Siluanov appears to be a voice of reason in the Kremlin, but it's too bad he has little political power. As for his predecessor and stanch fiscal hawk Alexei Kudrin, we very much doubt he will play any significant role in the "new" administration, despite Putin's encouraging words recently. Our best guess is that he will wait in the sidelines until something resembling a consolidated opposition is able to form. We therefore agree with the assessment by Fitch ratings as it has threatened to cut Russia's long-term ratings on the basis of the deteriorating fiscal accounts and growing dependency on oil. Russia is a classic case of high tides hiding the rocks (and those who are swimming naked). Still, our own sovereign ratings model shows Russia as a solid BBB+ credit, and so downgrade risk to Fitch's BBB rating does not appear elevated right now. If we experience a sharp decline in oil prices, however, Russia will be materially affected.
Aside from the usual evidence of carousel voting and ballot stuffing, it appears as if this time observers and the opposition members may be able to statistically prove that fraud occurred beyond a reasonable doubt. This may be possible because observers gotten hold of the protocols containing the results from individual voting stations. They are now busy matching these protocols with the results provided by the central election officials. Nevertheless, some early estimates by locals also suggest that, corruption aside, Putin would still win the election -- albeit by a much narrower margin than the 64% of votes he received. As his victory speech made clear, Putin's conciliatory gestures towards the disgruntled segments of Russia will be economic, not political. The escalation in the crackdown towards protestors over the last few days resulted in hundreds of arrests. We assume the domestic upheaval will quiet down soon, but there is no doubt that the process of regime change is in motion, though it will take years still before we see the political results -- but the economic results may become visible far sooner. While Putin has already signalled willingness to stand again for a fourth term, there are many that doubt he can last his next 6-year term. Much will depend on the economy and the oil tides.