THE DOUBLE-HEADED SUCCESSOR

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Analysts calculate the probability of successor scenarios

In the wake of United Russia’s congress and Vladimir Putin’s announcement that he may become prime minister, the situation has changed: the most likely construct for the transfer of power is a scenario in which Prime Minister Viktor Zubkov becomes president, and Putin takes his place as prime minister.


In the wake of United Russia’s congress and Vladimir Putin’s announcement that he may become prime minister, the situation has changed fundamentally: according to Tatiana Orlova, an analyst with the ING Wholesale investment bank, the most likely construct for the transfer of power (65% probability) is now a scenario in which Prime Minister Viktor Zubkov becomes president, and Putin takes his place as prime minister.

A less likely scenario (20% probability) would involve one of the former successor-candidates (senior deputy prime ministers Dmitri Medvedev and Sergei Ivanov, Regional Development Minister Dmitri Kozak) becoming president, with Zubkov as prime minister.

A low-probability scenario (5%) would involve one of the three abovementioned potential successors becoming president, with Putin as prime minister; even less likely (3%) is a scenario with Putin as prime minister and someone else (unidentified as yet) becoming president.

In Orlova’s view, even a “President Zubkov with unidentified prime minister” scenario would be more likely (7%), since it would be easier for Putin to run for president again in 2012 if he distanced himself from official power entirely.

Orlova maintains that the most probable scenario, “Zubkov as president with Putin as prime minister,” is definite enough to have a favorable impact on the markets already. Neither does it mean that two centers of power will emerge in the near future: Putin’s dominance is obvious. In the more distant future, if the office of prime minister is strengthened (Prime Minister Putin could easily achieve this), Russia would move toward becoming a parliamentary-presidential republic, like Ukraine. Orlova says that political stability could weaken if this happens, but it’s too early to predict how it might affect the economy.

Stanislave Ponomarenko, analytical department manager at ING Wholesale, explains that the Zubkov-Putin option has been selected as the most likely precisely because it entails the lowest risk of destabilization and alternative centers of power in the short term.

Roland Nash, chief strategist at Renaissance Capital, goes further: in his view, no dual power situation will arise after the election of 2008, because Vladimir Putin will continue to be the real leader, regardless of which official post he may hold. Nash warns that the “Zubkov as president with Putin as prime minister” option is by no means the one and only possible scenario.

Alfa Bank analyst Erik DePoy also maintains that the markets would react positively to the “Zubkov as president with Putin as prime minister” construct, with Putin retaining dominance: “They like Putin-era stability.” DePoy concludes that it’s generally pointless to guess what the future configuration will be: even in the Kremlin, almost no one knows what will happen.

Kirill Tremasov from the Bank of Moscow says that the “Zubkov as president with Putin as prime minister” option is regarded in the West as the most probable scenario, and investers consider it the optimal scenario for the markets.

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