Kremlin clan in-fighting spilled into the open this week when government officials sympathetic with Russia's fragmented opposition warned the country's ultimate leader Vladimir Putin he may soon lose power if he doesn't undertake sweeping reforms.
Putin, Russia’s president from 2000 to 2008 and now prime minister, is expected to return to the presidency after March elections, but is looking increasingly out of touch after the opposition brought tens of thousands of people onto the streets in December to demand a re-run of parliamentary elections.
Putin first dismissed the protesters as chattering monkeys financed from abroad, then backed a proposal from his protégé President Dmitry Medvedev for gradual political reform, but later had a former KGB spy appointed as Kremlin chief of staff.
Kremlin insiders say the muted response is the result of a fight for the ear of Putin between the ‘siloviki’, men with a security services background, and a ‘liberal’ or ‘moderate’ faction whose influence has substantially weakened as Medvedev’s term draws to a close.
Almost the entire "moderates" clan travelled to the World Economic Forum in Davos in Switzerland this week and used the event, previously attended by both Putin and Medvedev, to speak about the massive political challenges Russia faces.
Comments made by a raft of leading public figures contrasted sharply with previous Russian Davos appearances, when officials mostly trumpeted successes in improving the investment climate.
"We have a chance to hear clear and tough voices that the current situation is intolerable and needs to be changed," Putin’s first deputy Igor Shuvalov said in Davos.
"Changes can differ. Things can be changed in such a way that power can be lost like it was for Gorbachev in 1991," he said. "We shall not lean towards conservatives, (who want) to cork the bottle and not release any gas, or do the opposite and give so much freedom that it leads to a chaos."
German Gref, chief executive officer of state-owned Sberbank , Russia’s largest bank, said the authorities needed to "learn to listen to the unpleasant truth about themselves, rather than put pressure on the people".
Another senior official, top Kremlin economic aide Arkady Dvokovich, said Russia needed a party representing the political right and described Russia’s main problem as "oversized and constant pressure from the state".
Even the First Deputy Central Bank Chairman Alexei Ulyukayev weighed in, saying the government intervened "way too often" in the private oil and banking business.
"CALL ME IN MARCH"
Putin’s supporters say his leadership saved the world’s top energy producer from political and economic collapse but opponents accuse him of banning any serious opposition and failing to tackle corruption. They predict a Libya-style revolt if unless he opens up to serious reforms.
Opponents say Putin’s inner circle is a small group of former KGB spies, businessmen and Kremlin officials who have little sympathy with the Internet-savvy generation of younger, urban Russians who came out onto the streets last month.
Former KGB spy Sergei Ivanov was appointed Kremlin chief of staff in December and Deputy Prime Minister Igor Sechin has voiced concern about the role played by the Internet in the Arab Spring revolts.
Ivanov, Sechin and Nikolai Patrushev, the powerful head of the Russian security council, are all old friends of Putin and are portrayed as hardliners.
Shuvalov, Dvorkovich and Gref made most of their remarks during a Sberbank breakfast in Davos on Friday, attended by foreign investors including trading giant Glencore’s chief Ivan Glasenberg and Citigroup’s chief Vikram Pandit.
An improvised electronic poll among breakfast participants showed 24 percent thought Russia’s main challenge was corruption, 17 percent said it was government intervention and monopolies, and 16 percent its an outdated political system.
"The liberals are feeling squeezed. They are just scared they will lose out completely after March," said a person close to the Davos delegation. Although not being among Putin’s closest allies, moderates have mostly served under Putin since early 2000.
Some insiders say Putin’s ally and former Finance Minister Alexei Kudrin, who joined last month’s protests in Moscow, could be the ultimate rescuer for the clan of moderates if he regains a top position in the next government after the election, as he retains Putin’s support.
Kudrin, since being ousted last year by Medvedev for criticism of ballooning social and military spending, came to Davos as a professor of the University of St Petersburg, his and Putin’s home town.
But he attended and often chaired official Russian events in Davos and his schedule was packed with meetings with top Russian and global executives.
Kudrin reiterated his calls for political competition in Russia, saying: "There was clear pressure on business, which supported opposition parties (during the last election)… We must aim for tolerance in our society regardless of political views."
When asked what his plans were after the elections, Kudrin said: "I want to have some rest and finish writing my book. Call me in March".
One of Russia’s former top investors, Bill Browder, who accuses the authorities of stealing his firms and killing his lawyer, said he did not believe Kudrin could become a true opposition figure and would be rather used by the Kremlin to take the steam out of the opposition movement.
"Putin has a big problem. He cannot put the genie back in the bottle. Fear evaporated in December," said Browder.
