Medvedev Vows to Cut State Role in Economy

ReutersMedvedev, gesturing during a Reuters interview, rejected the notion that the Kremlin had an eye on a TNK-BP stake.
President Dmitry Medvedev said in an interview that he wanted to reduce the state's role in the economy and curb government spending to combat rising inflation.

Medvedev rejected any idea of a state energy giant buying into TNK-BP and said Russia would not gamble its vast sovereign oil wealth on risky equity investments.

In the wide-ranging interview at the Kremlin on Monday, Medvedev stressed the importance of international cooperation to solve global economic woes and repeated his proposal to make the ruble one of several regional reserve currencies, limiting the world's exposure to the dollar. Analysts say that rising inflation, likely to hit 14 percent this year, is the country's top economic problem. They believe that the economy is growing too quickly, or overheating.

Noting that prices were rising more than twice as fast as an original government target of 5 percent to 6 percent a year, Medvedev said Russia did not have "supernatural overheating" but should act "toughly and clearly to limit these inflationary tendencies."

Asked what specific measures he would take, he mentioned the reduction of "excessive" government spending but said Russia "could not pursue interest rate policy in isolation" from international factors.

Medvedev first suggested giving the ruble a role as a reserve currency in February, and he returned to the idea in the interview, saying it would help build a more robust global financial system.

Medvedev defended former President Vladimir Putin for bringing certain industries under tighter state control. This, he said, was important to "guarantee the strategic interests of the economy in the years to come."

"But any additional strengthening of the role of the state, increasing its presence in the economy, is not foreseen," Medvedev said. "On the contrary, we will take action to reduce the presence of the state in the economy."

The EU has raised concerns with Russia about the fate of TNK-BP, where BP's half-share of the company is mired in a dispute with the Russian co-owners about strategy and ownership.

Analysts have suggested that the Kremlin wants a stake for a state energy firm such as Gazprom or Rosneft in TNK-BP. But Medvedev, who previously headed Gazprom's board, rejected this. "I didn't lead such conversations even as chairman of the board of directors," he said. "As far as I know, there are no proposals about the sale of the corresponding stakes to Gazprom or Rosneft, so there is nothing to talk about. If there are offers, they will be considered. But state companies have no objective right to acquire stakes from private companies."

Both the Russian shareholders and BP should settle their differences using the law and their own memoranda of understanding, he added.

Russia has built up a $162 billion windfall from unexpectedly high oil revenues, and Medvedev said this money should be used first for domestic investment and to guarantee social programs and pensions. Some money could be invested abroad but only in "attractive, first-class assets, protected assets that will bring a guaranteed income, even in a conservative scenario."

Medvedev called on Russian private sector businessmen to invest more of their surging profits abroad, however, saying that to do so would "strengthen economic stability and create mutual dependence."

As for Russia's security, Medvedev said poverty and corruption were the biggest internal threats and that unstable financial markets, terrorism and international crime were universal dangers to be tackled through coordinated action at the European and G8 level.

Read the Transcript of Medvedev Interview