Bloomberg News

Putin Plans to Roll Out Version 2.0 to Stem Russian Unrest

December 19, 2011

(Updates with comment from Putin on protests in ninth paragraph.)

Dec. 8 (Bloomberg) -- Prime Minister Vladimir Putin plans to change his public image after more than a decade as Russia’s top politician to stem discontent over Dec. 4 elections that may hurt his bid to return to the Kremlin.

Putin, 59, who is running for the presidency next year, told party officials in charge of regional outreach on Dec. 6 that he is willing to change his stance on “strategic priorities” and overhaul his Cabinet, according to a transcript published by the government.

In an election marred by complaints of violations, including ballot-stuffing, the ruling United Russia party lost 12 million votes, or more than a quarter of the support it garnered four years ago. Three nights of protests since the balloting sent stocks and the ruble tumbling.

“We’ll see the new Putin before the elections, 100 percent,” Sergei Markov, a former United Russia Duma deputy who heads the Institute of Political Studies, said yesterday in a telephone interview. “If nothing is done, the downward trend will continue. Putin must stop it.”

Russian stocks rose after dropping to the lowest level in more than a week yesterday. The Micex Index gained 1.3 percent to 1,467.66 by the 1:33 p.m. in Moscow. The ruble was little changed at 31.3025 per dollar.

Moscow, St. Petersburg

Thousands of people took to Moscow streets in the two days after the vote to protest election results, with another mass rally planned. Police said they also detained about 90 people at unsanctioned demonstrations last night in the capital and St. Petersburg, Russia’s second-largest city. About 300 people were detained in Moscow in each of the previous two evenings.

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. Observers noted evidence of ballot-box stuffing and other irregularities at the polls, it said.

The Solidarity movement, an umbrella opposition group, plans to stage a rally on Dec. 10 near the Kremlin, which may attract 10,000 people or more, Olga Shorina, a spokeswoman for Solidarity, said in a telephone interview yesterday.

Russians have the right to protest provided that they act within the law, Putin told members of his All-Russia People’s Front today in Moscow. The group of supporters, which includes social and professional groups, was created this year to renew United Russia’s Duma ranks amid dwindling support for the party.

‘Shrinking Support’

“The election results clearly demonstrate the current regime’s shrinking support,” Vladimir Pantyushin, chief economist for Russia and the Commonwealth of Independent States at Barclays Capital in Moscow, said in an e-mail yesterday. “Without substantial political reforms, this trend is likely to continue, we believe, raising the risk of more violent and widespread protests in the near future.”

The improvement in living standards since Putin became president in 2000 means the demonstrations are “unlikely to pose a significant threat to the ruling elite,” Vladimir Tikhomirov, an economist at Moscow-based Otkritie Financial Corp., wrote in an e-mailed note yesterday.

“The average Russian has a great deal to lose and is therefore disinclined to take to the streets,” Tikhomirov wrote. “This makes the Russian situation completely different from the recent uprisings in the Middle East and North Africa.”

‘Putin 2.0’

The premier backed the presidency of Dmitry Medvedev after his maximum second-consecutive term ended in 2008. Putin’s support has waned as stalling wage growth and the government’s failure to curb corruption repels voters.

“Of course, people expect a Putin 2.0,” Dmitry Peskov, the premier’s spokesman, said in an interview with the British Broadcasting Corp. posted on its website on Dec. 5. “It’s obvious that the party will have to reinvent itself and Putin, as a candidate for another presidential term in this country, will have to present new ideas, proposals and make new alliances.”

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 tenure.

Gross domestic product of the world’s biggest energy exporter will rise as much as 4.5 percent this year after a 4 percent increase in 2010, the government estimates. Putin is seeking annual growth of between 6 percent and 7 percent to turn the economy into one of the world’s five largest.

‘Inner Need’

The diversification and modernization of the economy, which was set back to deal with the global financial crisis, should be resumed, Putin said on Dec. 6. He pledged to remain dedicated to serving the people.

“And then there are things that aren’t so fundamental, even of a strategic nature, related to priorities for development,” he said. “The inner need for those changes, the modernization of society, is of course becoming ever sharper. In that sense, we’re of course all changing, myself included.”

Putin may devote more time to public dialog on policy, according to Markov. He may also take more ideological positions, such as supporting traditional values, he said.

“Putin himself is fairly conservative, and while he’s someone capable of change, he’s less so than he used to be,” Igor Bunin, the president of the Center for Political Technologies, a Moscow-based research institute, said in a telephone interview yesterday. “His entourage is also conservative. There are basically no modernizing types left.”

Poll Lead

Putin would get 31 percent of the vote in a presidential election, compared with 7 percent for Medvedev and 8 percent for Communist leader Gennady Zyuganov, according to a Levada Center poll last month. A third said they were undecided. The Nov. 18- 21 poll interviewed 1,591 people and had a margin of error of 3.4 percentage points.

The Russian leader showed in 2009 that he is able to react “with pragmatism to economic problems that were threatening to become social and political problems,” Chris Weafer, chief strategist at Moscow-based Troika Dialog, said in an e-mailed note yesterday.

Putin “has to reposition himself and his policies,” Roland Nash, chief investment strategist at Moscow-based Verno Capital which manages $175 million of assets, said in a an e- mailed response to questions yesterday. “He will have to become more interventionist and more of a politician.”

--With assistance from Lyubov Pronina and Anton Doroshev in Moscow. Editors: Balazs Penz, Andrew Langley, Paul Abelsky

To contact the reporter on this story: 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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