James Sherr
Associate Fellow, Russia and Eurasia Programme

Russia's Prime Minister Vladimir Putin and President Dmitry Medvedev have announced their intention to swap places when the next presidential term begins in March 2012. There are two disturbing aspects of their decision. First, it is difficult to find anyone who had prior knowledge of it. The second is the casual way it was announced, as if the pretence of consultation no longer mattered.

The first part of the decision, Putin's return to the presidency, was widely expected. It probably says less about his personal ambition than his inability to find a safe pair of hands to maintain a system that he created and that might be heading for trouble. 

The second part of the decision, Medvedev's assumption of the premiership, was not widely expected. As president, Medvedev has not acquired independence, authority and a constituency of his own. As prime minister, he will be further diminished. This is unlikely to inspire a future Cabinet of Ministers, let alone the present one.

The system's one effective reformer, Finance Minister and Deputy Prime Minister Alexei Kudrin, served Putin loyally for twelve years, but his resignation last month underscores the distinction between the political elite, of which Kudrin seemed an indispensable part, and the power elite of which he was not. The latter have served notice on those who would challenge Russia's model of governance and economic tribute from within. So long as Kudrin did so, the reformist wing of the establishment could entertain hopes that the system would evolve into something better. That establishment has now been snubbed. Even if Medvedev turns out to be the fall guy and Kudrin the eventual heir, damage has been done.

President Obama and others in the West who invested political capital in Medvedev's 'liberal vision' of Russia have also been snubbed. Putin's recent call for a ‘Eurasian Union’ further tarnishes that vision. Anyone who has followed Medvedev's utterances on Russia's prerogatives in the former USSR will know that on this issue, there are no differences of principle between him and Putin. But there are differences in ingenuity, tenacity and ruthlessness, and this is likely to become clear in the months ahead.

Today the West is less prone to illusion about Russia's course than it was previously. But Western business remains a soft target. Two paradigms compete for their attention. The first, reiterated by Putin at the recent Moscow Investment Forum, is that business benefits from 'stability' (i.e. concentration of power). The second is that business and stability benefit when power is subordinated to law, property rights and the sanctity of contract. In Russia, it is the other way around, and there is no sign of this changing.

Another casualty of recent weeks, Mikhail Prokhorov, who resigned in indignation from the in-house opposition party, Right Cause, believes that Russia 'stands on the threshold of a tectonic shift in the composition of the country's elite'. If he is correct, it is possible that a counter-elite will form in the country for the first time since Putin came to power. If he is exaggerating, it does not alter the fact that Putin has narrowed the base of power. This spells trouble for Russia. Russia loves unified authority. But a growing number of Russians know that this is not what Russia needs.