Putin Signals Perpetual Power With Shift to Premier (Update2)

By Henry Meyer

Oct. 2 (Bloomberg) -- Russian President Vladimir Putin unveiled a plan to adhere to the form of a democratic succession while dispensing with the substance.

Putin, 54, signaled his intention to remain in charge after the end of his presidential term in March by announcing his availability to lead the pro-Kremlin United Russia party in parliamentary elections in December. The president, barred by the constitution from seeking a third consecutive term, said it would be ``quite realistic'' for him to become prime minister instead.

With popularity ratings exceeding 80 percent in polls, Putin is likely to emerge from the parliamentary elections with enough support to push through constitutional changes to strengthen the role of prime minister if he chooses, analysts said.

``Putin will eventually become invulnerable, untouchable by the president,'' said Alexander Rahr of the German Council on Foreign Relations in Berlin.

Putin's plan would give him a degree of control rivaling that exercised by the most potent leaders of the old Soviet Union. He has already used his clout and popularity from eight years of economic growth to reassert state control over the energy and other industries, muzzle political dissent and increase his sway over the news media.

``He controls the process,'' Dimitri Simes, a Russia analyst who is president of the Washington-based Nixon Center, said in an interview. ``What we know is the outcome: He remains in power.''

Amending Constitution

Putin's strategy will probably be to seek amendments to the constitution, using his control of the legislature to give parliament, rather than the president, the right to nominate the premier, Yury Korgunyuk, an analyst with the Moscow-based research organization INDEM, said in a telephone interview.

Some Moscow-based analysts said Putin may run into resistance if he seeks to push too far. ``The people with power in the Kremlin may be happy to see some additional powers accruing to the prime minister, but would they support a radical change that would effectively see power shift from the office of the president to the prime minister?'' Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, said in an e- mailed note to investors.

``Right now, all of the important executive power in Russia is with the president,'' said Weafer. ``That is a situation that simply could not exist if Putin were to be prime minister.''

Premier's Powers

Under current Russian law, the prime minister has to seek the president's approval to appoint ministers. The ministers of defense, foreign and interior affairs and the head of the Federal Security Service report to the president, not the premier. The president has the right to dismiss the government.

If Putin makes major changes to Russia's system of government, this could be ``a very destabilizing move in the longer-term,'' said Christopher Granville, managing editor of London-based Trusted Sources, an analytical service on emerging markets. Putin might instead rely on his control of parliament to tie the hands of his successor, Granville said in an interview.

Putin's announcement came three weeks after he unexpectedly appointed as prime minister a longtime associate and little- known 66-year-old financial regulator, Viktor Zubkov, in the process instantly elevating him to the ranks of potential presidential successors.

Hints and Pledges

Putin has repeatedly ruled out changing the constitution to let him stay on as president for a third term and has promised to back one candidate to succeed him once the election campaign gets under way. At the same time, he has hinted that he might run again for the post at the next election, in 2012.

Korgunyuk cautioned that even a seemingly compliant successor might be tempted to resist a Putin power grab once in office. ``If Putin carries out this plan, he will face major obstacles,'' he predicted. ``The new president will be doing everything to unseat him.''

Stanislav Belkovsky, a former Kremlin adviser who heads the Moscow-based Institute for National Strategy, said a dual power structure would threaten a centuries-old Russian system of strong central leadership in the Kremlin.

``Putin is committing a big mistake, breaking with 1,200 years of Russian tradition,'' Belkovsky said in a telephone interview. ``It's the first step to a national catastrophe.''

Shares Rise

Investors, though, welcomed the prospect of a continued dominant role for Putin, who delivered annual average economic growth of 6.7 percent from 1999 to 2006. Russian stocks surged today on Putin's announcement, which came after the close of yesterday's trading in Moscow. The ruble-denominated Micex Index closed up 3.6 percent at 1,795.06, its biggest gain in almost two weeks. The dollar-denominated RTS climbed 3 percent to 2,108.57, surpassing its July 23 record close.

``Irrespective of one's view of Putin's democratic credentials, markets respect the stability and prosperity he has brought to Russia and should react positively to the latest development,'' Timothy Ash, an emerging-markets analyst at Bear Stearns & Co. in London, said in an e-mailed research note.

The developments are being closely watched in the West, where relations have chilled as Putin reasserted Russia's military might by restarting long-range bomber patrols and upgrading Russia's intercontinental ballistic missiles.

`A Close Eye'

U.S. State Department spokesman Tom Casey yesterday declined to comment on whether Putin's plans would give him too much control. ``We'll be keeping a close eye on it,'' Casey said. ``But certainly to the extent that he's doing this within the context and limits of Russian law and Russia's legal system, that's certainly his choice to make.''

Vytautas Landsbergis, a Lithuanian member of the European Parliament who is on its foreign affairs committee, said: ``There is no democracy in Russia: that was stated very clearly yesterday.''

The Nixon Center's Simes, asked if anything could prevent Putin from retaining power, said no, ``unless you assume God is Russian. No one else.''

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net .

Last Updated: October 2, 2007 11:35 EDT

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