Question: What were your principal achievements this year? What was the most important, the most difficult, the most unexpected and the most interesting?
Dmitry Medvedev: The first thing I realised was that the Prime Minister’s job was no easier than the President’s. The Government works round the clock: it addresses routine national problems, manages the economy, and develops and issues a huge number of laws and other instruments. That’s how governments work in all countries. That was my first emotional impression. As for the year, it was very complicated. Economic developments forced me to take decisions that I would have avoided in other situations.
The so-called budget rule is the object of a lot of discussion right now. Does it help or hurt economy? The rule demands that we meet social commitments irrespective of fluctuations in oil and gas prices. This is a good rule, I’m sure. It was approved, in particular, because of the vague economic prospects in the world. However hard it was to adopt the budget rule, its adoption was a breakthrough that helps us live within our means and not squander government resources, as too many like to do.
As for the general economic situation, I don't want to stir up any passions. It’s more or less acceptable. But we need much faster growth. It was roughly 3.4% last year – not too high but higher than in Europe, which is in recession. Government debt is at a good level. Of course, everyone should live within their means. It is only 10% of GDP, while it is practically 100% of GDP in the most developed economies – the US, Britain and Italy – and even higher in Japan.
Our employment numbers are very respectable. Last year ended with 5.5% unemployment, compared to 6% in 2011. It was below the unemployment level in any European country and many other countries as well. As we know, employment is a crucial factor. It sets the public mood. I remember how people were feeling in 2008-2009, when unemployment was rising sharply. Luckily, we were able to bend the curve downward and create many new jobs. As for current macroeconomic indices, they are acceptable on the whole, though they could be better considering that we need annual growth rates of at least 4-5% for development.
At a recent Government meeting we discussed three scenarios of Russian economic development in 2014-2016. The conservative scenario involves growth rates like we are experiencing now. The moderately optimistic scenario would be 4-5% a year, which allows us to tackle key problems. And there’s the radical, progressive version, with growth rates up to 7% a year. But I don’t think there’s much chance of this happening.
Question: So you are not even considering the zero growth scenario?
Dmitry Medvedev: No.
Question: But the Government’s critics say that a downturn is looming.
Dmitry Medvedev: Growth cannot go on forever, and sooner or later a downturn will occur. The question is where this downturn will lead us. Neither a technical nor a real recession can be allowed. The Government will fight against it and I think we have every chance to prevent it. Although the global economy is on the brink of a recession we must stimulate domestic demand so that we can cope with the adverse trends. Think what was happening three or four years ago. The prices for our oil, gas, metals and other commodities dropped and so did the currency earnings that account for much of our budget. The same happened in Brazil and to some extent in China although their rates of growth were higher. But it did not happen in India because they have robust domestic demand. At the same time the economy should not be allowed to overheat as happened in the United States on the eve of the crisis when anyone could get a mortgage for half a percentage point and then everything burst like a huge soap bubble.
Question: We have been talking about building up domestic demand for years, but we are still dependent on oil.
Dmitry Medvedev: That is true, but consider how many years it took us to get addicted to it. This is one of those bad habits. It did not come about in the space of a year, we were deliberately building up our hydrocarbon production. I am not suggesting that this was such a bad thing. It enabled us to develop the country during the Soviet period. But one cannot live only off that, it is our duty to change the structure of our economy. I am not talking about the 1990s, which saw a perpetual decline that sometimes erupted into crises. The past 13-14 years have simply not been enough time to do this. Besides, the last few years were spent getting out of the global crisis, so it is still a challenge.
Question: Since the beginning of the year, 400,000 individual entrepreneurs have left business. Why is it that most of the jobs growth is accounted for by bureaucrats and supervisors who seem to think of nothing but putting a dampener on things?
Dmitry Medvedev: Yes, we are very fond of supervising. As for people dropping out of business I don’t see that that is so terrible, people decide themselves what to do. Of course people will quit if they feel that they have no future. That prompts adjustments and certain decisions by the Government and amendments to laws. You are referring, aren’t you, to the situation with the so-called self-employed population? People started to figure out what is better for them, to continue as individual entrepreneurs or to work for hire. These attitudes may be adjusted, for example, by introducing a differentiated rate of insurance premiums and by supporting those whose incomes are less than 300,000 a year. But the main thing is to create conditions that would make people want to be in business. We cannot have the whole country become bureaucrats or representatives of some managerial class or work in the services although we see such processes going on in the world. It must be said for the sake of fairness that in other countries too a lot of people work in government service, but we have an acute need for a larger middle class, i.e. small and medium-sized businesses.
