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Cablegate: Medvedev's Four "I"S: - the Keys to His Economic Program

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DE RUEHMO #0431/01 0461427
ZNR UUUUU ZZH
R 151427Z FEB 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 6652
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MOSCOW 000431

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/RUS, EBB/IFD
STATE PASS TO USTR
TREASURY FOR TORGERSON
COMMERCE FOR EDWARDS

E.O. 12958: N/A
TAGS: EINV ETRD RS
SUBJECT: Medvedev's Four "I"s: - The Keys to His Economic Program

1. (U) Summary. In a speech at an economic forum in Krasnoyarsk,
Siberia February 15, Deputy Prime Minister and presidential hopeful
Dmitry Medvedev identified four economic priorities for Russia:
infrastructure, innovation, investment, institutions. He called for
a smaller state role in the economy, including a diminished role for
government officials on the boards of state-owned enterprises. He
also said that if he were elected, he would seek to turn Russia into
"one of the biggest financial centers in the world" with a stable
currency, strong banking sector and reformed tax system. Medvedev
identified combating corruption as one of most serious challenges
before Russia, and called for a stronger and more independent
judiciary and mass media as means to reducing corruption. He
emphasized freedom - personal and economic, as well as freedom of
expression. End Summary

Economic platform
-----------------

2. (U) In his speech, Medvedev outlined several key tasks: lowering
administrative barriers, reducing the VAT, turning the ruble into
one of the world's resource currencies, modernizing transportation
and energy infrastructure, creating an innovation society and
implementing a social development program for the country.

Modernization and the State
---------------------------

3. (U) Medvedev criticized the insufficient investment levels in oil
and gas production over the past decades, and called for a series of
measures that would increase production, create state-of the art
generating plants - nuclear, goal, electricity and gas-driven - and
define the regulatory framework for investment. He stated that the
government had a role to play in co-financing major projects. The
state also should assume significant responsibility for improving

the state of the roads, and for ensuring that everyone has access to
modern, uninterrupted telecommunication and internet services.

4. (U) Medvedev, however, cautioned about the state having too large
a role in the economy. He called for a greater transfer of assets
to the private sector and urged that government officials not hold
the majority of seats on the boards of state-owned companies. He
also subtly encouraged the SOEs to become more flexible.

Russia - A financial center
---------------------------

5. (U) The ruble should be seen as a world currency and used in
reserves, according to Medvedev. He called for measures to support
Russian exports and investment abroad. Russian raw materials should
be priced in rubles, which would help turn the ruble into a world
currency reserve. Russia should become one of the world's largest
banking sectors, with a stable currency and reformed tax system.
Regarding the latter, he suggested that value-added tax rates should
be lowered as well as taxes imposed on the sale of stocks on the
Russian market. He supported the creation of tax incentives for
companies in the extractive industries to increase production and
adopt modern technologies.

6. (U) Medvedev said the government would be ready to assist the
banking sector, should global economic conditions start to take
their toll, and would use the newly created Welfare Fund if
necessary to provide the financial support.

Closing the Gap
---------------

7. (U) Recognizing that not everyone has benefited from Russia's
recent economic growth, Medvedev called for pension reform. He also
advocated a lowering of taxes on private expenditures on education
and health-care related services and pensions. He pointed out the
need to increase the affordability of housing, observed that only 20
percent of the population can afford housing, and said the GOR's
goal is not less than 35 percent by 2012.

Combating Corruption, Increasing Freedom
----------------------------------------

8. (U) Medvedev harshly criticized the level of corruption that
permeates all aspects of life in Russia. He urged for a
comprehensive anti-corruption campaign, and pointed to an
independent judicial system, free access to information and media as
critical elements. He also called for the strengthening of measures
to protect private property. Expounding on the need for judicial
reform, he expressed support for the development of pre-trial and
non-court conflict resolution mechanisms, the introduction of a
compensation fund for losses from unlawful court decisions, and a
'humanization' of the judicial system. The grounding principle
should be freedom, in all its aspects - personal freedom, economic
freedom, and freedom of expression. The grounding value should be
the rule of law, he argued.

Comment
-------

9. (SBU) Medvedev seems to be increasingly intent on demonstrating
his liberal economic tendencies. His goals are both technical in
nature but significant in scope, and are designed to increase
Russia's global competitiveness and to ensure that the benefits of
economic growth trickle down. End Comment.

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