Medvedev Not Ready for Champagne

ST. PETERSBURG — President Dmitry Medvedev cautioned Friday that while the global economic crisis appears to have peaked, "it's still far too early to open the champagne," and Russians must be ready to retrain and relocate to help the country recover.

The president also called for the creation of new reserve currencies and criticized international financial institutions, staying in relatively familiar waters in his keynote address to the 13th St. Petersburg International Economic Forum, which ended Saturday with smaller deals than last year but better-than-expected attendance.

Medvedev told a packed room Friday that he didn't know whether a graph of the country's emergence from the crisis would most resemble an L, V, U or W but that "the most important thing now" was for people to adapt to the changing economy around them.

"Everyone … needs to understand this fairly simple thing: Today, you need to become more mobile, sometimes to change your line of work and even where you live to ensure your family's well-being and your children's education," he said. "That's not just the state's responsibility — it's the responsibility of each of us."

The government in February allotted $43 billion to fight unemployment in the regions, including funding to retrain workers and compensate them for relocation expenses, to help avoid -unrest in cities and towns where factories are idling. The comments also suggested that the state would not be willing or able to conduct a Pikalyovo-style rescue for every ailing business or town.

On Thursday, Prime Minister Vladimir Putin berated factory owners in the town of Pikalyovo, including billionaire Oleg Deripaska, for allowing a business conflict to leave thousands there with unpaid wages. Lawmakers from Putin's United Russia party have introduced a bill to nationalize the three plants, and Putin personally ordered Deripaska to sign a supply contract and repay wage arrears by the end of the day.

In comments that were markedly more sober than his speech here a year ago, when oil was close to its high of $147 per barrel, Medvedev lauded the Central Bank for choosing the "correct" devaluation strategy for the ruble and once again talked up the creation of a supranational currency — lately a favorite topic of the Kremlin.

"Many countries decided on a sharp devaluation of their currencies, but our Central Bank chose a different route," Medvedev said. "I think that was absolutely correct. The state of the financial markets today justifies their actions."

The Central Bank spent billions from its foreign reserves to devalue the ruble gradually, avoiding a sudden drop in its value and giving individuals and banks a chance to switch their holdings to other currencies. Medvedev recently appointed Central Bank Chairman Sergei Ignatyev for another four-year term.

He also called for a reform of the global financial system, urging countries to lessen their reliance on the dollar as a reserve currency, and insisted that Moscow should become an international financial center. And while the speech broke little new ground, it did serve as a starting point for many of the discussion panels over the weekend, particularly regarding the shape of the recovery.

Some participants felt more at ease commenting on Medvedev, a refreshing break from the monotonous praise of earlier keynote speeches by his predecessor, Vladimir Putin.

"We've been waiting for some passion and optimism from Dmitry Medvedev, some carrots, but only got a sad narrative about what's going on," David Yakobashvili, chairman of Wimm-Bill-Dann, Russia's biggest dairy producer, said as he walked from the hall where the session just ended. "Last year, it was all different when First Deputy Prime Minister Igor Shuvalov talked about the liberalization of the economy, and everyone was terribly excited."

Others appeared to be on the same page with the president, though, agreeing that people must be ready to change to survive the crisis.

"This is absolutely right to change in the crisis," said Mirax Group chairman Sergei Polonsky. "Businessmen have actually changed their lives in the space of a few months, refusing to buy expensive boats or fly on private planes. Ordinary people, though, still live beyond their means."

Polonsky, who fell off Forbes' list of billionaires this year when his real estate company was hard hit by the liquidity crisis, said last fall that he had sold his yachts and other luxury items to put cash back into Mirax. In a post on his blog in January, he said the comments were "a joke" and that he never owned a yacht.

Troika Dialog chairman Ruben Vardanyan also said changes were imminent. "Businessmen's lives will certainly be changing. They'll change their lifestyles and probably their professions," he said, shaking hands with Finance Minister Alexei Kudrin, who was passing by.

Speaking at a later forum event, Kudrin said he was unsure whether the bottom had been reached, as the stock markets could still be in for a correction, and that Russia's path out would be "crooked."

When asked what shape he thought that the Russian recovery would take, banker Oleg Tinkov said he expected a W. "There are no fundamental changes for the positive, and we're still terribly dependent on oil and metal prices," he said on the sidelines of the forum.

Responding to the same question, Vardanyan chose not to limit himself to the Latin alphabet and instead drew what he called the teeth of a saw in a Moscow Times reporter's notebook.

Leonid Melamed, a director at state corporation Rusnano, cracked a grim joke. "Maybe we'll never get out," he said. "Maybe we'll just have to get used to this as a way of life."

The comment, while clearly hyperbolic, came just weeks after Medvedev warned his government that "when my colleagues … say that Russia will not come out of the crisis for another 50 years, it is unacceptable. If you think so — go and work somewhere else."

"Next year is likely to be a bottom, but a second wave is possible," Krasnoyarsk Governor Alexander Khloponin said. "It all depends on how the government deals with the wave of bad credits that is on the horizon. So far, the numbers don't look good."

The numbers also didn't look so good in terms of the value of deals reached at the forum, at least in comparison with last year. Economic Development Minister Elvira Nabiullina said Saturday that the figure was several billion dollars, compared to $14.6 billion last year.

She didn't give the exact figure but promised that it would be published on the forum's web site. A ministry spokeswoman said Sunday that the information would appear online Monday.

The single contract that Nabiullina did name was for the European Bank for Reconstruction and Development to loan money to state development bank VEB for its small-business lending program. Despite the expected lower value of the deals, Nabiullina praised the forum as a success, saying it "gave us food for thought."

First Deputy Prime Minister Igor Shuvalov said the government had been afraid that the turnout would be lower.

"We thought it would be more modest," he said. "In a crisis, many try to save on trips."

But the forum brought together 3,500 participants from 83 countries, including 26 ministers, Shuvalov said. The most senior visiting officials were presidents of Finland and the Philippines.

In a change of routine, the president held separate meetings with three groups of business leaders instead of having one larger meeting as in previous years. The closed-door meetings were with Russian and international oil and gas executives on Friday; chiefs banking and other corporations on Saturday; and a group of agribusiness executives at the World Grain Forum on Saturday. Discussion at the forum this time focused on global issues such as trade protectionism and the reserve currencies rather than Russian affairs.