Prime Minister Dmitry Medvedev gives an interview to Kommersant newspaper
29 november 2012
Question: You’ve been Prime Minister for six months now. We can safely say that the organising phrase of forming the Government is over. Earlier you had outlined seven priority areas of the Government’s work including in the short term. What have you been able to resolve at this stage and what issues remain unresolved?
Dmitry Medvedev: It would be absurd for me to claim that we have resolved almost every issue after just six months in office. I think that it is important for the Government to begin its work as a full-fledged team with a common agenda. In these six months, my colleagues and I, as a Prime Minister, have sought to create a common platform for our work. And I think we have succeeded in this respect.
This does not mean that everyone in the Government holds the same opinions. It is absolutely normal for Government members to have different points of view on certain issues. My position is simple: an issue should be discussed as candidly and thoroughly as possible before a decision is taken. Once a decision has been taken, all discussion comes to an end, and this decision must be carried out. If somebody doesn’t like the decision, they can criticise it, but they will have to do so from their new job.
As for the Government’s goals, they are to have a normal, modern and competitive economy, to improve people’s lives, to increase their income and to improve living standards. These are the goals of every Government, even one operating in a period of crisis.
Question: Do you still think we are in a crisis?
Dmitry Medvedev: Currently we are not in a crisis. Rather, we are in the calm before the storm. This fact has helped shape our work over the past six months. I recall how I started my work as Prime Minister. After the President had signed his executive orders, I summoned all Government members and told them that we have practical tasks to address.
First, we must approve state programmes. I believed then and I believe now that a programme-based approach should be the foundation for drafting the budget. The second issue was the approval of the budget for 2013 and the three-year budget period. Third – issues related to social development, increasing benefits for some categories of citizens according to earlier decisions. Fourth – reforming the civil service. Fifth – working with the expert community in the Open Government. Sixth – privatisation. Seventh – to implement the measures envisioned by the roadmaps of the national business initiative as soon as possible, so as to improve the investment climate.
It is not for me to judge our successes and failures. I can only say that we have made progress in all these areas. At the next Government meeting, we will analyse what has been done in the past six months.
Question: Mr Medvedev, next year you will unveil the programme for the Government’s work until March 2018. What will be the priorities?
Dmitry Medvedev: I don’t want to unveil the programme ahead of time, work on it continues. You can’t expect me to announce something that doesn’t exist right now. In my view, we must staunchly defend the values that our country has suffered for, so to speak.
This is not always easy. Everything seems so clear when you talk in generalities. But once you wade into the details, everything becomes much more complicated. For example, privatisation. Is this a value or simply a mechanism for selling off public property? I came to a conclusion that privatisation in Russia is not merely the transfer of property from the state to private ownership. It is an ideologeme that creates a vector for national development, it leads to efficient proprietors, it means that we are not building an economy under state control, state capitalism.
Yes, the Government’s work always boils down to a set of compromises. As such, it is all the more important that the programme for its work include value-based guideposts. And the programme will have them.
Question: The Open Government system was created to improve relations between the Government and the expert community. What have you accomplished in this respect?
Dmitry Medvedev: I believe that the Government’s activity has obviously become more open after the introduction of this format. Have we accomplished everything? No, it’s a process. However, many of our bills are assessed by Open Government experts. This is a fact, and I was very happy to hear various opinions during the discussion of the draft law on industrial safety and security. No one pressured these practical business people to say anything one way or the other on this issue. And then they were surprised that it took the cumbersome Government machinery only three months to draft a document, something the business community has discussed for six years. But this was the result of a long-awaited dialogue.
Question: And do you think there is any political pressure on Open Government from inside the Government?
Dmitry Medvedev: Political pressure?
Question: Obviously, some people in the Government could oppose Open Government, because it could interfere with their customary work patterns.
Dmitry Medvedev: In effect, the Government is always a closed system. It’s possible that not all Government Staff and ministerial employees like to work in an open discussion format.
But I don’t see anything special in critical remarks directed at Open Government. Government members should make each decision in line with the law on the Government and in line with internal regulations. We have already amended Government regulations to make them comply with Open Government principles as a platform for open discussion.
Question: Whether you are used to it or not, the Government now has to address many ideological issues in terms of their essence and consequences. This concerns major social reforms and economic policy issues. But the Government has always claimed an apolitical stance. It would be interesting to know how you plan to ensure ideological unity among your colleagues.
Dmitry Medvedev: I have no intention of ensuring the Government’s ideological unity. The Government is a team of like-minded persons, rather than a party. However, Government members should share similar values. For example, there are no people who would openly support a Communist idea in my Government.
Question: And could a Social Democrat work as Minister of Finance in the Government of Dmitry Medvedev?
Dmitry Medvedev: Russia does not have a party Government or a parliamentary republic. Anyone could become Minister of Finance if we had a coalition Government. But, if you are asking me as seasoned politicianh, then I’ll tell you that I don’t yet see such a situation for myself.
We can have different opinions of various economic development parameters. For instance, if I were Deputy Prime Minister for Social Issues, I would voice my own opinion of the budget. In effect, I address social issues as part of high-priority national projects. If I were Minister of Finance, I would probably share opinions similar to those of Anton Siluanov or Alexei Kudrin. “Noblesse oblige,” as the French say. My position dictates specific priorities for me. On the other hand, the Government is a team of like-minded people, and it is highly unlikely that they would express diametrically opposed opinions on the entire range of issues.
