Bloomberg News

Putin’s Hold on Parliament Weakens as Communists Advance

December 13, 2011

(Updates with protest rally starting in 24th paragraph.)

Dec. 5 (Bloomberg) -- Prime Minister Vladimir Putin’s hold on parliament weakened as opposition to his 12-year rule grows amid his campaign to regain the presidency in March.

Putin’s United Russia won 49.5 percent of yesterday’s vote for the State Duma, down from 64.3 percent in 2007, the Central Election Commission said, citing a preliminary tally. The results give United Russia 238 seats, or 52.9 percent of the 450-member legislative body. The Communists polled second with 19.2 percent, up from 11.6 percent four years ago, boosting the number of their seats to 92 from 57. Turnout was 60.2 percent.

“This is a shift in the Russian political environment,” said Masha Lipman, an analyst at the Moscow Carnegie Center. “Life will no longer be as easy for the Kremlin,” she said in an interview with Bloomberg Television. “Before, it enjoyed a political monopoly on decision-making, but this doesn’t seem to be the case anymore.”

United Russia’s loss of a two-thirds majority, which allowed it to change the Constitution unilaterally, is the first time its support declined in a nationwide vote since it was set up a decade ago. Putin, 59, will have to rely on support from other parties for major legislative initiatives, which may prevent him from making unpopular cuts in social spending or raising the retirement age to balance the budget.

‘This Is Normal’

“Given the new composition of the Duma, on individual issues and on certain questions, we will have to enter into coalition bloc agreements,” President Dmitry Medvedev said at the party’s campaign headquarters late yesterday. “This is normal. This is parliamentarianism. This is democracy.”

The new legislature will be “more entertaining and energetic,” Medvedev said today at a meeting with supporters. United Russia secured a majority “that will allow us to work calmly and smoothly, maintaining stability,” Putin said at a government meeting today.

The ruble dropped 0.1 percent to 30.8720 per dollar at the close of trading in Moscow, extending its decline so far this year to 1 percent, heading for a fourth consecutive year of losses. The results of the vote may be “slightly negative” for the Russian currency, Viktor Szabo, who helps manage about $7 billion of emerging-market debt including Russia’s ruble Eurobond at Aberdeen Asset Management in London, said by phone late yesterday.

Russia’s $3.5 billion of Eurobonds due 2020 rose for a third day, pushing the yield down eight basis points, or 0.09 percentage point, to 4.262 percent. The yield has fallen 76 basis points overall in 2011.

‘Personal Defeat’

Putin handed the Kremlin over to Medvedev after his maximum second-consecutive term ended in 2008. His support has waned as stalling wage growth and the government’s shortcomings in curbing corruption repels voters.

“This is a personal defeat for Putin,” said Dmitry Oreshkin, an independent political analyst in Moscow. “He understands that his popularity is falling and it’s falling increasingly fast.”

Two other parties scored above the 7 percent threshold for proportional representation in the legislative body. Just Russia, which was set up with Kremlin support before feuding publicly with the government and campaigns for increased social spending, gained 13.2 percent of the vote, up from 7.7 percent in 2007. Nationalist Vladimir Zhirinovsky’s Liberal Democratic Party, or LDPR, garnered 11.7 percent, up from 8.1 percent.

‘Big Surprise’

Just Russia’s performance was “a big surprise since they were more or less written off a few months ago,” said Marcus Svedberg, chief economist at Stockholm-based East Capital, which manages about 5 billion euros ($6.7 billion).

“United Russia should in any case be able to continue to rule but the election results show that the electorate is growing increasingly impatient and frustrated with the ruling elite,” Svedberg wrote by e-mail.

Medvedev, whom Putin plans to appoint prime minister after March presidential elections, may take over as leader of United Russia “within several months,” Sergei Naryshkin, head of the presidential administration, said on state TV yesterday.

Putin, speaking after Medvedev, called the results “optimal,” saying voters chose to maintain United Russia’s role as the “leading” political party.

