May 21, 2007

Geopolitical Diary: Medvedev's Political Challenge

Source: Stratfor

May 22, 2007 02 00 GMT

Leading up to his departure in March, Russian President Vladimir Putin has shown an assertiveness not seen in Russia for decades. Putin wants to exemplify that he has created a unified Russia that is both domestically and internationally strong. But as he prepares to pass the reins to either of his expected successors, First Deputy Prime Ministers Sergei Ivanov and Dmitri Medvedev, it is notable that one of them has been absent for weeks -- Medvedev. Medvedev has recently faced new challenges to how he must wield his power and new blows to what Putin is willing to allow him to get away with. Now, if Medvedev is serious about taking Russia's top spot, he must regroup and move himself and his faction -- which includes energy giant Gazprom -- in a new direction.

For the past two years there has been a consensus that the Russian presidential race is between Ivanov and Medvedev. The two are not enemies within Putin's inner circle, though the political heavyweights behind them -- Vladislav Surkov and Igor Sechin -- most certainly are. Ivanov is the former defense minister and still rules over Russia's military, nuclear and security fields. Medvedev, on the other hand, is an economist and political mover of Gazprom.

Most eyes in Russia are focused on Medvedev, but this is not to say the public does not love, fear and respect Ivanov. However, Medvedev has captivated the Russian media with his youth and charm. He has been in front of the camera for many landmark Russian power plays, such as Russia's natural gas cutoff to Ukraine that affected Europe during the height of winter in 2006. This attention, on top of the fact that Putin has personally groomed Medvedev for nearly a decade -- as opposed to Ivanov, who had a career independent of the president until Putin's second term -- suggests that Medvedev is Putin's choice for Russia's top spot and that Ivanov will slide into the premiership.

However, at a time when Russia is pushing its weight around to show it is ready to retake its place as one of the world's leading powers, one would think Medvedev would be center stage for the fanfare. He was last publicly seen at Putin's state of the nation address when the camera panned to the audience to show Medvedev and Ivanov sitting side by side. But his obvious absence at some of Russia's largest moments since then, such as Victory Day, U.S. Secretary of State Condoleezza Rice's visit, German Foreign Minister Frank-Walter Steinmeier's visit and the tense EU-Russia Summit, are causing people to ask: Where is Medvedev?

The answer lies behind the scenes of Putin's expected departure. If Putin leaves his position to Medvedev, nothing would stop Gazprom from swallowing up the rest of Russia's energy infrastructure. However, Putin is trying to ensure balance and is strengthening Gazprom's rival, energy company Rosneft, before he leaves to ensure Gazprom is kept in check. Though Medvedev knew of Putin's plans to do this, it still must have come as a shock to see Rosneft take most of bankrupt Russian oil firm Yukos' assets in auctions over the past few weeks. Gazprom did snatch a few pieces, but the auction catapulted Rosneft into the position of Russia's largest oil company, and made it a power to reckon with.

For the past few weeks, Medvedev has been keeping his head down while Rosneft publicly rejoices in its victory and he and his political backer, Vladislav Surkov, determine how to proceed. Moreover, Medvedev needs to prove that Gazprom is still the Kremlin's most-valued asset and show Putin that he can rule a balanced Russian government.

Medvedev and Surkov are apparently looking to move Gazprom into large fields it has yet to attempt or dominate, such as coal, telecom and media. Gazprom is said to be the potential buyer of Russian telephone company Rostelcom; it is expected to take over Russian coal giant SUEK; and it also has been in secret negotiations to take over Germany's largest coal mining company, RAG. Medvedev is the one heading up these plans, which would diversify and enlarge Gazprom without directly competing with Rosneft.

But the issue remains: can Medvedev rein in his ambitions for Gazprom and its aspirations for total supremacy enough for Putin to give him the top spot? Medvedev already is missing some of Russia's most defining moments, while Ivanov has been basking in the spotlight. Medvedev has to find a way to balance his own agenda and Gazprom in Putin's master plan -- he cannot upset Surkov, hurt Gazprom's supreme identity or alter his strong public image. If Medvedev does not pull all this together by the end of the year, he could see himself missing not only media appearances, but also a spot on ballots in March.

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