The Prime Minister answered questions from TV anchors Valery Fadeyev (Channel One), Sergei Brilyov (Rossiya), Irada Zeinalova (NTV), Igor Poletaev (RBC) and Mikhail Fishman (TV Rain).
Excerpts from the transcript:
Results of the Government’s performance in the outgoing year and the state of the economy
Dmitry Medvedev: Today we can say that the economy has started growing and that on the whole the changes taking place in it are quite favourable.
Yesterday Vladimir Putin said that the main achievement of the outgoing year is that the economy has come out of recession. That is exactly so, because during the past year we had an economic decline of 0.2 percent. This is not much, but still growth was practically zero and even negative. This year the situation is different. This year our GDP has grown by about two percent, which is comparable to the average growth rates of advanced countries.
This year we will register record low inflation. In all probability, it will be below three percent. This will be the absolute best for the entire post-Soviet era.
Real incomes of the population, real wages are on the rise. Most likely, salaries will have increased by about three percent according to the results of this year. In nominal terms, the growth is seven percent. This means that incomes are growing rather than falling.
Investment in capital stock will grow by over four percent. We have not seen anything like it in recent years either. Not to mention such important indicators as a balanced budget and currency reserves that have also increased this year.
We have fully met our social commitments. We have done all that we planned.
The rouble exchange rate
As the year draws to a close, we can state that the rouble exchange rate is stable and predictable, even though the exchange rate is invariably affected by a multitude of indicators and variables. With regard to our country, it is perfectly clear that the state of the national economy is largely dictated by prices for hydrocarbons, that is, oil. Plus other factors, including relevant external shocks or external effects, such as sanctions. Now, all things considered, we can admit that all these variables, even though they have an impact on the rouble exchange rate, are still not strong enough to make the rouble exchange rate as volatile as several years ago. Over the past year (a little more), oil prices fluctuated within 50 percent between $43 per barrel and $65 per barrel. That is, the range was fairly wide. Previously, with such volatility in oil prices, the rouble followed the oil prices. Now, the peg is no longer there. The rouble fluctuated between just 56 and 65 roubles per dollar during the same period.
I don’t think that we have exhausted our growth potential yet, although our economy is under the pressure of what economists refer to as shocks. I’m talking about external shocks and internal shocks, or internal challenges. The external shocks include the prices for hydrocarbons, which, although higher now, are still a far cry from what they were three to four years ago. Also, there are the sanctions, that is, the attempts of certain states to use political means to influence our economic situation. However, the structure of our economy, which is still largely oriented towards hydrocarbon production growth, remains, of course, no less important or, perhaps, an even more pressing problem.
However, this is changing. About 60 percent of our revenue is now coming from sources other than oil and gas exports. Still, we would like to see these other sources account for 80 to 85 percent of our revenue. So, changing the structure of our economy and carrying out structural reforms remains high on the list of our priorities. This model will need to be implemented in the near future, if we don’t want to get stuck at the 2-percent mark.
Poverty is one of our most painful issues. It is part and parcel of an underdeveloped economy.
Indeed, due to economic problems, the number of low-income people has been up over the past several years. However, it is still significantly below what we started out with earlier this century, 10-15 years ago.
Speaking of pensioners, our primary goal is to increase the size of pensions and adjust them in order to keep up with inflation or even outpace it. Actually, we have achieved this.
Speaking of programmes to support people with disabilities, there are social and medical rehab programmes. We are also implementing such programmes, and they are quite targeted.
Supporting families with children is our key mission. When we started the maternity capital programme, and began to pay out the maternity allowance for giving birth to a second child, we operated on the premise that it would encourage families to have more children. And that is what happened. This programme is working, and the President has just proposed renewing this programme for another term until late 2021.
Paying allowances to couples who plan to have the first child is another important step. This allowance will amount to one subsistence wage and be paid until a baby turns 18 months.
There’s still another decision, which is to pay a similar allowance, but this time to those who have a second or a third child, at the expense of maternity capital, if these families want to receive additional money.
Another important decision concerns housing. There’s an idea to subsidise mortgage loans that exceed 6 percent APR (according to international calculations, 6 percent is the mortgage rate which the absolute majority of families can cope with). The difference between 6 percent and the applicable mortgage rate will be offset with federal funds. This arrangement will apply to those who plan to have a second or a third child, and these measures are introduced for a period of three years and five years.
We promised that the taxation system will remain fundamentally unchanged during the current period (the President said so, and the Government reiterated). We have delivered on our promise. Clearly, the tax system is complex, but the fundamentals of the tax system and the tax rates have remained unchanged.
