OREANDA-NEWS. June 25, 2008. Mr Medvedev answered questions from Reuters News Agency journalists Janet McBride, David Schlesinger and Michael Stott.

The interview was recorded on June 23 in Moscow.

D. SCHLESINGER: Mr President, thank you for giving us your time. We would like to know about the upcoming Russia-European Union summit. What are your priorities for the summit? 

DMITRY MEDVEDEV: I think it will be a success. I hope we can set progress in motion on the most complicated problem that has come up of late – drafting a new basic agreement between Russia and the European Union.

We will, of course, examine all the different issues on the agenda in an absolutely friendly spirit, notwithstanding the fact that in some areas work has not been going ahead as intensively as we would like.

But the time and venue of the summit oblige us to examine the entire spectrum of relations between the Russian Federation and the European Union. We have a lot of joint projects. To give you just one figure that came as quite a surprise for me, Russia is the third biggest exporter to the European Union, and the Russian market is the European Union’s fourth biggest export market. This makes it essential that we go through all the issues on our agenda as thoroughly as possible.

D. SCHLESINGER: But is there any one issue that particularly stands out among the list of priorities?

DMITRY MEDVEDEV: I think the biggest priority today is simply to make progress on all the different objectives that we have set at present. What do I mean by this? If we are ready to sign, say, a new basic agreement, then this is the main task. This must be a serious document that is at the same time not burdened down with specifics. It is more of a framework, after all, setting out the main outlines for development over the years to come. At the legal and organisational level this is probably the summit’s main priority.  

As for priorities in relations between Russia and the European Union, what we have is a relationship between the Russian Federation as a major European state, a country that identifies itself and is aware of itself as a part of Europe, and the European Union as the community bringing together a large number of Europe’s countries. This is probably the most important thing.

We also have priorities on a different level, matters we traditionally work on together and which I deliberately will not go into here, simply because they are part of our routine agenda, part of the fabric of relations between Russia and the European Union. These are things like energy cooperation, economic cooperation in general, including investment, political cooperation, cooperation in fighting international crime, social contacts. These are all important items on the agenda, of course, but I will not go into them now because they are all part of our daily work and there are far more positive results than problems in these areas.

D. SCHLESINGER: Do you consider the European Union a difficult partner? After all, there are many differences of opinion within the European Union, in particular with regard to Russia.

DMITRY MEDVEDEV: I think that overall the European Union is a comfortable partner. It is another matter that the European Union is indeed not a homogenous entity but a union, a community of different states. One of the key principles of the EU’s work is European solidarity. This solidarity often makes it difficult for the mechanisms of the EU itself to function.  

In this respect problems sometimes do arise in our relations, for example when we see that most of the EU members are ready to accept this or that development in relations or take this or that step, and at the same time there are one or several countries able to block these steps. But this is the European Union’s internal matter. This position is based on internal documents. We respect this position, although we realise that it does not give the EU added mobility in making decisions.  

It is not only Russian-European relations that sometimes suffer as a result of this situation but also the EU’s own interests, and I am thinking in particular of the Lisbon process, when one country is able to block all the complex work related to history, cultural traditions and the economy done by a dozen other countries. But at the same time this also gives the European Union a number of advantages in the way it functions. I don’t consider therefore the European Union a difficult partner, but it is a partner that now and then has difficulties. 

D. SCHLESINGER: During President Putin’s time in office European Union governments often criticised his foreign policy. What foreign policy line will you take? Will it differ from that of your predecessor? Could you tell us about your foreign policy priorities?

DMITRY MEDVEDEV: I think it is a completely normal situation when countries criticise each other’s foreign policies. I don’t think there is anything so terrible in this, and we too sometimes express a critical assessment of this or that action. But I think that criticism should be positive in intent. Criticism just for criticism’s sake has never increased countries’ respect for each other and has sometimes even provoked more serious conflicts. Overall, however, we always listen attentively and seriously to the criticism we receive from our partners. 

Regarding our foreign policy, it is shaped not by the amount of criticism directed at us, but by our own values and objectives. In this sense, it continues the foreign policy line the Russian Federation has painstakingly developed over these last two decades. Adjustments might be made here and there, but the essence of our foreign policy remains unchanged. The main objective of our foreign policy is to defend Russia’s national interests at every level and in every area of international cooperation based on pragmatic considerations and what we consider to be our defining values, namely freedom, democracy and protection of private property. We will defend these values in our relations with our international partners.