Question: Were any specific measures taken last year that could change the mood in society for the better?
Dmitry Medvedev: Yes, there were. We have adopted 40 state programmes which contain solid decisions and are well-financed. Of course it is necessary to spend the money still more effectively. For example, one of the programmes is about supporting scientists. We are talking about hundreds of billions of roubles to be allocated over several years. But people are usually not impressed because they say that nobody knows where these billions will actually go. It is important to put in place real instruments to support people who have finished university and decided to take up careers in science. We envisage substantial grants, but we should also provide them with housing. We need a special social mortgage arrangement so that universities or the Academy of Sciences can dispose of these funds. The same is true of engineering workers and the President’s and the Government’s scholarships in various engineering specialties, including those who are engaged in the defence industry.
Question: On the subject of the defence industry. Are we not investing too much in it?
Dmitry Medvedev: The most unpleasant thing about the work of the Government is the need to constantly distribute money. It never happens that everybody is happy and there is never enough money to solve all the tasks. We were underfinancing state defence in the 1990s and in the 2000s and money has only became available over the last five to seven years. Yes, these are big sums of money. We need to see to it that this money is not stolen and that it is spent on modern weapons. And, first of all, we need to finance huge collectives that are engaged in producing defense technology. And secondly, these engineering solutions will later be used to create civilian technology, so I think we are doing the right thing in spending significant amounts of money. But of course we will try to handle the budget wisely, and if we cannot immediately produce something we can postpone it to a different period or use credit schemes. But I repeat: it is a very important area for reviving Russian industry.
Voice: People would like to hear that jobs are being created, among other things.
Dmitry Medvedev: We are preserving jobs and creating new ones.
Question: Doesn’t that threaten social programmes? You know, “guns instead of butter”.
Dmitry Medvedev: That will not happen. Although we have to moderate our wishes in the context of the global economic downturn, no social programme has been curtailed and no social obligation has remained unfulfilled. All the allocations are being disbursed in full. This is the strategic course of the state, the course of the President and the course of the Government. We will stay that course.
Question: But some people will have to tighten their belts?
Dmitry Medvedev: We are already introducing austerity measures. It has been decided that every government agency should give up 5% of supplies for state needs or state services. That adds up to billions nationwide. That is one austerity measure. Let me remind you that back in 2010 I signed a presidential executive order reducing the number of positions in Government by 20%. That target has by and large been met, although downsizing is always a difficult matter. Both Vladimir Putin and I have been receiving a lot of petitions arguing that downsizing is not an option because it could mean the end of the world. Sometimes we go along, but sometimes we say: no, guys, you have to downsize. And there are a number of other decisions aimed at preventing our government service from exceeding a certain size. It is true that the number of civil servants has been growing in recent years. In spite of staffing cuts, there is still work to be done, and not only at the federal, but also at the regional level.
Question: When will the Government finally sort out the pension system reform?
Dmitry Medvedev: It took us a long time to put in place a pension model that is in action now. It works, but it is not ideal. There is not enough differentiation and people do not fully understand what is happening and how. Of course, everyone wants pensions to be bigger and the replacement ratio (that is, the ratio of your pension to your wage) to be as high as possible. We should seek to keep the coefficient at least at 40%, as it is in many other countries. As for the current situation we have passed laws that provide the outlines of a new pension system. The pension formula is currently being discussed so that people can easily understand it. We have even decided to make a kind of model, a pension calculator so that everyone can put their salary into the Internet or in the Pension Fund and get their pension based on that formula. Then the pension system will be clear and transparent. But we need to get everyone involved in devising such a formula. For example, what is the problem with small businesses and self-employed people? Many of them have made practically no contributions to their pensions, which is not entirely right. They are not super-rich people who can afford not to think about their pensions. Now we have offered people the choice of how the money that has recently been contributed to the accumulated part of the system is to be divided. There will be an opportunity for part of the money to go into the solidary part of the pension and part into the accumulated part, but people should decide themselves whether they are interested in it.
Question: It turns out that people were first sold one pension system and now the government has decided to break it up and sell people another system?
