Page 4 - FSUOGM Week 03 2020

FSUOGM COMMENTARY FSUOGM
Russian gov resigns ahead of
constitutional reforms
There is likely to be little, if any, short-term impact on Russian energy policy
RUSSIA
WHAT:
Long-serving Russian PM Dmitry Medvedev has resigned with the rest of his government.
WHY:
His replacement his former tax chief Mikhail Mishustin, who has re-appointed most of the former cabinet.
WHAT NEXT:
There is unlikely to be a shift in Russian energy policy as a result of the upheaval.
RUSSIA’S longest-serving Prime Minister Dmi- try Medvedev resigned on January 15, along with the rest of his government, marking the country’s biggest political upheaval in years. Former Fed- eral Tax Service head Mikhail Mishustin – a rela- tively unknown technocrat – has taken his place.
Hours before Medvedev’s resignation, Pres- ident Vladimir Putin announced that Russia’s constitution would be overhauled to shift power from the presidency to the Duma, Russia’s lower house of parliament. Among the changes, the Duma is to be given greater responsibility for selecting high-ranking government officials. The president, on the other hand, will no longer be able to serve more than two terms, in total. At present, the two-term limit only applies if the terms are consecutive. Many Western observers view this as a power play by Putin - a move to weaken the position of a potential successor if he decides to step down at the end of his current term in 2024.
Medvedev said he needed to step down for these reforms to take place. The former corpo- rate lawyer is one of Putin’s closest allies, the pair having first worked together in the St Petersburg Mayor’s Office in the early 1990s. It was Med- vedev that was Putin’s hand-chosen successor when he stepped down as president in 2008. Putin meanwhile became PM, continuing to wield the real power. Medvedev served his one term and then left to clear the path for Putin to return to the presidency in 2012 and appoint Medvedev as PM.
Medvedev will go on to serve as deputy chair- man of Russia’s Security Council, chaired by Putin. He likely to have far less decision-making power in his role, suggesting he may fade away from the Russian political scene.
Mishustin’s appointment as PM was swiftly approved by the Duma and Russia’s upper house, the Federal Council. The 53-year-old is a former investment banker and IT specialist who entered government in the late 1990s. He served in sev- eral key roles, including as deputy tax minister between 1998 and 2004, before becoming federal tax chief in 2010.
While rarely in the public eye, Mishustin gathered recognition in government circles for his effective reform of Russia’s notoriously inef- ficient and corrupt tax system. This was at a time when the finance ministry was scrambling for extra funds to plug a RUB2 trillion hole in the
budget, caused by low oil and gas prices.
Energy policy
There is likely to little, if any, short-term impact on Russia’s energy sector as a result of these political changes. Shares in major Russian oil and gas companies dipped slightly when Med- vedev announced the government’s resignation, only to swiftly recover. Likewise, the Russian ruble dropped to a one-week low, but then rebounded.
Mishustin’s new cabinet was announced by the Kremlin on January 21, consisting of many of the old faces. Russian Energy Minister Alex- ander Novak will retain the role he has been in since 2012. Natural resources and finance min- isters Dmity Kobylkin and Anton Siluanov will also stay on, as will veteran Foreign Minister Sergei Lavrov. As such, Russian energy policy is unlikely to see a sudden shift, either at home or abroad.
A cornerstone of Russia’s energy policy over- seas is of course its commitments as part of the OPEC+ alliance. Novak has played a key role in fostering trust over the years with Saudi Arabia, the unofficial leader of OPEC. Following the oil price crash in late 2014, Russia and Saudi Arabia were initially weary of working together to rebal- ance the market. They finally agreed on what became the OPEC+ pact on output restrictions in late 2016.
Novak remaining the head of Russian energy policy will ensure continuity in relations with Saudi Arabia, helping to ensure that the OPEC+ pact stays in force.
Meanwhile, there is growing antipathy to co-operation with Saudi Arabia among Russian oil producers, who are eager to ramp up output and expand their market share.
One of the most vocal critics of the OPEC+ is Rosneft CEO Igor Sechin, another of Putin’s closest allies, but also a key political opponent of Medvedev. It is therefore conceivable that Medvedev’s departure could strengthen Sechin’s influence in government, allowing him to erode away support for OPEC+ over time.
However, the pact is likely to remain in place for as long as Putin wills it. The Russian president has been a strong supporter of the cuts so far, which have helped prop up oil prices, resulting in each Russian oil barrel fetching more on the international market.™
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w w w. N E W S B A S E . c o m Week 03 22•January•2020