November 14, 2005

Putin reshuffle sparks succession speculation

By Richard Balmforth

MOSCOW (Reuters) - Russian President Vladimir Putin
promoted his two closest allies -- his chief-of-staff and his
defense minister -- in a government reshuffle on Monday that
made both of them strong contenders to succeed him in 2008.

In televised comments, Putin said chief Kremlin aide Dmitry
Medvedev, also chairman of gas giant Gazprom, had become first
deputy prime minister in the government of Mikhail Fradkov.

Defense Minister Sergei Ivanov, a close political
confidant, will take on the extra job of deputy prime minister,
a rank already held by key liberal economic strategist
Alexander Zhukov.

Politicians and analysts said Putin's surprise move meant
it was now a straight choice between Medvedev and Ivanov as the
hand-picked successor to the presidency when he bows out in

"This decision effectively means the start to the
presidential campaign of 2008," said Dmitry Rogozin, who heads
the nationalist Rodina (Motherland) party.

"Vladimir Putin has effectively named his possible
successors for the future presidential elections," Nikita
Belykh, heads of the Union of Right-wing Forces, was quoted as
saying by Interfax news agency.

Sergei Sobyanin, currently governor of energy-rich Tyumen
region in western Siberia, was named new Kremlin

Both Medvedev, who has been in his present job for two
years, and Ivanov, Putin's friend from his days in the KGB
state security apparatus, have long been at the top of the list
of potential candidates to replace him.


Ivanov, 52, and Putin have known each other since the
1970s, both hailing from Russia's second city St. Petersburg
and both former KGB spies. Self-effacing and doggedly loyal to
Putin, Ivanov has repeatedly denied any ambitions for the
Kremlin top job.

Medvedev is a 40-year-old lawyer, also from Petersburg, who
started out in politics in the early 1990s in the ranks of
former city mayor Anatoly Sobchak's team alongside Putin.

Putin cannot stand for a third term under the constitution.
But it has always been clear he would want to hand-pick his
heir -- as he himself was chosen by former president Boris

Putin was head of the FSB state security force in August
1999 when Yeltsin appointed him prime minister. He went on to
win election as president the following March.

It was not immediately clear what the implications of
Monday's reshuffle were for Zhukov or for prime minister
Fradkov, a colorless technocrat who has failed to resolve
conflicting opinions in his government over the country's
economic direction.

But some analysts noted that Putin had not taken the more
clear-cut step of naming either Ivanov or Medvedev to be prime
minister -- a more obvious stepping-stone to Kremlin power --
and could be yet leaving his options open.

"It means Putin has two heirs, Ivanov and Medvedev, and he
wants to try them out ... Maybe Putin is not sure either will
do well," Sergei Gureyev, head of a graduate economic school,
told Reuters.

"If both fail he will choose someone else (to become prime
minister) in 2007. That is why it is reasonable to believe he
has not decided yet," Gureyev said.


Medvedev's appointment strengthens Gazprom, Russia's
largest company, as it opens up its shares to foreign
ownership, while some analysts saw Ivanov's promotion as a
balancing gesture to reassure Putin's old secret service

"Putin is trying to balance the two groups while also
hoping to create a more effective administration," said Tim
Ash, emerging markets analyst at Bear Stearns in London.

Others said it was clear that Fradkov's days as prime
minister were numbered.

"It is possible there will be other changes. Fradkov could
be moved," former economy minister Yevgeny Yasin told Reuters.

Financial analysts said the reshuffle to strengthen the
cabinet was bullish for Russian stocks, which rose by 2
percent, as it could signal an end to the policy drift that has
prevailed since Putin named Fradkov premier in early 2004.

"If Putin exerts greater influence on the government
through his allies things can only get better," said Florian
Fenner at UFG asset management. "The market is up a bit but I
don't expect this will cause it to take off."

(Additional reporting by Julie Tolkacheva, Elif Kaban,
Andrew Hurst and Douglas Busvine)