Dmitry Medvedev: We are not smashing it up. The overall meaning of the changes is that nobody is losing anything. There is still a choice. Rather, we are talking about expanding opportunities for using their accumulated pensions, and not some kind of model where people are told: you know, it used to be this way and now we have decided that it will be another way. I think the main merit of the pension model we have proposed is that it gives people a chance to choose between one option and another.
Question: There are three issues about the work of the Government that invariably have popular resonance. The top issue is winter time. The second is migration and the third is drunk driving. What lies in store for us on these issues?
Dmitry Medvedev: If all our problems were confined to these “hit” questions I think we would be very happy and very comfortable. The main problems lie elsewhere. As regards winter time, all the studies that have been carried out show that about 50% of people would like things to remain as they were before and 50% would like to see a new system of coordinates. Of course there are pluses and minuses. I once gave instructions to the previous government to pass a decision on the matter. It was passed and the government sees no reason to revise it because the number of discontents will remain roughly the same. But I do not believe that this question has been closed once and for all. Throughout the 20th century we have repeatedly changed time zones. But we can’t fiddle with them endlessly. And especially since, as I said, as soon as we do it the other half of the population will say, why did you do that?
Question: And the pro mille alcohol rate in the blood of drivers?
Dmitry Medvedev: That is a very serious problem. The situation with carnage on the roads is appalling and much of it is due to drunk driving. I would like to remind you that in Soviet times there were no breathalyzer tests and nobody raised the question of the accuracy of instruments and no question of people being allowed to sit at the wheel after having a drink or two. The norm of 0.3 pro mille with regard to motorists was only introduced into the Traffic Code a few years ago, but it has since been abolished. My position has not changed: you cannot drink and drive, especially considering the habits characteristic of many of our people. If a certain pro mille rate is set people take it as license to drink, and our people know how to drink. They drink a little for starters, but they cannot stop, so it is too soon yet for us to adopt the system that exists in other countries. I don’t know, perhaps we will become a law-abiding country in many years’ time. Having said that, not all countries allow drinking and driving, like in the United States, where they have the 0.8 pro mille rate. But one thing I must agree with is that there are more breathalyzers in use now and some of them are more sensitive and I do not rule out manipulations to solicit bribes even on the part of police. No one is without sin, so to speak, so the law must make provision for a margin of error so that people do not have to suffer due to instrument errors.
Question: In other words, yogurt is allowed.
Dmitry Medvedev: Yogurt is allowed. This is just scaremongering by all sorts of people, including those who lobby the interests of alcohol producers. Some of my colleagues, whom I do not want to name, have acted as guinea pigs, they drank yogurt, various medicines, kvass and breathed into alcohol testers. The results are scary. They say even kvass, which does contain some alcohol, cannot be detected by any instruments within half an hour and yogurt and medicines are not detected at all. But in order to rule out that possibility I said when addressing the State Duma: Okay, let us talk with scientists and determine the maximum margin of error. All the rest is disingenuous and is aimed at exonerating people who drive under the influence of alcohol.
Voice: Finally, migration.
Dmitry Medvedev: This topic is neither positive nor negative. This is just our life. First, we live in an open country, with people coming and leaving. Second, we have a complicated demographic situation, we need additional manpower. It is unlikely that Russia will be able to dispense with the services of guest workers in the coming years or decades. Because we ourselves do not want to sweep the pavements (incidentally, I swept the streets when I was a student). This is low-skilled and badly-paid work. But everyone who comes here must observe our rules, our laws and traditions and have command of the Russian language, then the situation will be calm. The migration process must be kept under control. I recently visited the migration service in Nizhny Novgorod (where they keep track of the number of visitors in real time) and I was amazed at how many people come to work here from developed countries, hundreds of thousands of people from Germany, the Netherlands and Britain. Not tourists who want to visit the Hermitage Museum. They have come on work visas. This means that our country attracts people who can earn decent money at home. A huge number of people come from Ukraine and Belarus, on certain days their numbers run into the millions. And of course a lot of people come from Central Asia, especially from Uzbekistan and Tajikistan. The main thing is to put in place a system to control these processes. This is the purpose of the latest decisions, including the requirement for international passports rather than some kind of dubious certificates. We must know who is coming to us: this is a sanitary-epidemiological and economic problem but it is also a security problem. That is how we will approach it.
