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Russia: Putin's power comes under scrutiny

Stock markets are unimpressed by president's pro-business reforms

Putin: Losing his grip on business?

Not long ago, foreign investors saw president Vladimir Putin as an all-powerful leader, before whom oligarchs, ministers, judges and soldiers all trembled. The strength of his authority was considered the foundation of Russia's economic growth. But recent events have had some analysts wondering if Putin, with only two years left as president, might be turning into a lame duck.

What else can explain state oil company Rosneft's apparent refusal to merge with Gazprom, the state gas monopoly? Putin himself declared on television in September 2004 that the state would swap Rosneft for 10% of Gazprom shares, which are presently held in treasury. The merger was scheduled to take place this month.

The swap would give the state more than 50% of Gazprom, and create a national oil and gas champion able to compete on equal terms with the world's supermajors. It would also pave the way for liberalization of Gazprom shares, so foreigners could invest in Gazprom's locally listed equity without any of the present restrictions. Thus the Gazprom/Rosneft merger was a key part of the president's economic strategy.

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