So far, I have seen no indication that ideological disagreements in the Government are so intense that people are finding it difficult to work together.
Question: And do you think that this could happen some time in the future?
Dmitry Medvedev: I don’t think so. You know, I had the impression that my economic approaches were not so different from those of Mr Kudrin. But it turned out that were. He told me this quite clearly, and in the end I was forced to dismiss him. Such things happen. By the way, I have the impression that he hadn’t thought about the consequences of his statement before he made it. Nevertheless, we recently met and talked over tea.
Question: Did he act on his own initiative?
Dmitry Medvedev: Yes. He came to me and said: “You dismissed me exactly a year ago, on this day.” He and I sat for a while and discussed various issues. He said: “I will criticise the Government.” I replied: “That’s right, Mr Kudrin, go ahead and criticise.” He said: “I will also work on various projects,” and I said: “Very good.”
Question: And what did Mr Kudrin criticise during your conversation?
Dmitry Medvedev: We mostly discussed constructive issues and some foreign affairs.
Question: Did it surprise you that the Minister of Regional Development, Oleg Govorun, would quit so quickly?
Dmitry Medvedev: Yes. I was under the impression that he was an experienced person, and that he was better prepared to react calmly to specific assessments, which were voiced. I realise that some remarks might sound unfair or offensive. But a public official, including a minister, should understand that they are in the spotlight, and that they can be criticised by others, including the President and the Government. And they should have a more measured response to this.
I would like to mention an analogous situation, which, in my opinion, is quite significant. During the Soviet era, it was almost impossible to find a minister or a first secretary of the Communist Party’s district committee who had not been reprimanded or scolded in one way or another. But none of them quit the Communist Party because they realised that there was work that had to be done. But this was his personal choice and we should respect this.
Question: How solid is the anti-corruption legislation? Does it need to be enhanced?
Dmitry Medvedev: We didn’t have anti-corruption legislation before. Now we have it. It’s not ideal, but there it is, and it’s not inferior to similar legislation in other countries. We are now talking about criminal prosecution of acts that were previously not considered a crime. It includes accountability of public servants, rules of conduct and other things. I would be a bad lawyer if I didn’t mention that this is an outstanding piece of legislation designed to last for centuries. All this should be improved. However, I can say with a certain degree of satisfaction that we have dramatically strengthened this foundation over the past few years.
Question: Are recent high-profile anti-corruption investigations the result of the new legislation or are they a manifestation of the political will?
Dmitry Medvedev: It’s always about a cumulative effect and it’s also a response to a popular request to fight corruption. There was a feeling at all levels some time ago that fighting corruption was an exercise in futility, that corruption is our birth mark and some kind of an ancestral curse. That there’s nothing we can do about it. I believe we managed to infuse a certain legal input into this work. But the request for fighting corruption was still there. The work of law enforcement agencies, which have received additional legal tools to do this work, is the second element. Of course, there have to be certain political decisions to get things going. Let me be straightforward about it: this should be a systematic process, not a campaign that starts and fizzles out soon.
Question: Have you ever received any tips about the situation in the Defence Ministry before?
Dmitry Medvedev: The presence or absence of financial fraud is a matter of evidence which is now being put together by law enforcement agencies in accordance with the Criminal Procedure Code. They should make the case and then prove it in court. The President and Prime Minister are regularly updated on developments in various departments. Directives to conduct inspections are issued for all cases that warrant such an inspection. The audit at the Defence Ministry did not start today, but much earlier. Its results can be classified as an administrative offence or a crime only in court. There’s no other way to go about it.
Has Anatoly Serdyukov's military reform reached a point of no return, or will it be rolled back?
Dmitry Medvedev: The decision to reform the military is made by the commander-in-chief. Vladimir Putin was the commander-in-chief at one point in time, then I and now it’s Vladimir Putin again. Of course, a lot depends on the Defence Minister. You can do nothing, or you can conduct reforms. Anatoly Serdyukov conducted reforms. Perhaps, there were errors along the way, but I have no doubt that these reforms have really begun. They focused on the armed forces and the social welfare of servicemen. It's always easy to criticise, but the social status of men in uniform has changed dramatically over the past few years. Their salaries have grown considerably and the outflow of people from the armed forces has stopped. Discharged servicemen are provided with housing. This had never been the case before. Speaking about salaries, no man is ever fully satisfied with his salary, but current military salaries in Russia are comparable to salaries of military personnel in Europe, and are not that much different from what US servicemen are paid. This is the result of changes that took place in the Ministry of Defence. And I would like everyone to keep this in mind.
I hope that the new Defence Minister will continue down this course. The President and I have discussed this with Mr Shoigu. He said he believes a lot has been accomplished. We need to sort things out to see what was done right and what was not, but reforms must continue.
Question: So why was Serdyukov dismissed from office then? That is, if there is no court decision and no formal charges against him?
Dmitry Medvedev: The achievements of the reforms are obvious. But there are rules of conduct in such a situation in every country. In case there are doubts with regard to a particular official when a case is brought to court and gets into the public eye, the leader must decide on suspending or dismissing this official from office. He must do so, at least to ensure that there are no doubts about the objectivity of the investigation. That’s how it's done in all countries.
Question: Are you worried about the social atmosphere that has shaped up in the wake of these cases? When the opposition talks about the return of Stalinist purges, it is clear that even in the event that something like this were to happen now, formally, it would look nothing like Stalinist times. How do you think the public sentiment was affected by the anti-corruption campaign?
