VZCZCXRO8344
RR RUEHDBU
DE RUEHMO #3335/01 0900906
ZNY CCCCC ZZH
R 310906Z MAR 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 3312
INFO RUCNCIS/CIS COLLECTIVE
RUEHXD/MOSCOW POLITICAL COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 04 MOSCOW 003335 

SIPDIS 

SIPDIS 

E.O. 12958: DECL: 03/30/2016 TAGS: PGOV ECON PINR RS

REF: A. 05 MOSCOW 14734 B. MOSCOW 1082 C. MOSCOW 1434 D. 05 MOSCOW 15735 E. MOSCOW 3218 Classified By: Ambassador William J. Burns. Reasons: 1.4 (B/D). 

¶1. (C) SUMMARY. In the months since President Putin's November 14 personnel reshuffle that moved Dmitriy Medvedev and Sergey Ivanov into succession spotlight, political discussion has centered on how that move is playing out. Most observers continue to accept Putin's word that he will step down at the end of his term. They are divided over whether Medvedev will ultimately benefit from having been assigned to oversee Putin's national priority projects. While Sergey Ivanov has taken some serious hits (on, e.g., military "hazing" excesses), he is fighting back, and most observers do not rule him out as a potential successor. Discussion also includes other possible contenders, with Dmitriy Kozak and Sergey Sobyanin appearing more frequently than previously. The general view is that all those considered even potential contenders face enough serious pitfalls to preclude confident predictions about who will ultimately grab the brass ring. Meanwhile, the Kremlin is working in overkill mode to neutralize any threats to its succession scenario, notably from Dmitriy Rogozin and Mikhail Kasyanov. The preoccupation with succession politics, and an attendant increase in infighting over politics and assets, leaves less Kremlin time and energy for policymaking. END SUMMARY. 

¶2. (C) On November 14 Putin shook up the political scene with a major personnel reshuffle in the Presidential Administration (PA) and government (ref A). Over the past four months, that reshuffle has been the primary point of reference in discussions of the succession, as that issue increasingly dominates the domestic political scene. . 

PUTIN, MEDVEDEV AND SERGEY IVANOV --------------------------------- 

¶3. (C) Most observers continue to see the November reshuffle as confirming Putin's commitment to step down at the end of his current term. In a meeting with the Ambassador, Norilsk Nickel owner Vladimir Potanin said Putin remains determined to leave office in 2008. Ekho Moskvy radio station head Aleksey Venediktov shared that view, telling us Putin is increasingly tired of the presidency. Venediktov believes Putin's heavy focus on energy issues reflects a plan to transition to a lucrative position in the energy sector once he departs the Kremlin, leaving himself the option of running for president again in 2012. (Note. The Constitution bans more than two successive terms as President, but would not ban a non-consecutive third term. End Note) Other scenarios -- all equally speculative -- continue to circulate about Putin's post-presidency plans. No one is entirely sure Putin will step down, however, with Moscow Carnegie Center's Aleksey Arbatov, for instance, casting doubt on the reports that Putin is tired of his position and predicting that Putin will find a way to stay on. 

¶4. (C) Dmitriy Medvedev was initially seen as the big winner in the November reshuffle. By moving him from PA chief to First Deputy Prime Minister and above all by placing him in charge of the national priority projects, Putin appeared motivated by a desire to give Medvedev a higher public profile and to increase his popularity as a way to lay the groundwork for presidential anointment. Over the last few months, Medvedev has sought to take advantage of the opportunity, seemingly trying to cast himself as a president-in-waiting. When PM Mikhail Fradkov has been away from Moscow, Medvedev has made a point of running the Cabinet and ensuring that the media covers his activities. A Center for Political Technologies (CPT) study noted that Medvedev has tried to adopt Putin's leadership style, brusquely giving orders to Cabinet members to demonstrate that he is in charge, although he has not always done so persuasively. With the trappings of office, including an honor guard, Medvedev attempted to "look presidential" when he recently welcomed visiting Energy Secretary Bodman to the Kremlin. (Olga Kryshtanovskaya, a sociologist specializing in elite politics, has recently written that Medvedev's televison appearances have left the impression of weakness and indecisiveness, while Sergey Ivanov has more successfully captured the "presidential" style that reminds viewers of Putin.) In meetings with the Ambassador, Medvedev has been very down-to-earth and focused on tangible progress on the national priority projects. 

