Bloomberg News

Putin May Co-opt Growing Duma Opposition to Help Kremlin Bid

December 13, 2011

(Updates markets in sixth paragraph.)

Dec. 7 (Bloomberg) -- Russian Premier Vladimir Putin may co-opt his strengthened parliamentary opposition on issues from foreign policy to taxes, smoothing his return to the presidency next year, policy makers and political scientists said.

The Communists, the nationalist Liberal Democrats and the Just Russia party won a combined 212 seats in the 450-member State Duma, the lower house of parliament, as discontent with stalling wage growth eroded the support of Putin’s United Russia. Thousands of people have been pouring on Moscow’s streets over the past two days to protest election results, with another mass rally planned for Dec. 10.

Putin, 59, who wants to return to the Kremlin in March, may seek to broaden his support in the legislature as he works to shore up his backing after United Russia’s biggest election setback since it was created a decade ago. The Duma opposition’s ties with the government may guarantee their cooperation, said Kirill Rogov, an economist who works for the premier.

“They aren’t opposition parties as such and are well enough integrated in the current political system, so they pose no threat to the political regime,” Rogov, who is a member on one of the panels reviewing the government’s Strategy 2020 for Putin, said in a telephone interview yesterday.

Stocks Tumble

Russian stocks fell the most in two weeks yesterday, tumbling 4 percent, after Standard & Poor’s said it may cut the credit ratings of 15 euro countries and police detained protesters in Moscow during a second night of rallies over the election.

The Micex Index was little changed at 1,458.42 at 2:27 p.m. in Moscow. OAO Gazprom, Russia’s gas-export monopoly, was down 0.8 percent. The dollar-denominated RTS Index was little changed at 1,486.58 after retreating 4.7 percent yesterday.

The Solidarity movement, an umbrella opposition group, plans to stage a protest rally on Dec. 10 on one of the squares bordering the Kremlin, which may attract no less than 10,000 people, Olga Shorina, a spokeswoman for Solidarity, said by phone today.

Just Russia and the Yabloko party will take part in the demonstration, she said. About 1,000 protesters have been detained so far, according to Shorina.

‘Snowball’

“Investors are concerned that this will snowball into a concerted display of mass popular dissent,” Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said in an e-mail. “In a country with a history like Russia’s it’s only sensible to pay attention to developments like this, but perspective needs to be maintained.”

The parliamentary opposition supported the Kremlin, even with its two-thirds majority in the past four years, on “politically important” occasions such as extending the terms of the president and the State Duma and the recognition of two regions that broke away from Georgia, Stanislav Belkovsky, an analyst at the Institute for National Strategy in Moscow, said in a telephone interview yesterday.

“Whenever the parliamentary opposition’s support was needed by the Kremlin, the Kremlin got it,” he said. “Always and without exception. United Russia could have passed the laws unilaterally, since it had more than 300 seats, but politically it was important that the opposition parties also supported the amendments.”

In August 2008, 447 of the Duma’s 450 deputies voted to recognize South Ossetia and Abkhazia as independent states, with no votes against or abstentions. Three months later, 392 lawmakers were in favor of extending the terms of the parliament and the president, with 57 Communists voting against it.

‘Coalition Bloc’

United Russia will have to enter into “coalition bloc agreements” to execute its policy agenda in the new parliament and avoid being “bogged down” by disputes, President Dmitry Medvedev, head of United Russia’s party list, told supporters in Moscow on Dec. 4 after balloting ended.

The ruling party may opt to ignore the opposition agenda and continue to use its parliamentary majority to adopt its initiatives, Sergei Markov, a pro-government lawmaker who advises the Kremlin, said in a telephone interview yesterday.

‘Absolute Majority’

“United Russia will have an absolute majority in the Duma and can adopt all laws including the budget, unless it’s a constitutional change, singlehandedly without any need entering any coalitions,” Markov said.

The election lacked fairness as United Russia benefited from uneven access to state resources and media coverage, the Organization for Security and Cooperation in Europe said in a Dec. 5 report on the vote. The rules were also stacked against the parties that were the most critical of the Kremlin, it said.

“These elections were like a game in which only some players are allowed on the pitch, and then the field is tilted in favor of one of the players,” Heidi Tagliavini, head of the watchdog’s observation mission, said in a statement. “Although the choice was limited and the competition lacked fairness, voters were able to come out and have their voices heard.”

As the Communists, who got 19.2 percent of the vote and Just Russia, which won 13.2 percent, campaign for increased social spending, the Kremlin may have to compromise on some budget measures to win their support, said Yevgeny Volk, an analyst at the Heritage Foundation research group in Moscow.

‘Lobbying Capability’

The opposition’s “lobbying capability increases when it comes to concrete economic policy.” Rogov said. “They will compete in populism on the economic field.”

After balancing this year’s budget, Russia will probably run a 2012 deficit of 1.5 percent of gross domestic product, Putin said Nov. 16. The country, which posted budget surpluses between 2000 and 2008, faces deficits of as much as 3 percent through 2014 as oil prices fall, presidential aide Arkady Dvorkovich said in June.

The Communists are proposing nationalizing natural resources and oppose state asset sales. Just Russia, which was set up with Kremlin support before feuding with the government, campaigned for increased social spending. The Liberal Democrats have also criticized state asset sales as “the complete theft of state property.”

“The Duma has become more leftist, more populist,” said Volk at Heritage. “It is a signal that people want more social benefits. The degree of opposition is insignificant but no one wants to compromise themselves in front of the electorate.”

Policy areas where United Russia is able to co-operate with the opposition may include taxes on the rich, he said.

Just Russia is ready to join coalitions with other factions that support its initiatives, leader Sergei Mironov, who wants to run for president next year, said on Dec. 5, RIA Novosti reported.

The three parties will “dance to the tune of United Russia,” said Boris Nemtsov, former deputy prime minister under the ex-President Boris Yeltsin, whose opposition Parnas group was banned from the elections.

--With assistance from Denis Maternovsky and Ilya Arkhipov in Moscow. Editors: Balazs Penz, Andrew Langley, Paul Abelsky.

To contact the reporters on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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