Wednesday, June 14, 2006. Issue 3431. Page 1.
Putin Touts Russia as World Leader
By Stephen Boykewich and Yuriy Humber Staff Writers
ST. PETERSBURG -- President Vladimir Putin on Tuesday trumpeted Russia's leading role in a world economy moving rapidly eastward, while Dmitry Medvedev, the first deputy prime minister and possible presidential successor, suggested Russia had a few economics lessons for the United States.
"No one has any doubt that for several years in a row Russia has been a world leader in economic growth," Putin said at the start of a two-day conference billed as the Russian Davos.
The leaders of Finland, Latvia, Slovenia and Serbia were among those in the audience listening to Putin at the St. Petersburg International Economic Forum.
"Our GDP by purchasing power parity has exceeded $1.5 trillion," Putin said. "We no longer need foreign loans. What's more, the size of our gold and currency reserves this year may cover the total amount of both government and private external debt."
Russia has been awash in petrodollars at a time of record-high energy prices and a surge of investor interest in emerging markets -- though both, curiously, took a major hit Tuesday.
The RTS stock index dropped 9.4 percent, while crude oil prices in Europe fell to $66.80, down by more than 2 percent.
There were no signs of uncertainty from Medvedev, however. Delivering the keynote speech at the conference's plenary session on the challenges of globalization, he mapped out a confident and detailed vision for Russia's future and raised questions about the dominant role of the dollar -- and the United States itself -- in the changing world economy.
While the United States is running huge trade and budget deficits and growth is stagnating in Western Europe, Medvedev said, Russia's fiscal health "gives us the moral right to initiate a discussion about the need for more balanced rules in this area."
"The current state of the economy in the United States -- the issuer of the world's sole reserve currency -- raises concerns," he said.
Global economic stability would be enhanced if the dollar were joined by a number of world reserve currencies, including Russia's own, he said. "Given rising world demand for the ruble, our currency may become one of these reserve currencies."
Deputy Prime Minister Alexander Zhukov, speaking at a round table on the so-called BRIC countries -- Brazil, Russia, India and China -- not only supported Medvedev's suggestion but added China's yuan as a possibility.
At present, the yuan's exchange rate is pegged to the dollar at an artificially low rate, which has protected Beijing's exports from growing more expensive as the dollar has fallen. It has also led to heated U.S. accusations of market manipulation.
The breadth of Medvedev's speech, which included an economic assessment of the Soviet Union's collapse and references to several Western economists, was particularly striking coming from the a man tipped as a possible future president. Most observers say Medvedev is in a close race with Defense Minster Sergei Ivanov to win Putin's blessing as successor.
Ivanov was scheduled to speak on the strengths and weaknesses of the Russian economy at the conference Wednesday.
Though usually seen as a far less commanding presence than Ivanov, Medvedev borrowed a page from Putin in his speech, beginning by lightheartedly likening his remarks to an appetizer before lunch and then speaking with visible self-assurance about Russia's unique path.
"The choice of a model of economic development should depend on its quality, and not on who is proposing it," he said in an apparent dig at the U.S. model of free-market capitalism.
The Russian economy, he said, ought to be built around its three strategic advantages: its immense natural resources, its "unique geopolitical position" bridging East and West, and the "natural creativity" of its population.
Medvedev also sounded Putin's theme of the need for clear state guidance of the economy, including the promotion of strategic sectors. Medvedev attributed the weak performance of Russian goods abroad "less to low quality or high prices than to the lack of a system of governmental support."
But amid much discussion of a shift in the world economy toward the emerging BRIC economies, it was the issue of the state's role in the economy that seemed to set Russia apart.
Globalization in major developing economies "is now a growth strategy as never before, but it is growth that has gone from being state-driven to becoming entrepreneur-driven," said Indian Trade Minister Kamal Nath.
Echoing Nath at a later round table, Michael Kline, Citigroup's chief of global banking, said the world economy was "all about aggressive and active entrepreneurship on the world stage."
Russia's growth model, by contrast, is growing increasingly reliant on state direction and consolidation. Interestingly, Oleg Deripaska and Alexei Mordashov, who were scheduled to speak, did not attend. Among the few Russian entrepreneurs present were TNK-BNP executive director Viktor Vekselberg and LUKoil president Vagit Alekperov.
"State investment is not the main motor, but without support from the government in terms of infrastructure, there will be no such thing as strong economic growth," Zhukov said.
Zhukov said Russia's growth was likely to lag behind that of other emerging countries because of the demographic crisis.
Medvedev also acknowledged the crisis and noted that he was overseeing a program aimed at addressing it.
Putin also suggested that Russia host the world's exposition in 2015. "By hosting the expo, Russia could become a generator of new roads of global interaction," Putin said. "We are ready for the job."
World Expos usually run for half a year, and some 22 million people visited the Expo 2005 in Aichi, Japan. The next World Expo will be held in Shanghai in 2010. Russia has never hosted the event.
The most controversial presentation at the plenary session -- and the most theatrical -- came from Stockholm School of Economics professors Kjell Nordstrem and Jonas Ridderstrale. In a flashy, tag-team pitch that recalled Western corporate motivational gurus, the two academics proposed that the success of the U.S. economy lay in the fact that the United States was "not a nation-state, but an idea" that any global citizen could join.
Though later speakers seemed impressed by the performance, Russian Railways head Vladimir Yakunin attributed U.S. economic dominance to more concrete causes.
"The great American dream was never planned as a model to be used elsewhere, other than in the interests of American business," said Yakunin, also tipped as a possible Putin successor. "The American dream is a national idea, for a specific nation, to uphold its national interest."
http://www.moscowtimes.ru/stories/2006/06/14/001.html
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