¶5. (C) Heading the national projects initiative offers MOSCOW 00003335 002 OF 004 Medvedev an opportunity to gain popularity, but it comes with pitfalls, as many observers are underscoring. Mastering the new bureaucracy emerging around the national projects, as well as dealing with the old one that is still addressing the four project areas, is a significant bureaucratic challenge,Qnd Medvedev has already publicly complained about unjustifiable delays. Potanin told the Ambassador that of the priority projects, only housing offers any real chance of demonstrating significant progress. Some think Medvedev was put in charge of the national projects to limit corruption. Particularly for that reason, a corruption scandal involving the projects would be a serious failure, even if Medvedev himself were not accused of wrongdoing. The National Strategy Council's Iosif Dyskin, an advisor to presidential contender Vladimir Yakunin, predicted to us that such scandals would emerge over the next few months, sullying Medvedev's reputation even though he would not be directly implicated in corruption. 

¶6. (C) Meanwhile, Medvedev must deal with political infighting with potential rivals. Venediktov told us how ill feelings arose in the Kremlin when Medvedev decided that, by virtue of being First DPM, he should have almost as large a staff as Fradkov. Seeking to spite Medvedev and deny him slots for some trusted staffers, Fradkov pared down his own apparat, forcing Medvedev to lessen his demands, Venediktov related. Fradkov has also sought to hinder Medvedev by assigning him extraneous tasks that distract from his work on the national projects, such as insisting that Medvedev be put in charge of the campaign against avian flu, which offers little political gain if the disease doesn't spread -- but much room for blame in the event of a serious outbreak. 

¶7. (C) In another example of infighting, reports surfaced that Boris Kovalchuk, the 28-year-old son of Putin insider Yuriy Kovalchuk, would be appointed to head the newly formed department in charge of the national projects. Federation Council member Vladimir Slutsker echoed to us the view of many observers that the decision to install a young and inexperienced person to head a key department was meant to undercut Medvedev. The older Kovalchuk was not necessarily opposed to Medvedev but simply wanted to have his son installed in an important -- and lucrative -- position, according to Slutsker, who said others encouraged the idea to damage Medvedev. Venediktov, by contrast, told us that though the appointment might not encourage efficiency, Medvedev consciously accepted it to court Putin insiders such as the older Kovalchuk. 

¶8. (C) In sum, observers agree that Medvedev faces a tough road ahead, despite being given an early chance to succeed. Potanin told the Ambassador he thinks Medvedev will likely become PM, possibly even this year, but the presidential succession would not necessarily follow. Venediktov believes Medvedev remains the front runner, and that if he does well, Putin may call early Duma elections to test Medvedev's political skills. 

¶9. (C) Although many thought he was advanced only into a "fall-back" position, Sergey Ivanov also gained from the November reshuffle, which made him a Deputy Prime Minister while he retained his position as Defense Minister. He has had some troubles since then, taking a public relations beating over a brutal hazing incident in Chelyabinsk (ref B) and sparring with the Military Prosecutor's Office. Venediktov told us that the extensive airing of the hazing story in the Russian media was clearly orchestrated by Ivanov's opponents. Observers believe Ivanov has fought back vigorously and effectively, and Putin recently broaden his control of the military-industrial complex, putting him in charge of the government commission that oversees that sector. Potanin told the Ambassador that Ivanov is smart and remains in contention. Our sense is that most other observers similarly do not rule him out. . 

OTHER CONTENDERS ---------------- 

¶10. (C) Given broad agreement that Medvedev and Sergey Ivanov could well falter, observers are also watching other potential contenders. Of late we have heard renewed discussion about Southern Federal District Presidential Representative (PolPred) Dmitriy Kozak. That may have been precipitated by press rumors, which could have been planted by Kozak's supporters, that Putin is considering installing him as Justice Minister in the near future. Potanin told the Ambassador that Putin will bring Kozak back to Moscow before 2008, and he should not be counted out for the succession. Aleksandr Machevskiy, the well-connected assistant to Presidential Envoy to the EU Sergey Yastrzhembskiy, noted to us recently that the Kremlin saw Kozak as having done a good MOSCOW 00003335 003 OF 004 job in the North Caucasus under extremely difficult conditions, and he hinted that Kozak's succession prospects had improved as a result. 

¶11. (C) We also have noted more talk recently about Sergey Sobyanin, the former Tyumen governor who was appointed to head the Presidential Administration (PA) in the November reshuffle, as a possible albeit still dark-horse contender. Although Venediktov downplayed Sobyanin's abilities in a conversation with the Ambassador last month (ref C), others have told us he is performing well and will soon begin to assert himself in the PA. Some of our reformist economic contacts express pleasant surprise with Sobyanin's willingness to consider tough structural reforms and support the national priority projects. Potanin told the Ambassador that Sobyanin, despite his low profile, was proving effective and warranted attention. Andrey Ryabov of the Institute of World Economy and International Relations told us Sobyanin was gaining strength in the PA and would soon begin to bring in officials from Siberia to take over mid-level PA slots currently dominated by St. Petersburgers. 