In this sense, our foreign policy cannot be defined as liberal, conservative or anything else. It is a policy that affirms and supports our national interests, and this is its essence.

D. SCHLESINGER: If the substance and the essence of Russia’s foreign policy remain unchanged, will there be any change in the nuances of tone that your predecessor used and that you will use?

DMITRY MEDVEDEV: Nuances in tone, speech and style are always there, and that is absolutely clear. Every person has their own nuances. Politicians are people too and so they should have their own style and tone, but this does not change the basic foundations of policy.

Stylistic particularities do have their importance at times, of course, but they are nonetheless secondary. 

D. SCHLESINGER: Another summit is just around the corner – the G8 summit. Could you say something about Russia’s proposals at this summit and your expectations?

DMITRY MEDVEDEV: Yes, this is an important event coming up in July. The summit in Japan is set to take place at what is not the easiest time for the world economy in general and for the lives of a huge number of people.

It is clear that the international financial crisis, the food crisis, and climate protection issues will dominate the agenda. We think these are all key issues and we are preparing our proposals on these issues for discussion at the G8 summit in Hokkaido.

In general, the G8 countries have a huge responsibility for world economic development, maintaining stability on our planet and supporting a full-fledged economic system. In this sense, the issues discussed at G8 summits are key issues of concern to all countries and all of humanity. But it is another matter that, in my view, the discussions that take place are far from always immediately enshrined in decisions, and this is to the detriment of the technological side of the work. Given the particularly complex agenda today I think that we and the other participants in the G8 could discuss a number of new economic mechanisms aimed above all at maintaining economic and financial balance in the world, laying the foundations of a new international financial system, eliminating the most outdated and poorly functioning international mechanisms and reflecting on what we can do to guarantee food security in the years ahead. And we need not only to reflect on this but to examine the practical steps to take in this area, even going so far as to sign international conventions aimed at ensuring a normal food balance in the world. 

Regarding the climate issue, there a lot of documents and international agreements in this area, but we need to understand what lies ahead and work out how to tie the interests of the countries participating in the Kyoto process with the interests of the countries that have chosen not to participate, because one group of countries cannot work on climate change while another group is taking no part in the resulting agreements. Either we all have to work on this together or we have to abandon these attempts. So I think that this issue should also be one of the main items on the agenda at the G8 summit.

D. SCHLESINGER: As you know, most of the G8 countries are currently going through an economic downturn, but the opposite process is underway in Russia. What proposals do you have to avoid an ‘overheating’ of the economy with all the consequences this would entail, in particular rising inflation, ‘overheating’ in wages and price rises? 

DMITRY MEDVEDEV: Most countries are facing this ‘overheating’ problem. We are monitoring the situation closely so as not to let our own economy overheat. Unfortunately, the international processes and international financial problems that emerged at the end of last year have affected everyone, including the Russian Federation in part. Our economy is growing well, our GDP is increasing at a decent rate and money is coming into the various development funds we have established, but inflationary processes are universal and are present today in the majority of the world’s economies. We are trying to manage the situation, neither letting the economy overheat, nor upsetting the macroeconomic balance that could trigger a rise in inflation. I hope that we will be successful in tackling these problems, because it is impossible for us to carry out our economic projects in full with high inflation, and even more importantly, inflation seriously affects our population’s interests.

Regarding our relations with other countries, I think that the system regulating international financial relations, the system that developed over the last few decades, has proven itself ineffective of late. I spoke about this during the CIS summit and the conference that followed it in St Petersburg, the International Economic Forum. I think that it is the responsibility of the countries that make a significant contribution to the world’s GDP and have a real influence on international finances to draw up a set of rules that make it possible to deal with and stop the spread of problems arising in one country.   It was not by chance that I used the term ‘national economic egoism’ in my speech then. You can pump up your own economy with the result that everything will go splendidly at first, but if it has reached such a size that any ensuing crisis affects the international economic situation this is no longer the problem of a single country, even a very strong country, but is an international problem. We know that there are cycles in the world economy’s development, but we can nonetheless smooth the effects of the most difficult periods. We simply have to coordinate our efforts. As far as I know, my colleagues from the other G8 countries are also drafting proposals on these issues at the moment. All of this will be a very important subject for discussion.  

Òhe same thing gîes for the food crisis. After all, the food crisis did not just come out of nowhere. Some number of years ago humanity decided that it could feed itself easily enough without any real pressure. But the economic priorities that were set for years ahead have resulted in the food market starting to come apart. 

