Putin Has a Plan to Keep Running Russia Without Being President

(Bloomberg Businessweek) -- Eight years ago, Vladimir Putin appeared to shed tears of relief as he thanked Russians for reelecting him president, despite a stint as prime minister that was marred by the biggest protests against his rule. By 2018, after he stormed to a second consecutive presidential term allowed under the constitution, there was more than a hint of inevitability to his being at the helm. He’s managed to run the country since 1999 by shifting back and forth between being prime minister and president to skirt term limits. When one reporter asked if he would return to the Kremlin in 2030 after he steps down from the presidency in 2024—the quarter-century point of his domination of Russia—Putin shot back defensively, “Am I supposed to be president until I am 100 years old?”

That’s become the question, however, as Russia’s longest-serving leader since Soviet dictator Josef Stalin moved on Jan. 15 to secure his power—possibly for life. He proposed sweeping changes to the 1993 constitution that would allow him to stay in charge even if he’s not president by boosting the powers of Russia’s parliament and the State Council, an advisory body. Under measures to be rushed through parliament by spring, the president will be weakened, limited to two terms total instead of two consecutive terms, a loophole Putin exploited. The State Duma, the legislature’s lower chamber, will get to approve ministers on the prime minister’s instructions, taking that privilege away from the president. “The State Council becomes something like a collective presidency,” says Andrey Kortunov, director general of the Kremlin-founded Russian International Affairs Council. Putin could become State Council head, parliament speaker, or take another influential post—and rule without being president.

For his allies, the prospect of a more permanent Putin is heartening. As State Duma Speaker Vyacheslav Volodin, a longtime supporter, once said, “There’s no Russia without Putin.” Putin’s maneuver could put him in place to join the long line of Russian rulers who departed the top job only in a coffin. And it may allow him to emulate Xi Jinping, 66, who got the right to retain power until he dies when China abolished presidential term limits in 2018. The Russian strongman, who’s repeatedly praised Xi’s leadership, held China up as a model of development at his marathon annual press conference in December, highlighting its progress in challenging the U.S. for leadership of the world economy.

Formally, Putin, 67, is sticking to the term limits of the post-Soviet democratic constitution, which he says is essential to avoid going back to Communist-era lifetime leadership. “It would be very worrying to return to the situation in the mid-1980s, when heads of state stayed in power until the end of their days, one after another,” Putin said on Jan. 18, when asked by a World War II veteran if he backed ending restrictions on presidential mandates. Still, he appears to be preparing the ground for a role as father of the nation—and preserving his legacy. Putin is looking to groom a pliable heir, likely from a generation of younger up-and-coming officials.

On the day Putin proposed the constitutional changes, he sacked Prime Minister Dmitry Medvedev, who’s loyally switched places with him, for a little-known technocrat who ran the tax service. But, having demonstrated his readiness to submit to Putin’s will, Medvedev might still have an outside chance to be the next president, despite his demotion to deputy head of the Security Council, according to Olga Kryshtanovskaya, who studies the Russian elite at the State University of Management in Moscow.

Putin’s ploy to keep control indefinitely was the deepest of secrets. Top officials were in the dark; even Medvedev was unaware of his looming ouster 72 hours before. It reflects the Kremlin boss’s conviction that he has a unique mission to guide Russia and cannot trust anyone else. A fitness fanatic who eschews alcohol, Putin intends to pull the strings until his dying day, even after he quits any formal government position, say two people close to the Kremlin, speaking on condition of anonymity. He can achieve this by acting as an arbiter for all other centers of power to make sure they compete with one another and come to him for support, they say. Putin’s goal is to coordinate all the branches of government “without having to deal with day-to-day affairs,” says Tatiana Stanovaya, head of R.Politik, a political consulting firm.

This bid for limitless rule reflects Putin’s global ambitions. Giving up the presidency will allow Putin, who’s focused increasingly on maximizing Russia’s influence, to distance himself from the mundane task of managing domestic needs. His stature began to increase when he stared down the West in 2014 by seizing Crimea and backing separatist rebels in eastern Ukraine to thwart Kyiv’s hopes of joining the North Atlantic Treaty Organization. Although the first annexation of territory in Europe since World War II prompted U.S. and European sanctions, it put Russia back in the geopolitical spotlight. “Putin sees himself as a global leader, one of the elder statesmen of the world, and that’s what he intends to remain, as president or in any other capacity,” says Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, which advises the Kremlin.

Putin’s clout increased after his 2015 intervention to rescue Syrian ally Bashar al-Assad made Russia a major power in the Middle East for the first time since the Soviet era—even as U.S. influence in the region was starting to fade. A year later he deployed undercover tools to aid Donald Trump’s election in an unprecedented challenge to the world’s sole superpower, according to an assessment by U.S. intelligence agencies—one dismissed by the Kremlin and the Trump White House.

Putin has found other ways to subvert America’s global leadership. Russia opened a rift within NATO by selling advanced air defense systems to Turkey, a member of the U.S.-led military alliance. It’s expanding into Africa, where it recently seized the initiative in efforts to resolve together with Turkey the conflict in oil-rich Libya. And even though the U.S. defense budget is more than twice Russia’s government spending, Putin has plowed resources into new-generation weapons. At his December press conference, he touted the world’s first deployment of hypersonic nuclear missiles, which could reach the U.S. in as little as 15 minutes.

