Prime Minister Dmitry Medvedev spoke with CNBC anchor Geoff Cutmore.
Dmitry Medvedev’s interview with CNBC
Geoff Cutmore: Prime Minister,
thank you very much for joining me and for giving me time for this interview. I
wanted to start off by talking about the deals that you’re doing with the
Chinese currently. Some western analysts are looking at the deals, especially
the large oil and gas deal you did earlier in the year. And they are saying
that these are political deals not economic deals that are in the best
interests of Russia over the long term.
Dmitry
Medvedev: You see, our relations with
the People’s Republic of China are long-term in nature, and don’t depend on the
political situation, which, as you know, is far from simple right now. But we
have been actively developing relations with China for nearly 25 years. China
is our largest trading partner. Our trade currently stands at $90 billion. I’m
sure that next year we’ll hit $100 billion, and we plan to reach $200 billion
by 2020. I believe this is completely feasible. In short, these are not
political considerations, it is our choice. What is it based on? Russia is both
a European and an Asian country, which is why we trade with Europe and are
willing to continue to do so – our trade with the European Union reached about
$420 billion last year. And we also trade with Asia, where China is our largest
partner. So, once again, these are not political deals but an informed choice.
At the same time, we need to take note of everything that happens around
Russia. If some of our projects with Europe, America or others are put on ice
(I’m not talking about the reasons behind this), we logically move these
projects to other destinations.
Geoff
Cutmore: The size and the numbers
that you talk about sound very impressive. But the history of Russia’s trade
relationships over the last two decades has been one of deepening flows between
Western Europe, the United States and Russia. Again, I come back to this.
People look at the pivot east, as it’s been announced by you and the President,
and they say these deals are about showing President Obama and Chancellor
Merkel that Russia intends to reduce its dependence on both western goods and
western capital. Is that wrong?
Dmitry
Medvedev: Yes, it’s absolutely wrong.
We are pragmatic people, and I believe that everyone should be aware of this,
including our partners such as President Obama, Chancellor Merkel, and any
others. The idea is to trade lucratively and to secure profitable contracts.
Our market should be properly stocked with quality goods, both from Europe,
Asia and other parts of the world. Again, this is not a political choice. If
you are referring to the current situation, which we did not provoke in the
first place, we had to take certain decisions. For example, when our largest
energy companies are told: “Sorry guys, we won’t supply anything to you because
of the sanctions,” we interpret this as a serious signal. Not that we are
willing to destroy our relations with partners in America and Europe. Not at
all. But we need to implement our projects, including offshore projects, and to
develop gas fields. As such, we’ll have to reorient towards other producers.
Frankly, after certain decisions were taken
(some of them were public and others were not), our largest energy companies
started talks with equipment producers in other regions, including China, which
produces equipment for energy companies, including pipe-layers and other
complicated systems. Of course, we can achieve our goals in cooperation with
them [Chinese partners]. But the question is, who is this hurting? I think the
country that gets these contracts will definitely gain.
Regarding your first question about China, I’d
like to remind you that yesterday when I met with my colleague, Premier of
China Li Keqiang, we signed 38 agreements, which was unprecedented. We were
worn out after signing all these documents. The ceremony lasted 40 minutes.
These agreements concern all aspects of life and development in our countries,
from large energy projects such as the Power of Siberia, under which we will
build a pipeline to China – a $50 billion, 30-year project – to smaller
projects in agriculture, manufacturing and banking, which are especially
important to us. Our partners – at least those who are imposing sanctions – aim
to sever Russian banks from the money market, from financing. I don’t think
they will succeed, first, because we can handle these issues ourselves, and
second, because there are other markets with which we can work.
Yesterday we signed several banking agreements
with China, including a rouble-yuan currency swap deal between our national
banks, which will allow us to make settlements in the national currency, and it
won’t be tied to the dollar, the euro or any other currency, which is very
convenient. China has long made such deals with other large countries, for
example Germany and Asian countries. We have signed an agreement on settling
foreign exchange deals in roubles and yuans. We have also signed agreements on
loans, on the opening of loan facilities for Russian banks. I see this as clear
proof that, as we say, if there is a gap, something will fill it. If someone leaves,
others will take his place.