First, consumption of a number of different products rose beyond the expectations of analysts and governments.

Second, a new type of energy economy emerged. I am referring to the production of alternative bio-fuels, which has taken up a lot of land that used to be used for growing food crops or in part for livestock. This has also affected the situation on the food market.

As a result of these kinds of policies food prices rose by 40 percent last year, and I suspect that this year the result will be no better. Is this not good reason for the biggest countries to discuss the situation and work out suitable responses to these challenges? 

M. STOTT: Mr President, Russia currently faces the problem of rising inflation and rising expenditure at the same time. What will you do to address this problem? Will you bring down inflation? Do you plan to lower interest rates? What steps do you plan?

DMITRY MEDVEDEV: You rightly identified these two trends. Indeed, inflation has risen. We will definitely take measures, and are already doing so, to bring it down, including by cutting back on surplus state spending. We also need to have an effect on the monetary causes of inflation, and the non-monetary factors too. The government has already drawn up and is implementing a programme of measures.

As for interest rates, we cannot dissociate interest rate policy from the general situation. Interest rate policy is shaped by the inflation level and the situation with the international financial institutions too. I am referring to the state of international financial liquidity, for example, because we realise that money flows freely from one country to another today depending on the interest rate policies each country follows.

We will make the necessary adjustments to our policy taking all of this into account, but there should not be sudden surprises here.

D. SCHLESINGER: But can you say clearly at this point that Russia will pursue a ‘gradual reduction’?

DMITRY MEDVEDEV: I don’t think that we face an excessively overheated situation, but we do need to monitor these processes.

As for lowering inflation, we would like this to be not a gradual but a decisive and steady process, and we had already set the goal of bringing the inflation rate down to 5-6 percent a year before the international financial crisis began. As far as the current situation is concerned, inflation is twice as high as our target figure and we therefore must take decisive and clear action to curb these inflationary trends and allay the effects of rising international prices for the main foodstuffs. 

This is also a problem for us because the Russian economy and Russian foodstuffs consumption depend so heavily on imports. Unfortunately, we do not have the kind of food supply independence that Russia had 100 years ago, say, and this is another objective we will have to address over these coming years.

Our task is to manage these processes carefully, ensuring that they do not upset the balance of the main economic indicators and that they create as few problems as possible for our citizens.

D. MCBRIDE: In this context, I would like to ask about the weak dollar. Can the G8 take decisions to deal with the problem of the weak dollar? 

DMITRY MEDVEDEV: The dollar has indeed become an international problem. It is the country that uses the dollar as its national currency that can make decisions on its future. The country that prints the dollars is the United States of America. But unfortunately the state of affairs in the dollar zone affects the entire international financial system. Our American partners have to decide on the policy with regard to the dollar that will be acceptable to them in the years to come, and they have to take into consideration the impact this policy will have on the international financial system.

It is equally important for the international financial system to become based on a number of different currencies, and then the problems the dollar is going through would not have such a serious impact on the situation in other countries. The international financial system is to a large extent very much based on the dollar at the moment, but there is also the euro zone and there are a number of ideas for establishing regional reserve currencies. The Arab world is looking at such an idea and so are a number of other countries, including Russia. We think that the rouble has the potential as a fully convertible currency to play the part of regional reserve currency for transactions in countries in the rouble zone, countries that use the rouble as a means of payment. This would require a number of steps, in particular, carrying out energy trade transactions in roubles.

I think that this is, overall, a perfectly realistic goal. It would benefit the Russian Federation and the other countries in the Commonwealth of Independent States. I think it is also of interest to the rest of the world too because it would help to create a system based on the use of several reserve currencies, and this system would be better able to resist the kinds of crises that have emerged of late.

D. MCBRIDE: On the issue of reserve currencies, are there plans for a big move from the dollar to the euro, plans to use the euro as the main reserve currency? 

DMITRY MEDVEDEV: We use the euro as a reserve currency of course. Previously, most of our foreign currency reserves were in dollars, but now the euro practically has parity with dollar, and we also have some reserves in other currencies, the pound sterling, for example. But the euro is now one of the Russian Federation’s main reserve currencies and is potentially a very good reserve currency, though this does not make the goals I spoke of any less important. 

