TRANSCRIPT: Neue Zurcher Zeitung interviews Prime Minister Dmitry Medvedev

File Photo of "World Economic Forum" Display at Davos from Past Session

( – January 25, 2013)

Correspondent: As the Prime Minister, you are known for supporting the need to make tough and honest assessments of the situation both domestically and internationally. The scenarios developed by the World Economic Forum (WEF) show that the time for simple reforms has passed already in Russia… The reform process needs a boost to overcome corruption and other issues. Do you share this view? What is your take on the situation?

Dmitry Medvedev: Thank you, Mr Fischer (Peter Fischer), for appreciating my openness in dealing with problems. I believe that this is important for any politician or decision-maker for that matter. You’re right. And the analysts are right, too. Simple reforms of the economy and economic regulations are history for Russia… Russia has been a market economy for 20 years now. We face a fair number of problems. Corruption is one of them. The voting that was just held in the conference room… Did you have a chance to see it?

Correspondent: Yes, I did.

Dmitry Medvedev: I was absolutely confident that this would be voted as the number-one problem. And it was.

Correspondent: Governance…

Dmitry Medvedev: Global corporate governance. Yes, including corruption… This is a far more delicate issue because it cannot be resolved through executive orders or laws. It can only be resolved via system-wide work by the authorities on all levels and civil society. I believe that Russia can cope with this problem.

This doesn’t mean that we will get rid of corruption in the government and other places in a matter of two, three, or even five years. It does mean, though, that we can bring the level down significantly, so it will not dampen Russia’s image as a safe investment location. We can achieve this by enforcing existing legislation and by making corrupt officials accountable for what they have done.

The responsibility of government officials is the third factor, which is just as important as laws and law enforcement. The idea of corruption-based behaviour should change. Government officials shouldn’t just be fearful of soliciting bribes. Bribery should be seen as an unseemly thing to do for all government officials, as it is now in most modern economies. There, officials do not accept bribes because doing so would be inappropriate, not because they are afraid of the consequences…

Correspondent: Will institutional reforms, such as reforms to the legal system and administrative reforms, be promoted and used to combat corruption?

Dmitry Medvedev: Speaking of changes to the legislation and the judicial system, we have done everything that needed to be done. We have modern civil and administrative legislation. Our civil code, which serves as the economic constitution of any nation, is the most modern such code in Europe. Our administrative regulations are also fairly modern and are being updated. Although court case resolution may not be ideal, the judicial system has undergone major changes over the past 20 years to remain consistent with the new political system.

The problem now does not concern changing the rules, such as court rules… The problem rather concerns improving the credibility of the Russian judicial system. This is not directly related to the rules, but rather to the feelings that rulings on economic disputes or criminal sentences cause in our citizens, our businesses, and foreign investors. This is why resolving economic disputes in Russia as opposed to any other country is so important for us. We are fine with the Stockholm Arbitration Institute, the London Court, the Paris Court, and other courts… But we believe that it is important for Russian and foreign businessmen to have faith in the Russian judicial system as well.

Most importantly, our citizens should trust our judicial system. To get there, we will need to overcome many challenges, such as increasing the social wellbeing of judges, their level of satisfaction with their working conditions, and their work habits. It is no secret that we have to deal with a difficult legacy. As the President, I often wondered why up to 97% of the verdicts in our courts are guilty verdicts. Why don’t courts ever rule for an acquittal? I came to the conclusion that this is a problem that concerns political and legal awareness, a reporting problem where judges feel uncomfortable questioning the findings of investigators. All of this is rooted in the dark years of the 20th century in Russia. If we change the way that the judicial system operates, it will become more attractive, and then our legal and judicial systems will work in tandem. I believe that they are already in fairly good shape in terms of the legal conditions.

Correspondent: We have heard media extensively discuss and cover the corruption scandal involving Serdyukov… How should we view this? Is this a sign of an impending new wave in the fight against corruption?

Dmitry Medvedev: In fact, there are a lot more corruption scandals in Russia. Just like in any country, corruption scandals involving Government officials draw more attention in Russia. There are currently 50,000 corruption cases in courts. That’s a lot, but only high-profile cases catch the public eye.

As a lawyer, I make a point of never talking publicly about individual court cases. I do this for various reasons, including the presumption of innocence, first, and also due to what we call the administrative resource, so that the judiciary doesn’t take something said by the President or the Prime Minister as a cue. This would be the wrong thing to do… As a matter of fact, this is how things are in all countries as well. However, I believe that it is good that corruption cases are covered on TV and discussed by civil society.

Perhaps, they are not always correct in their judgements, but our people are clearly very concerned with the corruption problem. It is an important but not an overarching problem. It is a huge problem for businesses, but just another nuisance for regular people. Surveys show that housing and utilities are a much greater problem while corruption occupies the fifth place or so.