Geoff
Cutmore: You’ve given me a very long
and comprehensive answer to the question. But you’ve also raised a very
interesting question with your answer, which is one about America’s position in
the global economy and the importance of the dollar going forward. Do you see
the action that you’re taking here alongside China as a way of trying to reduce
the dollar’s significance globally and to try to marginalize America’s power
economically in the world?
Dmitry
Medvedev: This is really an
interesting topic, which came to the fore back in 2008. I remember the G8
summit and the first G20 meeting, which President Bush chaired after the
financial crisis hit. This is when we started wondering whether the Bretton
Woods system was enough, whether one powerful currency – the US dollar – and
several reserve currencies such as the euro, the pound and others can support
the entire global financial system.
Mind you, we have nothing against the dollar,
and I don’t think China has anything against it either. But we believe that a
modern currency system should be better balanced, so that when one of the
currencies is sagging, this should be compensated by other global reserve
currencies. In this sense – I’m only talking about my impressions, which have
not changed since 2008 – I believe that we need six or seven reserve currencies
to create the required level of financial stability, and they should include
the dollar, the euro, the pound and possibly in the near future, the yuan. We
also considered the rouble, but this is a goal for a more distant future.
We believe that this would be a much fairer
financial structure, which doesn’t mean that we have a negative view of keeping
our savings in US dollars. The dollar is the main reserve currency; it’s a
fact, no one can deny it. Moreover, as you know, we have substantial gold and
foreign currency reserves which we keep in securities. And the bulk of these
securities are denominated in dollars, simply because the market of
dollar-denominated securities is the largest in the world. I’m not sure this is
a good thing – not because we don’t like the dollar, but because it makes us
very dependent on the US economy.
The US economy has started growing again, which
is good, but we don’t have confidence that it won’t enter another recession,
which would be bad for everyone. This is the kind of dependence that we should
avoid in the global economic system, as I see it. And I believe that many
rapidly growing economies share this view, such as the economies that are often
identified by the abbreviation BRICS, namely Brazil, Russia, India, China and
South Africa, but not only them. I think this would benefit the global economy.
Geoff
Cutmore: I want to ask you a delicate
question. And I think as prime minister you are used to having difficult
questions asked to you. So I won’t shy away from this. Recently in China, we’ve
seen a number of corruption-related scandals. You have been a great champion
against corruption in your various posts in government. As you deal with Chinese
state companies, do you feel that you need to look extra hard at who stands
behind those businesses? Is there a highest stress test required before you do
business with Chinese companies?
Dmitry
Medvedev: Corruption is a global
problem. But it is more widespread in rapidly developing countries. It is a
growth problem. There are many corruption-related problems in Russia too. So,
regarding stress tests, I think that such tests should be applied to all
companies. Of course, there are public companies with a solid reputation, which
can be tested quite easily. On the other hand, the case of Lehman Brothers’
bankruptcy has taught us an important lesson. No one doubted for a second that
the group was completely solid, but what happened, happened.
Dmitry Medvedev’s interview with CNBC
If you want to ask if state companies are more
susceptible to corruption than private companies, my answer is no. Rather, the
problem lies in the system set up to expose corruption. State companies can be
highly successful and also transparent. I’m loath to praise a rival, but take
Statoil, a state company… No one seems to question its operations and
conditions, even though it is a state company. In other words, state companies
are not inherently good or bad. They should be evaluated just like any other
company.
During my legal practice in the 1990s, I
repeatedly performed due diligence together with my colleagues. That’s why it
exists. There are special agencies that can tell you more about it.
Geoff
Cutmore: Can I pick up on President
Obama? There’s been some suggestion that there is a possibility for a reset of
the relationship. Foreign Minister Lavrov suggested this could happen. Can it
happen while sanctions are still in place?
Dmitry
Medvedev: No, of course not. It’s
absolutely impossible. Let's be clear: we did not come up with these sanctions.
