In a startling admission, Russian President Dmitry Medvedev on Tuesday said Russia was run by corrupt officials and many of its businessmen did nothing but live off the sale of raw materials.
Speaking to the Valdai discussion group of Russia experts, Medvedev said his country was on a “road to nowhere,” relying on exports of oil, gas and metals and could not hide from the pressing need for economic and social reform.
Russia relies on natural resources for most of its exports and government revenues. Sharp falls in world commodity prices in the wake of the financial crisis have hit the Russian economy hard, exposing how little it has diversified.
Medvedev next May reaches the midpoint of his four-year term in office. Critics are complaining that his talk of reforms and modernization is not being matched by deeds. In some areas, such as corruption, businessmen say the situation is getting worse.
During a two-and-a-half-hour lunch with the Valdai Group at a luxury shopping center on Red Square, Medvedev reserved his harshest comments for corruption among officials.
“Corrupt officials run Russia. They have the true power in Russia,” he said.
“Corruption has a systemic nature, deep historic roots,” he said. “We should squeeze it out. The battle isn’t easy, but it has to be fought.”
Some of those listening said these were explosive comments from a man normally viewed as the junior partner in the ruling “tandem” of president and Russian Prime Minister Vladimir Putin.
Medvedev was picked by Putin to succeed him in the Kremlin, but most analysts in Moscow agree that Putin continues to take the key decisions from his desk as prime minister.
“It is absolutely amazing and could anger a lot of people,” said Reinhard Krumm, head of the Friedrich-Ebert Foundation in Moscow of Medvedev’s comments.
“But I am very doubtful he can do anything. He reminds me of [former Soviet leader] Mikhail Gorbachev, who began talking about the necessity of reform but couldn’t follow through.”
Medvedev also lashed out at some of the country’s powerful billionaire oligarchs. Many businessmen in Russia “did nothing” he said “other than sell raw materials.”
“We need to change the business model, the business mentality,” he said.
The break up of the Soviet Union in 1991 spawned a new generation of billionaires who profited from taking possession of highly profitable state assets, much of it in the oil and steel sectors.
The financial crisis, however, has weakened their grip on the economy and exposed the fact that many oligarchs did little more than live off the rents from extractive industries and borrow heavily in order to grow their empires through acquisitions.
The sudden halt to foreign lending last year hit the more heavily indebted oligarchs hard and has made them vulnerable to attempts by the state to take back some of their assets.
Russian public opinion is strongly against the oligarchs, so political moves against them are popular.
Medvedev’s G20 sherpa and top economic adviser Arkady Dvorkovich said at the weekend ordinary people would survive the crisis, the oligarchs would not.
But Russia experts said they doubted Medvedev’s increasing strong language on corruption and reform would be matched by effective deeds before his term expires in 2012.
Harvard academic Timothy Colton said Medvedev would struggle to deliver on his pledges.
Corruption in Russia has actually increased since 2000, Transparency International said, and the country is near the bottom of the organization’s list of transparent countries.
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