Question: Russia puts its sovereign wealth in foreign banks at 1.5% interest, whereas foreign loans cost us 6.6% on average and inside the country at least 14%. Why is it that we are supporting other economies but not our own?
Dmitry Medvedev: These simple numbers make even specialists think that it is losing us a lot of money.
Voice: The amount has been calculated: it’s $35 billion a year.
Dmitry Medvedev: Yes, these losses are counted and then we are told that we are helping foreign economies. That is not quite the case. First, we spend our money by putting it in foreign debt instruments because that is what the whole world does. Russia, Norway and some Arab countries place their sovereign wealth money in foreign assets to diminish their country's risks. Our country depends heavily on oil and gas, so we try to put our money in highly reliable instruments that are well protected and are not exposed to heavy risks of fluctuation. Of course all sorts of complicated things may happen. Reserve currencies may become deflated. The dollar had problems. Today it is fairly confident. Now the euro has problems. But this does not mean that we should not keep our reserves in what are so far the most reliable foreign currencies.
Second, the people who do these calculations forget that the loans our companies obtain in the West at a high interest rate and the money that we place there at a lower interest rate are not exactly the same. We usually put money in debt instruments for a shorter term and we get loans for longer terms, so comparing percentages, as you said, one percent versus six percent, is not a sound way of doing the economic calculations.
Voice: We are not building high-speed railways, we are not building roads, we are not developing the Far East – people are leaving in droves – whereas our money is kept in a piggy bank.
Dmitry Medvedev: We are building roads, and we are building more and more every year. But we should not forget that we live in the world’s largest country. It is one thing to provide a network of roads, for example in Holland, and it is another thing to do the same in Russia. We really do face much more difficult tasks. And I hope you all understand that. We are building a lot. You only need to look at what was happening in the Far East, what is happening in Sochi and around Moscow where we are solving very difficult transport problems. But we should not translate all the money we earn into roads, for example.
Macroeconomic proportions must be observed. We should not just pump money into the economy. Let us recall the early 1990s when inflation was running at 1,500%. Now inflation is 6.5%. I hope this year it will be less than 6%. We are protecting the savings of our people and if we now decide to throw all our money into domestic projects we will stoke up inflation and it won't be 6% but 10-15%. Our own people will come to us and say: “Listen, why aren’t you protecting our savings? Why are they shrinking year in year out?” And they would be right. We have a still more ambitious goal: we need to curb inflation and bring it to the level of European countries, i.e. 2 -3%. Then the cost of mortgages will be different, so those who say that we are investing our money on the cheap and getting the money of others at a high cost are not talking professionally.
Voice: You are speaking about cheaper mortgages, but even our enterprises get loans at least 12-14%.
Dmitry Medvedev: This shows that our financial system is still not working perfectly. We have achieved an inflation rate of about 6%, but the banks evaluate the risk at double the interest rate and at much higher than the Central Bank refinancing rate. And that is wrong. The issue has been raised more than once during the past month. Of course we cannot just tell the banks what to do…
Question: And if you call the bankers and try to persuade them?
Dmitry Medvedev: This is not a market method, but we should perhaps raise a finger at them. We told them: please match the cost of risk against the real state of the economy while we will improve the conditions for banks. I am told that these signals have reached the banking community, especially since many of our banks are state-owned. We will probably have to develop private banks more actively in the future, but at present a significant part of the money is with Sberbank, VTB, and our development institution, Vnesheconombank. Of course we have talked with the managements of these banks. I hope we will be able to improve lending conditions in Russia. This is one of the ambitious tasks that the new Central Bank management will have to tackle. Let's hope for the best.
Question: Can we hope to see some results by the autumn?
Dmitry Medvedev: Yes, one counts chickens in the autumn. (Laughs).
Voice: Today we have prohibitive interest rates.
Dmitry Medvedev: Yes, they are very high, I agree. I remember people saying that as soon as we have low inflation the cost of loans, mortgages will also go down. Our inflation is low today (by Russian standards of course), but interest rates are quite high.
Question: One more paradox: the price of the dollar and the euro has remained practically unchanged for several years. Why are we shoring up the rouble artificially? It hits the domestic producer.