Dmitry Medvedev: Are you talking about the political opposition or the fight against corruption? These are different things.
Remark: I’m talking about non-systemic opposition.
Dmitry Medvedev: I don’t like that term. I have deliberately tried to focus on the fact that there is legal and illegal opposition. Legal opposition includes all those who belong to legal political movements or parties. I think the term “non-parliamentary opposition” is more fitting. Well, in any case, in order for us to be able to pass judgement on what happened during Stalin’s purges, we need to understand the atmosphere of that time. Look at the documents of the time and you’ll see that our society is very different from that of the 1930s and that things like that are simply inconceivable.
Question: By the end of the spring session, the State Duma had adopted a number of controversial laws, including those tightening the rules for staging protests. The article on defamation will be returned to
the Criminal Code. The opposition refers to this as tightening the screws in Russia. What is your attitude to these measures?
Dmitry Medvedev: Society is developing, becoming more modern and more open as the state becomes prosperous. That is why society demands so much from the Government. When the country is poor, its people ask for much less than they do now. They only think of surviving. The fact that public demand grew during the 2011 election proves that our civil society has become more mature. I think that the all this talk about another repression is being raised as part of a particular political agenda.
There are other political attitudes as well, of which I have spoken recently. Part of society, and we must remember this, believes that simply having order is not enough. They are looking for repression, saying that everything that was done in the 1930s was good and that we must stick to that course. This is not only the opinion of some pensioners, but also young people. During one of the recent discussions on Stalin’s role in Russian history, I had to react. My attitude is that most of those who laud that period have no idea of what was happening. It is very easy to admire a tyrant when you know that nobody is coming to arrest you at night, to have you shot or imprisoned for 25 years on false testimony.
You mentioned changes to the legislation. You know, popularity for different public movements comes in waves. You mentioned defamation. I thought that the article must be decriminalised, and so I pushed for it. We must not punish defamation with imprisonment. Later defamation was defined as a socially dangerous act for which one should not be jailed, but rather, should have to pay a fine. This I approve of. I think liability of this kind is appropriate for this offence: a socially dangerous act, but one that does not result in imprisonment. I would say that we must not have tougher and more repressive punishment.
Question: The latest amendments to the law on treason and the possible enforcement of this law may harm scientific and business contacts. What are the chances of this, and would it be possible to amend the law quickly?
Dmitry Medvedev: We need to wait for legal practice to understand whether the law is repressive, or an adjustment of some legal and technical aspects is needed. Let's wait and see. If the practice proves to be repressive and it excessively increases liability, then you are right. But I don’t think this will happen.
Question: Will the geographical decentralisation of government continue in Russia? Is it economically feasible to transfer the Supreme Court and the Supreme Commercial Court to St Petersburg?
Dmitry Medvedev: In terms of ideology, this is an entirely reasonable idea. Considering the size of this country and certain legal idiosyncrasies it would be preferable for the courts to be located away from the government, so that there is less temptation to try to influence the courts. Moreover, the courts do not need to be in direct contact with the other branches of government to do their job. It does not have executive functions. It is self-sufficient, so to speak. The Constitutional Court continues to issue rulings in St Petersburg, as it used to do in Moscow. Transferring of the judicial branch to another region has its advantages in terms of decentralising power. The economic dimension, however, requires further discussion. This process would not be cheap. But if we manage to sell the buildings currently occupied by the high courts in Moscow at the best possible prices, it would be a reasonable move.
Question: But would this contradict the plans to build a new administrative centre in Greater Moscow?
Dmitry Medvedev: No. There has never been an approved plan on who will relocate and where. There was an idea based on the fact that the government agencies are scattered around Moscow, which is inconvenient for both Moscow residents and staff, who have to waste time commuting between offices. In many countries, government buildings are located in a single area. Of course, we’ll have to calculate the costs. Despite the rumours, this project has not been cancelled. The instructions have been issued and are being carried out. Speaking about the government, the parliament and presidential administration, they could be potentially transferred from Moscow to the the city’s newly incorporated areas. Technically, though, it is quite complicated.
Question: So the project to extend the boundaries of Moscow continues?
Dmitry Medvedev: I have already explained the reasons behind this decision. This needs to be done not because of the staff but because the city just can’t breathe. Twelve million people – actually fifteen million people including those who came from other cities – just can’t live within the city boundaries of the 1960s. It is impossible. So Moscow must be expanded. It is not just a passing fancy but a well thought-out decision. I’m sure that within the next few years we will see rapid development of the newly incorporated areas. They will only benefit from that because, after all, living standards in Moscow are higher than in the Moscow Region.
Question: Do you think the government has completely dismissed the idea of integrating Moscow and the Moscow Region?
Dmitry Medvedev: I am not the one to answer this question. First of all, you should ask the people. If you want to hear my opinion, then, frankly speaking, it is too much for our country. These twenty million people (Moscow and the Moscow Region) account for one seventh of the country’s population. I think it would be really difficult to manage, even though I’m sure these kinds of ideas will keep coming up. It would be more realistic to integrate St Petersburg and the Leningrad Region, since there are fewer residents (under seven million). We already have regions of a similar size, for example, the Moscow Region. They are quite manageable, although certain legal, administrative and even social aspects present a challenge. Size does matter.
Question: Last Friday the State Duma voted for a package of laws on the issues that provoked the fiercest debates in the Government in 2012 – the pension reform and pension accruals. What are the reasons behind these debates? Are they to do with ideology, world outlook, finances, the budget or the interests of lobbies?