With regard to the income tax, no decisions have so far been made to change the income tax rate. The flat income tax rate proved to be an effective approach in our country. We collect up to 3 trillion roubles in income taxes yearly, which is a huge amount of money.
This does not mean, though, that one should never attempt to change this flat rate. We have people with very low incomes. Perhaps, hypothetically, we can consider incomes that are tax-free. On the other hand, some people can probably pay slightly higher taxes. We must weigh all pros and cons and make a final decision.
The financial system
At the moment, our financial system remains in a stable equilibrium. Despite the difficulties that we had several years ago, this system was balanced out by smart decisions taken by the Central Bank, which raised a few eyebrows, but ultimately proved to be beneficial for the financial system. For its part, the Government also adopted or supported these decisions. The way they were implemented led the financial system to regain its stability.
The banks live and die by indicators, such as capital reserves, capital adequacy, credit risk, and liquidity, that is, the availability of sufficient funds in the bank itself. The Central Bank and the Government, as far as the Government is concerned, will keep tabs on these variables. However, there is absolutely no reason to believe that these measures will result in some kind of a reverse effect. On the contrary, I think that our financial system has become stronger as a result of the developments that have taken place in the past two or three years.
Theatre director Kirill Serebrennikov
Clearly, I can’t comment on current developments, because the investigation is still underway. This is a high-profile case. It is necessary to figure out exactly what were the possible violations, and what was part of routine operations that are within the confines of the law. I hope that investigators and courts will be able to sort this out.
We have achieved outstanding results with 140 million tonnes of grains and pulses. This is unprecedented for our country. It has never happened before, in any century or under any system.
We have become the world’s largest net exporter of wheat and other grains. This spells capital and hard currency. As a matter of fact, it can help our farmers. If we export about 45-50 million tonnes, which is quite possible with this kind of harvest, with account taken of carryover, so that all our producers and processors are provided in full with bread and grain, this may resolve many of our issues.
Rotation of governors
This is a large group of relatively young people who received new appointments. Please note that they are only holding interim appointments. They have yet to be elected. Some of them have already been trusted with public confidence, including the "Varangians" I referred to earlier.
In 99 percent of cases, the head of a relevant Russian region is also the head of the executive branch. So, in fact and in law they are participants of the federal vertical of executive power headed by the Government, accordingly, the government of those regions and those who make executive decisions in municipalities. They should not be pulled out of this context. However, supporting the people is of paramount importance. Now, another group of people who have received such appointments must prove their worth in these circumstances.
There was a long period when instead of living we were forced into the survival mode. That was in the 1990s. Nobody thought about it in the 1980s at all. It is only recently that we started building the foundation for our technological development. We have everything we need for this. We have the institutions and the money. We also have the instruments, which we have tested. But the most important thing is that we have the people. If anything, Russia has a lot of talented people.
What we have lacked so far is the skill to quickly transform technological innovations into commercially successful projects. The state and business must concentrate their efforts on this. Business must invest in R&D, IT research and modern technology.
These are hugely important tasks, but I am sure that we have the wherewithal to stand on a par with the most advanced countries. We did this in the 20th century, and we can do it again now.
Regarding international legislation and conventions on cybersecurity and relations in the sphere of digital technology, we are at the zero level. Humankind has not advanced since the 1970s or 1980s, whereas the world has changed radically.
Take cyber sovereignty. What is it? We must be self-sufficient but not isolated. Self-sufficiency means that we must have modern cyber technology that will boost our economic development. Isolation is counterproductive, because it can turn us into a state that does not develop at all. What we need is balance.
As for allegations regarding Russia, it has become fashionable to say that all hackers in the world are Kremlin agents. As if we have nothing else to do.
Everyone is meddling in everyone’s affairs. Countries are trying to spy on each other. So it is ridiculous that Russia alone is being blamed. Everyone knows this, but some states are using this situation to deal with their own internal political problems, their internal squabbles.
It is necessary to address the serious aspects of cybersecurity rather than shout that there are this or that country’s hackers everywhere. What I mean is that we need to stand up against the threat of terrorism. That is a real problem. Terrorists are using modern technology. This is what we must fight, and we must do it together. All countries that have faced this threat must join forces against it.
The modern world is based on digital technology. Therefore, I believe that there are more reasons for cooperation than for envy or suspicion.