Dmitry Medvedev: Let me be honest with you, the Government recently had a serious conversation on that topic without the presence of the media. Positions vary. For example, the Central Bank believes that our rouble is not too strong while other agencies think the rouble is being overvalued. We are talking like macroeconomists but if we reasoned the way the vast majority of our people reason we would come to the conclusion that a strong rouble is good. Remember what happened in 2009 when the rouble grew weaker? People became nervous because it is one thing when the dollar costs about 25-30 roubles and it is another thing when it costs 35-37 roubles. People are confused about what is happening, stop trusting the national currency and begin to get rid of roubles, which is also bad for our economy. There will always be two competing trends, the strengthening of the national currency and its gentle weakening, this is the management challenge in the current situation. Which is preferrable, supporting exporters or importers? Is it better not to allow any devaluation or to let the rouble float a bit?
Question: Experts are scaring the Russian people with the prospect of a new crisis. Is it time for us to stock up on tinned meat, buckwheat and matches?
Dmitry Medvedev: Considering that your newspaper is read by people with very different ideas (this is good, it means you are popular) I should make my answer simple. I am sure that we will be able to avoid the kind of crisis we had in 2008-2009. There is no need to stock up on tinned meat, soap, matches and salt. But there is no doubt that the international economic situation is very complicated. The fact that the Russian economy inherited a dire legacy from the Soviet era does not help either, so we will try to meet these challenges, seek to avert unpleasant consequences connected with the economic slowdown. But people should look into the future calmly. All the social programmes, all the pension savings are protected under the law and in my opinion are being managed fairly efficiently.
Question: There was also a lot of scare-mongering before Russia joined the WTO, some people said it would be the end of the world. What results do you see today as the head of the Government?
Dmitry Medvedev: First of all, the end of the world has not happened. Nothing has been ruined and even the most vulnerable sectors, such as agriculture, have kept going. The main challenge for agriculture now is not our membership of the WTO but the outlook for the harvest because the farming sector is heavily dependent on decisions that are made up above, the sun and the rain. Nevertheless agriculture must get better state support. I am referring above all to pork and poultry farmers. We have spent a lot of money and effort to get our own pigs and our own chickens and we now can almost meet 100% of our needs. We no longer need “Bush legs” or even meat produced in other countries, although it is always important to strike a balance so that the price is not solely dependent on internal domestic factors. But our top priority is to support our own producers, so I have decided that an extra 42 billion roubles should be found in the budget, which is no easy thing to do, to support the farmers. There are some problems in other sectors as well, but on the whole nothing terrible has occurred.
Question: But have we gained anything?
Dmitry Medvedev: The pluses from WTO membership are not like a delicious piece of cake on a silver platter. The pluses are that we have started living according to the common rules and our products will meet the main criteria of the WTO countries, perhaps not immediately, but in a year, two, three or five years, and we will be able to manage the cost of this production. Many of our products turn out to be uncompetitive precisely because we are increasing costs whereas we should learn to manage them to make sure that our products sell well. Why have our Chinese friends flooded the world with their products? Because they have low production costs. We must also do something to make our products sell. We can produce many things of good quality, but if they are more expensive than Chinese and indeed European goods we have little chance of selling them. The WTO is a code of rules. As soon as we become immersed in them we become part of civilised world trade.
Remark: There is a sense that the Government is not sending enough signals to the economy that labour productivity today is the key to survival.
Dmitry Medvedev: I disagree. The Government is sending out these signals.
Remark: This was the view expressed by Mikhail Prokhorov.
Dmitry Medvedev: Mikhail Prokhorov represents a different political force here. When he has a seat in this cabinet you can ask him the same question: why aren’t you doing more to improve labour productivity? But that is not yet the case…
On the whole labour productivity is indeed a problem. Over the past 10-12 years we have managed to solve many tasks that have made a difference to many people. We have increased public sector pay, and wages in production and in the commercial sector. But our wages have been growing much faster than labour productivity. And you know, I have mixed feelings about this. Many fellow economists tell me: this is wrong, this is not the way to do things, this goes against the economic laws. They probably have a point. Indeed we should seek to ensure priority growth of labour productivity. But let's get back down to Earth: what did wages used to be like? It's embarrassing even to recall. Just to remind you, in 2000 the average wage in the country was $100, today – it is 8-10 times higher. Of course it varies from region to region, but still. I think the challenge for the state over the last 10-12 years has been to put an end to poverty so that our people earn more. Now the average wage is quite comparable with wages in the countries of Eastern Europe and certainly higher than wages in Ukraine, Belarus, let alone Central Asia. We should now focus on labour productivity, but that is not the kind of task one can solve sitting in one’s office. Labour productivity should be the concern of representatives of the business community, including Mr Prokhorov whom you have just mentioned, because if someone is in business they must put their own house in order first. This is the challenge for public-private partnerships in the broad sense of the word.
