Two-part czar.

• Author: Reddaway, Peter
• Position: Dmitri Medvedev and Vladimir Putin

The world's economic crisis may have profound political effects in many countries over the next year or two, but it certainly won't cause President Obama to leave office early. The same cannot be said with any certainty about President Medvedev or Prime Minister Putin of Russia. Indeed, the system of dual-executive leadership that they operate is the subject of continuous debate and increasing anxiety on the part of Russian elite groups. Some observers fear that the tandem system is becoming unstable, is undermining the cohesion of the state and--in particular--may not be able to handle the deepening recession. They are apprehensive that the two men could, before too long, lose the public trust that they now enjoy, which is a crucial linchpin holding a fragile state and society together. This in turn could cause dangerous convulsions over who should lead the country.

These observers, from academe to think tanks to business circles, see the tandem system as unnatural, first because the executive branch has only rarely in Russian history been divided. On those occasions, as in 1917 after the fall of the monarchy and in the early 1990s when Gorbachev and Yeltsin competed, the division was short-lived. Second, the history of the present arrangement, launched in December 2007, has been bizarre. Toward the end of his presidency, Vladimir Putin rejected calls to change the constitution and run for office again. Instead, he anointed a protege, the politically weak Dmitri Medvedev, to succeed him as president. Then he had Medvedev appoint him to what was, formally, the politically inferior position of prime minister.

Subsequently, however, with some exceptions, Putin went on acting as though he, not Medvedev, was "the real czar." Meanwhile, Medvedev took occasional initiatives and made periodic speeches about the need for change, but remained, at crucial moments, essentially subservient to his longtime boss.

What has imposed new strains on the awkward tandem rule is the deepening recession. Responding to this requires a well-devised strategy and agile tactics. To date, these have been lacking, partly because Putin and Medvedev have somewhat different interests and instincts, partly because the mafia-like clans of Russia's power elite are seriously divided, and partly because the deeply ingrained vices of "the Putin system" have made personal and clan interests, not Russia's interests, the ruling class's priority. None of the clans wants to upset the covert and intricate arrangements of the status quo with an honest debate about the national interest. They are rich, sometimes superrich, with too many secrets to hide about how they acquired their wealth. Usually their business interests conflict with the national interest, to the detriment of the latter. Members of Putin's main clan--his comrades from the security services in St. Petersburg--are especially determined to hang on to their power and wealth, and may, in the short term at least, have more ways both of influencing Putin and of under-cutting Medvedev than do others.

The clans are trying to adapt to the disorienting political system in which there are suddenly two masters and not one. Even though Putin is clearly more powerful than Medvedev, they see that this might change if, say, Putin decides to retire. So maybe it is best to get close to Medvedev in advance, or at least to hedge their bets. On the other hand, maybe Putin will push Medvedev out and resume the presidency, in which case he'd take revenge on them for having sucked up to Medvedev. After a year of this, the uncertainties facing Russia's rich are as enervating as ever. And with a drop of 70-75 percent in the value of the stock market, the well-off are losing a lot of money and their moods have become sourer still. Thus the risk grows that the bolder clans could start to seek change in the leadership, a potentially disruptive outcome.

If, as seems plausible, the recession and the clumsy tandem structure should make the Putin-Medvedev leadership increasingly erratic, the implications would be many--a deteriorating economic policy, business and bureaucratic groups ever-more aggressive in their demands, regional governors asserting more autonomy, the spread of popular discontent, weakened media censorship and a less predictable Russian foreign policy, to name a few. The future of the leadership would be subject to even-more discussion, maneuvering and plotting than it is already. And the critical public support for the present leaders would start to fragment. This would throw their futures into doubt and could lead to an unstable transfer of power.

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The recession is also having painful effects on the Russian populace. What scares many ordinary people is the rising level of unemployment and the fear that, with production falling, the job situation will continue to get worse. One well-known economist with ties to Medvedev's entourage, Yevgeny Gontmakher, believes that real unemployment will likely go up by year's end to about 13-14 percent (from the current 8 percent). At the same time, annual inflation has officially risen to 14 percent, fueling fears that it may go higher still if the government sticks to its present course of undiminished social spending.

Also, for the first time in a decade, the 2009 budget projects a deficit--a hefty 7.4 percent of CDV. This will be wholly financed, Putin said on March 19, by tapping what amounts to more than half of the government's Reserve Fund, a stockpile built up from taxes on oil and gas sales. Acknowledging that deficits would probably continue for a few years, he said that these would be funded, if necessary, by borrowing from domestic, not foreign sources.

Critics, such as former-Prime Minister Mikhail Kasyanov, argued that the budget was unrealistic, notably in its overoptimistic projections for inflation and GDP. A World Bank report predicted that GDP would fall by 4.5 percent, not the 2.2 percent estimated in the budget.

A more specific threat to working people is the $500 billion debt to Western lenders accumulated by Russian companies. Some $130 billion of this is due to be repaid this year alone. However, most of the companies cannot pay, and the prospects for debt restructuring are unclear. At the Davos World Economic Forum in January, Putin discreetly sounded out Western banks on this score, but...