Due West: Kremlin Reshuffle or ‘Refluffle?’

© Photo : KommersantKonstantin von Eggert
Konstantin von Eggert - Sputnik International
The new government that Vladimir Putin was putting together for Dmitry Medvedev while the latter was talking to Barack Obama and the G8 leaders in the United States has finally been presented in Moscow.

The new government that Vladimir Putin was putting together for Dmitry Medvedev while the latter was talking to Barack Obama and the G8 leaders in the United States has finally been presented in Moscow.

Two-thirds are new faces and one-third is well-tested veterans of Moscow apparat battles. The promise of a major reshuffle by both Putin and Medvedev was seemingly fulfilled. However, only seemingly. This is very typical in the way Russia has been governed over the last 12 years: to change all, but change nothing.

Most of the new ministers were deputies to previous ministers, or heads of the so-called federal agencies – mini-ministries dealing with specifics of this or that sector. Their former bosses, like the much liked former Economic Development Minister Elvira Nabiullina or the much reviled former Education Minister Andrei Fursenko, relocated to the Kremlin to be assistants to the president. Their task will be to watch over their former fiefdoms and inform Putin what Medvedev's ministers are doing wrong, in their view. The real power over major economic decisions will now be vested in the Kremlin.

The appointment of a former deputy prime minister and one of the president's closest confidantes, Igor Sechin, as the CEO of the state oil giant Rosneft is very important. Together with the nomination of Medvedev’s former economics advisor Arkady Dvorkovich as deputy premier responsible for industry, including the energy sector, sends the clearest signal yet that all decisions relating to oil and gas will be made by the magic circle of people closest to Putin. Dvorkovich is not one of them, while Gazprom CEO Alexei Miller, Swiss-registered Gunvor company owner and trader Arkady Timchenko (Gunvor is a major reseller of Russian oil), and Igor Sechin are.

The new Rosneft CEO will be a particularly important figure. Against the backdrop of the continuing fall in Gazprom's exports to Europe, Sechin's task is to implement large-scale offshore projects in the Russian Arctic and Black Sea basins with Rosneft's new strategic partner: the U.S. giant ExxonMobil. His other job will be to develop assets abroad, including Western Texas and the Gulf of Mexico, that Rosneft acquires from Exxon under this deal.

There is, however, a stick in the spokes in those plans and that’s the decision of the international court in The Hague on the fate of Yukos assets, which form the mainstay of Rosneft's well-being after Yukos was forcibly expropriated by the Kremlin and its owner, Mikhail Khodorkovsky, was sent to jail. The Hague judges will be ruling on a suit by two Spanish retirement funds which claim that they lost up to $100 billion as a result of the Yukos seizure by Putin's men. Although few observers expect the amount to be awarded in full, even a fraction of it would be enough for former Yukos shareholders to try to impound Rosneft's assets abroad. The court decision is coming up sometime this year or possibly in 2013.

Putin's centralization policy and the demonstrative marginalization of Medvedev gives the president nearly total control over economic decision-making. He sees this as a key component of ensuring his main goal: hanging onto power indefinitely. As another important component of the political regime in Russia, fear, evaporates in Moscow and in the provinces, cash handouts and the boosting of social programs remain as a relatively secure guarantee of maintaining the loyalty of his core powerbase (civil servants, military, police, and retirees).

But this centralization is also fraught with risks. Too much “manual control” over the economy and keeping the opaque and inflexible state companies like Gazprom and Rosneft the way they are will impair the Kremlin's ability to react to major challenges of the global economy and global energy markets.

The shale gas revolution in the United States, Central and Western Europe, and most likely very soon in China, as well as the inevitable growth of the LNG market share may start impacting Russia's set economy much sooner than the Kremlin sages may think. There may well come a time when Putin might divest himself from the overall economic responsibility. By that time, I think, it will be too late. 

The views expressed in this article are the author’s and may not necessarily represent those of RIA Novosti.

What is Russia's place in this world? Unashamed and unreconstructed Atlanticist, Konstantin von Eggert believes his country to be part and parcel of the "global West." And while this is a minority view in Russia, the author is prepared to fight from his corner.

Konstantin Eggert is a commentator and host for radio Kommersant FM, Russia's first 24-hour news station. In the 1990s he was Diplomatic Correspondent for “Izvestia” and later the BBC Russian Service Moscow Bureau Editor. Konstantin has also spent some time working as ExxonMobil Vice-President in Russia. He was made Honorary Member of the Order of the British Empire by Queen Elizabeth II.

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