Magazine article Global Finance

Kremlin Set to Tighten Its Grip

Magazine article Global Finance

Kremlin Set to Tighten Its Grip

Article excerpt

Expect to see more of the same in Russia in 2005, only louder, brighter and bigger: a more powerful Kremlin, an economy that continues to be dominated by commodities, and a risky environment for investors-although one also offering significant potential reward.

Russian President Vladimir Putin will continue to centralize power within the Kremlin in 2005. "With non-existent public opposition, a deeply demoralized and scared corporate sector, a weak parliament and looming changes to electoral law that will mean that regional governors will no longer be elected, the Putin regime will extend its control over all spheres of public life," says Alexander Bim, a leading political analyst with IMAGE-Contact Consulting Group in Moscow.

Putin's plans post-2008, when his second term is scheduled to come to an end and he is constitutionally mandated to step down, will be a heightened focus. "[Putin's] behavior just does not suggest that he has the sense of urgency that one would expect from a leader realizing that he has onthree years left to enact his grand plans," observes Alexei Moisseev, an economist at Moscow brokerage Renaissance Capital. He suggests Putin may try to engineer the election of a trusted ally as president in 2008-and then take up the reins again in 2012. With a oneterm gap, Putin would not violate the letter of Russia's constitution, which states that an individual cannot be president for more than two consecutive terms but does not specify any limit on total number of terms.

Economic Reform Stalls

The numerous reforms critical to the process of removing the remaining shackles of socialism from Russia's economy have stalled-and won't get much more than lip service in 2005. Natural monopoly restructuring, a serious revamping of the banking system, and housing services reform are just a few of the issues that will continue to languish on the Cabinet's agenda. …

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