Russian President Vladimir Putin called for changes to the constitution that would shift power to the Duma, the Russian parliament, as well as imposing some new limits on the president’s power, during his annual state of the nation speech on January 15.

One of the most important speeches of the year, unlike the annual press conference Putin holds in December that is aimed at the general public, this speech is delivered to the assembled political elite and he uses it to lay out his main policy goals for the upcoming year.

Putin suggested the deputy prime and line ministers recommended by the Duma will have to be accepted by the president, who will have no right of refusal. Currently the president chooses the key roles in the cabinet and line ministers.

This represents a major shift in power back to the Duma from the presidential executive. Actually the Russian constitution places most political power with the Duma and mentions the presidential executive in passing. However, with the weak control over the Duma Russian Prime Minister Dmitry Medvedev has exercised, the hallmark of Putin’s presidency has been the real political power has shifted to the executive.

"I propose changing… the order and tasking the State Duma with more than just agreeing but also nominating the candidate to head the Russian government. Later, upon their recommendation, the recommendation of the prime minister, [it will nominate] all deputy prime ministers and federal ministers," Putin said, underlining that the president will be legally obliged to appoint the candidates proposed. "In other words, he will not be able to reject the parliament-approved candidates to hold these official positions," he stressed.

The changes Putin is suggesting will formally limit the president’s power. He also commented on the two-term limit as president, saying he agreed with it. Although Putin has not said so explicitly, he is hinting at capping a president’s term in office to a total of two terms. Putin himself side-stepped the term limits on office by taking some time off as prime minister in 2008 but coming back at the end of Medvedev’s one term in office.

"Almost all factions represented in the State Duma, and you know that we meet with their leaders regularly, believe that the Federal Assembly is ready to assume more responsibility for forming government. Taking up greater responsibility for forming government means taking up greater responsibility for the policies pursued by this government. I agree with this statement, fully agree," Putin stressed.

Putin sketched out some new checks and balances and made it clear that the president would retain control of the appointment of Russia’s top policeman, the general prosecutor. However, he also said that the judiciary should remain totally independent from both government and the executive, as is the case in the classic three pillars of any democratic government.

The president also noted that Russian society is becoming "more mature, responsible and demanding". Russia was plagued by a series of popular protests in 2019 and Putin clearly recognises that he has to take the popular mood into account so he suggested all these constitutional changes need to be approved by a referendum, as well as the need to make government more accountable.

"I believe that such proposals are justified, which will increase the role and importance of the national parliament, the role and importance of the State Duma and parliamentary parties, will boost independence and responsibility of the prime minister and all cabinet members, and make cooperation between representative and executive branches of power more efficient and substantial," he concluded.

The changes represent an elegant solution to Putin’s succession problem when he is due to step down in 2024 when his current and last term in office expires.

He faces a “Stalin problem”. When Lenin retired he nominated Stalin to take over as general secetary, but quickly realised his mistake and famously wrote a letter from his deathbed renouncing his recommendation. Too late. Stalin’s blood regime of 30 years followed. By concentrating too much power in the president’s office, as he knows better than any westerner, if Putin makes a poor choice for successor then things can go very badly wrong.

But by setting up more special interest parties to the Duma, clipping the president's powers somewhat and setting up some real checks and balances, Putin is trying to ensure his legacy will not be undone.

As former European Bank for Reconstruction and Development (EBRD) chief economist Sergei Guriev pointed out in an interview with bne IntelliNews, another more immediate danger faced by the political elite is the first thing a new powerful president is likely to do is oust all the Putin-loyalists who currently control the richest of the state assets like Gazprom and the construction companies that spend their infrastructure money. The easiest way of doing that is to accuse them (justifiably) of corruption and throw them in jail. The upshot is the elite will probably support a shift of power to the Duma as it should protect these men from persecution under a new regime.

No foreign policy content

One of the notable parts of Putin’s speech was the almost total absence of foreign policy comments. Putin told the VIPs that Russia’s security was secured for “decades to come” as “Russia possesses weapons that they haven’t got”. The president was referring to the hypersonic weapon systems he showcased with graphic video footage during last year’s state of the nation speech.

"We are not threatening anyone and are not seeking to impose our will. At the same time, I can assure everyone that our steps for strengthening national security were made timely and in a sufficient volume," the Russian president said.

He also made a few brief allusions to the problems in the Middle East without going into details. However, Russia remains deeply involved and will participate in a Libyan peace conference, hosted by German Chancellor Angela Merkel in Berlin at the weekend on January 19.

Stepping back and Putin is clearly satisfied with the progress Russia has made and believes that he has more or less won his showdown with the west. The military modernisation programme is coming to an end. Russia’s military intervention into Syria is coming to a successful end, which has given Russia a firm foothold in the Middle East and established Russia as a key mediator. That role was only emphasised by the historic visit of King Salman bin Abdulaziz Al Saud to Moscow in 2017 and again by the key role the Kremlin is playing in the current Libyan peace talks. And finally, political tensions are down now that a real peace process has started over the Ukraine conflict.

In the first part of his speech Putin drilled down into social and healthcare policy improvements. This part was clearly aimed at the public and is the part of government work they are most interested in.

Amongst the many measures Putin proposed is to extend the child support paid to families who want a second or more children. Introduced several years ago, this has been one of the Kremlin’s most successful and popular reforms. While the Kremlin's successful policies get little attention in the west, the child benefits were extremely popular in Russia and led to a remarkable recovery in the demographics as the birth rate soared. The Russian population started growing again in 2008 in defiance of all predictions from the UN and other observers.

The population started shrinking again in 2019 as the worst of the dent in the demographic pyramid from the economic chaos of the 1990s hit. On top of that the deep devaluation of the ruble in 2015 has also meant that migrants, mostly from the Commonwealth of Independent States (CIS), have stopped coming to Russia as their pay was halved. The upshot is that both the national and absolute population contracted in 2019 for the first time in a decade.

The government is once again focused on the birth rate and Putin said he is dissatisfied with the fertility rate of 1.5 in 2019. The breakeven replacement rate needs to be 2.1 to maintain a stable population. "This is not enough for our country," Putin stressed.

The government’s solution is to throw some money at the problem. Putin proposed providing monthly payments for children between the ages of three and seven years from January 1, 2020 for families whose income doesn't exceed the subsidence level of one person.

Putin said little about business too, but did bring up the key points. The president put his finger on the biggest issue the economy is facing when he called for an increase in investment, with growth of 5% a year to bring the amount up to 25% of GDP.

Russia's economy is stagnating as the country searches for a new economic model after the petro-dollar version was exhausted starting in 2011. However, despite the sterling macroeconomic results Russia’s own businessmen remain reluctant to invest. Foreign investment has also almost entirely disappeared thanks to sanctions.

Putin touched on the 12 national projects that are designed to “transform” the economy, but as bne IntelliNews has written elsewhere a state-led rescue is unlikely to solve Russia’s more fundamental problems as domestic business is suffering a crisis of confidence that is partly caused by the uncertain political future beyond 2024. No one wants to invest until there is some certainty, which in turn has led business owners to take the cash out of their companies in the form of extremely generous dividend payments rather than plough them back in as investment.