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It's fun to be a Kremlinologist again!

Serdyukov sacked , “Siloviki” ascending.

According to Stratfor and a host of other Russian media outlets, Russia’s defense minister, Anatoly Serdyukov, has been sacked by President Vladimir Putin over allegations  of real estate fraud and corruption. http://www.bbc.co.uk/news/world-europe-20218216

Another sign that Putin 2.0 is more inclined to cronyism and corruption than anything else. Serdyukov is one of the few ministers of Putin’s cabinet that has shown himself to be capable, competent, and more interested in doing the job at hand than enriching himself and his buddies. He has never been a favorite of the military hierarchy, mostly due to his wish to drop the conscript model in favor of a professional standing army, and thinning out the very top heavy “old guard” corps of generals and colonels in the army who haven’t done anything in years. He also has made enemies with the “siloviki” faction in the Kremlin (Viktor Ivanov, Nikolai Patrushev, and the egregiously incompetent and outstanding fictionalist Igor Sechin, ) who no doubt have had a hand in manufacturing this latest scandal. Putin 1.0 would have never been forced to sack one of his few competent staff over an internal, factional struggle – Putin 2.0 had to do so in a matter of 3 days.

The good news for Russia’s military is that Serdyukov’s replacement, Sergei Shoigu, is also one of Putin’s rare competent ministers, who took on the impossible task of emergencies minister (a portfolio that was a convenient dumping ground for every problem other ministries didn’t want to deal with ) and performed exceptionally with little or no budget and/or resources. Shoigu might possibly align with the ‘liberal” faction of the Kremlin power vertical (German Gref and Aleksei Kudrin, who I believe will once again find portfolio in a Putin administration) seeing that the “technocrat” faction has lost all credibility in the last year (Medvedev exposed as a talking puppet whose words are powerless and meaningless, and Alexei Miller’s Gazprom beset with problems, not the least of is the Rosneft takeover of TNK-BP, replacing Gazprom as Putin “model” corporate front of the government.) However, with Kudrin right now on the sidelines, the “siloviki” are definitely on the ascent, much to the detriment of Russia’s immediate future.

Talk about “back to the future!” Just as in Soviet times, three different power factions jockeying for power – the KGB, the Army, and the Party back in the bad old days, this go ‘round the technocrats, the liberals, and the siloviki – have  a significant amount of influence over the modern day version of the GenSec. Removing Serdyukov is a major win for the siloviki, and a significant change in the power dynamic. The siloviki are only going to encourage Putin in his repressive practices against opposition parties and figures, and move putting closer to an era of crony influenced stagnation the country hasn’t seen since Brezhnev. Russia’s “rental economy” model cannot sustain itself forever, and the oil, gas and energies sector which right now fuel what little economic growth there is in Russia will eventually need a competent hand at the wheel. Right now, crude oil is at about $86/barrel, which is operating at a razor thin margin for sustained growth of the Russian rental economy. If oil ever drops to $60-65 a barrel – a very real possibility with the US about to overtake the Saudis as the #1 oil producer in the world (no later than 2017, according to Goldman Sachs)—the current Russian economic model will implode and halt any semblance of growth virtually overnight. Kudrin is by far the most talented economic and financial mind available to reform the Russian economic model before the next presidential election – whether or not he will get a chance while the siloviki are in ascent inside the Kremlin is anybody’s best guess. What we do know is that there is a good possibility Putin and his legendary vertical power structure are not the sole decision makers in the Kremlin anymore, as Serdyukov’s sacking would indicate (even Ekho Moskvy’s savvy and politically astute opposition figure Yulia Latynina was caught unaware of Sedyukov’s dramatic fall from grace http://www.themoscowtimes.com/opinion/article/serdyukovs-sad-state-of-affairs/470741.html ) This is going to make a Kudrin return to portfolio a more difficult prospect – again, to the detriment of the Russian economy and ultimately, the Russian people.

There's been some speculation that Serdyukov's sacking is the start of a serious anti-corruption campaign by Putin, who is sensing that his grip on power is under attack by both the people and the various Kremlin factions. While there is no doubt, given the common practices of most of Putin's inner circle, that Serdyukov probably enriched his personal standing while in office, to single him out amongst a plethora of more egregious cases of corruption, still serving in high places in the Kremlin, is dubious at best.