Our international partners did. As we say in Russia, let God be their judge. Of
course, we will overcome these sanctions. I have no doubt that after a while
these sanctions will dissipate; there will be no more sanctions, but we can’t
deny the fact that they have damaged our relations. I understand the concerns
that our partners may have regarding the international situation and the
developments in Europe and Ukraine, although clearly Ukraine is closer to us
than anyone else, because we are almost one people. But when the foundations of
international relations, which we have worked so hard for, are being sacrificed
to impose all sorts of restrictions just to show how tough and quick to punish
they are... well, in my opinion, it’s an absolutely destructive, and I would
even go as far as saying, a stupid position. It’s sad to hear President Obama
say in an address at the UN that the threats and challenges facing humanity
are, in this particular order, the Ebola virus, the Russian Federation, and
only then the Islamic State. I don’t want to dignify it with a response. It's
sad, it's like some kind of mental aberration. What kind of reset is possible
in these circumstances? It’s imperative to leave all of that behind, get back
to normalcy, perhaps, go back to square one, and only then talk about our
future relations.
Here’s my last point. We are not closing any
doors. All that we want is a constructive and friendly dialogue with all
civilised nations, including, of course, our partners in Europe and the United
States. But to do so, we must bring the situation back to normal.
Geoff Cutmore: At that UN speech, President Obama
said that the sanctions would only be lifted if quote: “Russia changes course
on Ukraine.” Is the pullback of troops from the border meant to signal to
Washington a change? Is that a change, the kind of change that the President is
looking for? And if so, what do you want from President Obama now?
Dmitry Medvedev: We don’t want anything from
him. Only the American people can want things from President Obama. The
American people elected President Obama, not the Russian people. And he is
accountable to the American people, not the Russian leadership or the Russian
people.
I understand that there’s political phraseology,
and then there’s real life. Real life is as follows: we are deeply concerned
about the events in Ukraine. We would like the civil war unleashed by the coup
earlier this year to end and Ukraine to return to calm and stability.
Ukraine can make any choice it likes: join the
European Union or go the other way. Let it decide for itself. We believe that
the risks faced by Ukraine if it pursues economic relations with the European
Union are quite high (I’m referring to advanced economic relations, because we
also work with EU and quite well). But it is the responsibility of the
Ukrainian leadership.
Our current goal is to help restore peace in
Ukraine. We can do so only through negotiations. Central Ukraine, the central
government must listen to eastern Ukraine. Whether or not they like these
people, whatever they choose to call them, they must sit down and agree on how
they will live together, if they want to. That's the most important thing. All
sorts of decisions that Russia takes, including decisions on our armed forces,
are the responsibility of our government and the President of the Russian
Federation, and are in no way related to the situation in Ukraine, although it
is, of course, our major concern.
Geoff
Cutmore: So very briefly, that
pulling back of troops to bases is not a signal to Washington? I just want to
be very clear.
Dmitry Medvedev: It’s not a signal to Washington. This decision is
part of Russia’s domestic policy. It can be construed any way you like, but
it’s not a signal.
Geoff
Cutmore: Obviously, in that UN
meeting a number of other issues were talked about and the Russian Federation
gave its support to an American-led motion against terrorism, which perhaps
many who look at the way international relations are carried out would have
thought was surprising given what the President had said previously in the
meeting. But you gave your support. So let me ask you: can you imagine being
part of an alliance against ISIS in the Middle East? We know that a Chechen
leader has tried to draw you into the conflict by threatening Russia directly.
Could you be involved in an alliance that involved Western European countries
and the United States in spite of the difference of opinion over who governs
Syria?
Dmitry
Medvedev: As a matter of fact, we
have a long and reasonably good history of counter-terrorism cooperation with
other countries, including the United States. We are aware of our
responsibility as a country with certain capabilities that is also threatened
by terrorists and is under pressure from terrorist forces, much of which are
formed in the Middle East. This is absolutely clear. But as for specific
measures and solutions – I’m just speculating, because the President is
responsible for Russia’s foreign policy – I’d like to say that in such
situations it is imperative to seek common solutions to combat the terrorist
threat. We’ve never backed off from counter-terrorism cooperation, and we have
examples of successful cooperation. However, the mandate for counter-terrorism
operations must be obtained in accordance with international law, that is, the
UN Charter, and on the basis of a consensus. It’s always bad when this is done
on the basis of decisions taken by individual governments, even if they have
good intentions.
