Strategy | August 12 2016 MidLincoln Research Notes From MidWest Global Investment Strategy with focus on Emerging markets |
Politburo reshuffles - Sergei Ivanov has been replaced by Anton Vaino as Putin's Chief of StaffSergei Borisovitch Ivanov a long time Putin's ally has left or has possibly been dismissed from the post of Putin's Chief of Staff, and has been replaced by a young deputy Anton Vaino. The reasons for the Ivanov's departure are not clear, ranging from health reasons to something connected to customs scandal or the recent reshuffle process around Putin where hardline siloviki or personal bodyguards took the important posts. However it doesn't perfectly fit into the later considering how close Ivanov has been to Putin during most of his career. Ivanov served as a defence minister in Putin's first presidential term. Appointed to this post shortly after Kursk disaster. Soviet intelligence officer serving in Northern Europe and possibly Nigeria he was one of the key figures in Putin's conservative siloviki circle. Albeit he was quite market oriented and has never been spoted as overly protectionist or too favoring SOEs. He was nevertheless serving most recently as BOD Chair of Rostelecom. He is also a long time member of the Russian Security council along side with former head of FSB Nikolay Patrushev. He has been viewed as an ally of Igor Sechin, and has been considered as a key figures in the Putin's new politburo which has been especially strengthened after Putin's 2 week absence of spring of 2015. Ivanov has been associated with so called party of war supporting Russian involvement in Ukraine following the anti-Yanukovych coup. Anton Vaino, born in Talin in 1972, a grandson of Estonian Communist top boss, with degree from Moscow MGIMO has been a diplomat in Japan early in his career and has been covering Asian countries in Russian Ministry of foreign affairs. He started serving in the presidential administration in 2007 under Sergei Sobyanin and was in charge of protocol. He then followed Putin to government and then followed Putin back to Kremlin in 2012. He was appointed as Deputy Chief of Staff. He is also on the board of Rostec, which is headed by Sergei Chemezov. Vaino is probably the same Putin's man - with links to the same siloviki circle - as Ivanov, albeit much younger. Vaino however is not a party man. While Ivanov has been quite involved into United Russia. But Vaino and Ivanov could possibly had polar views on the peace treaty process between Russia Japan. Vaino has been likely involved into peace treaty negotiation with Japan, where as Ivanov representing more conservative fraction of Russian siloviki could have been supporting a more hard line view on the peace settlement agreement with Japan which has been stalling since 1945. More recently the dialog around this peace treaty has intensified. Last time Vladimir Putin met Shinzo Abe in Sochi in May while the next meeting is to be held in September in Vladivostok. The meeting in Sochi has been quite warm and much is expected from the meeting in Vladivostok next month. It is not clear if the treaty will be signed in September but significant progress is likely and Vaino will manage it. Putin a judoka from his youth, has been quite keen to settle with Japan, however facing a silent but strong opposition from more conservative (such exist) Russian siloviki. While Japan has been under pressure from the US administration to avoid reaching a compromise with Russians. Putin also needs the treaty with Japan to alleviate the damage from sanctions. Under sanctions European and American institutional investors are only bared to invest into a short list of names. However for Japan institutional investors the whole of the Russian market is shut in the absence of peace treaty. Departing Sergei Ivanov has been appointed a special envoy to Putin in charge of ecology and transportation, which is not any important role versus his previous post. It is also not clear whether he will remain on the Security Council. Anton Vaino new appointment and Sergei Ivanov departure hint at possible further major reshuffle around Putin. The change doesn’t imply anything about 2018 presidential election in our view but it could be somewhat of the loss for the party of war. It could also be viewed as less focus on United Russia in the election in September. It means probably more focus on Asia and Japan in particular in foreign policy. As such it is mildly positive for the markets. Ovanes Oganisyan
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