Sustaining growth a headache for Medvedev

By Gleb Bryanski

MOSCOW (Reuters) - Russian President Vladimir Putin is handing over to his successor a booming economy, bumper currency reserves and a major headache over how to stop the rosy economic picture from turning bad.

Russian officials trumpet the economic achievements of Putin's eight years as president and portray the country as an island of stability amid global financial turbulence, citing high economic growth and investment rates.

But Dmitry Medvedev, who will become president on May 7, takes over at a time when growth rates are threatening to falter and inflation is on the rise -- all just as Russians' expectations for their economic well-being are growing.

Putin and his administration were too busy restoring state control over key sectors of the economy, consolidating the Kremlin's political power and protecting windfall oil revenues to pay much attention to structural reform.

So that task will now fall to his successor, a 42-year-old corporate lawyer who since 2000 has been chairman of Gazprom (GAZP.MM: Quote, Profile, Research), Russia's state-controlled gas giant. Putin will play a role too, staying on in the post of prime minister.

"The end of the electoral cycle in Russia allows for a shift in gear, exploiting the window of opportunity to pursue structural reforms," said Yaroslav Lissovolik, economist at Deutsche Bank.

POLICY DISPUTES

Medvedev's biggest immediate problem could be that economic planners in the government and the Kremlin are at odds over how to respond to these challenges.