Kremlin Changes to Stay the Same: Medvedev Inaugurated as Russia's Third President 

In a lavish ceremony staged in the Kremlin today Dmitry Medvedev made an assertive speech pledging prosperity for "great Russia". As the third president of the country since independence in 1991, Medvedev has an opportunity to shape Russia's course, although the actual degree of his authority is arguably smaller than presumed. In this piece, we propose that the emerging power configuration promises domestic policy continuity that is essentially favourable to foreign investment.

The Multi-Headed Russian Eagle

Medvedev's arrival in the presidential seat in Russia has been simultaneously smooth and controversial. The popular vote on 2 March proved a piece of cake, as he comfortably scored 70% of the popular vote. The high score, however, was not as much due to Medvedev's personal or political appeal to the electorate—he barely had an election programme—but rather owed much to the support of the formidable state administrative machine, and the personal endorsement of popular president Vladimir Putin of Medvedev as his preferred successor. Medvedev thus comes to the presidency as the front man of the ruling elite rather than the leader of a political force or bloc that has beaten its rivals in a popular contest. Hence, his actual powers and the ability to push forward his agenda will depend not only on the constitutional provisions, but also on how he handles the ruling elite.

Vladimir Putin is staying on as Prime Minister and leader of Russia's ruling party, United Russia. Despite pledges to avoid tinkering with the presidential powers, Putin has already moved a number of key functions from the presidency to premiership, of which the control over regional governors is of key importance. Medvedev will retain some crucial prerogatives, such as the formulation of Russia's foreign policy. The institutional configurations, however, are still secondary in Russia to actual practice, and given the undisputed personal authority of Putin and his obvious wish to continue shaping the country's course, as well as the hitherto apprentice position of Medvedev, much analytical and journalistic effort has been invested in figuring out the exact degree of power sharing between Putin and Medvedev, and the ability of each to shape Russia's present—an effort that we believe is somewhat misguided.

For all the institutional powers invested into the positions of president and prime minister, and the historical and cultural tradition of powerful rulers in Russia, it is essential to understand that the course of Russia's development does not rest solely in Putin and Medvedev's hands. Despite Russia's obvious democratic shortcomings, in which the lack of transparency is the key, policy-making is determined by the result of a competitive struggle of various interest groups within the ruling elite. These groups rely both on a strong administrative authority and private business, and are engaged in the perpetual struggle to advance their interests and topple their opponents. Putin and Medvedev both rest on the support and handling of such groups more than on constitutional provisions, and hence they act as power brokers, arbiters in the continual competition between various power groups and clans. Hence Putin and Medvedev, important as they are, should not be considered as the only decision-makers in Russia, and any forecasting of Russia's development requires understanding of the needs and interests of the ruling elite, and, to some degree, of the population.

Time for Money—and Prestige

Russia's ruling elite comprises state administrators at the national and regional levels, as well as some representatives of large business, who play secondary role to the bureaucrats. Their primary interests combine the search for material rewards with the wish for moral and ideological gratification in seeing Russia's might. This warrants the continued development of the market economy, on the one hand, and increasing the role and prestige of the Russian state, on the other.

There is sufficient evidence to argue that the Russian elites are committed to the development of private capital in Russia. The government is investing heavily in the development of modern technologies, and has pledged stronger input in the country's infrastructure to help support industrial revival. The legislative framework for business operations is constantly being improved, and President Medvedev has committed to the simplification of the business environment from the regulatory, legislative and fiscal points of view. The Russian elite need the country's economy to grow, as this brings them popular support as well as personal material benefits. The opportunities for investment in the Russian Federation are changing as economic growth spills into the regions and towards the middle classes, but the growth potential is certainly there as well as the elite commitment to private business development.

Yet another distinct feature of the Russian mentality, both within the elite and the population at large, is the search for prestige and international respect, which warrants an assertive foreign policy. Russia is searching for a global role to build upon its newly found economic might in a way that often unnerves its Western partners, which are particularly sensitive to dependency on Russian gas deliveries. Despite the new Russian President being the most Western-friendly choice among Putin's possible successors, and the Western hopes that Medvedev's liberal attitudes will replace the security-service chill of Putin, Medvedev's personal preferences are likely to become secondary to ideological and structural factors, and hence Russia's recent assertive stance is likely to be augmented in the coming years.

Outlook and Implications

The arrival of a new figure at Russia's helm does not bode any significant policy change in the short term, as it essentially marks the preservation of power in the hands of the same ruling elite that has shaped Russian policy over the last eight years. For all their personal weight, both Putin and Medvedev are essentially power brokers for the plural and competitive circle of bureaucratic and business elites. The interests of these elites point to the further development of private business, with the simultaneous increase in the prestige and weight of Russia as the state. Foreign investors thus will still have opportunities for obtaining substantial rewards in Russia, provided that they demonstrate due respect to the country's leadership aspirations. The window of opportunity for investment will eventually close as the markets consolidate and the government becomes more protective towards its domestic businesses. Yet the period of up to the next two years arguably remains a good time to make a mark in the country. From the investment angle, the arrival of Medvedev is as good continuity as investors could have hoped for.