Dmitry Medvedev: It is both an ideological, world outlook and financial dispute. I don’t remember any other pension reform that would be implemented strictly according to plan. The pension system in any country is a very complicated, cumbersome and highly conservative mechanism whose operation concerns the interests of the absolute majority of people.
The State Duma is discussing laws designed to modernise the pension system. They concern early retirement pensions in the approved list of professions and pensions for self-employed people, as well as a number of issues which may seem peripheral but which in fact bear on the interests of millions of people. Following discussions, it was decided that some provisions could be implemented in stages. I believe that this is a good decision. Indeed, we have held numerous discussions of this issue, and some colleagues called for doing everything without delay, while others argued that, for example, the funded part of pensions should be left as it is.
As it often happens, the compromise scenario that has been approved will balance the situation. The new procedure for the distribution of pension funds will come into effect in 2014, rather than 2013. This will allow us to prepare for the change, to come up with en efficient, substantiated and balanced pension formula based on mathematical calculations. In fact, this decision allows people to make their own decisions on their pension accruals, to keep them within the current system or move them to the new system.
There is nothing terribly wrong with the current pension system but, as any other pension system, it could stand improvement. The fact that it was adopted only 10 years ago is not a sufficient argument to me. Ten years is a long time, and unless we make the decision now we will face major problems soon. What are they? It is possible that when those who formed their pensions within the current funded system reach retirement age their pensions will be smaller than those who retired during the operation of the distributive system. But the goal of the funded pension system was to ensure that pensions get bigger, not smaller. We must protect people’s interests.
At the same time, we should ensure a certain balance within different groups of pensioners. Some may choose to remain within the current system. Therefore, the pension rights offered by the current pension legislation will be reaffirmed for those who choose to remain in the current system.
Question: Kommersant mostly represents the views of business, which is interested above all in taxes. Can you guarantee that the decisions on the pension reform will resolve the issue of the planned increase of the aggregate insurance premium rate, which had been lowered, back to 34%?
Dmitry Medvedev: Do you want me to swear that it will? I won’t do this because I am a responsible person. I can only tell you that we have no such plans. We do not plan to raise the aggregate insurance premiums from 30% to 34%. But there are many factors beyond our control, including the global economic crisis. We shall see.
By the way, the question of the pension system also includes the pension rights of business people. I don’t mean the super rich, for whom this is not too important (although everything can changes very fast), but small and medium-sized businesses. It is very important that the state pension system, either distributive or funded one, is complemented with corporate pension system. We must ensure that they survive. Currently, about 7 million people in Russia are members of corporate pension plans. This is not such a small figure, is it? If it grows to, say, 25 million in 2022, we will be able to say that the goal of ensuring the pension rights of our middle class has been achieved. To date, corporate pension systems can cover 15% of their clients’ income. And lastly, non-corporate, that is, purely private pension systems will account for another 5% to 7% of income. This is a sizable addition to a pension from the system that developed with the assistance of the state.
Question: As a Prime Minister, you have inherited an additional de facto ideological problem, namely, the debate between the Ministry of Economic Development and the Ministry of Finance. Over the past ten years, the Ministry of Economic Development has been saying that economic growth amounts to state investment. At the same time, the Ministry of Finance has been saying that economic growth is ensured by a well-balanced macroeconomic policy. Is this an eternal debate?
Dmitry Medvedev: Partly, yes. And this is not because the Minister of Economic Development is always someone like German Gref, and the Minister of Finance someone like Alexei Kudrin. By the way, when I was President, it was proposed to merge the two ministries. I did not agree with this idea. I had already discussed this issue with Vladimir Putin during his previous presidential term, and he also was not in favour. It is normal and even constructive to have a contradiction between growth policy and balance-sheet policy. This contradiction will always be manifested in a state which has two key economic departments. No matter where I am, be it at an economic forum or with my colleagues, they are always trying to establish what should come first: fiscal consolidation or development goals. All IMF debates also revolve around this issue. We spent many hours trying to decide what is more important at the G20 summit. Naturally, we did not reach any conclusion because no country can stipulate only one thing as its main objective.
Of course, fiscal consolidation is very important in conditions of an economic slump and an unstable financial system. But, on the other hand, we don’t need fiscal consolidation for its own sake. Fiscal consolidation is needed for the sake of macroeconomic stability and subsequent development. Economic growth stops as soon as we use budget restrictions to clamp down on development. And as economic growth stops, we can’t maintain the conditions of a normal economy and it becomes impossible to abide by macroeconomic proportions. It’s a vicious circle. Development and fiscal consolidation are two sides of the same coin.
It is the Government’s responsibility to see that they work together at every specific moment. In 2009, Russia and most foreign economies believed budget consolidation was more important. We had to stay afloat. We subsequently rectified the situation, and support for economic growth was prioritised later on. Of course, we must not destabilise the budget in any way. Consequently, we have introduced extremely tough budget regulations. I don’t view the current budget as merely an austerity budget. This budget has investment potential and a growth model, although the growth will not be as fast as we might like it to be.
Question: The Government needs to take similar decisions with regard to inflation. Are 5% consumer-price hikes a normal background inflation level for Russia, or should this be reduced further? In this sense, does the Government also insist on 5% inflation as a compromise, of sorts?
