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24.04.2006 Financial Times - 1st Deputy Prime Minister Dmitry Medvedev Interview
How would you define the fundamental goal of the national projects?
The goal is very simple — to raise living standards for people in Russia. We chose the four sectors of providing quality healthcare, and education, access to affordable housing, and developing agriculture, because how things look in those areas has the biggest impact on how people feel about their lives. Together they affect 100 percent of the population.
Where have you encountered the biggest challenges?
There are more complex projects, let's be frank, and less ambitious ones — though that doesn't mean any of the goals are insignificant. Housing is rightly seen as most complex, because in comparable countries such as the U.S. it took decades to complete similar programmes. America's programme to provide affordable mortgages lasted from the 1940s until the 1960s. Frankly, I don't think our housing programme will be any shorter. But in the short term we ought to be able to achieve some real changes, and make mortgages much more accessible to people. Total outstanding mortgages, we hope, will reach $3.5 billion by the year-end. That's decent but still too little. In the long run it should be many times higher.
To what extent is the investment, $7 billion this year, going into raising wages, or into real structural changes?
It's not simply about raising wages, though we need to do that. The projects will succeed only if they're accompanied by modernisation of the relevant sectors. In healthcare, for example, it's proposed that resources going to primary care doctors, those in general practice, should not simply raise wages, but help attract more highly-qualified people to the local level, where they're needed.
What do you say to critics who suggest that while a lot of work is going into the national projects, liberal economic reforms have virtually stopped?
The economic reform programme has not stopped, but is being consistently carried out. In six years, we have achieved a large part of the economic projects and structural reforms talked about in the 1990s. We adopted the new tax law which significantly lowered the total tax burden and tax rates. We have one of the world's lowest income tax rates — a 13 percent flat rate. Untransparent tax breaks and burdensome taxes have been abolished. In 2007 we hope to fully liberalise currency transactions, a vital precondition for making the rouble convertible. Making the rouble a hard currency is one of the state's aims. We're also passing important laws, like the law on foreign investment in so-called strategic sectors, so that foreign businesses know in which sectors the state will attach particular conditions to investment. On the other hand, we're preparing the so-called "capital amnesty" law, allowing the return of capital taken out of the country on payment of 13 per cent income tax. This all shows there's been no change of economic course.
But the state seems to be playing a much bigger role in the economy, with state companies buying up private ones.
I don't believe we're seeing any significant increase in the state's participation in business. True, in a number of cases, the state, or state-controlled companies, increased their presence in several sectors. Above all we're talking about the energy sector. But these are not new companies; we're not talking about nationalisation but about buying appropriate assets on the market. Many oil companies have done this. As for Gazprom, the state's acquisition of [a controlling stake] was linked to the need to liberalise the market for the rest of Gazprom's shares, which investors had spoken about for a long time. This was carried out last year, along with the abolition of the so-called "ring fence" [which restricted foreigners' rights to own shares]. As a result, Gazprom's capitalisation has gone from $10bn, when I became chairman, to $200bn, putting Gazprom among the world's 10 biggest companies. That's good for Gazprom and for the whole Russian stock market.
Why did Gazprom have to turn off gas to Ukraine in January?
There should have been no need to turn anything off. What we needed to do was ensure a transition to market relations with our partner, Ukraine. President [Victor] Yushchenko was the first to speak about this when he suggested moving to full openness and 100 per cent cash payments at European prices. We agreed with that approach. That's the civilised way of developing market relations, and that, ultimately, is what we did. The agreements we signed are based on the prices most European countries pay for energy. Though the price we agreed, $230 per thousand cu metres, is still lower that those within Europe, where spot prices can exceed $1,000/tcm.
But all this raised questions in European countries about Russia's reliability as an energy supplier.
Those questions should not have arisen. Firstly, because in January Russia fulfilled all its obligations under its long-term contracts with European energy consumers. Secondly, as far as I know, all European governments and big energy companies recognise Gazprom's right to operate according to normal market relationships. In fact we were often criticised for subsidising other countries' economies by supplying energy on non-market conditions.
Everything done in January was aimed at guaranteeing normal, competitive conditions which ultimately should benefit energy users in Europe. And I think Russia, in its G8 presidency this year, as the world's biggest energy power, has already presented some important initiatives on energy security to leaders of the G8 countries. The decisions that will be taken [at the G8 summit] will help us guarantee that security.