This has happened on many occasions in Iraq and
Afghanistan, and is happening now in Syria. And there may be only one
legitimate question: if this kind of action is really needed, then it’s
essential to achieve a common position and get the go-ahead from the legitimate
government of Syria. Again, some may not like it, or may dislike Assad and wish
to see him go, but until that happens, the central government of Syria is the
sole bearer of the sovereignty of the Syrian people. That’s what needs to be
kept in mind when discussing any kind of action.
Geoff
Cutmore: So again, just to clarify.
There will be no military support on the ground or in lieu against ISIS as long
as the United States continues to insist that Assad leaves office.
Dmitry
Medvedev: It's not that the United
States insists on Assad leaving office, although as far as I know, they went
beyond insisting and are, in fact, trying to establish separate contacts within
the leadership of the Syrian Republic, to tell you the truth. But that’s not
the point. The point is for all decisions on combating terrorist activities to
be based on international consensus. Not on a decision taken by one country,
even a highly respected one, but international consensus. That’s my first
point. My second point, and I’m positive about it, is that the solution for
Syria must come from Syria and its neighbouring countries, just like in any
other part of the world. The Syrians have a very multi-layered society composed
of people of different faiths, including Alawites, Shiites, Sunnis, Druze, and
Christians. They all need to sit down and try to come to terms. I’m not talking
about the terrorist groups, I’m talking about achieving a solution to the
Syrian problem in general.
Geoff
Cutmore: I want to move you on
because I’d like to understand from you what damage is being done in relations
between Western European capitals and Moscow currently. Chancellor Merkel has
been in a leadership role in terms of Europe’s sanctions against Russia. Has it
damaged the long-term relationships with Berlin and with German business that
might want to be involved here in Russia?
Dmitry
Medvedev: I don’t think any
significant damage has been done, but only because we haven’t taken any
countermeasures toward German businesses. Our only restriction in accordance
with the presidential executive order and the Government resolution, which I
signed, was to restrict imports of certain foods from the countries that have
imposed sanctions on Russia. It may have affected the interests of certain
German entrepreneurs, but I don’t think this is a huge problem.
Currently, there’s no damage whatsoever. But
frankly, it will materialise sooner or later, and we are not interested in
seeing that happen. We are interested in good trade relations and good
investment projects, but, as I’ve already mentioned, if one person leaves,
another always takes his place. I can tell you the following (you are well
versed in economic relations yourself, having worked in Hong Kong, and you are
familiar with how the Asia-Pacific region works): of course, businesses will keep
these sanctions in mind, but eventually pragmatic considerations and the
opportunity to make money will prevail, and the niches that become vacant after
European manufacturers leave will be filled by other suppliers. I’d like to
reiterate that we don’t want to see this happen, and the situation can still be
turned around. But to do so, we need to have both feet planted firmly on the
ground and to act reasonably.
Geoff
Cutmore: ...because what I wanted to
ask is, in the past, I think Chancellor Merkel has been in your corner, if I
can use that phrase. And we've seen very strong integration of the Western
European and US economies over the last two decades. Has what has happened now
damaged personal relationships between the President and Chancellor Merkel, and
you, Prime Minister, with Chancellor Merkel?
Dmitry Medvedev: I’m on good terms with everyone. And I know that
President Putin also has good relationships with everyone. But it’s not an
issue of personal relationships – we may call each other every other day or
send each other cards on New Year’s. These are real economic issues, and so
they present real political issues as well. I’d like to repeat that so far
nothing dramatic has happened to our economy or the EU economy, to say nothing
of the US economy, which doesn’t depend in any way on Russian economy. However,
it is obvious that if these trends persist, the negative potential will start
growing. At present our trade is about $400 billion, a figure I’ve already
mentioned. Germany is our second biggest trade partner after China, but some
time ago it was first. China is developing rapidly and has already become the
world’s largest economy in terms of purchasing power parity. At any rate, as
you know, on 8 October China was recognised as such, but naturally the US
economy is much bigger overall for the time being.
So if this potential starts to accumulate, our
relations will suffer. We’d like to avoid this very much. I hope Europeans
don’t want this either. In any event, I’m absolutely certain that European
businesses are categorically against this because it’s contrary to their
interests.