Dmitry Medvedev: In effect, this is a philosophical issue regarding national economic policy and the eternal debate between the Ministry of Finance and the Ministry of Economic Development. I believe that inflation targeting is an important measure which has enabled us to curb inflation. However, inflation has not yet decreased to the desired levels.
Question: Judging by your statement, the Government has set a target of 3-4% annual inflation or less.
Dmitry Medvedev: Sure, technically speaking, this is what we want to achieve.
Question: So the current 5% compromise is, in fact, a coincidence, rather than a compromise?
Dmitry Medvedev: But we really do want Russia to have the same macroeconomic parameters as Germany, the United States or even China. China has its own specifics, including times of fluctuating inflation in the past. However, those fluctuations were curbed. As for developed economies, they now have 2-4% inflation. We do not need to attain this level, because we live in a complicated world and in a specific situation. But we must try and abide by the parameters we set for ourselves.
Question: Next year, the Government will have to address the mega-regulator issue and that of financial oversight consolidation. Do you expect any decision to be made in this area?
Dmitry Medvedev: We will certainly make a decision. We didn’t start up this whole process just to tease someone. This decision is in the making. I can tell you my opinion on this now, although the decision is not final.
We have a number of institutions which influence the financial market. The Central Bank is the most powerful of these, and it is an independent system. It makes sense to delegate these powers to the Central Bank. There are no ideal managerial bodies, and no one is truly perfect, but, as for corruption levels, the Central Bank is a much more transparent and open system than many other state agencies.
Question: Five years ago, the banking community had some misgivings about being overseen by the Central Bank. The Government was worried about the situation with bankrupt banks. Have all these problems regarding Central Bank monitoring been eliminated? What do you think about this?
Dmitry Medvedev: This means that Sergei Ignatyev and the entire Government were successful in their work, and that these five years did not pass in vain. Incidentally, this is why the idea of a mega-regulator based on the Central Bank does not scare the financial community. But no final decision has been reached. Therefore I have issued a directive to analyse all options, including the consolidation of the current agency which oversees the regulation of financial markets and the complete transfer of the relevant powers to the Central Bank.
Question: The Government has recently increased the volume of bank deposits guaranteed by the Deposit Insurance Agency from 700,000 roubles to one million roubles. As a rule, governments do this in times of crisis. What is the logic behind the Government’s decision here?
Dmitry Medvedev: Yes, this is sometimes done to reassure the people. This is not the case in Russia, everything is fine here. But I have to admit that when we decided to insure bank deposits totalling up to 700,000 roubles, the sum was quite different at the time. The Deposit Insurance Agency de facto insures smaller sums. Consequently, it was only too fair to increase maximum deposit volumes being guaranteed by the Agency to one million. Over the past few years, our volumes have been smaller than those of many CIS countries, including Kazakhstan and Ukraine, considering the correlation between per-capita GDP volumes and deposit insurance coverage.
Question: At the same time, it was noted that the Deposit Insurance Agency may guarantee part of bank deposits. Will the Government re-examine this issue?
Dmitry Medvedev: This may become possible some time in the future. But the people of Russia should prepare for this.
Question: Will the Government continue to support the Central Bank on the issue of enlarging the banking sector?
Dmitry Medvedev: We should not enlarge banks just for the sake of it, but for the sake of creating more powerful banks. No one is telling the Central Bank to establish a required number of banks. This is for the Central Bank to decide.
Naturally, we use economic methods and banking norms to persuade banks to make these decisions. Russia has about a thousand banks. Do we need so many banks? As always, experts are divided on this issue. In all, 200 banks control about 93% of financial assets. Does this mean that we must retain only these banks? On the other hand, if I remember correctly, there are several thousand banks in the United States. Of course, the US economy is larger, and the US population is double Russia’s. But, for some reason, they are not trying to herd these banks into major banking organisations at any cost. In some cases, average banks are more stable than major banks. Nevertheless, the banking community continues to evolve. It has been decided that a bank’s start-up capital should total at least 300 million roubles.
Question: In yet another dispute, maybe the most important, over the choice between encouraging privatisation and the further development of the state-owned sector of economy, you are consistently in favour of privatisation. However, state capitalism in other countries is organised in other ways rather than the sheer domination of state-owned companies. Germany, for example, uses a form of co-ownership between the industrial and financial sectors. There are at least some people in our Government who advocate this “continental” model. Your ban on state company participation in privatisation bids: is it your fundamental position? Does the German model stand any chance in the Russian economy?
Dmitry Medvedev: We aren’t German, so we’ll never be able to follow the German model. I believe that we must do our best to make the situation as transparent as possible, and restrict state companies from participating in privatisation bids. This doesn’t mean total exclusion though. After some argument, I signed a Government resolution which allows state companies and their subsidiaries to take part in privatisation with Government consent. Without direct authorisation, they cannot bid in privatisation deals. This provision will prevent big state companies – and not so big ones – from trying to sidestep real privatisation by transferring property from one pocket to another.
Question: Are you prepared as well, using this model, to limit state-controlled banks’ growing influence on the Russian economy? Their share in loan portfolios allows them to strengthen their economic control without attaining complete ownership already.
Dmitry Medvedev: No, I am not. Had our financial situation been absolutely stable, we could have considered restricting state-owned bank presence in our market. However, the entire world finance system is going through a difficult time now; liquidity is in short supply, not just in our market, but in Europe as well. The state has had to directly intervene in the financial markets in many countries, including the US, which has earned Barack Obama the epithet of socialist. In fact, it was just something that needed to be done. Otherwise, entire economies, and specific industries, would have collapsed. The financial markets are still in trouble, and it would be wrong now to avoid using them without state financing.
