The regime's stability nonetheless led to significant changes in Russia's polity. Strong economic growth, in the first instance but not exclusively attributable to high commodity prices, has persisted throughout Putin's presidency, facilitating his policy agenda. Putin's Russia is characterised by, among other factors, an increasing fusion of political and economic power, with government officials controlling - both formally and informally - large segments of the economy; growing government control over the energy sector; and macroeconomic stability. Politically, the regime has constructed a 'power vertical', in which the Kremlin transmits its will down an administrative chain of command and which limits the influence of regional elites. The Kremlin gives significant leeway in terms of policy to only a small number of people Putin trusts, both in government and business. Finally, there are clear limits on political dissent and effective opposition. The public, which values stability and has benefited from increased government spending and overall economic growth, has largely accepted these limits.
In the economy, since the 1998 debt default, Russia has enjoyed remarkable economic growth and rapidly expanding consumer demand. Since 2000, the Putin administration has pursued rigorous fiscal and monetary discipline and has conducted or at least attempted some significant reforms. Coupled with the sharp rise in global commodity prices that began in mid-2003, this has enabled Russia to post robust GDP growth rates of 6-7% annually since 1999. By early 2007, Russia's GDP hit US$1trillion, making it one of the world's ten largest economies, and the Central Bank of Russia (CBR) has amassed the world's third largest gold and hard currency reserves, which currently stand at around US$420 billion. Of that volume, the government has put away more than US$120 billion in a stabilisation fund set up to mitigate inflationary pressures as well as to finance future budgetary spending. Russia has repaid most of its sovereign debt, for instance retiring all of its outstanding Paris Club debt ahead of schedule in 2006, and made the ruble convertible. Last year the CBR brought inflation down to 9% (marking the first time inflation was less than 10% in Russia's post-Soviet history), with the goal for 2007 being to bring it even lower, and the country enjoys solid trade and budgetary surpluses. While the state has maintained a strong and growing position in sectors considered to be strategic - chiefly in energy and military-use industries - consumer-driven sectors have enjoyed little state involvement and have flourished as Russian consumer spending continues to grow. Real disposable income has risen steadily since 1998, growing an average of 11% yearly since 2003, with similar annual growth in real wages. As Russians' incomes have grown, Western consumer tastes have taken root in the major cities. The Russian population and especially its elite have benefited greatly from this economic expansion, tied to Putin's tenure in office, and are fearful that Russia's new relative prosperity could again vanish.
Because of the president's paramount importance to the political and economic system, and because Russia's governing elite worries that a new president could redistribute wealth and privileges and upset stability, the Russian political class is intensely focused on the December 2007 parliamentary and (especially) the March 2008 presidential elections. Putin is required by the Constitution to step down after serving two consecutive terms. However, he increasingly signals that he will be at the centre of Russia's political life and decision-making even though he won't be in office. Putin's recent statements and decisions, for instance the September 2007 cabinet reshuffle, reinforce Putin's status as the ultimate 'balancer' of the political system.
Two main elements of the system Putin created in Russia while in office are 'state strength' - Russia's re-emergence as a great power internationally, its more aggressive and ambitious foreign policy, and the Kremlin's accumulation of political and economic control domestically - and 'macroeconomic stability and development'. If the first element is pushed by a group of Putin's associates who frequently have backgrounds in security services and the military, the second element is supported and implemented primarily by Western-style reforming technocrats. The two groups have their delineated spheres of influence, and both are important to how Russia has been functioning under Putin. Recently, after moving to strengthen the more conservative and statist (so-called 'silovik')-oriented groups in government earlier in 2007, Putin moved to strengthen the technocratic wing. He seems committed to establishing the rules of the game for the next president, to make sure that these two elements continue to be guarded, balanced and developed. It is expected that President Putin will choose a successor who will both carry on his policies and permit Putin to exercise continued political influence. Putin's nod toward a particular individual would more or less guarantee that candidate's electoral success in March, even beyond the administrative resources that will aid the Kremlin's nominee. Behind the scenes, any deal on succession will have to include guarantees to key members of the elite that their economic and social position is not going to be threatened. The designated successor will have to subscribe to the catchwords of the day - continuity and stability. Putin also does not discourage talk about possibly returning to the presidency in 2012, which is permitted by the Constitution.
The recent government reshuffle concentrated numerous potential presidential contenders in the cabinet. The new Prime Minister, Viktor Zubkov, became a potential successor overnight, having been promoted by Putin from a little-visible bureaucratic post to the second most important executive position in the land. The two long-standing possible 'successors', first deputy prime ministers Sergei Ivanov, a former defence minister, and Dmitri Medvedev, former presidential chief of staff, kept their senior positions. A leading technocrat, Dmitri Kozak, was handed the reins at the Ministry of Regional Development, which was given a much expanded mandate. These are among the likely individuals to succeed Putin in the Kremlin. Other mentioned potential "successors" are Vladimir Yakunin, the head of Russian Railroads, a key natural monopoly; Sergei Chemezov, the head of Russia's arms export monopoly Rosoboronexport, which is being transformed into a major industrial holding; Sergei Sobyanin, the presidential chief of staff; and Sergei Naryshkin, a deputy prime minister.The president, however, could also make a more surprising choice, as he has done in the past. All of these individuals, some of them with 'silovik' leanings or background and some of them among Russia's leading technocrats, are likely to be at the core of the new administration over the next president's term in office, continuing to balance each other's interests and supporting and extending the policy course that President Putin has given Russia during his eight remarkable years in office. In early October, Putin agreed to head "United Russia," the country's main political party, in the December Duma elections, as well as stated that he could become prime minister after the presidential elections. Regardless of whether he becomes prime minister, Putin will clearly hold significant power and seek to dominate political decision-making in the country. Thus, whoever the successor, Vladimir Putin himself will be around to make sure that his course is followed.
