The unexpected removal of Sergei Ivanov from his panoptical position as head of the near-enough-all-powerful Presidential Administration has inevitably created a frenzy of kremlinological speculation. A reshuffle is certainly underway, and there is clearly some longer-term political goal. However, one aspect which has largely been neglected has been how this will affect the governance of Russia in the short term, and the perennially any-day-now prospects of meaningful economic reform.

The face-saving talk that Ivanov had only ever wanted to head the Presidential Administration for four years, and his new portfolio as presidential plenipotentiary for transport and the environment and member of the Security Council cannot conceal that this is a distinct step down. He is being treated with dignity, as befits a loyal member of Putin’s crew, but he is nonetheless has surrendered what has become, in practice, the second most powerful job in Russia.

We do not, cannot know precisely what is going on. Some of the more entertainingly outré theories of vicious struggles for power in the Security Council and the like can be safely ignored.

Other theories, such as that Putin is preparing the ground for early presidential elections in 2017, are harder to ignore, but also harder to substantiate. It is not as though Putin needs a renewed mandate to do pretty much anything he wants, from deep reform to personal coronation. Nor is it likely that 2017, as necessary austerity measures bite and the Communists celebrate the 100th anniversary of Russia’s first colour revolution – the red one – would offer that much more congenial an electoral environment.

Whatever may be the longer-term plan, though, in the meantime Russia needs to be governed. The country is embroiled in wars in Ukraine and Syria, is still under international sanctions, faces a RUB2tn hole in its public finances, and is about to hold parliamentary elections that may take considerable massaging if they are to provide the now-traditional legitimating claim of overwhelming and enthusiastic public support.

Russia’s political system has been de-institutionalising ever since 1991, under Boris Yeltsin even before Putin. Power has become defined by people and their relationships more than organisations and formal structures of government. In that context, the Presidential Administration in some ways bucked the trend, in some ways exacerbated it, emerging as the institution that facilitated the personalisation of power.

This has many downsides, not least the way that it does not only cradle the president, it cocoons him, controlling and framing most of the information that reaches his desk. Nonetheless, this has become the primary instrument of power in late Putinism: the cabinet is there simply to carry out policy, but the Presidential Administration helps Putin shape it, and then conveys this to Prime Minister Dmitry Medvedev and his technicians of governance.

Exit Ivanov

Ivanov’s successor, the 44-year-old Anton Vaino, seems unlikely to be the same forceful presence in Kremlin politics. Or at least not yet: he may well grow in office, and like most of the new crop of appointees it will be interesting to see how he evolves now he is no longer someone’s deputy or understudy.

It remains to be seen whether he will try to change the Presidential Administration, not least address the way it was at times a festering source of toxic and badly-informed conspiracy theories about the outside world. In this respect Ivanov, the soul of a 1930s commissar beneath the veneer of a sophisticated cosmopolitan, certainly has left his stamp on the administration.

In the meantime, though, it may become less powerful as Vaino finds his feet, and maybe cleans out staff. Nobody rises to senior office in today’s Russia without a considerable reservoir of ambition and pushiness, and ministers –  even the over-maligned Medvedev – might take the opportunity to try to assert their own interests. After all, insofar as there are any serious insider proposals for systemic change, they have come from the technocratic departments, from ministries to the central bank, not the president’s circle.

There is likely only to be a narrow window of opportunity for them, but the key problem is that given the de-institutionalisation of the state, the only way that anything substantial can be attained is through winning Putin’s support.

Putin himself appears to appreciate that there are serious structural problems with the Russian economy, which is why he brought his usual financial fixer Alexei Kudrin back onto the scene to draft a “Plan K” programme. However, while Putin is willing to purge some of the more inefficient and corrupt officials here, bring in some youngsters there, and generally apply a little grease to the wheels of the machine, he is not willing to sanction any major reconstruction.

After all, Putin is in many ways a product of the Perestroika years. From his berth in East Germany, he heard his fellow KGB officers’ horror stories of a country being torn apart by a well-meant but badly-thought-through attempt at thorough-going reform – and he then witnessed first hand how quickly a seemingly orderly state could collapse when the GDR folded.

There is no way he wants his historical legacy – and increasingly that seems to be where his mind leads – to be the man who “regathered the Russian lands” only to shatter the Russian state. To put it bluntly, he does not dare take on the core self-interest of a corrupt and comfortable elite, nor is he willing to sacrifice his vision of an assertive, “sovereign” Russia with a Eurasian sphere of interest.

The tsar is not for turning

There can be no meaningful and successful economic reform in Russia without comparable political, social and geopolitical reform. There need to be courts able and willing to protect property rights and uphold individual freedoms. Russia needs foreign ideas, investment and technologies, and a far smaller defence and security budget. There needs to be accountability and transparency for the government, social mobility and political engagement for the masses.

None of these will happen under Putin. At best, so long as the tsar is in his heaven, Russia can hope for a slight amelioration of the present conditions. A little less wasteful geopolitical adventurism, a little more social provision, reining in the elite a touch, stressing the rule of law.

This is a wasted opportunity, and in this respect Putin is actually letting his fear tarnish his historical record. But it is not a terrible thing for ordinary Russians, most of whom would gladly take a slight improvement over anything worse. However, even for this to happen, there needs to be someone or something able to make the case to Putin, still the sole “decider” in this system. When Kudrin made a relatively mild comment about the economic advantage in better relations with the West, after all, he was slapped down publicly for his pains. He is a semi-sanctioned “loyal oppositionist,” though: it would need to come from deeper inside the system.

Once, Medvedev couldn’t do this, and Ivanov’s Presidential Administration wouldn’t. Although it is hard to be especially optimistic, we will see whether Vaino will prove a little more realistic and flexible, or whether Medvedev and the technocrats within the administration can use this opportunity to make a case. Austerity for the masses this autumn, after all, is pretty much a given. The real question to watch is whether, as usual, the masses have to pay for the avarice of the elites and the ambitions of the Kremlin, or whether the pain will be distributed a little more widely, and offset with any limited systemic change. Or else, all we will be seeing is the Titanic taking on a mid-cruise change of crew.

Mark Galeotti is an incoming senior research fellow at the Institute of International Relations Prague, a visiting fellow with the European Council on Foreign Relations, and the director of Mayak Intelligence. He blogs at In Moscow’s Shadows and tweets as @MarkGaleotti.