The upcoming year will be of outmost importance for Russia’s future.
This is not – as one might expect – because of the presidential elections scheduled to take place on the 18th of March. The elections are devoid of any real intrigue. Instead, the importance of next year emanates from the fact that the power balance formed during Putin’s inevitable transition into his 4th term will shape Russian governance in coming years.
Informal elite groups have been competing for a place in Putin’s post-2018 ruling team for quite some time now, and they all have a long-term goal in mind. This team is expected to manage the country (while Putin increasingly distances himself from hands-on governance) and to produce a candidate to succeed Putin in 2024. Russia’s elite networks aim – at the very least – to make sure the latter choice is in line with their agenda.
The transition of power (even if a cosmetic one) in 2018 and the changes in the ruling elite will happen against a backdrop of slowing economic growth and depleting financial reserves, weak institutions, negative foreign policy inertia, and a risk of social tensions.
Points to watch
- The key intrigue of 2018 will be in the people that will accompany the President throughout his last presidential term. Those appointed to high-profile positions should be closely monitored, as they will be the key favourites for the 2024 transition.
- Changing demographic balance (as shown by the phenomenon of young protesters in 2017) and tired business are likely to increase pressure on the Kremlin. To respond to this pressure, Russian authorities will increasingly promote a new “agenda of the future”. As the appetite for change grows, the balance of power among elite networks might change in favour of those who can offer such an agenda, i.e. the liberals.
- In the unfavourable international context in which the Kremlin’s every step on the international arena is closely monitored, it is likely that we will see the importance of commercial diplomacy grow. In 2017, we saw national industry leaders such as Rosneft and VTB Bank involve in projects abroad, which ultimately promoted Russia’s foreign policy goals. This nascent trend should be closely monitored by investors to avoid associated reputational risks.