Question: Federation Council Speaker Valentina Matviyenko has proposed decentralising the country’s economy. As it is, 10% of Russia’s population is concentrated in Moscow. What is your take on this?
Dmitry Medvedev: It's a sound idea, and incidentally, not a new one. When Valentina Matviyenko was Governor of St Petersburg some major companies moved there, in other words, there was some decentralisation, at least between the two capitals. The Constitutional Court has moved to St Petersburg and plans are afoot to move other courts there. But the offices of major companies would best be distributed among all the regions. If you look at Western countries, say, Germany or the USA, wherever you go in every city there are headquarters of major companies. But to do this regional heads must create decent conditions, including schools, universities, theatres and museums – a certain level of investment attractiveness.
Remark: But they say there is no money, it's all been taken by Moscow.
Dmitry Medvedev: It's true that Moscow has the biggest concentration of finances, but the situation today is not what it was in the 1990s. The regions have learned to earn money and we have some very successful regions and by no means all of them are oil and gas producing provinces. For example, the Belgorod Region has excellent livestock farms.
Question: Is any list being compiled for the relocation, for example, of state-owned monopolies?
Dmitry Medvedev: For obvious reasons we cannot tell private companies what to do, but we have some influence on Government structures. The Government could probably issue directives to state-owned companies.
Question: So there is support for this at the highest level?
Dmitry Medvedev: I think this is a sound idea. And then of course it must be matched by a reasonable redistribution of sources of income because it is not right when all the taxes are paid to the capitals.
Question: You set up the Ministry for the Far East with its headquarters in Khabarovsk. Will a state corporation be formed?
Dmitry Medvedev: We must find an acceptable method for promoting projects in the Far East. Investment is high when there is a specific goal. For example, there was the APEC meeting. Whatever one may say, it has turned Vladivostok into a modern city. When I visited it five years ago it did not even have a sewage system. We built the Baikal-Amur Railway long ago and it enabled us to solve a whole range of tasks. What is needed are major infrastructure projects and the right mechanism. It could be some kind of fund, like the one that exists today (but it's taking its time to get its act together) or some new structure may be created. I don’t think we need a state corporation, state corporations combine management and commerce but we need to promote business. It's been suggested that we create a public company that would operate in a new way.
Question: What is that exactly?
Dmitry Medvedev: A public company is a structure established by the state to solve specific tasks on instructions from the Government, but it operates on a commercial basis. This has to a large extent been borrowed from Anglo-Saxon law. We do not have such companies, and we have still to weigh up all the pros and cons of setting up such a company for the Far East. I am no believer in multiplying the number of various instruments. Companies are created, money is spent but nothing useful happens. We already have a fund, we have major infrastructure companies, including Russian Railways, and we have the Far East Ministry to implement the strategy.
Question: You've proposed setting up an offshore zone in the Far East. What is the thinking behind that?
Dmitry Medvedev: I made this proposal in order to make some of our foreign partners sit up and take notice because they had been taking liberties with our banks, our companies and Russian citizens’ money. There may be differing opinions about the people who kept their money in Cyprus, but some of the money there had been officially declared, it was honest money that people had earned in Russia. Yes, they did not have much trust in our banking system, so they put their money in Cypriot banks, and then they saw all this being confiscated unilaterally, Bolshevik-style. I said: if that's how things are, let us consider having similar tax regimes at home. Our foreign partners who accuse Cyprus of being a haven for various sorts of money, including from Russia, let them first shut down their own offshore zones. Let them shut down the Bahamas and the British Virgin Islands. They make money there while at the same time telling us: no, no, no, don’t you dare open such zones in your country and get out of Cyprus. So I think that there are various options. It is another question that a special tax jurisdiction is a risky affair. We had such places as, for example, Kalmykia, which had been exempt from taxes and these places quickly turned into black holes.