Having said that, I admit that in the future we shall probably need to have many more powerful private banks capable of competing with our biggest state-controlled banks: Sberbank, VTB or even such instruments of development as Vnesheconombank.
Question: Can you comment on Rosneftegaz’s plans to consolidate assets, at least in the power industry, which might be seen as a diversion from privatisation?
Dmitry Medvedev: Rosneftegaz is, in fact, a company that owns a number of assets [in different industries], including Rosneft shares. So this issue does not concern a conflict over the fate of a company because Rosneftegaz is wholly owned by the government and is controlled by the government in two ways – by the President, who has approved a special procedure for taking decision on a number of transactions, and by the Government, which adopts key executive orders on economic issues. By the way, I approved this special coordination procedure as President of Russia. This special decision-making procedure concerns the future of strategic companies, the coordination of key decisions by the boards of directors, and asset disposition. As with Rosneftegaz, such actions are coordinated with the Government and the President’s Executive Office.
The government is implementing its policy through Rosneftegaz. And Rosneftegaz’s dividends could be used for a variety of purposes, including to increase the market value of other state-owned companies and to fulfil its development objectives. The President recently signed a decree on RusHydro, which provides for using Rosneftegaz resources. In addition, the dividends of other companies could also be used to achieve other goals. The decision rests with the government.
Question: Are you confident that Rosneft’s deal to buy TNK-BP will close exactly as planned? We have seen large deals go foul in 2003-2005, in particular Yuksi [the proposed merger of Yukos and Sibneft] and the planned merger of Gazprom and Rosneft.
Dmitry Medvedev: I remember those deals. In principle, the parameters of the TNK-BP deal could change depending on the market situation. But on the whole, the basic terms of the deal must be honoured, unless a force majeure event occurs. The matter boils down to an agreement between the seller and the buyer.
The story of the deal is connected with the relations between the two TNK-BP shareholders – the Russian concern AAR and British Petroleum. As I see it, the company’s structure was contradictory from the beginning: I would not recommend that anyone base a company, especially such a large company [as TNK-BP], on a 50-50 ownership agreement. It was a trend at the height of the pro-cooperation movement in the late 1980s, but today two major players with their own interests as equal partners in the same company could be described as a Mexican standoff. No wonder they started fighting and bickering, appealing their cause before all kinds of officials in Russia and outside it, and even filing lawsuits. All this resulted in a drawn-out and very complex internal conflict at TNK-BP. How could that conflict be resolved? Only through the sale or reduction of one of the partners’ stakes. This is the road we have chosen.
As for the acquisition of the whole or part of TNK-BP by Rosneft, I believe that this is an exception to the rule. I always consider such transactions very carefully because I don’t think the government should increase its interest in companies, especially such commercially successful companies as TNK-BP, without good reason. But truth be told, when this marriage came to divorce, the Russian government could not regard the issue of a new owner with indifference. I will not name the companies that wanted to take over TNK-BP or the countries behind them, but when the future of a very large oil asset is at stake and the choice is between a state-owned Russian company and any other company, I would choose a state-owned Russian company any day.
Question: Is this a hypothetical situation or did you received such proposals?
Dmitry Medvedev: No, this is not a hypothetical situation; had Rosneft failed to buy TNK-BP, some other company would have definitely become involved. The current buyer is Rosneft; any other buyer would have been either acceptable or uncomfortable for Russia. We don’t need to be shy about this as any government would have acted likewise.
Mind you, Rosneft will not necessarily keep this asset. It is a large, and [after the acquisition] it will become the largest concern on the oil market, but it is still a state-owned company that is on the privatisation list. Considering that its market value has grown, its dividends will increase and revenues from its privatisation will grow too. There will come a day when we will have to take a decision on the controlling stake. It will be a major decision, but anything below a controlling stake could be easily sold with due account of the market situation.
Question: Does this mean that the decision to lower the government’s interest in Rosneft to a blocking stake or even all the way to zero by 2018 can be reviewed?
Dmitry Medvedev: We have not yet taken a final decision on this. It all depends on the practical parameters. Would we benefit by selling the company? How much could we expect to receive from a sale? What does “maintaining control” of a company mean? There are few examples in global practice when a single investor owns the controlling stake (in Russia it is 50% plus one share). In case of dispersed ownership and sufficient free floating funds, we could still control Rosneft with a 20% to 25% stake.
Question: You actively criticised the concept of state corporations during your presidential term. What do you think of them as Prime Minister? What will happen to them in the future? Will they be abolished or overhauled, will they receive some other status, or will everything remain as it is?
Dmitry Medvedev: I will not feel very upset when state corporations stop operating. They are just an instrument, a legal framework, one which is not used in other countries.
The future of state corporations will vary. One of them, Rusnano, has already become an ordinary shareholding company in line with my directive. Two other corporations, Olympstroy and the Housing and Utilities Fund, will serve their purpose and then go. The situation with the latter corporation is more complicated, because it has to accomplish a large-scale objective. It faces numerous problems which have accumulated in the municipal utilities sector, as well as problems concerning rundown housing, renovations and overhauls. Consequently, we are extending its term of operation. There are other corporations, which are called “sui generis” by lawyers. This expression means "of its own kind/genus." These corporations include Rosatom, which is not just a commercial company merely striving to expand its business operations or to accomplish social objectives. This company combines economic and managerial functions. It accomplishes some ministerial tasks, as well as some commercial company tasks. Such are the specifics of the nuclear power industry and dual-purpose nuclear technologies. That’s why Rosatom will remain a state corporation for a very long time.