I’ve also talked with US business
representatives. Naturally, they also say that they are opposed. They whisper:
“Well, you know that this is the decision of the government and we have to
comply, but we consider it completely destructive.”
Sanctions have never produced a positive effect.
Let’s recall a little history. When sanctions were imposed on the Soviet Union
in 1925, we could not pay with gold for various imported products but we
survived somehow.
A list of sanctions was imposed on the USSR
after the end of World War II. They banned exports of some goods to the Soviet
Union, but the country continued developing nonetheless. There were attempts to
introduce sanctions on the Urengoy-Pomary-Uzhgorod gas pipeline after events in
Afghanistan. They didn’t lead anywhere either. There were attempts to introduce
sanctions in the 1990s but with zero result.
Have sanctions on Iran produced any result? I
don’t think they’ve had a serious impact. Sanctions on the People’s Republic of
China were adopted after the political events of 1989. I believe China went on
to substantially speed up economic development. It’s time to return to reality.
Geoff
Cutmore: I think you made the point very
clearly about how effective you feel the sanctions have been. We have some
opportunities coming up in the diary for some progress, it seems to me. The
President is going to meet with President Poroshenko in Europe, in Milan on the
17th. We also have elections in Ukraine coming up towards the end of the month
here. Let me ask you, is the way to deescalate this, and put our relationships
back on track, take the sanctions away, for there to be an outcome in these
Ukrainian elections that leads to federalism in Ukraine that will then allow
the Russian minorities to feel protected? Is that the bottom line, is that
ultimately what the Kremlin wants?
Dmitry Medvedev: Ukraine is an independent country and Ukrainians
should decide for themselves where to live. Ukraine’s problem is that its
society is deeply divided and people have different values. Some people want to
be part of Europe and want closer relations with the European Union, whereas
others think Ukraine should pursue ties with the Eurasian Economic Union we’ve
established. Some people want to speak Ukrainian only, whereas others say they
want to speak Russian because they’ve spoken it their whole life. This is the
root of the problems that have been growing in Ukraine in the past 20 years.
In addition, past Ukrainian leaders
unfortunately pursued an extremely ineffective economic policy – extremely
ineffective. Ukraine is bankrupt. It is on the verge of financial collapse. It
does not service its debts or pay for gas or other supplies. We would very much
like to see Ukraine become a normal, modern and solvent country with which
we’ll develop relations.
As for the form of political arrangement, this
is up to Ukrainians and their authorities. If they want to live in a unitary
state, go right ahead. However, it seems to me that they have reached an
impasse, because part of Ukraine has said they cannot live like that. If they
agree on a federation, that could facilitate Ukraine’s development. But this
decision must come from within Ukraine – by the Ukrainian authorities and those
people in the east of the country who have different views. This is the only
possibility.
Dmitry Medvedev’s interview with CNBC
Geoff
Cutmore: I understand you perfectly,
which then... Let's dismiss this next issue very quickly here, because there
are those in the West who look at what's happened over the last year, and they
say, this is about rebuilding some former Soviet Union, and that the Estonian
government should worry that President Putin and Prime Minister Medvedev will
be coming for their Russians at some point. How do you respond to this?
Dmitry
Medvedev: Do we want to restore the
Soviet Union? It is impossible to restore what is gone, obviously. I was born
in the Soviet Union at about the same time as you (although we lived under
different systems, we still listened to the same music, as we found out) but
the world has changed since then, and the Soviet Union no longer exists. We
have the Russian Federation, which is based on a Constitution adopted by our
people. This Constitution proclaims the same set of values that is accepted by
the absolute majority of humankind, notably, the supremacy of human rights,
democracy, the protection of private property, market-based development and so
on and so forth. I won’t list all of them because these are universal values.
So nobody wants to go back. There is no returning to the past.
Geoff
Cutmore: So the Estonians can feel
safe that you're not coming after their Russians?
Dmitry
Medvedev: Regrettably, for some
countries, including small ones, this is simply a way of consolidating elites.
We all remember how it works: the Russians are coming, so we must unite, and
under this banner hold parliamentary elections… Well, if they find this
helpful, let them have fun.
