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International Periscope and Perspectives

/ Source: Newsweek International

Russia: The Putin Strategy | Banking: Cleaning House | Global Buzz: The Bluff And Bluster Edition | Northern Ireland: Taking the Hard Line | Technology: Seeing Eye To Eye | Health: Chewing The Fat | Business: A Card in a Compact Disc | China: Canon of Corruption | Q&A: Sting | Perspectives


The Putin Strategy

The big question in this Sunday’s parliamentary elections is not whether supporters of Russian President Vladimir Putin will dominate their opponents, but what Putin will do with the victory. To push through his ambitious second-term agenda, Putin needs a strong election showing from United Russia, the party handcrafted by the Kremlin over the past four years to give him an easy legislative ride. With GDP growing around 6 percent this year, Putin pledges to make sure ordinary citizens share in the country’s growing prosperity. Teachers, police and soldiers will see a pay increase, he says. There will be improvements in basic infrastructure, such as heat and running water in dirt-poor provinces. In the budget next year, Putin plans to spike an unpopular 5 percent sales tax and to create a so-called stabilization fund from windfall oil revenues.

Putin’s first post-Dec. 7 moves, though, will likely include some ministerial housecleaning. As the top-ranking Yeltsin holdover, Prime Minister Mikhail Kasyanov heads the list of those predicted to go. Putin wants his own man in the spot, someone like Sergei Ivanov, a friend and fellow former KGB officer currently in charge of Russia’s ragtag military. Another leading candidate is Finance Minister Alexei Kudrin, a liberal economist favored by the business community.

Putin also wants to make the Russian civil service more efficient. In doing so he would be going after the very power base that’s set to deliver him the new Duma. His United Russia party draws much of its strength from “administrative resources,” a euphemism for those millions of people on the government payroll who are expected to vote as they are told. Still, if Putin uses Russia’s $89 billion budget to pay more money to fewer, more competent bureaucrats, he’ll be on the road to creating an effective federal government, and one that is far less frightening to foreign investors.

Perhaps the biggest plays in Putin’s second-term game book involve Russia’s main moneymaker, the energy industry. Tapping public disdain for the country’s billionaire oilmen, Putin has told the oligarchs to pitch in. If the Kremlin and the new Duma turn that populist rhetoric into tax laws aimed at the oligarchs, Putin will have a powerful weapon to use on their holdings.

Another major play involves Russia’s largest company, Gazprom, which supplies Europe with one quarter of its natural gas. Foreign investors have been pushing Moscow to open up Gazprom more fully to investment for years. Putin is hinting he’ll do it, says Charles Ryan, head of the UFG investment bank.

There may also be darker items on Putin’s agenda. Some suspect that the mother of them all is to amend the Russian Constitution so that, come 2008, Putin could serve a third or even fourth term. Would he have 301 of the 450 votes required? If Putin delivers on his promises, more than a few Russians might wish he does.

—Frank Brown