Putin doesn’t have the economic heft of his Chinese counterpart. For now, as he tries to insulate his country against the dollar-dominated international financial system, Russia is running a budget surplus, has relatively little debt, and has amassed one of the world’s largest reserves of foreign currency and gold. It’s also brought down inflation from Argentina crisis-style levels in the 1990s to close to 3%. But the economy remains stuck in low growth. That’s a far cry from the first nine years of Putin’s rule, when rising oil prices and market-friendly policies powered a 7% average annual growth rate. Russia even came close in 2012 to matching the per capita gross domestic product of Portugal—a goal famously set by Putin just before he took over the presidency in 1999. For the past five years the economy has been in a rut, keeping growth to 1% to 2% for the foreseeable future, amid sanctions and relatively low oil prices exacerbated by an inefficient state-dominated model. The state’s share of the economy, including that of Kremlin-owned companies, could be as much as 60% to 70%, up from about 25% two decades ago, the government’s antimonopoly agency said last year. With the world’s economy as a whole expanding at about 3.5%, the International Monetary Fund expects Russia’s share of global GDP to drop to 1.7% in 2024, from 3% in 2013.

Still, most older Russians lived through the Soviet Union’s collapse in 1991, one that provoked an economic slump deeper than America’s Great Depression. To them, Putin remains a savior for reversing that chaos.

Nevertheless, after the recent stagnation, real incomes are languishing 10% below what they were before the annexation of Crimea. On the day he unveiled his power grab, Putin warned of a “direct threat” to Russia’s demographic future from depressed living standards. Birthrates, which went into a downward cycle in the 1990s, had begun growing again in the first decade of the 21st century. Last year, however, the expansion ended. The population is forecast to shrink by about 10 million from 146 million by 2050. That’s another blow to the economy, as the 75 million-strong workforce loses close to a million people a year. Migrants represent the only hope to replenish it, but Russia isn’t laying out a welcome mat. Indeed, it’s shutting doors.

Under Putin’s shake-up, Russian law will take priority over international obligations, allowing Moscow to ignore rulings from the European Court of Human Rights frequently sought by opposition activists. He also wants to ban top officials from having foreign citizenship or permanent residency and require anyone running for president to have lived an uninterrupted 25 years in the country.

Some observers place hope in the new prime minister, Mikhail Mishustin, who’s promised an injection of public spending and has vowed to work with business to bolster growth. Fluent in English, the 53-year-old has the reputation of an efficient bureaucrat and won plaudits for curbing the country’s infamous tax cheats by installing a nationwide computerized reporting system after he was appointed in 2010. “Mishustin revolutionized tax in Russia, where tax evasion has long been a national sport,” says Max Nalsky, co-founder of IIKO, a leading software provider for restaurants in Russia.

Mishustin hasn’t yet managed to eliminate graft in his agency, echoing a problem in the government and state administration, anticorruption campaigners say. “It’s obvious that Mishustin won’t change the course; he’ll do everything within the existing framework,” says Natalia Orlova, chief economist at Alfa Bank in Moscow, who rules out any significant acceleration in growth. “Our economic model is keeping the status quo. Nothing is going to change.”

Amid growing public dissatisfaction with the sluggish economy and lack of enthusiasm for Putin’s foreign adventures, his approval ratings have fallen to the levels before a patriotic frenzy in 2014 drove them up to almost 90%. While they remain just below 70%, that’s distorted by the lack of political competition and people’s reluctance to criticize the Russian leader over the phone. Protests have flared up again. Tens of thousands of people took the streets of Moscow in mid-2019 after authorities barred opposition candidates from municipal polls, and the unrest is spreading across Russia.

Outside the big cities, Russians have been voicing anger over bread-and-butter issues such as pensions, health-care cuts, and growing mountains of trash rather than over a lack of democratic rights. “People are just fed up at their low living standards—it’s a major threat to the existing political system,” says Mikhail Dmitriev, an economist who correctly predicted the biggest protests under Putin in 2011 and 2012. “If the population’s mood worsens, that will create huge risks.”

Russia has a history of rulers who stayed all their lives, but there are notable exceptions: reformists Nikita Khrushchev and Mikhail Gorbachev, as well as Putin’s predecessor Boris Yeltsin, who stepped down abruptly on New Year’s Eve 1999 as his health deteriorated, making way for the ex-KGB colonel. In the end, for all his calculations, Putin might face a challenge as shocking as his own sudden elevation to the pinnacle of power after Yeltsin’s unexpected resignation.

Putin may yet find himself limited by his own new rules. At a Jan. 22 public appearance, he said that Russia, with its huge territory and multi-ethnic population, “needs strong presidential authority.” Under his new plan, the president will retain control of the army and security services and the power to appoint the prime minister as well as dismiss the government. No president is likely to use these to Putin’s detriment—for now. But he’s ruled Russia for more than two decades. Says Gleb Pavlovsky, a former Kremlin adviser often critical of the authorities: “Putin doesn’t understand that Russia will be entering a period in which he’ll be on his way out.” —With Evgenia Pismennaya

To contact the editor responsible for this story: Howard Chua-Eoan at hchuaeoan@bloomberg.net

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