M. STOTT: Mr President, we know that Russia is trying to attract foreign investment and foreign investors, but foreign investors are worried at the moment by what is happening with TNK-BP, where shareholders are using administrative resources, in particular the tax police and security service, to sort out ownership problems.

The European Union has already raised this issue with Russia and has asked the Russian Government to protect European companies, in particular BP, on the Russian market. What response can you give to this issue that has been raised?

DMITRY MEDVEDEV: The same response that I always give in such situations.

First, one needs to choose the right partners, and second,  all  actions must be based on the law.

What do I mean by this? The situation with TNK-BP is a private sector issue: on the one hand we have a foreign (British) company, and on the other hand a completely private Russian company. They were supposed to agree on the principles for their cooperation for years to come. The state has no relation to this at all. Any disputes that arise between them must be settled through recourse to the law. As a lawyer I see no other way of looking at the issue. Therefore, I cannot call attempts to get the state involved in settling internal corporate disputes anything but unlawful. Neither the Russian party nor the British party should resort to such attempts. They need to settle the situation themselves in accordance with the memorandums they signed and the charters that exist, and use the court procedures appropriate to the situation. That is my advice. Otherwise we end up with a rather amusing situation. On past occasions we have been criticised for excessive state intervention in the affairs of private companies, and now we are being told, “Please intervene, see how they’re quarrelling, something needs to be done”. But the state should not get involved in these kinds of disputes.

M. STOTT: So you do not want to see Gazprom or Rosneft acquire part of this company?

DMITRY MEDVEDEV: You know, even when I was chairman of Gazprom’s board of directors I held no such talks. As far as I know, no proposals to sell the relevant share to either Gazprom or Rosneft have been made, and so there is nothing to discuss. If an offer is made it will be examined. But the state companies have no plans for buying a private stake at the moment.

D. SCHLESINGER: Do you think that state involvement in the economy, in particular the energy sector, is going to expand or shrink, or is it already at the right level?

DMITRY MEDVEDEV: I think it is impossible to say what exactly the right level is. Most economists in the Soviet Union thought the state should control everything. This was the distinguishing feature of the command economy. The opposite construction is also possible, when practically all companies are in private hands and the state is almost absent from business. And then there are models in which the state and private business are both present in the economy. The extent of state participation in the economy should be decided based on each specific moment. I think that at the moment there are no grounds for talking about increasing the state’s presence in the economy. The state has no interest in this. On the contrary, we are continuing the process of privatising assets that began more than a decade ago. A number of big companies, above all energy companies and some defence companies have returned to state hands. We consider this important for ensuring our strategic economic interests over the coming years. But there are no plans to further increase the state’s presence in the economy. On the contrary, we will take steps to reduce the state’s presence in economy. 

D. MCBRIDE: I would like to continue on the issue of the dollar. High oil prices are currently bringing big profits into the Russian economy. The Persian Gulf countries are making just as big profits and are investing actively in other countries’ economies, buying up assets and banks. Will Russia become more active and start taking more initiative in this direction? What is your view of using state funds for investments of this kind abroad?

DMITRY MEDVEDEV: Yes, this is an interesting subject. The biggest priority for surplus revenue earned from energy sales is without a doubt investment in our own economy, in developing business in our country and supporting the social sphere and pension system. These processes are all regulated by law and this will continue. But at the same time, we do think that Russia should play a suitable part on the international economic markets in order to support our possibilities in different countries and help us to develop our economic relations with these countries, including through investing these kinds of funds in foreign assets. 

I recently held a meeting that decided that money from the National Prosperity Fund – state funds – would be invested not only in foreign assets but also in Russian assets.

As far as foreign assets are concerned, these should be attractive assets, protected assets that offer a guaranteed, even if conservative income.

But I think the task is broader. I think that not only the state but also Russian business, after investing in the Russian economy, should also actively invest free funds in big projects in other countries, and not even only in big projects, but also in medium and even small projects, because all of this helps consolidate economic stability and creates ties of mutual interdependence. This would benefit not just Russian businesses but the economic situation in the world in general, and would help specific economies to develop.

M. STOTT: Mr President, what do you consider the greatest threat to Russia’s national security?

DMITRY MEDVEDEV: I think that the challenges in today’s world are universal in nature.

As far as economic threats go, these are the things we have been talking about for the last hour, the threats related to international financial instability, the food crisis, and all the processes that ensue. 

