OREANDA-NEWS. February 16, 2009. EVGENY REVENKO: Hello, Dmitry Anatolyevich!
PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Hello, Evgeny!
At this point in the life of the nation, it is very important to tell the truth and to talk about the difficulties that our country and the whole world are currently experiencing.

I believe that those in authority are duty bound to talk openly and frankly about this, about the decisions that we’re taking to overcome the crisis and about the difficulties that we’re facing. 

In this regard, I believe that our conversation today should be devoted to this issue. And I think that in the current situation those in authority should speak to this issue on a regular basis, and that this sort of exchange should take place on a regular basis.

EVGENY REVENKO: Thanks for inviting us, especially because the questions are naturally going to be difficult ones in view of the crisis. Your statement on Monday at the meeting on economic issues has been carefully scrutinised. You said that according to projections the world economy will not recover before 2010 and here I’m quoting you: “we must set aside resources in case the crisis continues beyond this year.” In this connection, the question arises: how stable is our financial system and for how long will last the accumulated “air bags”? 

DMITRY MEDVEDEV: As you know, we’re not exactly delighted with these projections. They all present quite a challenge and most of the experts, most of the analysts, have different projections, but they all foresee difficulties. Of course we have to focus on a development scenario that will surely be very difficult. But that does not mean that we are in a desperate situation or a very worrying situation. No, in general things are clear and under control. But we must take certain steps that will help us overcome the crisis not only this year but possibly next year as well. That said, over the last 5-7 years we've built up an important surplus, we’ve created reserves that will help us overcome the difficulties of the financial and economic situation.

And I should say frankly that during the last few years when this was done, we were criticised by people who kept asking why the government cabinet was putting resources into this Reserve Fund. They said that we needed to spend it right away, that we had only one life to live, that we needed to use this fund as soon as we could so that we could obtain results right away.

But recent developments have shown that we have done all the right things because those who spent their money recklessly, forgoing the opportunity to create their own reserve funds, funds for future generations, are now facing bankruptcy, whereas our financial and economic situation is stable. We are making certain changes to the budget. Yes, this is a difficult budget, a budget in which we had to run a deficit. But using the mechanisms available also in the Reserve Fund we should be able to cover all our spending, including social spending, this year and next year and get through the most difficult part of the financial crisis. In this sense, I believe that the policies carried out in the financial sector in recent years have proved their effectiveness.

EVGENY REVENKO: Still, arguably one of the most difficult problems is unemployment. The trend is disturbing. According to the MHSD [Ministry of Public Health and Social Development] which is constantly monitoring the situation, just last week the number of unemployed increased by 90,000 and if I am not mistaken in total there are now 1,735,000 unemployed.

Which raises the question of how the state is going to help people who find themselves in this difficult situation, or do people have to fend for themselves?

DMITRY MEDVEDEV: Of course this is probably the biggest and most painful challenge facing us today. Such crises always mean a reduction in the number of jobs, factory closures and an increase in unemployment. Unfortunately that is what is happening in our country as well. And the numbers you cited are the figures for those officially registered as unemployed. There is also unofficial unemployment and we have to attend to it as well. But of course the most important thing is to prepare effective measures. What are these measures?

First, we have to raise unemployment benefits beyond their current levels. This is in the short term, but in the longer term of course we have to find other jobs for these people. If production stops or closes temporarily, we need to direct our efforts, including public finance, towards the creation of new jobs, and this is in effect what is now taking place. At this point we are working with the regions to prepare special programmes to create new jobs. These programmes will be funded by the central government, that is by the country itself, the Russian Federation, and by the regions. For this purpose we have allocated an additional 44 billion roubles [about USD 1.3 billion].

With this money we have to create new jobs, including small businesses and new industries, and create new projects, projects that can be used to create additional jobs. This could mean building roads, it could be other infrastructural projects. We are going to do this without fail.

And, finally, a very important part of the programme is retraining, because this sort of crisis will unfortunately force a lot of people to find new jobs. This does not mean that we don’t have enough jobs: there are lots of vacancies in our country. But of course someone who has his own business, his own interests, may not want to get re-qualified and end up in a less prestigious job. But in some cases that is going to be necessary.

EVGENY REVENKO: Do you mean a psychological barrier?