Russian Technologies, the most complicated state corporation, has more property and more human resources than any other corporation. After becoming President, I signed an executive order on its establishment. But I have many more questions about this corporation than about others. Russian Technologies should demonstrate its merits, and its future will be decided separately.
Question: How many years will it take for Russian Technologies to prove, or disprove, its effectiveness?
Dmitry Medvedev: Two years ago, it seemed to me that this corporation was not changing at all. But I cannot say this today. Russian Technologies has picked up momentum and operates rather well in a number of sectors. It will take at least a few more years to improve the performance of this corporation. After that, it will become possible to decide on its transformation.
How will this be done? Well, this is a separate question. I will simply state my own viewpoint. In the long run, these organisations should turn into ordinary commercial companies with the legal status of shareholding companies.
Question: State corporations are protected from the prospect of liquidation in the next few years. And are their top executives immune from resignation?
Dmitry Medvedev: Of course not. Successful executives can continue to work. Those who are unable to work very effectively should admit this. In fact, this is true of any state corporation, any ministry and any state agency.
Question: In 2011, it was suggested that state corporations should be converted into permanent public companies. Will you continue to discuss this idea?
Dmitry Medvedev: Public companies are a special category. But we would like those businesses that have joined Russian Technologies to become normal companies, rather than a collection of ineffective enterprises which have to be supported by us in order to retain jobs and their production achievements.
Vnesheconombank (VEB), a special credit-financial institution, resembles a real public company. VEB is not a bank in the narrow sense of the word. It fulfills various functions resembling specific bank objectives. It appears that VEB closely resembles a public company. However, it is a separate question of whether we need these public companies or not. Previously, this concept was not used by Russian lawyers.
Question: While speaking about a “pre-storm” situation, you could only have been referring to the European part of the world financial crisis. Does the Russian Government think that the EU will be unable to contain the crisis within its present boundaries?
Dmitry Medvedev: I believe that they will overcome this crisis. Let no one think that we are wiping our partners’ tears: the EU economy is one of the strongest in the world, on a par with America’s and China’s. But there are also the BRICS economies. I am sure that the emerging markets, of which the Russian market is one, will cope as well. The question is, at what price? I wouldn’t like the euro to be sacrificed because of problems in certain European economies. I am not saying this simply because I sympathise with the idea of the euro. I know that one of the reasons why we were hit by the 2008 crisis was that we didn’t have enough reserve currencies. The crisis was triggered by the dollar and its problems; now it is the euro that is beset by problems. It is in our interests, therefore, that the world should have more reserve currencies, including – in the future – the rouble, the yuan, and others. That way we can better balance the cross-country risks, as well as the risks threatening individual countries in common currency zones. We want the situation in the EU to be normal: our trade with the EU is worth $400 billion, which is half of Russia’s foreign trade turnover. Almost 42% of Russian hard currency reserves are in euros. Furthermore, a multi-currency financial system is better for serving the world economy.
Question: There has been a reset in Russian-American relations. – What positive steps have been taken and what has stood in the way? How will relations be structured with the new Obama administration?
Dmitry Medvedev: I’ve never had illusions that Mr Obama and I, or anyone else, would be able to change everything in a matter of a few years. As I see it, we have done well in many fields. We signed the START-3 Treaty. We have come to terms on certain visa cooperation issues. We have energised the economic ties, even if there is still work to be done here. We worked as a team when taking decisions during the crisis. We managed to reach an understanding on many foreign policy issues. We’ve done a great deal, but we still need to do more. There are issues we differ drastically on. I am talking about missile defence in Europe; whoever the head of Russia may be, our position is not likely to change. I hope that during Barak Obama’s new term of office Russia and the United States will move forward and that the efforts undertaken in the past will not go up in smoke. We are prepared to do our bit. But our partners should also understand that we cannot be indifferent to what is going on in the world, nor to the decisions they approve.
We welcome the fact that at last U.S. Congress is canceling the Jackson-Vanik amendment, a relic of the past. But we don’t like it being done in a package with another act. We don’t like it at all. It’s absolutely unacceptable that one country should impose its will on another in this way. In my view, therein lies the big mistake of U.S. legislators and the U.S. establishment as a whole. The doctrine of extended U.S. sovereignty, if you want to call it that, is a shoddy doctrine. When U.S. courts attempt to consider disputes between foreign entities, when U.S. justice attempts to impose its verdicts across the world, when U.S. secret services bring people to the United States for trial or in order to put them in jail without trial… I don’t want to keep on about this. In any case, this particular act will provoke both symmetric and asymmetric reactionsfrom our country. We’ve been there before; this kind of thing happened quite often in the Soviet period. Do we all need this? I think not. They won’t profit by this either.
Question: Do you see the ongoing diffusion of the “Magnitsky act” in Europe – the UK, Germany, etc. – as a clear example of foreign policy struggles?
Dmitry Medvedev: There is the Euroatlantic solidarity, if you wish. I’ve been involved in practical politics for rather long and I saw how votes were taken on various issues. I’ve been to meetings of the Russia-NATO Council and I know how this sort of thing goes ahead. It’s a case of strict subordination and discipline, like in the former socialist camp. This bill exemplifies how ideological decisions approved in one place are later replicated by other states. This is silly and pointless.