When I spoke about an offshore zone I meant a special regime that would apply low tax rates only to projects implemented in the Far East, and then business would head to that region rather than to Belgorod or Rostov-on-Don. The question is still in the melting pot. We should proceed above all on the basis of our national interests and not based on what our partners are telling us. They give little thought to us when they make decisions, for example, within the European Union. We are friends with them, we are on good terms, but they are guided by their own European Union interests, and we must be guided by Russian interests.
Question: You insist on the continued privatisation of state-owned enterprises. Who can guarantee that they will not be sold for a song, as it happened in the 1990s?
Dmitry Medvedev: I think that we need to privatise but we should do so judiciously. We have many state-owned facilities that are poorly used or not used at all, and we have recently managed to sell some of them quite effectively. And the aim is twofold. First, to raise money for the budget. Some of the facilities (ports, transport enterprises such as SG-Trans) were sold at 5-10 times the initial price in the tenders, that’s billions of roubles. But the second and equally important aim is to provide them with a good and efficient owner. I am not suggesting that any private owner is necessarily more efficient than the state, but on the whole private owners care more about their companies than state structures, so I am counting on that effect. I don’t know whether the same applies to media outlets, many of which are state-owned.
Remark: You've said that the Government should withdraw from the media, but at the end of the day the financing of state-owned media outlets has tripled and state media holdings have been created in all the country’s regions. The media market has practically collapsed because private media are unable to compete with injections of hundreds of millions of Government roubles (even in the subsidised regions). State media are springing up like mushrooms.
Dmitry Medvedev: It is a pity that we did not follow through with that topic. State presence in the media is not diminishing, in fact in some ways it is increasing. Very often the regional leader makes a point of having his own state-run media outlet, which is not conducive to greater authority of the media. People say: this is an outlet where our Governor parades himself and glosses over reality. Trust and interest in such newspapers and television channels are falling.
Remark: This was not the case even five years ago.
Dmitry Medvedev: The standard answer to this question used to be as follows: we have 88,000 or 90,000 media outlets, of which only 3% are state-owned. What else do you want? But the point is which media are more powerful. That of course depends partly on how successful a private media outlet is. Yours is doing well, and thank God for that. I think that the regions could certainly do without funneling money into state-owned media holdings, especially since we have such a powerful federal resource that we can use everywhere, the All-Russia State Television and Radio Broadcasting Company can bring the message from the state to any region.
Question: Three members of the Cabinet have resigned during the past year. The latest was Deputy Prime Minister and Head of the Government Staff Vladislav Surkov. What are the reasons behind this and are we going to see more resignations?
Dmitry Medvedev: We tend to forget that in recent years (I am not talking about the 1990s) people have joined the Government and quit and been sacked and some of those sacked (I don’t want to name names) had criminal proceedings opened against them. I stress – those were the years under the current administration and there is nothing unusual about that because the Government is a living organism. As for Vladislav Surkov, I would like to say that he has been an able head of the Government Staff and has done much to strengthen discipline, which is very important in my view. That’s point one.
Point two. You know, everyone has emotions and feelings that they may sometimes choose to stifle, but sometimes they listen to them at various periods in their life. At difficult periods one person might clench their teeth and soldier on: I know that I am right, I will show patience and I will carry on. Someone else might say to themselves: I want to change everything in my life, I’ve had enough. This is not to say that the first person is right and the second is wrong. Each of us can decide our own destiny. Vladislav Surkov has decided to quit and he has handed in his resignation. We have to respect his choice and such things happen all the time in any government. Once again, he has done a good job and has accomplished much, I bear no grudges against him.
Question: Is Education Minister Dmitry Livanov next in line to be sacked?
Dmitry Medvedev: I have already commented on this: a Government minister should not try to please everyone, otherwise you get the impression they are simply playing to the audience and engage in some kind of self-PR. In general the Government is a complex management team which often has to do unpopular things. I know what I'm talking about having served as President and now as Prime Minister. The President should be above the fray, protected from the daily fuss and routine because the President is the symbol of state sovereignty and the guarantor of the Constitution, while the Government, if you like, is the workhorse. The Government is not protected against anything: against claims or criticism, and that is perfectly normal. Livanov is being criticised. Some of the criticism is probably justified because he has to be in constant communication with everyone, including his own party, United Russia. Some of the criticism is probably unfair because he has his own vision and, I’ll tell you honestly, he is trying to implement reforms that are necessary. But of course you have to explain everything you are doing, you need to conduct a dialogue without making unduly emotional statements. People are only human, and there is much that my colleagues in the Government have yet to learn.