Geoff
Cutmore: President Putin will be
going to the G20 meeting. The prime minister of Australia has used this very
peculiar term, which we're all trying to understand. He says he's going to
"shirtfront" the President, apparently, which is a sporting reference
to a kind of tackle they do in Australian rules football. I wonder if he's
aware of the President's prowess on the judo mat.
Dmitry
Medvedev: This is a question for the
Australian prime minister. I don’t have the honour of being acquainted with
him, but I knew two of his predecessors and had good relationships with them. If
he likes to use sports terms, let him go ahead. Mr Putin is quite adept at
sports and they could have forceful debates. That said, serious politicians
should choose their words carefully.
Geoff
Cutmore: This was obviously a
reference to the Australians still feeling that not enough has been done to
investigate the cause of the MH17 crash, and this is a serious subject. Can I
ask you, do you feel that there is unfinished business as far as the Russian
Federation is concerned, that you could at this point be offering more
cooperation and support for the investigation into what happened to MH17?
Dmitry
Medvedev: I’m not an expert on air
crash investigations but I can say a few things. Responsibility for every air
crash lies with the state over whose territory it occurred. This rule follows
simply from international legal norms. I don’t know what happened. Again, this
is a question for the experts. I’d only like to say that it was a horrible
tragedy. But let the experts hold all the necessary hearings and investigations.
Nobody has the right to blame any side. As for Russia, it has absolutely
nothing to do with it.
But if you want to know my opinion not only as
the prime minister but as a lawyer, let me say that Ukraine is fully
responsible for all accidents in its skies. If it wasn’t in control of part of
its territory at some point, the Ukrainian government should have mustered up
the courage to say: guys, we don’t control these areas, there are ongoing
hostilities there, so please change your flight paths. They didn’t do this,
which is a serious violation of international aviation law.
Geoff
Cutmore: Do I have one last question?
Okay, let me move on. I want to come back to the Russian economy. We've been to
a lot of places, but I want to bring you back to where we started, really, and
it's about innovation. And you said something very interesting in the course of
this interview about... State companies don't necessarily have to be judged
differently from private companies. What we've seen from the rapid privatizations
of the late '90s was a big expansion of the private sector in Russia. Now we're
seeing state companies again take up more responsibilities in the economy, and
especially in the energy sector. And this morning, as I read my newspaper, I
saw that there was a plan to build a new state oil services business. Can I ask
you, is there a point at which it becomes harder to generate innovation in the
vast energy industry if you focus resources too heavily into one or two
businesses? Gazprom and Rosneft, I'm sure, are very efficient at what they do,
but Western technologies leaving because of the sanctions, and you're giving Mr
Miller and Mr Sechin more and more control over this whole part of the Russian
economy... Does that not raise any concerns about the ability to innovate and
be as efficient and as nimble as Western companies? Is it the right direction
for Russia to be going over the longer term?
Dmitry
Medvedev: Let’s divide the answer
into two parts. Frankly, the sanctions are obstructing normal innovation activities.
This is true. I won’t pretend that they aren’t affecting anything. And while
they may provide motivation to be more active in launching innovations, in
reality (as I’ve just discussed with Premier Li Keqiang) innovation comes from
the continuous exchange of ideas. If someone stops the flow of ideas,
innovative development slows down.
As for state-owned companies, I can tell you the
following. First, the term “state-owned company” is a convention. Under any
legal system Gazprom is a joint-stock company that is controlled both by the
state and private investors. Moreover, the latter own 45% of its shares and
have a considerable free float. So it’s a regular joint-stock company. Rosneft
is an ordinary joint-stock company as well, but its share of private investment
is smaller, so they should operate under normal corporate laws and they have an
interest in heavily investing in innovation.
Incidentally, we ourselves often lament how much
the oil or gas sector dominates our economy. This is probably bad and we need a
somewhat different economic structure, but we shouldn’t forget that it is these
large companies that are the main customers of high-tech solutions. True, they
aren’t supposed to buy everything abroad, however good some foreign innovations
are; they are also supposed to pay our innovators, our small companies and to
create start-ups to address these issues.
This happens all the time. Small private
innovative companies are sprouting up around Gazprom, Rosneft, Russian Railways
and Rostelecom. The entire world has followed this road, and I hope we’ll
manage to as well.
Geoff
Cutmore: It's been a real pleasure,
sir. Thank you so much.
