2008-02-28
The Russian presidential election will be held on March 2. Vladimir Putin, elected President in 2000, has been in power for two election periods and, according to the Russian constitution, cannot be elected for a third period.
He enjoys an outstanding support in Russia. In the opinion polls almost 80% of the Russians are favourable to his presidency. Approximately 1/3 of the Russian population wants him as President for life. Putin has declared a continued interest in exercising his influence on Russian politics in the future as well. The successor he has appointed Dmitrij Medvedev, has already announced his intention to appoint Putin as Prime Minister, should he be elected for president. In reality there is hardly any doubt that this will happen.
A question in this context is how the presidential election affects the corporate environment in Russia, particularly regarding foreign investments. Presently, the Russian economy is very strong, mainly thanks to high oil prices. Russia is the second largest oil exporter in the world and the largest producer of natural gas. Another strengthening factor in the Russian economy is that previous transitional problems during the 90’s, when the transition to market economy began, have been overcome. There are no signs indicating that the Russian economy will weaken in the short term. As long as oil prices are on a high level, the Russian economy remains stable. Even if there is a big need for restructuring Russian industry, foreign investments are pouring in, e.g. in the retail and property market.
The Russian elections will not change anything regarding the general financial development in Russia.
Dmitrij Medvedev has declared his intention to continue executing Putin’s strategy. He probably means it. As long as the new and the former Presidents have the same view on how politics should be managed, conditions for foreign investments in Russia are not going to change. It is not impossible however, that the situation might get complicated should they not share the same opinion. According to the Russian constitution, the political power resides with the President, who appoints and dismisses the Prime Minister. Should there be a difference in opinions, there is no formal doubt on who makes the decisions. In reality, however, Putin will most likely enjoy a strong support in the leading quarters of Kreml. A friction between the President and the Prime Minister could probably lead to internal power struggles, which could have a negative effect on the corporate environment in Russia. Right now, these are only theories. Medvedev’s opinion regarding these questions indicates a more liberal view on enterprise and foreign investments than Putin. When it comes to investments in so-called strategic sectors of the Russian economy, for example oil, gas, other natural resources and defence industry, there are plans to introduce limits on foreign participation. Medvedev will not likely make any changes in that respect.
In summary, for all practical purposes, it will be business as usual after the presidential election.