Question: When State Duma deputies called for Livanov’s resignation you stood by him. Are you prepared to defend every minister in the same way?
Dmitry Medvedev: The Government is a team. I proposed these names to the President for approval and he approved every one of them, but I am responsible for them. If I think that someone is doing a good job I'll stand up for them, and in any case I will try to explain their position and help them even if that person comes under fire. I think that is the right way for a Prime Minister to behave.
Question: But are there ministers that you would like to replace?
Dmitry Medvedev: Ministers whom I would be willing to offer to be sacrificed? No.
Question: It was on your initiative that civil servants have been reporting their incomes and will soon be obliged to submit declarations on their spending. How would you comment on the fact that Government officials with their modest salaries are able to buy villas abroad and drive luxury cars and your first deputy, Igor Shuvalov, even had money stashed away in offshore zones? How can declarations help in fighting corruption?
Dmitry Medvedev: Firstly, it is good that there are now such declarations. It was me who started all this some time ago. I might not have done it, but I said: guys, it's high time.
Remark: Everybody at the time said: no problem, declarations are no big deal.
Dmitry Medvedev: That's not true. Everybody is watching this. It turned out not to be so easy to hide everything. You've mentioned Igor Shuvalov. As a matter of fact he was in business for a long time and he has some savings. The money that he is using somewhere, as far as I understand, has been earned absolutely legitimately by him and members of his family, by his wife. It is another question that Government members and State Duma deputies and members of the Presidential Executive Office must share all the risks with their country and its economy. If you live in Russia and manage it, you have to be ready to answer for its economy in the realisation that your money depends fully on your doing your job as manager. That also partly applies to real estate, although the situation there is more flexible: you only have to declare the sources of the money with which the property has been acquired. I think that is also right. Foreign assets are a more complicated issue. I don’t think we should cast aside the people who are in the civil service or in parliament and find themselves in a delicate situation. Such people are told: sell your business at once or else we will kick you out. But perhaps they have been in this business for a long time and then they would simply lose their money… But now that a certain model has been chosen we shall see how well it works.
Question: Won’t these people simply choose to leave the Government and other state structures in order to keep hold of their money?
Dmitry Medvedev: I cannot rule out anything, but that would be a certain signal about the effectiveness of these rules. It is not our aim to throw well-off people out of the Government (including the regions and municipalities) or out of parliament. We want to see in the Government and in parliament people who are successful and not people who have stashed away some money and say: no, no, everything is fine, don’t worry, we earn three kopecks.
Question: You are the first Prime Minister who is so active on the Internet. Your press secretary, Natalya Timakova, recently said you felt rather offended by the familiarity with which some bloggers address you. Is that true?
Dmitry Medvedev: I think Natalya was simply protecting me as my press secretary. To be honest, I don’t feel offended by anything. There are some things that I don’t like, that's true. But when I am addressed as Dimon on the Internet, I think that's fine, perfectly human. This is the kind of milieu… What’s wrong with Dimon? This was what they called me as a child. This is nonsense. Of course we have our own traditional ways of addressing people – “Dmitry Anatolyevich”, “Vladimir Vladimirovich”. This is an old tradition. If you addressed somebody by their first name and patronymic it was a sign of respect. But in many countries they address ministers, prime ministers and presidents by their first names, and that is part of their political culture. Perhaps it is different at some formal events, but basically everyone can address them by their first name. We in Russia have a different tradition.
Question: Your son Ilya enrolled at MGIMO last year. Does he attend classes or is he studying at home? Can you shed a little light on this?
Dmitry Medvedev: There's no secret here. For obvious reasons, the life of the children of state leaders has its complications. But for me it was important that my son feels like an ordinary modern guy. He is a normal student. I think that is good for him above all.
Question: Is he planning to get married?
Dmitry Medvedev: Not yet, thank God. I hope he will first finish his education.
Remark: Thank you for finding the time for a detailed conversation with Komsomolskaya Pravda. And congratulations on the first anniversary of your Government.
Dmitry Medvedev: Thank you.