‘Stable Development’

“With this result, we can guarantee the stable development of our state,” Putin said.

The premier warned last week against “smashing” the parliament’s unity and suffering the political paralysis afflicting Europe and the U.S. as Russia seeks to avoid contagion from the euro region’s debt crisis.

United Russia’s “results are obviously lower than expected, so the market could potentially interpret this as slightly negative,” Ivan Tchakarov, chief economist at Renaissance Capital in Moscow, said by phone yesterday. “But not massively so.”

In the Russian capital, Europe’s largest city, United Russia got 27.5 percent, just ahead of the Communists’ 25.5 percent, according to an exit poll by the Public Opinion Foundation.

Opposition parties complained of violations during the election, including ballot stuffing and misuse of absentee ballots. Before the poll, the opposition also accused authorities of detaining their candidates and activists and seizing campaign material.

‘Fair, Just and Democratic’

The election was “absolutely fair, just and democratic elections,” Medvedev said today. “Some violations were registered but according to observers, there weren’t any abuses that could have influenced the outcome of the vote,” said Duma Speaker Boris Gryzlov of United Russia.

The vote lacked fairness as United Russia benefited from uneven access to state resources and favorable media coverage, international monitors said. Observers from the Organization for Security and Cooperation in Europe noted “serious indications of ballot-box stuffing” and other violations, the watchdog’s Office for Democratic Institutions and Human Rights said today in an e-mailed statement.

Monitors from the OSCE visited 150 stations, and assessed the counting at 34 of them as “very bad.” A Russian vote- monitoring watchdog, Golos, received 1,500 abuse complaints. Putin’s party would have garnered about 30 percent of the vote without the procedural irregularities, Alexander Kynev, head of Golos’s analytical department, said today.

‘Shame’

Thousands of protesters flanked by hundreds of riot police converged on a boulevard in central Moscow tonight, chanting “Shame” and holding posters that read “Russia will be free.”

“There are so many of us, and that means we won,” Boris Nemtsov, an opposition leader and former deputy prime minister under the late President Boris Yeltsin, told the crowd. “Putin knows he lost,” said Vladimir Ryzhkov, a leader of the pro- democracy Parnas group.

About a dozen people, including journalists, were detained by the police when protesters tried to move to Lubyanka square, near the headquarters of the Federal Security Service.

Putin would get 31 percent in a presidential election, compared with 8 percent for Communist leader Gennady Zyuganov and 7 percent for Medvedev, according to a Nov. 18-21 Levada poll. A third of respondents in that survey said they were undecided.

‘Dissatisfaction’

“Dissatisfaction with the level of wages and a distrust of power as venal and detached are directly reflected in United Russia’s approval rating,” Grigoriy Kertman, the Public Opinion Foundation’s chief analyst, said before the vote.

Real wages increased an average of 15 percent a year between 2000 and 2008, according to data compiled by Bloomberg. Including declines for much of 2009, growth has averaged 1.5 percent since.

Russia placed 143rd of 182 surveyed countries in Transparency International’s 2011 Corruption Perceptions Index. Russia is the world’s most corrupt major economy, with higher levels of graft than in Pakistan, Cameroon and Niger.

During Putin’s two terms as president, he worked to centralize power and increase state ownership of the country’s biggest companies. Buffeted by a booming global economy, Russia’s economic growth averaged 7 percent a year during his 2000-2008 tenure.

Gross domestic product of the world’s biggest energy exporter will increase 4.1 percent this year after 4 percent last year, the government estimates.

“Of course popular discontent is boiling over but Putin will continue to keep power in his hands,” said Mikhail Kasyanov, a former prime minister under Putin who is now an opposition figure.

--With assistance from Henry Meyer, Ilya Khrennikov, Scott Rose and Jack Jordan in Moscow. Editors: Balazs Penz, Paul Abelsky, Andrew Langley

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Lyubov Pronina in Moscow at lpronina@bloomberg.net

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


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