Market Data 
A government reshuffle was always in the cards after Russian President Vladimir Putin was sworn in last week as Russia’s leader for a fifth term.
But Putin’s replacement of Defense Minister Sergei Shoigu was unexpected — and his choice of successor, civilian economist Andrei Belousov, was even more of a surprise.
The appointment of Belousov — a technocrat who has served in various roles in Russia’s government, including as minister of economic development and deputy prime minister — is bound to raise eyebrows in military circles, but it comes as defense spending surges and Putin prepares the country and economy for a long war in Ukraine.
As such, the appointment of an economist to the defense ministry is being widely seen as a way to marry Russia’s immense defense needs with the booming war-oriented economy and military-industrial complex.
“These high-level reshuffles following the Russian presidential election strongly suggest that Putin is taking significant steps towards mobilizing the Russian economy and defense industrial base to support a protracted war in Ukraine and possibly prepare for a future confrontation with NATO,” analysts at the Institute for the Study of War (ISW) said Sunday.
Analysts at the Washington-based think tank noted that Belousov’s lack of military experience is not anomalous given the fact that his predecessor Shoigu also had no prior experience. Instead, the ISW noted, it was likely that the Kremlin intended Belousov to “integrate and streamline” Russia’s defense industrial base with the country’s wider domestic economic policy.
“Belousov’s nearly decade-long tenure as an economic minister in the Russian federal government and his more recent involvement managing various domestic defense industrial base innovation and drone projects, prepare him well to lead the struggling Russian MoD apparatus,” the ISW said.
“Belousov has a stronger reputation for being an effective technocrat, and insider sources have claimed that he has a positive relationship with Putin,” the analysts added.
Need for ‘innovation’
Russian troops have been making incremental gains in eastern Ukraine and last week launched a new offensive in the northeastern Kharkiv region.
Russia is widely seen to be trying to make as many territorial gains as possible before billions of dollars of new U.S. military aid reaches Ukraine’s depleted forces on the battlefield. Given the fact that Russian forces have seized the initiative in recent months, Russia’s change in defense leadership is interesting in terms of its timing, coming at a potential pivot in the war.
Analysts say Russia’s fortunes in Ukraine might have prompted Putin to make the change now but the Kremlin also pointed to the need for adaption and development, with Kremlin Press Secretary Dmitry Peskov saying the appointment of a civilian to the defense ministry was rooted in a need for “innovation.”
“On the battlefield today, the winner is the one who is more open to innovation … Therefore, at this stage, the president has made a decision for a civilian to head the Defense Ministry,” Peskov said, news agency Tass reported.
Russia analysts stress that Belousov will have little to do with Russian military tactics and strategy in Ukraine in any case, with that task largely resting on the shoulders of Russia’s top general, the Chief of the General Staff Valery Gerasimov, who will remain in his job, the Kremlin press secretary noted Sunday.
“First of all, Belousov will not manage military combats, he will not get engaged in military planning tactics,” Tatiana Stanovaya, senior fellow at the Carnegie Russia Eurasia Center and the founder of analysis firm R.Politik, told CNBC Monday, saying military planning would be left to military officials like Gerasimov, although his replacement could also not be ruled out.
“Belousov’s main goal is to secure [Russia’s] military needs in terms of arms. This is the major incentive for Putin to make this personnel decision. Belousov is keen on military technologies and innovation in the military industry,” she said.
“So Putin thinks if he puts Belousov as the head of the defense ministry, he will have a better situation in terms of arms supplies to the army. In this sense, the appointment is not surprising,” Stanovaya said.
Why has Shoigu gone?
The Kremlin announced on Sunday that Shoigu, Russia’s defense minister since 2012, had been relieved of his post and would become secretary of Russia’s influential Security Council. There he will replace Kremlin ideologue and close Putin ally Nikolai Patrushev, who would be given a different role, the Kremlin said.
Shoigu had no military experience prior to his appointment to the defense ministry and his credentials have been put to the test with Russia’s invasion of Ukraine in February 2022, and was often found wanting.
A number of Russian military commentators and officials, among them Yevgeny Prigozhin, the head of the Wagner Group of Russian mercenary fighters, have criticized Russia’s military strategy and leadership in Ukraine — often at great personal cost.
Prigozhin died last August in a plane crash after a short-lived and ill-fated rebellion against Russia’s military leadership. Though the Kremlin denied any involvement in his death, Putin was seen to have backed Shoigu over his old associate Prigozhin as the feud played out.
Another factor that could have influenced Putin’s decision-making is the fact that Shoigu has become increasingly unpopular with Russia’s military-industrial complex, publicly chiding arms manufacturers for what he saw as sluggish production, and is seen as an unpopular figure with Russia’s armed forces.
“Shoigu has had so many vulnerabilities,” R.Politik’s Stanovaya noted. “One of them was the conflict with [Russian state-owned defense conglomerate] Rostec.”
“Shoigu complained a lot about how the the military facilities produced arms. For Shoigu, it was too slow and of not enough good quality … I think that the fact that it did not work out between defense ministry and Rostec bothered Putin and he wanted to secure [an alliance] that works.”