Other threats are also very evident: terrorism, international crime. All of these things create problems for the Russian Federation too because we are an open society. Enormous amounts of freight and big passenger flows cross our territory. As an open country Russia experiences all the same problems as the other members of the international community.

We also have our own specific problems. To name two of these, the first is poverty, which we have still not overcome yet. This is our country’s biggest priority and we will make consistent effort and use all our economic possibilities to resolve this problem.

The second problem I cannot but mention is corruption. Corruption is a challenge to our system and a threat to our national security. It undermines citizens’ confidence in the state’s ability to maintain order and protect people from all kinds of criminal levies and from having to pay money for services they did not order.

Along with corruption there are the related issues of strengthening our law enforcement system and court system, which we are working on now. 

D. SCHLESINGER: I would like to touch on the political side of things, namely on your relations with former President and current Prime Minister Vladimir Putin. You have already said that you work in tandem. My question is this: will Vladimir Putin be a transitional prime minister, or do you intend to keep working in tandem with him through the two presidential terms allowed to you?  

DMITRY MEDVEDEV: You know, I think that we really do have a good alliance for resolving the very complex issues facing the Russian Federation. We will work as long as is needed to reach the goals we have set, in accordance with the limits set by the law, of course.

D. SCHLESINGER: One of the things that distinguished Putin’s presidency was control over the media. Will there be any changes here, and will Russia get independent television channels?

DMITRY MEDVEDEV: First of all, I cannot agree that this was a distinguishing feature of the presidency of my predecessor or of anyone else. We have no kind of special control over the media beyond the forms of control that exist in other countries. I have already said on many occasions that the electronic and print media and the new forms of media, the Internet media, for example, are absolutely free, though their editorial policy is up to their owners. In the case of private media outlets, the owners set editorial policy, and in the case of the state-owned channels, there are editorial boards. But I cannot say that these editorial boards and management bodies carry out any special kind of policy. I think that we have mature and modern television channels that show Russia’s life in all its diversity, give coverage to the different political figures at the forefront of Russian political life today, and show our problems and our achievements.

In this respect, as I have said before, I think that our television is mature and of high quality, and I for one find it interesting to watch. I think that a large share of our population would agree. But fortunately for those who do not like this or that channel, we live in a free society and you can turn on other channels, turn on foreign channels, private channels, read newspapers, go into the Internet and find whatever takes your fancy.

In this respect Russia is not closed to information in any way, was not yesterday, and will not ever be in the future. You can rest assured on this point.

You know, every country has its share of political ‘losers’ who think that the media are not free because they are not shown every day. But that is their problem and not the media’s problem. 

D. SCHLESINGER: I’d like to come back to the problem of corruption. You said that you will fight corruption. What specific measures do you plan to take? 

DMITRY MEDVEDEV: This is a very serious and sensitive issue for our country. Unfortunately, our traditions in this area are not very good. I have said in the past and will say again that disregard of the law, legal nihilism, has become deeply entrenched in the national psyche, and we need to combat this very seriously. As for corruption, it is a collection of different crimes that effectively paralyse the civil service in many cases, and only by making a systemic response can we address this kind of threat. What we have come up with at this point, and I am not saying that it is ideal, is a response in the form of the national anti-corruption programme we now working on.

This programme encompasses a whole complex of different systemic measures. First of all, there are legal measures. In other words, we are preparing a number of special laws, including a specific anti-corruption law. Second, there are the economic institutions that will suppress incidents of corruption, the regulations and rules covering civil servants’ work with documents and with the public, and the creation of economic incentives to dissuade officials from committing corrupt acts in the first place. 

Really, there is nothing new here. Many countries have created these kinds of economic incentives and have had good results in bringing down the level of corruption. One hundred years ago, practically any country just beginning to develop the foundations of a full-fledged market economy ran up against the problem of corruption. 

Third, and more ideal in scope, is legal consciousness. By this I mean the development in people’s minds a positive image of proper law-abiding behaviour. I am not talking about achieving this through some kind of primitive state propaganda campaign, of course. But we do need to help people develop the realisation that we need to be guided in our acts by the law and not by some other instinct. This will be the most difficult part of our work, but we will work in this direction and it could become the third component of our anti-corruption programme.

It’s like the seat belts in cars. People either already have it in their heads that they need to buckle up, and if that need isn’t there in their minds, all the rules in the world cannot force them to do so. Unfortunately, not everyone in our country buckles up the seat belt.

D. SCHLESINGER: Thank you very much.