Konovalov is widely seen as close to Medvedev, and the two both taught at St. Petersburg State University's Law School in the 1990s.

Ivanov also appears to have lost out. As first deputy prime minister, he oversaw heavy and high-tech industries. Neither Putin nor Medvedev said Monday what Ivanov's new responsibilities are.

"This should be a disquieting signal for Ivanov, who has been left with a position but no accompanying responsibilities or powers," Mukhin said.

Medvedev also seems to have won a victory Monday, replacing FSB director Nikolai Patrushev with Alexander Bortnikov, a veteran FSB officer seen as more loyal to him. The FSB reports directly to the president.

Viktor Cherkesov, Patrushev's bitter rival and head of the Federal Drug Control Service, had hoped to head the FSB but instead was sent packing to an arms procurement agency -- a body that lacks power following Putin's decision last year to award a near-monopoly over arms exports to Rosoboronexport.

"This is clearly a demotion," said Alexander Khramchikhin of the Institute of Political and Military Analysis.

Another key loser was Leonid Reiman, the scandal-tarnished former IT and communications minister and one of four ministers whom Putin failed to include in the new government.

"The fact that [the Cabinet] is complete and so consistent with what we have had in the past suggests there are no major fissures in Russia's ruling elite. They have agreed on the big stuff," said a longtime Moscow-based banker, who asked not to be identified as he was not authorized to comment on politics.

While praising the makeup of the economic team as a sign the government would seek to follow through on goals to rein in inflation, which surpassed 14 percent in April, investors were quick to note that time would tell how much power the ministers would get.

"We know who is responsible for implementation, but we still don't really know where the levers of power are going to be pulled from," Nash said. "It's a work in process. I don't think even the two principal players know yet."

Yet Dmitry Peskov, Putin's spokesman who followed him to the White House, refused to read anything into Monday's announcement or the seating arrangement accompanying it.

Putin and Medvedev, he noted, sat not at the main presidential table but at a side table next to it. "In this particular case, there are no standard protocols," Peskov said.

Staff Writer Anna Smolchenko contributed to this report.


Dmitry Medvedev President
Ministers Reporting to Medvedev

Rashid Nurgaliyev Interior Ministry

Sergei Lavrov Foreign Ministry

Alexander Konovalov Justice Ministry

Sergei Shoigu Emergency Situations Ministry

Anatoly Serdyukov Defense Ministry

Vladimir PutinPrime Minister
Ministers Reporting to Putin

Viktor Zubkov First Deputy Prime Minister

Igor Shuvalov First Deputy Prime Minister

Sergei Sobyanin Deputy Prime Minister and Cabinet Chief of Staff

Alexander Zhukov Deputy Prime Minister

Igor Sechin Deputy Prime Minister

Sergei Ivanov Deputy Prime Minister

Alexei Kudrin Deputy Prime Minister and Finance Minister

Tatyana Golikova Health and Social Development Ministry

Alexander Avdeyev Culture Ministry

Andrei Fursenko Education and Science Ministry

Yury Trutnev Natural Resources and Environment Ministry

Viktor Khristenko Industry and Trade Ministry

Dmitry Kozak Regional Development Ministry

Igor Shchyogolev Communications and Press Ministry

Alexei Gordeyev Agriculture Ministry

Vitaly Mutko Sports, Tourism and Youth Ministry

Igor Levitin Transportation Ministry

Elvira Nabiullina Economic Development Ministry

Sergei Shmatko Energy Ministry