Russian President Vladimir Putin backed his long-time ally Dmitry Medvedev to succeed him on Monday, preparing the way for Putin to exercise power from behind the scenes after he leaves the presidency next year.
Medvedev, a 42-year-old first deputy prime minister and chairman of gas giant Gazprom is seen by markets as the least hawkish of the possible candidates for the Kremlin top job, but analysts said Putin's influence would remain key.
Putin's choice brings an end to years of speculation and puts Medvedev in pole position to win a March 2 presidential election because most Russian voters are prepared to back whoever the popular Putin endorses.
The Russian president, required by the constitution to step down after serving two consecutive terms, issued the endorsement at a meeting with four party leaders who backed Medvedev.
"I have known him very closely for more than 17 years and I completely and fully support this proposal," Putin was shown saying on state-run television.
"We have a chance to form a robust administration for the Russian Federation after the March elections...an administration that will carry out the same policies that have brought us results for the past eight years."
Medvedev is a trained lawyer from Putin's hometown of St Petersburg. The two men worked together in the city administration in the 1990s. Putin brought Medvedev to Moscow as a key lieutenant shortly before he became president.
Medvedev has been cast by investment analysts as a liberal who is less confrontational towards the West than many of his Kremlin colleagues.
He is softly spoken and sometimes uncomfortable in front of television cameras, though assured in more informal settings.
But he has also been at the heart of an administration that has aggressively asserted its interests.
Under his chairmanship, Gazprom has renegotiated energy projects with multinational companies and taken a tough line with foreign customers, notably former Soviet republics accustomed to subsidised deliveries.
"The choice of Medvedev...reflects Putin's desire to have the most obedient figure," said Yevgeny Volk of the Heritage Foundation think-tank. "Putin views Medvedev as a subordinate on whose loyalty he can count."
Russian stocks powered into record territory on news that Putin had thrown his weight behind Medvedev.
Some investment analysts speculated that the endorsement for Medvedev would create a vacancy on the Gazprom board, which could be filled by Putin after his term ends.
Shares in Gazprom, gained 2.6 percent, valuing Russia's largest company at $345 billion.
The benchmark RTS index rallied to stand 1.8 percent higher at 2,326 points, a record high that brought gains for the year to date to more than 21 percent.
"It's good news," said Tim Ash, emerging markets economist at Bear Stearns in London. "Bottom line: we all know that Putin's going to be the power behind the throne. Putin will tower over Medvedev."
Clashes Behind the Scenes
Medvedev has never held elected office and, like other would-be candidates in Putin's team, has always denied any interest in the Kremlin top job.
In the next two weeks, Medvedev will need to formally register as a candidate. He will either do so with the backing of Putin's United Russia party, which chooses a candidate on Dec. 17, or as an independent with Kremlin support.
Observers say Putin has been deliberately delaying endorsing anyone to succeed him. He is seeks to avoid becoming a lame duck and to deny feuding Kremlin clans time to challenge his choice.
There have already been signs of clashes behind the scenes involving the so-called "siloviki" faction, made up of Putin lieutenants with intelligence service or military backgrounds.
"If Medvedev is elected next March, that would weaken the position of the siloviki," said Chris Weafer, chief strategist at Uralsib bank in Moscow.
"It raises some short-term worries over how the siloviki will react -- will they try to block it?"