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. Last Updated: 07/27/2016

Time to Take the Bull by the Horns

In politics, this year is not likely to bear much resemblance to the first two years of Vladimir Putin's presidency -- the distinguishing feature of which has been social stability against the backdrop of an ongoing struggle between members of the Yeltsin-era old guard and the St. Petersburg chekist proteges of the new president for key government positions and for influence over the head of state.

And there is good reason for this.

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As the year kicked off, it was already clear that the economy cannot develop further without the implementation of far-reaching structural reforms. Otherwise, social problems resulting from growing inflation and widespread wage arrears could undermine social stability. However, political and social groups with an interest in cardinal transformation of the socioeconomic and political system that took root under President Boris Yeltsin still lack serious clout.

Major corporations only really need market reforms insofar as they allow them to bolster their existing hegemony in the economy and strengthen their political influence. They are in favor of rationalizing and optimizing the state's social expenditures, and even now it is a source of irritation that the president continues to pay "political" wages and pensions. At the same time these corporations seek to avoid competition both from the medium-sized business sector and from foreign firms.

Broad swathes of the population would prefer preservation of the status quo -- combined with a more just redistribution of wealth to poorer sections of the population -- to reforms. In particular, they are strongly opposed to the planned housing reform and the current abolition of tax breaks and other privileges affecting their interests.

All this makes even more pressing the imperative that the president form a political coalition based on a strategic consensus between the parties.

Continuing election-style policies of trying to keep everyone happy is becoming ever more difficult. Different groups within the elite are insistently reminding the president that it is high time for him to bite the bullet and openly declare his sympathies. The recent conflict between Defense Minister Sergei Ivanov and Unified Energy Systems CEO Anatoly Chubais over cutting off electricity to military bases can be viewed in this light.

Events in the international arena will push Putin to take a clearer stand on domestic issues. It is clear that further deepening of relations with the West, prospects for WTO accession, strengthening ties in the fight against international terrorism and attracting foreign investment depend both on the continuation of market reforms and the creation of a stable coalition of political forces supporting such reforms, as well as to a pro-Western foreign policy course.

Support for the new direction in foreign policy will be sorely tested if the United States commences military operations against Iraq. In such an event, Putin will be faced with a tough choice between maintaining a pro-Western course at the price of surrendering the strategic interests of certain elite groups in the Middle East, and reverting to the foreign policy tenets prevalent prior to Sept. 11 and, accordingly, to a deceleration of market reforms at home.

How will Putin respond to these challenges?

In effect, the president has two options. The first is to refrain from policies aimed primarily at maintaining high popularity ratings and to form a coalition for reform, relying on the most progressive social and political groups for support. Of course, even in this case only limited reforms, which do not encroach upon the corporate interests of major companies, will be possible. And in particular, given his current resources, Putin is unlikely to be able to make serious headway in establishing a more competitive business environment.

For the realization of this first scenario, the president will have to accomplish one particularly difficult task: the consolidation of his own team. The conflict between St. Petersburg chekists and members of Yeltsin's "Family" has gone too far for the opposing sides to reach compromise of their own volition. Furthermore, it would appear that other influential groups are being dragged into the conflict, such as Chubais' group, the "St. Petersburg liberals" (led by Dmitry Kozak and Dmitry Medvedev), Alfa Group, Yukos and Interros.

Reconciliation can only really be achieved if all parties involved come to the realization that they face a common threat -- such as mass social unrest -- or if the president adopts a proactive approach and pushes a compromise formula acceptable to all parties.

However, there is no serious threat expected this year of a magnitude sufficient to consolidate the elite. Furthermore, it would seem that Putin has no great wish for one or other group to emerge victorious, since a situation in which forces are more or less evenly balanced gives him more room for maneuver and for making his own decisions.

Furthermore, Putin probably fears that a radical shake-up in the top echelons of power could have a disruptive effect on social stability. A change of government in the coming months is only really on the cards if the country is gripped by a harsh financial or economic crisis that casts serious doubt on the effectiveness of the course being pursued by the president. In such a situation, candidates for the post of prime minister would be sought among those politicians with both a strategic plan of action and a team of professionals capable of implementing the plan.

Thus, the implementation of a consistent reform course this year will be problematic. Of course, reforms could be attempted without elite consensus, but this would be a risky strategy for Putin and one that he, as a very cautious politician, is unlikely to pursue.

Putin's second option is to continue maneuvering between different interest groups and centers of influence, on the one hand, and to keep on allowing policy to be dictated by public opinion. Under such a scenario, the possibility of furthering reform would be minimal, while the potential for conflicts between different elite groups to escalate would be considerable. In the short term, this policy could work and strengthen the president's position temporarily; but in the medium-to-long term he would lose. Putin would start to lose the trust of all the main parties to the conflict, just as happened to Mikhail Gorbachev in 1990-91. Under certain circumstances, disappointed elite groups might even start searching for an alternative candidate for the 2004 presidential election.

A third -- and highly unlikely -- scenario is a complete reorientation toward populism and the redistribution of national wealth to the poorest sections of the population. It is certainly the case that Putin's transformation into a "Russian Peron" would be welcomed by a significant portion of the population.

However, the president lacks not only the desire but also the necessary institutions to achieve such a transformation. The interests of the leading political groups and oligarchical clans are well represented in the Kremlin, and for these groups populism is acceptable only on the television screen and nowhere else. The presidential plenipotentiary representatives have failed to construct an executive chain of command linking all levels of the state apparatus in their federal districts. The current carve-up of national television channels will, it seems, lead to the concentration of these resources in the hands of the main oligarchical clans. And there is no evidence as yet that the recently formed Unified Russia party will provide a reliable buttress for presidential power; its functionaries, as before, prefer to consult with the presidential administration rather than take the initiative into their own hands.

Andrei Ryabov is scholar-in-residence at the Moscow Center of the Carnegie Endowment for International Peace. He contributed this comment to The Moscow Times.