Question: Do you think modernisation is still possible in Russia in spite of its growing international problems?
Dmitry Medvedev: Modernisation is impossible without cooperation. It would be sheer wishful thinking. What is modernisation? It is an effort to create a more advanced economy based on state-of-the-art methods and innovations. Can we do it on our own, relying on our own strengths? No, we cannot, because otherwise the DPRK would have been the number one moderniser in the world.
We are lagging behind in a number of technological areas. At the same time, we’ve made a lot of headway in other fields that can sell competitively: nuclear power industry, space exploration, certain advances in information technology, communications and biotechnology. Under no circumstances should we “become enclosed within our own shell.” This is why many special agreements and protocols on joint modernisation projects with European countries have been signed with my direct participation over recent years.
Question: Everything is changing in the world – not only positions but also governments. Bidzina Ivanishvili has become Georgia’s new prime minister, and so is now your colleague. Are you prepared to meet with him?
Dmitry Medvedev: I said once that the only person I am not prepared to sit down with at the same table is Mikheil Saakashvili. He started the war, which was a crime. This was primarily a crime against the Georgian people. But it was also a crime against other nations, and he is responsible for the deaths of their citizens.
The current prime minister belongs to a different generation of politicians. We will have to see what he plans to do. We are receiving some signals from Georgia about its desire to establish contacts, albeit not yet at diplomatic level. Recall that it was Georgia, not Russia that severed diplomatic relations. We will monitor these signals carefully. I don’t see anything bad in restoring cultural cooperation. Our planes fly back and forth, and there is still contact between our people, thank God. We have preserved our cultural ties and may also restore trade and economic relations… This is an uphill road, but Russia has always expressed its readiness for dialogue with the new Georgian leaders. That said, this dialogue must take into account the existing geopolitical realities and Russia’s decisions to recognise Abkhazia and South Ossetia.
Question: Many governors were replaced in 2009–2012…
Dmitry Medvedev: Yes, I have played a big role in this. In fact, I replaced half of the governors.
Question: Are you pleased with the results?
Dmitry Medvedev: On the whole, I am. New people with more modern views became governors. Not all of them kept their posts. Some did not make it, some resigned or were asked to resign. This was normal in the former system of decision-making regarding the powers of governors. Now we have a different system and they are elected. But is someone does a poor job, they may be also asked to resign. The President has the right to do this. The Government also has the right to inform the President of its dissatisfaction with a particular governor. When making decisions, it is very important to think carefully on who will be the next governor because these are full-scale elections, a true political contest. In this sense, it was easier for me to replace governors the old way.
Question: Who will be re-elected from among those you appointed?
Dmitry Medvedev: I don’t want to mention any names so as not to offend anyone. What for? This wouldn’t be right. We had elections in five regions. There were some minor faults but nobody had any big grievances against this campaign. Most regions saw the usual political intrigue. All governors of these regions were re-elected, to the surprise of many. They were backed by United Russia. I’m glad the current governors – even those I had doubts about – have made it through this evaluation. They have proved to people that they are better than representatives of other parties.
Question: What do you think about the current status of United Russia?
Dmitry Medvedev: While deciding to join the party and link my political future with it, I thought of how this will affect the party and the public’s attitude toward me. If I had thought by taking this job I would damage the general political structure I would have never taken it. Everything seems to be normal so far – not ideal, of course, but normal.
United Russia is doing well now. We have gained a margin of security, which probably surprised some people during the recent regional elections. The number of sceptics has probably not diminished – some believe this party does not suit them and will never support it. However, a considerable number of people, in fact a majority of voters demonstrated their support for United Russia.
The main point is that the party has begun to change. Like any ruling party, United Russia started becoming too full of itself and had become rigid. It seemed that the administrative resources and the traditional core electorate would allow it to rule the country for a very long time. It ran into problems but now it is changing. Most important, the party and its leading bodies (both at the top and bottom) had the courage to change. During my visits to the regions, I always try to meet with party most active members and encourage them, to fire them up, so to speak. I will continue doing this. It makes sense.
Question: Do you think a verdict on the Bolotnaya Square case will be lighter than the public expects or tougher? What should we expect?
Dmitry Medvedev: I don’t want to interfere with matters of the court, and so I won’t comment a possible verdict. Let me just say one thing – we must all become a little more civilized. I can understand the disappointment of some people with the results of elections because some win and others lose. It is very unpleasant to realise there are no MPs you like, that none of them represent your political views. I can also understand that people take to the streets and make their demands to the Government – this is absolutely normal. This is also useful for the Government because the dialogue is becoming more active. I think this would be useful for our country as well. As for a package of political reforms that I announced last December and that our parliament adopted at my initiative, it has helped create a more modern political structure in Russia.
That said, everyone, including people with radical oppositionist views, must abide by the law. Everyone taking to the street to protest must realise that they cannot violate the law by assaulting police officers or destroying property even if they greatly dislike the current political system and its leaders. They will be taken to task for that. We will have a modern political system only if we learn to respect law and order. Let me emphasise that everyone must learn to do this – both the Government and the opponents of the Government. In this case, we will have a harmonious, modern society and a normal democracy.
Question: How will you teach the Government to do this? It is more or less clear how the opponents will be taught. But how can you teach the Government to do the same?
Dmitry Medvedev: Do you think the Government can’t learn? If that were the case, I would probably not be here talking with you today. The Government wants to be understood. It is important for it to be heard. We want people to understand us.