DMITRY MEDVEDEV: There’s the psychological barrier and the money. This means that we have to set aside significant resources for retraining and re-education. For this there are the resources of the Russian Federation, that is the federal budget, and the regional budgets. By the way, I should say that the regions have to tackle this problem in the most responsible manner possible -- that is the most important thing. We must not allow any delay in the adoption of these programmes and most of the regions have to confront these challenges. But unfortunately in some cases they have been slow off the mark and have failed to react promptly.

I can say that according to the data that the cabinet has given me that the Far East has problems of this sort in the Primorsky region, also in Ryazan and Sverdlovsk regions. I would like to see these decisions taken as soon as possible because the fate of thousands of people depends on them. This is not a joking matter.

EVGENY REVENKO: Dmitry Anatolyevich, of course another issue of concern for many people is the decline in real incomes. In the last month the rouble has lost 30 percent of its value against a basket of other currencies. What's going to happen to the rouble and what have you asked the financial authorities to do about it?

DMITRY MEDVEDEV: Yes the rouble certainly has dropped and the rouble’s weakness is due to the fact that the economy has changed. Unfortunately our revenues are down and our debts payable in foreign currency have increased. This could not help but affect the real exchange rate. We had to carry out such changes, but it had to be done calmly and in good faith, and in my opinion this is what the Central Bank did. We are not saying that the rouble should be frozen. At the moment according to the Central Bank the rouble’s value corresponds to the actual state of our currency, its condition at the moment, and our current financial solvency. Naturally the Central Bank will monitor the course of these parameters in order to prevent any sudden shifts.

In my view what is most important is that the weakening of the rouble was gradual, which was totally unlike the barbaric way that this was done in 1998 when people’s wallets, in fact everyone’s wallets, suddenly slimmed down by 300 percent, and this wave swept over everyone and it was very unpleasant. In this case, the drop in value that has occurred, something of the order of 30-35 percent, was handled with great care. And virtually all the participants in our economic dealings, our citizens and our businesses, were able to choose for themselves a sensible strategy for dealing with their savings in roubles. I think that this was the main reason that the impact on the overall situation – and incidentally this can be said of conditions in the banking sector as a whole – was minimal and our citizens’ faith in the banking sector was not shaken. This is very important for our stability, so that our state and our economy can function normally.

EVGENY REVENKO: So you have decided not to use shock treatment and allow a sharp devaluation immediately?

DMITRY MEDVEDEV: Of course, although some economists did recommend a rapid devaluation. According to certain economic models this presumably makes sense, but it could have a devastating effect on millions of our people and our companies. And in general what we have done is almost exactly what a number of major states have done. These are states with growing economies in approximately the same condition as ours, a large export sector, reduced foreign exchange earnings, and conditions that required them to deal with a weakening national currency.

EVGENY REVENKO: A lot of people need help and it seems that they get it, and this is true not only of state enterprises but of those in the private sector as well. Why?

DMITRY MEDVEDEV: The answer is very simple: because our economy is made up not only of state enterprises but also of companies in other sectors, of private businesses. Millions of our citizens work in these businesses. Incidentally, these are sometimes very large businesses, sometimes the mainstays of entire towns, employing tens or even hundreds of thousands of people. These people and their families are tied to these businesses. Therefore, of course we need to help not only the public sector, not only public enterprises, but also private enterprises that are trying to survive in this difficult climate and to keep their losses to a minimum. This does not mean that assistance is being provided to the owners. The shareholders have to sort this out for themselves. We are talking about support for the companies themselves, support for the enterprises themselves.

EVGENY REVENKO: And can we be sure that these funds, this very costly state support, will go to those for whom it is intended? 

DMITRY MEDVEDEV: As you know, that is why the state exists -- in order to keep track of what money goes where. There are always those who want to get their hands on this kind of money. But in the current situation I am confident that we have created a proper system of controls.

For example, I personally insisted on putting special supervisors from the Central Bank into the banks so that the banking system wouldn’t end up working for itself but would work for the real economy, for ordinary citizens so that they could receive their salaries on time, so that the money in their accounts isn’t frozen but can be used in the normal way to fuel our economy. And this type of monitoring activity should cut a swath from top to bottom and vice versa.

