> An end to policy hiatus.... After nine months during which the domestic focus was all about political transition and the protest movement, the formation of the new government and clarification of areas of responsibility bring this hiatus to an end. The hiatus has certainly contributed to the high risk-premium that investors are applying to Russian asset valuations and the exceptionally wide discount at which equities now trade relative to EM peers.
> ...but stability the main priority. The main interpretation from the changes is that maintaining domestic and economic stability is the key priority - the muddle-through scenario. Neither dramatic changes nor a major shift in policy priorities are expected unless, or probably until, the existing economic and socio-political backdrop materially changes and forces a new strategic direction and the more dramatic changes that investors had hoped for. Still, the changes we have seen show the following.
> A key priority for the government is to try and improve the perception of Russia's business and investment environment by placing mainly economic liberals in key finance and economic-related functions in the cabinet.
>A partial response to the protest demands in that the interior minister's position has gone to the former head of Moscow police, who has been widely praised for his handling of various protest events and efforts to weed out corruption.
>A more determined approach to regional development. President Putin has highlighted the development of Russia's Far East as one of his key priorities but there have also been several new appointments, or expansion of existing roles, to reflect the importance of socio-economic development in the regions.
Chris Weafer is the Chief Strategist of Troika Diaogue