Putin Warns Against State Excesses

APPresident Vladimir Putin listening to speeches as he awaits his turn to address the World Economic Forum in Davos, Switzerland, on Wednesday evening.��
Prime Minister Vladimir Putin, who has overseen the creation of government-backed national industry champions, surprised participants at the World Economic Forum in Davos on Wednesday by warning against excessive state intervention in the economy.

"The state's role was brought to omnipotence in the Soviet Union in the last century," Putin said in his opening address to the forum, which aims to debate a post-crisis world. "It finally led to our economy being totally noncompetitive.

"We paid dearly for that lesson. I am confident that no one would want to retry that."

Putin, whose government is spending tens of billions of dollars in a rescue package, urged businesses to seek their own solutions to the economic hardships, saying that state aid is exhaustible and not always effective.

He also warned against excessive protectionism before offering a range of proposals that could avert a similar global economic debacle in the future. He said banks must write off their bad loans and assets, several strong regional currencies must replace the dollar as the single reserve currency, governments must better regulate local and international financial markets and the crude price must rise to a higher level.

Allowing crude prices to stay low will bar companies from developing new fields, prompting a lack of supply to fuel post-crisis economic growth.

"This will be a road to new crises," Putin said, representing the country that is the world's second-largest crude exporter.

He reiterated that the government would use the current problems as a "chance" to move away from the commodity sectors to a more high-tech economy. He said Russia would adopt economically justified tariffs for internal electricity pricing.

Russia will remain open to further foreign investment, Putin said.

In an apparent nod to the gas transit standoff with Ukraine earlier this month, Putin called for new international agreements to ensure energy security and championed Russia's two proposed undersea pipelines that would carry gas to the European Union directly.

Restraint on military spending would help the economy, Putin said.

Just as global financial institutions failed to prevent the crisis, international political organizations have shown their impotence by failing to prevent Russia's war with Georgia, the November terrorist acts in India and Israel's attack on the Gaza Strip, Putin said.

VimpelCom chief executive Alexander Izosimov said he liked that Putin was against excesses in government regulation.

"Tranquility is the most important thing for all of us now," he said by phone from Davos.

Putin's attempts to stress Russia's common interests with the rest of the world community was not enough to make investors forget about irritants such as the gas dispute and Georgia conflict, said Ian Hague, a partner at Firebird Management, which manages $700 million in Russian stocks.

"The most striking for me was Putin's not mentioning the problems of the property rights and corruption in Russia," Hague said from New York. He watched the speech on the forum's web site. "Despite the financial crisis, they still are the biggest problems we are facing in this country."