Putin Returns to Power Amid Street Protests

Vladimir Putin said his return to the presidency heralded a “new stage” for Russia, reclaiming the pinnacle of the country’s politics as police detained hundreds of anti-government protesters.

“Today we begin a new stage in the nation’s development,” Putin said. “The coming years will determine Russia’s fate in the decades ahead.”

The Russian leader signed at least a dozen decrees yesterday within hours of being sworn in for his third term, assigning deadlines for priorities including state asset sales, improving the investment climate and job creation. Putin also nominated former President Dmitry Medvedev to be prime minister.

Putin, 59, inherits an economy with more difficult prospects than when he left the Kremlin in 2008, making it harder to soothe the domestic tension that brought tens of thousands onto the streets of Russian cities starting in December. Hundreds of opposition activists spent last night at a square in central Moscow to protest the formation of the new government, with police detaining the Left Front’s Sergei Udaltsov and anti-corruption blogger Alexey Navalny.

By signing the decrees yesterday, Putin “sends the message of ‘I am the president and I have a plan that I came with and I know what to do,’” Olga Kryshtanovskaya, a sociologist at the Russian Academy of Sciences, and a ruling-party member. “The second message is that ‘while some people are out on Bolotnaya’’ square ‘‘messing around, I’m getting down to business.’”

Crisis Impact

The European Union, Russia’s largest export market, is grappling with its worst crisis in decades just as the struggling world economy puts a cap on crude prices. That threatens his ambition of turning Russia into one of the world’s five largest economies by purchasing power by 2015.

The Russian leader benefited from an almost fivefold jump in Urals crude during his first stint as president, from 2000 to 2008. The surge swelled state coffers, allowing Russia to recover from its 1998 default and spend more on military, infrastructure and social programs. The main stock index soared more than 1,000 percent.

“Putin’s ability to provide stability thanks to high oil prices is drained,” Yulia Bushueva, who helps oversee $500 million at Moscow-based Arbat Capital Management, said by phone.

Prokhorov, Schroeder, Berlusconi

Putin took the oath of office in a ceremony attended by politicians and corporate executives. Billionaire Mikhail Prokhorov, who challenged Putin for the presidency, was in the audience, along with former world leaders including German Chancellor Gerhard Schroeder, now the chairman of the Russian- led Nord Stream gas pipeline, and Italian ex-Prime Minister Silvio Berlusconi.

State television showed helicopter footage of Putin’s motorcade passing through downtown Moscow’s deserted streets, blocked off by police. He marched through the Kremlin’s ornate ballrooms to Andreyevsky Hall, a tsarist-era throne room, before taking the stage.

Outside, about 120 people were detained for attempting to hold an unsanctioned rally yesterday, city police said. Twenty- nine officers were injured in clashes with anti-Putin protesters on May 6. More than 400 people were held after protesters began throwing rocks and flares, police said. Pro-Putin supporters gathered about 30,000 people on May 6, police said.

Opposition organizers said protest leaders were detained, including former Deputy Premier Boris Nemtsov. Police said 8,000 attended the rally, while organizers offered figures ranging from 20,000 to 100,000. Nemtsov was among those detained again yesterday.

Trust in Putin

Fifty-three percent of Russians say they trust Putin, with another 24 percent saying they partially do, the Public Opinion Foundation, a Moscow-based pollster, said May 3. That was up 8 percentage points from December and 17 percentage points lower than in 2008. The poll of 3,000 people was conducted April 28-29 and didn’t give a margin of error.

Putin’s ability to deliver on election pledges, reassert Russia’s dominance among neighbors and compete with the U.S. for global influence may depend on him finding the cash to pay for programs including a 23 trillion-ruble ($766 billion) military upgrade.

About half of Russia’s budget revenue comes from oil and gas, and Deputy Economy Minister Andrei Klepach estimated last month that the industry contributed 4 percentage points to the average 7 percent growth over the past decade.

$24 Oil

The price of crude rose from $24 the day Putin took charge to $117 when he left office, helping the country expand by an average 7.1 percent per year from 2000 to 2008 before the global financial crisis triggered a 7.8 percent contraction in 2009.

The Micex Index (VTBMICX), a ruble-denominated equities benchmark, surged 1,045 percent from 1999 through the end of Putin’s first two terms. The Standard & Poor’s 500 Index fell 4.9 percent over the same period.

The Micex fell 0.5 percent to 1,377.93 at 11:11 a.m. in Moscow after erasing this year’s gain with a 5.9 percent loss last week.

Putin targets economic growth of at least 6 percent per year after GDP rose 4.3 percent each in 2011 and 2010. Boosting the economy to 5 percent or 6 percent per year will be one of the new government’s biggest tasks, Finance Minister Anton Siluanov told reporters before the ceremony.

Jobs, Investment Ranking

Putin’s orders signed yesterday included a long-term economic program. The measures call on the government to help the economy boost labor productivity by half through 2018, add 25 million new high-quality jobs and push Russia to 50th in the World Bank’s Doing Business ranking by 2015, from 120th now.

Putin also told the government to develop a plan by Nov. 1 to sell off state holdings in non-commodities companies by 2016. The measure excludes the defense industry and natural monopolies. Companies controlled by the state must also plan to sell off “non-core” assets, according to the order.

With the budget slipping into a deficit and the current- account balance likely to turn negative in 2014 or 2015, Putin will face “a much more difficult time in his third term,” said Ivan Tchakarov, chief economist for Russia at Renaissance Capital in Moscow. “The economy remains his biggest challenge,” he said.

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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