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Reference ID Created Released Classification Origin
07MOSCOW692 2007-02-16 12:02 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

DE RUEHMO #0692/01 0471202
O 161202Z FEB 07

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000692 
E.O. 12958: DECL: 02/16/2017 
Classified By: Ambassador William J. Burns:  1.4 (b, d). 
1. (C) President Putin's late February 15 government 
re-shuffle has brought presidential contender Sergey Ivanov 
to the same starting line as his rival Dmitriy Medvedev, 
relieved him of the albatross that is the Ministry of 
Defense, and given him issues that could potentially resonate 
with the Russian electorate.  With a few swipes of the pen, 
Putin signaled to all who the chief contenders for his job 
will be and demonstrated that he intends to be very much in 
charge of the succession as the last year before his 
departure progresses.  End summary. 
Putin in Control 
2. (C) The late-evening February 15 decision to make Sergey 
Ivanov Dmitriy Medvedev's bureaucratic equal as First Deputy 
Prime Minister was classic Putin and inaugurated the latest 
phase of his managed succession strategy.  By relieving 
Ivanov of the unreformable Ministry of Defense and awarding 
him responsibility for part of the civilian sector of the 
economy, Putin telegraphed that Medvedev and Ivanov are the 
leading candidates to succeed him when his term expires in 
2008.  The re-shuffle also showed that, as he predicted in 
his February 2 press conference, Putin intends to remain 
hands-on until the end of his term and will continue to rely 
on a loyal St. Petersburg cohort to navigate the final 
transition to a new President in 2008.  While it was the most 
significant change in government since Medvedev and Ivanov 
were named First Deputy Prime Minister and Deputy Prime 
Minister in November 2005, Ivanov's elevation had been 
planned well in advance. 
What Does This Mean for Ivanov? 
3. (C) We now have the makings of a two-person race.  Putin's 
decision frees Ivanov to excel in what interests him  --arms 
exports, aviation, economic diversification, and innovative 
technologies-- while allowing him to shuck responsibility for 
a portfolio that was doing little to advance his presidential 
aspirations. It also puts Ivanov on an equal footing with 
rival Medvedev, and gives him a portfolio that rivals 
Medvedev's in its ability to get him on to television screens 
with good-news stories of interest to mainstream voters. As 
if in anticipation of the February 15 announcement, the 
Ambassador found Ivanov at a February 5 meeting extremely 
relaxed, self-confident, and in campaign mode. 
4. (C) Putin's promotion of Ivanov evens the score with 
Medvedev, and derails the expectations of observers who, 
increasingly, were assuming that Medvedev had the upper hand 
in the succession struggle. In a pre-shuffle conversation on 
February 15, former Chief-of-Staff Aleksandr Voloshin told 
the Ambassador that both Ivanov and Medvedev were Putin's 
candidates for the presidency and thought it just possible 
that, if Putin were satisfied with their loyalty, they would 
compete equally for office.  Voloshin, as have others, noted 
that Medvedev and Ivanov get along well personally.  He now 
thought that Ivanov's stock was perhaps rising more quickly 
than Medvedev's.  Others have taken Ivanov's closer personal 
relationship with Putin --the President called twice during 
the Ambassador-Ivanov February 5 meeting-- as possibly 
meaning that Ivanov could get the nod, but the February 15 
decision does little more than put each in the starting 
blocks as the final year of the succession process gets 
MOD Gets A Manager 
5. (C) Succeeding Ivanov as Defense Minister will be Federal 
Tax Service (FTS) Chief Anatoliy Serdyukov. Serdyukov, who 
hails from St. Petersburg like Putin, Ivanov, and Medvedev, 
has demonstrated his loyalty to the President in his three 
years at the FTS, which he reputedly turned into an 
effective, if closed, structure which was a key player in the 
Yukos affair. Council on Foreign and Defense Policy Analyst 
Vitaliy Shlykov welcomed Serdyukov's financial expertise, 
management experience, authoritarian style, and outsider 
status as key to addressing the "chaos" inside the MOD.  Also 
enhancing Serdyukov's effectiveness, said Shlykov, should be 
his absolute loyalty to Putin and a lack of the presidential 
aspirations that had so distracted Ivanov during his tenure. 
MOSCOW 00000692  002 OF 002 
Serdyukov's five years as head of a state-controlled 
furniture store in the late '80s strongly suggests, however, 
that he knows much about corruption at first hand. 
Key Economic Players to Stay 
6. (C) The promotion of Head of the Presidential 
Chief-of-Staff Sergey Naryshkin to the post of Deputy Prime 
Minister for economic matters could signal greater Russian 
White House engagement in foreign and economic issues. The 
Prime Minister's economic team has been chronically 
understaffed, and the entry of Naryshkin and Ivanov into the 
economic realm
 could reinforce its standing and enhance its 
7. (C) At present, we see no threat in the appointments to 
either Kudrin or Gref.  Under Kudrin, Russia has accumulated 
record budget surpluses, seen declining inflation, and lower 
unemployment.  With macroeconomic stability key during an 
election year, Kudrin's departure seems very unlikely.  Ditto 
Gref's.  His mandate to get Russian into the WTO makes it 
very unlikely Gref will be left on the sidelines as the 
transition year progresses. 
8. (C) Some observers, on the other hand, have viewed the 
promotion of Naryshkin, a native of St. Petersburg and a 
longtime associate of Putin, as a possible step toward 
grooming him for higher office; perhaps the prime 
ministership, when power changes hands in 2008. 
9. (C) Surprise is a Putin hallmark and a key card to play in 
keeping Kremlin circles loyal and dependent on him as his 
term enters its final year. Putin has given another clear 
signal that he alone will drive the succession process even 
if, ironically, that produces a race in which there is real 
competition between two "equal" first deputy prime ministers. 


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