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. Last Updated: 07/27/2016

Market Yawns at Cabinet Shuffle

The markets once trembled when Boris Yeltsin sneezed, but President Vladimir Putin's first major political shakeup is only likely to rock them if he reshuffles his economic team, analysts polled said Wednesday.

They said markets might even welcome Putin's ousting earlier in the day of a handful of military men from the Interior and Defense ministries and the replacement of the Nuclear Power Minister and Tax Police chief.

"The best news is that there doesn't seem to be any," said Eric Kraus, chief strategist at NIKoil brokerage. "As far as I can see none of this has a major impact on the economy. You'll notice that none of the economy ministries were touched."

Wednesday's limp, nearly volumeless stock market continued trailing weak European markets when Putin announced he would install civilians in the so-called "power ministries" in what he called an effort to demilitarize Russian public life.

United Financial Group's Christopher Granville said a "traceable" market response to the move was unlikely.

He said Putin's removal of some leftovers of the era of Putin's predecessor, Yeltsin, in the Cabinet signaled a tight grip on the government and might actually help lift the country's risk factor that leaves Russian assets undervalued.

"The political signal is continuing normalization, continued shedding of the Soviet legacy," Granville said. "Today's news will lower country risk, which in time means tighter spreads and generally stronger asset prices."

Analysts said a changeover at the Tax Ministry was likely to make little difference in tax collection, which they said has improved because of the government's dire financial need rather than personality politics.

But Putin said there were more attention-grabbing staff changes to come.

Analysts said that if he had in mind Prime Minister Mikhail Kasyanov and other key economic officials, such as Deputy Prime Minister Alexei Kudrin and Trade Minister German Gref, Russia's markets and economy would pay for the shake-up.

Kraus said Putin's remark was especially threatening in the light of rumblings that Kasyanov, also originally a Yeltsin-era Cabinet appointee, might be punished for his government's failure to secure a tidy Paris Club debt deal.

Ben Slay, an economist at PlanEcon emerging markets consultancy in Washington, said Kremlin adviser Andrei Illarionov's harsh public accusations of stalling by the economic team were "like a shark smelling blood in the water."

Slay said sackings in the economic team could be only days away, while Granville expected that Putin would allow them to work through the end of the year, then call them to account.