¶12. (C) Sobyanin's impact on the byzantine politics and power balance inside the PA, and any resulting impact on the succession, remain unclear. According to Ryabov, Sobyanin's growing influence will soon pose a threat to PA deputy head Vladislav Surkov. Putin chose Sobyanin to bolster the influence of regional leaders, Ryabov continued, and thus to counter Surkov's Moscow-dominated approach. Slutsker also told us that Surkov's star is on the wane, with Putin increasingly disappointed in him. Indeed, by some accounts, the publication of Surkov's February speech to the United Russia party (ref E) was aimed at least in part to shore up his position. 

¶13. (C) Russian Railroads CEO Vladimir Yakunin, a close friend of Putin, has kept an extremely low profile but continues to be seen by many observers as in the running. Dyskin, a close Yakunin advisor, told us Yakunin was keeping a low profile at present to avoid being attacked by opponents. At the same time, Yakunin was using his post at the railroads to build wide regional support and demonstrate managerial expertise. Dyskin suggested that Yakunin's camp was discreetly helping undercut potential rivals, including by helping to develop plans to set off a corruption scandal involving the national projects that would harm Medvedev. 

¶14. (C) The candiates mentioned above do not necessarily exhaust the range of possibilities. Kryshtanovskya continues to predict that still other names (e.g., head of the government apparat Sergey Naryshkin) will be surfaced as the process moves forward. . 

NEUTRALIZING THE OUTSIDE OPPOSITION ----------------------------------- 

¶15. (SBU) Even as the maneuvering among political insiders picks up steam, the Kremlin has made significant progress in recent months in neutralizing outsiders perceived as at least potential threats to secure Kremlin management of the succession process. Most recently, at a Rodina party congress on March 25, Dmitriy Rogozin stepped down as the party's top leader, being replaced by Aleksandr Babakov. Rogozin explained his move as a result of Kremlin-driven intrigues, a claim that virtually no observers doubt. By most accounts, Rogozin -- although a "Kremlin project" in 2003 to drain votes away from the Communist Party in Duma elections -- had become too popular and was trying to become independent of his original Kremlin sponsors. That precipitated the Rodina's removal from the ballot in the Moscow city elections and in seven of eight regional legislative elections on March 12, seen as a clear signal that the Kremlin would paralyze Rodina unless Rogozin stepped down. According to a CPT analysis, the Kremlin finds Babakov a more manageable figure, and will allow the party to continue functioning now that it no longer represents a serious political threat. 

¶16. (C) At the same time, the Kremlin has been working on various fronts to counter the efforts of former PM Mikhail Kasyanov to mount a presidential bid. Most recently, it was by all accounts the Kremlin that engineered Kasyanov's failure to take over the Democratic Party of Russia (DPR), helping forestall the already remote chance that the democratic camp as a whole would fall in behind the former PM (ref D). Indeed, the democrats continue to show meager prospects of uniting behind anyone. That wound appears to be largely self-inflicted, with Yabloko and the Union of Right Forces (SPS) far from showing signs of unifying despite cooperation in the most recent round of regional elections. The Kremlin, or at least elements therein, may also be MOSCOW 00003335 004 OF 004 contributing to the continued disunity, with Ryabov speculating to us, for instance, that new DPR leader Andrey Bogdanov had been instructed by the Kremlin to promote a unification within the democratic camp but without any big names. . 

COMMENT ------- 

¶17. (C) The succession process is now fully underway, albeit in an early stage. The current focus remains on the two figures seen to have gained from the November reshuffle, but the prospects of both remain highly uncertain. For that reason, other political figures are being discussed, and the list of perceived candidates is likely to change with some frequency. Although reforms and policy initiatives considered or proposed in the period ahead may have substance in their own right, all will be viewed primarily through the prism of the succession, and many decisions will be taken primarily with an eye to their anticipated impact (positive or negative) on contenders for succession. Security Council head Igor Ivanov may have captured the situation best in a side conversation with the Ambassador when he said the Kremlin's preoccupation with 2007-08 distracts it from pursuing policies on their own terms. While focusing on the impact of their actions on potential contenders in the succession, many of the players will also look to feather their own nests while they know they are in a position to do so. And, Ivanov stressed, the process is only beginning and will not get better in the period ahead. BURNS	2006-03-31