Vladimir Putins speech at last months economic forum in St Petersburg gave some important indicators of what can be expected from his third presidential term. The impression was of a Putin in some respects more marketoriented by necessity, but just as economically illiberal by nature and now more powerful than ever.
First, the necessity: the oil price at which Russias budget breaks even is now almost $120 a barrel. That is partly thanks to higher spending in the run-up to the election. It makes extremely welcome the announcement of a new budget rule by 2015, to fix the amount of hydrocarbon revenues in the budget. Pensions, in particular, are an increasing drag on government finances. The retirement age needs to be increased, and this in time will prompt popular protests.
But Russias lack of a domestic capital base needs dealing with too partly so its markets are less vulnerable to foreign sentiment. At St Petersburg, measures were discussed to boost private-style pension funds, via insurance on such investments. That is more good news.
However, Putins speech left the timetable for selling state assets especially vague, which cast doubt on the privatization agenda, particularly in the all-important oil and gas sector. Furthermore, BPs announcement last month that it would consider selling out of its joint venture in Russia, TNK-BP, sits awkwardly with the supposed enthusiasm for foreign direct investment that the government trumpeted loudly at St Petersburg last month.
BP is, after all, Russias biggest foreign investor by some distance.
A key player in the new administration in this regard is Putins energy supremo, Igor Sechin: a man openly unenthusiastic about privatization. In the new government, Sechin is replaced as deputy prime minister in charge of energy matters. But Putin has maintained and even strengthened Sechins power by appointing him chairman of state oil firm Rosneft. Sechin is also secretary of a new state energy commission chaired by Putin.
Some reckon that behind BPs announcement, which follows the resignation of TNK-BPs billionaire chief executive, Mikhail Fridman, is Putins long-held dream of creating a national energy champion in the style of Brazils Petrobras, or Saudi Aramco. Far from liberalization, that might mean consolidating Rosneft and state gas firm Gazprom under a state holding company, Rosneftegaz, which might also buy controlling stakes in Russias other main energy assets, perhaps even TNK.
For billionaires like Fridman, who emerged in the more liberal, pre-Putin era, it could be another reason to sell up in Russia while they can, and expand internationally instead leaving the way for newer tycoons with closer ties to the government to come to the fore in Russia.