Correspondent: You have set the task of reducing Russia’s dependence on oil and gas exports. Statistics tell us that the work in this regard hasn’t been very effective over the past few years. Why?

Dmitry Medvedev: The dependence is strong, but not fatal… Approximately 50% of our revenues comes from oil and gas sales. The figure used to be over 50%. This means that the other 50% of our revenues comes from other sources. This dependence should be dealt with… Can this be done in one or two years? Probably not. It is particularly difficult to do so amid the crisis. Perhaps we need to be more focused and consistent as we try to get rid of this dependence on hydrocarbons.

Correspondent: What needs to be done?

Dmitry Medvedev: We should diversify our economy, create high-tech industries, focus on education, and create new jobs not just in the energy sector. I can give you an example, which I believe is very much to the point. Switzerland, for instance, is a very successful agricultural country overall.

Correspondent: We could have been more successful…

Dmitry Medvedev: Yes, right. But Russia can be the most successful agricultural producer in the world. We have 10% of the world’s arable land and 20% of the world’s water. In this sense, we can supply food to half of the world. We aren’t doing so yet, but if we develop our agricultural programmes properly ­ and they have been doing pretty well so far ­ then agriculture will serve as a driver for the economy for decades to come, not just oil and gas. But this is only one example. High technology is another. These things should be taken care of and promoted.

Correspondent: The case of TNK-BP and Rosneft has shown that international investors are finding it increasingly difficult to work alongside Russian investors. We see the state influence on the oil sector increasing. What is happening? Does this mean that the influence of the state on the private sector is increasing?

Dmitry Medvedev: Foreign investors should use better judgement when they choose their partners and use caution when they draft their constituent documents. If we take the case of TNK-BP, BP agreed to a very complex business arrangement from the get go ­ 50-50. These major companies clashed in an endless corporate squabble. The state has nothing to do with it, but they fought each other in all instances, including courts and Government authorities. The situation was intolerable. Clearly, one or both of them had to sell their interest. This is my first point.

Second, the buyer question… TNK-BP is a major global company. It cares who will take over the interest held by BP or by another Russian shareholder for that matter. I won’t give you the names of the prospective shareholders, but we decided that the Government had to go ahead and do so to keep the situation balanced. Will this arrangement exist forever? No, it may change. Moreover, Rosneft is engaged in the privatisation of its own shares, and a portion of its interest will go to BP, and this is just the beginning… Thus, when we take over assets, such as TNK-BP, we are not abandoning the idea of privatising Rosneft.

Correspondent: Privatisation is of great importance for our investors. German Gref (Head of Sberbank) said in a recent interview with our newspaper that he would not mind seeing Sberbank or even Rosneft completely privatised. You have announced the state privatisation programme as well. Can we hope that Rosneft and other major enterprises will be privatised?

Dmitry Medvedev: German Gref is the manager of one such company. Privatisation is something decided by the Government, not a company. Speaking about Sberbank’s privatisation, we just sold a large 7.5% interest in the company for $5 billion, and this process will continue. The state has its own mission in Sberbank, as it is Russia’s largest bank, catering to a huge number of clients. Thus, the decision on further privatisation will, of course, be taken with this in mind.

I said all that I had to say about Rosneft… The privatisation process has not been suspended. On the contrary, it is gaining momentum. The state only need to decide on the share that it should keep to maintain effective control over these companies. I believe that the blocking interest should be sufficient to maintain such control in most public companies… Of course, we should sell when it makes sense to sell ­ not when the management or someone else wants to.

Correspondent: What is the mission about? Revenue or modernisation?

Dmitry Medvedev: Both. We certainly should sell high to turn a nice profit. But the primary objective is to bring in effective private owners. Private owners also come in all shapes and sizes, but the mission is to bring in effective owners.

Correspondent: Here is my last question. After your speech at the WEF in January 2011, many liberal investors and other individuals were disappointed with your decision not to run for president again. What can you tell these people? Also, what can Prime Minister Medvedev do better than President Medvedev?

Dmitry Medvedev: What can I say to these frustrated citizens? I am now the Prime Minister. This is an important job. The Government deals with critical challenges.

What needs to be done that hasn’t been done yet? I will keep doing what I was doing before. I will implement economic and social policies. The Government is better positioned to do this work because this is its area of responsibility. I have everything that I need to implement the plans that were formed earlier and haven’t been implemented so far… No one knows what the future holds for us. Let’s wait and see. I hope that we will not disappoint the Russian people.

Correspondent: Thank you very much. I wish you the utmost success. Thank you.

Dmitry Medvedev: Thank you. All the best. Come to Russia!

Correspondent: I would be delighted to.