On Dec. 10, Russian President Vladimir Putin revealed the name of the candidate he will back in Russia's presidential election in March. Ending months of feverish speculation, the President chose his First Deputy Prime Minister and former chief of staff, Dmitry Medvedev.
Medvedev, who is also the chairman of energy giant Gazprom (GAZP.RTS), returned the favor on Dec. 11, revealing in a speech that if elected he would ask Putin to serve as Prime Minister and head of the government. With this not entirely unexpected development, the long-standing question of what Putin will do after leaving the presidency has at last been answered. The transition may not be very democratic, since Putin clearly will still hold the reins of power. But investors are reassured at the prospect of stability: The RTS stock index ended the day up a half percent, after rising 2% on Dec. 10.
In a rare interview with the Western media, Medvedev sat down with BusinessWeek's Moscow bureau chief Jason Bush in mid-September to discuss Russia's economic and political situation. In their wide-ranging discussion, Medvedev touched on many topical questions, including the legacy of President Putin, the role of the state in Russia's economic development, and next spring's presidential election. Edited excerpts from their conversation follow.
President Putin's presidency is coming to an end. How would you summarize the historical significance of the last eight years?
Fifteen or so years ago, the majority of our people had a feeling of disaster. It wasn't just a disaster for the state, but also a disaster for all those values which people had lived by for decades. During the last eight years, I think the main thing has been achieved. We've stabilized life in the country. We've created a modern market economy, which can secure the nation's development during the coming decades.
When many people look at Russia's economy in recent years, what they see is the growing role of the state. For example, state companies like Gazprom have been expanding. Doesn't this contradict the idea of a modern market economy?
I don't think it does. Modern market economies aren't all the same. If you take, say, the economy of the U.S. and the economies of the EU, we see different types of economy. That was the result of historical development.
As far as our economy's concerned, of course Russia also has its own historical traditions. Even under the tsars, Russia had a high share of state capital. The biggest joint stock companies, formed at the end of the 19th century, were state-owned. All the railways, and the insurance companies, developed as a result of a partnership between the state and private capital. Yet, at the time, Russia was one of the fastest-developing capitalist countries in the world.
Today, I think we have the share of state property that is appropriate for the current level of economic development. There are key sectors—energy, infrastructure—that certainly have a special character for our state and require state attention. I'm not a fan of state domination of the economy. But there are simply some tasks which, in Russian conditions, can't be solved without the participation of the state.
Many people speculate that there are different clans or interests within the state. For example, large state corporations are sometimes described as competing centers of power.
You know, this is just a simplistic, theoretical scheme that's only good for the tabloids. Why? Because if it was really like that, then our economy would have collapsed a long time ago. If someone sitting at the head of some large company made multibillion-dollar decisions based only on their private interests, the whole economy would stop. And just the opposite is happening. Economic growth is 7%.
There were several well-known cases that were particularly worrying for investors. I'm talking about the Yukos affair, the Sakhalin II case (BusinessWeek.com, 12/14/06), the problems with Kovykta (BusinessWeek.com, 4/19/07). Aren't property rights in Russia poorly defended?
As a whole I'd say that property rights in our country are protected. In the legal sense, everything's fine with our laws. They're some of the most modern in Europe. But understanding of the laws is also very important. I think we have to improve it on all levels. Not just on the private level, but also at the state level.
As far as the concrete examples you gave are concerned, I wouldn't say that these were cases of property rights violations. With Kovykta, you can interpret it in different ways. Our foreign partners—BP (BP)—had a whole bunch of violations, regarding environmental legislation and licensing, and they recognized that. I think that the compromise which Gazprom and BP reached was an entirely normal, market-based compromise. This wasn't a case of confiscation or requisition. It was done at the market price.
As far as the Yukos case is concerned, as you know, every decision was taken because the management and owners of the company were accused of crimes, which unfortunately happens in other countries as well, including the U.S. The claims that were made against this company were extremely significant, which of course led to its disintegration.
Another question is politics. To put it frankly, most of the outside world is already used to regarding Russia as an authoritarian country. Do you agree?
I think it's one of those stereotypes which of course don't correspond to reality. In order to judge whether Russia is a democratic country, you have to do more than read two or three examples in the media. You have to come here and see with your own eyes. Is our situation really that miserable? I think I have the right to say that as someone who lived in the Soviet Union.
A lot of things are explained by history. In the 19th and early 20th centuries, the development of democracy in Russia never pleased European observers. They always said we were doing it wrong. But compared with what then happened in the 20th century, everyone later understood that the development of the capitalism at the end of the 19th century, the creation of the State Duma [in 1906], the limits on the monarchy—this was the Russian path towards democracy. That direction was lost, mainly because a small group of citizens [the Bolsheviks] seized power unconstitutionally.
And today, I think that all these accusations are the result of a misunderstanding of Russia's nature. I've just read a book by Francis Fukuyama. It's called State Building. He draws attention to the different foundations of democracy in the U.S. and Europe. It doesn't mean that in either America or Europe there's some incorrect understanding of democracy. It simply means that there are different traditions. And in Russia, too, we also have our own history, and our own path towards the development of democratic values.
All the same, Russian elections are very specific. It's not like elections in the West. Here everyone wants to know what the President wishes. That's the Russian system.
You're right, Russia has its specifics. But it's not a system. It's specifics of the worldview of a huge number of people.
I don't know exactly how people understood the concept of democracy in the U.S. at the beginning of the 19th century, but probably it wasn't so advanced. At that time, slavery still existed and the separation from Great Britain was quite recent. And the notions of our people, their values, aren't absolutely ideal. It's the notions of people who developed in distinct historical circumstances.
Don't forget that less than 20 years ago, the power of the Communist Party was guaranteed by the constitution, which said that the Party was the "leading and guiding force of Soviet society." And 80% of people still remember this time, while 50% of people simply ceased their development during this time. It means that paternalistic attitudes are more developed in our society than they may be in developed democracies.
I don't see anything tragic in this. Time will put everything in its place. If 20 years ago, people had predicted what sort of model we would adopt, what sort of decisions we would take, what sort of institutions we'd develop, I'd have dismissed it as a fairy tale.
But the presidential election in March will be largely determined by the opinion of one man.
I think that there will be different candidates, and different parties who don't support the present course and the present President. But it's true that President Putin is popular. I think it's good for our country, because the presence of a strong President who can unify the nation is a guarantee of development.
But soon Putin won't be President.
That's what the constitution dictates—which, by the way, is another example of what I was talking about.
How do people inside the state regard this transition of power? Are people worried?
Of course, at the end of any political cycle, people may be worried, including individual state officials. But my sense is that the situation is radically different from the situation in the 1990s. When there were elections in 1996, I can tell you quite honestly, as an individual Russian citizen, there were a lot more reasons to be scared. Today the situation is more stable.
After the presidential elections, many people expect that Russia will see a bipolar system, with the new President effectively sharing power with the previous one. Do you agree?
I'm not an oracle, so I can't make any forecasts. One thing I can say is that after the elections, the authority of President Putin will be very high, and of course as the most influential person, he'll have a big influence on public opinion.
In general, what predictions can we make about the future of Russia?
I want to preserve [Putin's] course, simply because it has shown that it can work. Our citizens have begun to live better. Living standards are rising. The most important social problems are being solved. Not as fast as we'd like, but it's happening.
I think that continuing on the path of modern, stable development over several decades will turn Russia into one of the most developed countries in the world. Today we're already one of the 10 largest economies. The macroeconomic situation isn't bad. But it's obvious that there's a lot left to do.