Who Might Replace Vladimir Putin?

Insights and Market Perspectives

RUSSIAN TROOPS ARE RETREATING in northeastern Ukraine, and are bogged down in other regions, as the war enters a key phase on two other fronts: the possibility of a truce, and the growing speculation about Vladimir Putin’s health.

FIRST, THE BATTLEFIELD: Ukrainian troops have made spectacular progress after ousting Russia from territory near the northeast city of Kharkiv, less than 40 miles from the Russian border. In a symbolic signal of their recent battlefield successes, a small number of Ukrainian troops photographed themselves Monday just inside the Russian border.

THE NEWS IS LESS ENCOURAGING the southeast, where Russia is determined to control the Luhansk and Donetsk provinces that form the Donbas region. Both sides seem to be bogged down there, although Russia is rapidly losing troops and weapons.

RUSSIA HAS VIRTUALLY NO CHANCE of winning this war, and that likelihood has prompted some Western European countries — including France and Germany — to seek a renewal of peace talks. These leaders worry about massive shortages of food, fertilizer, fuel and other key commodities.

BUT CHANCES OF A TRUCE seem unlikely because neither Joe Biden nor Ukrainian President Volodymyr Zelensky are ready to negotiate. Their goal is a clear-cut victory over Russia, which could be within reach this summer. So why negotiate with Moscow now?

THAT RAISES A CRUCIAL ISSUE: Putin’s health, which is the subject of growing speculation, after his shaky performance at the May 9 Victory Day parade in Moscow. Some sources — including oligarchs caught in tape recordings — are flatly contending that Putin is suffering from a life-threatening illness, which raises another key issue: who might succeed him?

WE CHECKED THE RUSSIAN SUCCESSION PLAN in March, which confirmed that Putin has stacked the deck, with no obvious successor. Under the most recent constitutional changes, Putin would be succeeded by an obscure tax official, Mikhail Mishustin. Putin probably thinks an unknown like Mishustin would be a convenient protection against a coup.

IN JANUARY OF 2020 Putin ousted Prime Minister Dimitri Medvedev and his cabinet, and enacted a constitution that would make Mishustin the Russian leader. In the event of Putin’s departure, there would be a 90 day campaign followed by a special election.

PUTIN HAS NOT PICKED A SUCCESSOR, most analysts believe, because that could incite his enemies. But he may seek to anoint a young acolyte, rumored to be a hockey fanatic and close ally of Putin, Dmitry Kovalev. Also in the mix would be the director of the Federal Security Service, the successor to the KGB, Alexander Bortnikov. Other obvious choices would be Medvedev, who has a knack for survival, and Foreign Minister Sergey Lavrov, the serial liar.

ONE NAME NOT IN THE RUSSIAN SUCCESSION MIX is Sergei Shoigu, Russia’s defense minister and a former close friend of Putin. Shoigu is one of many scapegoats for the inept Russian military performance, which has led to growing dissent in Moscow.

GLASS HALF FULL OR HALF EMPTY? One way to look at a Putin departure would be to conclude that his replacement could be someone even worse than Putin. Another way to look at a replacement is that he might have political room to find an exit strategy, perhaps negotiated with France or Turkey. We’re betting on the latter.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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