For this reason I have given specific instructions to our ministers, plenipotentiary presidential envoys, and law-enforcement organisations: the Public Prosecutor's Office and other law enforcement agencies. I recently told the FSB [Federal Security Service] and the Ministry of Internal Affairs that now the task of law enforcement is to monitor very carefully the spending of public funds to be used in support of our economy. This is very important.

EVGENY REVENKO: Perhaps the role of financial intelligence has increased significantly. As often happens, the money is allocated and ...

DMITRY MEDVEDEV: I think that financial intelligence, the Financial Monitoring Service, must keep track of how much money goes where. If indeed there is some inexplicably large outflow of funds, they can then conduct an investigation and perform an analysis of the operation in question.

EVGENY REVENKO: On almost a daily basis we hear and see what the central government is doing to overcome the crisis. And if, Dmitry Anatolyevich, we go down to the regional level, are people working together as a team and do they all understand what their responsibilities are?

DMITRY MEDVEDEV: I think that this crisis, the complicated situation that exists today in our economy and in our social sector as a whole, is also an opportunity to review everyone’s capabilities. It is easy to work when you have large revenues, primarily from oil and gas exports. You sort of do nothing, the revenues pile up, and everything’s fine. In such a situation you need first to learn to spend money rationally, to budget money, and second to prove yourself to be a competent manager. I think that in general terms our management system is ready to deal with these problems, but that does not mean that we will turn a blind eye to, say, sloppy work, lack of talent, laxity or slovenliness in the performance of this or that manager. Unfortunately in such a situation it is impossible to pat someone on the head and say: you know, you need to pull up your socks. We will be obliged to make some important decisions if previously adopted laws are not implemented.

This is extremely important because the issue of executive discipline which has always been very important, especially in our country, has now come to the fore.

EVGENY REVENKO: As well as the issue of spending money properly. All we have to do is to recall the terrible event that happened recently, the tragedy in Komi.

DMITRY MEDVEDEV: Of course. And it is especially painful and terrible when people die as a result of this fundamental laxity, slovenliness and these cynical attitudes towards people, people who cannot move, the elderly, forced to live in a non-existent nursing home. This is a horrible story and of course we are obliged to see it through to the end. The investigation should identify the guilty and they should be punished to the full extent of the law. In the same way those in charge who allowed this to happen should be fired. A number of decisions have already been made. Of course we will get to the bottom of this matter.

EVGENY REVENKO: Dmitry Anatolyevich, now we know how difficult things are and that the necessary measures are being taken. Will we overcome this?

DMITRY MEDVEDEV: Of course we will. It’s simply a shame that a number of opportunities that have opened up must now be put off, not for tomorrow but the day after that. We’ll get over it, we’ll deal with it, everything will be okay. We need to work hard; we need everyone in their respective roles to assume their responsibilities. And to do so in good faith, honestly, not avoiding things – then everything will work out.

EVGENY REVENKO: Dmitry Anatolyevich, thank you for such a frank conversation.

DMITRY MEDVEDEV: Thank you.

* * *

EVGENY REVENKO: Dmitry Anatolyevich, soon you are going to London for a meeting of the G20. What do you expect to achieve?

DMITRY MEDVEDEV: That’s right, I am preparing to go to London on 2 April where there will be a meeting at which we will of course discuss overcoming the crisis.

We have already done some work on this and there is more to do. It is difficult work. I can tell you frankly: I am still not very satisfied with the results because we have not yet created a framework that could serve as the basis for the development of the financial system in the years ahead. But I hope that soon we will all be able to get on with actually creating such documents. Accordingly we will be talking about the most difficult issues that now concern all countries, including the world’s twenty largest economies.

EVGENY REVENKO: Of course everyone’s talking about a possible meeting with the new President of the United States. Will there be one and what will you talk about?

DMITRY MEDVEDEV: Such a meeting should take place. I hope that we can meet and discuss all the issues that are now on the agenda between Russia and America – there are quite a few of them. That conversation should be open, honest, and I hope productive. The signals that I am now getting from the United States, from the Administration and the President himself, the new President of the United States, are encouraging. These signals suggest that our colleagues want to work together. We are also looking forward to doing that.