Our protection in this sphere should be based on internal self-sufficiency, which comprises networks and information oversight. No protection can be absolute or remain effective for decades or even years, because the means of bypassing cybersecurity systems are created very rapidly. In principle, we are as safely protected as other major countries now thanks to numerous open and secret, monetary and legal solutions. We also have a special responsibility because Russia is a leading nuclear power, has the world’s largest area and is a permanent member of the UN Security Council.
Conversation with the US President at the summit in the Philippines
It was a short conversation, as it usually happens at such summits, and earlier in the day the President of Russia had a similarly short conversation with his US counterpart. My impression is that he [President Donald Trump] is a sympathetic politician who wants to develop full-scale contacts and who has a sober view of developments. We spent some of the dinner talking about various issues. He recalled our countries’ cooperation during WWII and said that this was important for both Russia and the United States. In this sense, we had a good conversation. I am sure that President Putin said the same, and that he [President Trump] seems all right in terms of interpersonal relationship.
But it is not the interpersonal relationship that matters. It is important, too, but it is secondary compared to the decisions we take and the atmosphere that is being created. The atmosphere in US-Russian relations is very bad. I would even describe it as disgusting. It is the worst ever as far as I remember.
US allegations against Russia
As for guilt, it is a hackneyed subject, and the only answer regarding the alleged guilt of this or that force or country is that the point at issue is not who is guilty but what we should do about this. We have our own position on this score, which is well known. I believe there is always a chance. The President of Russia has spoken about this, and our colleagues from the Foreign Ministry and I have spoken about this as well. The point at issue is that we need to launch full-scale communication on the most important subjects. US business people come to me – we have a commission on foreign investment, which includes 10 or 12 people from the United States, the chief executives of corporations that are worth hundreds of billions of dollars. All of them say that they want to work on the Russian market, to work with us. This is what the business community wants. Speaking about personal attitudes, I am sure that they differ radically from the policy of the current Washington establishment, which has also done a lot of damage to President Trump.
It seems to us that some American politicians are trying to solve their own problems at our expense; they are trying to influence the US President by playing the notorious Russian card. This happens only rarely. I cannot remember anything like this in our recent history, probably with the exception of the period of McCarthyism in the 1950s, but even then it was not about settling accounts with their own president.
Sanctions against Russia
We lived under sanctions throughout the 20th century. Western countries adopted sanctions against the Soviet Union and subsequently against Russia 10 times. Take the Jackson-Vanik amendment, which was effective for some 40 years. The Soviet Union collapsed, and the problem that provoked the amendment disappeared, yet the amendment was not lifted. Now our partners are trying to perpetuate anti-Russia sanctions, to make them into law, so that even the US President would be unable to lift them. The US President could suspend the Jackson-Vanik amendment. But he cannot do anything about the anti-Russia sanctions now.
We survived sanctions in the 20th century, and we will survive now as well. We have learned the art of survival; we know how to overcome these problems. In a way, they have helped us. The policy of import substitution would not have been adopted in its current format without the sanctions. But they are harming everyone.
The latest set of sanctions is clearly aimed at restricting our gas opportunities in Europe. It is a totally cynical position: they want to supply their LNG to Europe, but their ambition is thwarted by the deliveries of Russia’s pipeline gas, which is why the Russians must be pushed out of Europe. They are doing this absolutely shamelessly. Even the Europeans are shocked, although not all of them. Regrettably, our colleagues in Brussels have started complicating the situation by adopting decisions under which our gas supplies will be controlled by the so-called Third Gas Directive, Third Energy Package. Still, we hope that common sense will prevail in Europe and our gas projects will be implemented, because these are commercial projects of mutual benefit to Europe and to Russia.
On doping and attempts to ban Russian athletes from the upcoming Olympics
We are constantly looking for a way out of the current situation and my colleagues in the Government are dealing with this. Overall, the entire Government is, in one way or another, concerned with this situation and the President has repeatedly looked into it and expressed his opinion. We should distinguish two things here. The first one is our attitude towards doping. It remains the same and unequivocal: We are against using doping. There are certain problems in this regard and we will deal with them, which by no means puts Russia’s brilliant performance at our Winter Olympics in question. That was an honest and absolutely objective victory and no foreign forces will ever convince us that something was wrong. That victory was achieved thanks to our athletes’ hard work and the atmosphere of support, which reigned supreme at that time in Sochi.
This has become a standalone and absolutely politicised issue and doping is only 30 percent of it. The rest is a political manipulation.
This topic has become the basis for another anti-Russia campaign. And we can see that this campaign will peak during a certain political cycle in order to show how we are doing a bad job of it. This is their definite and quite clear plan. If our athletes are banned, of course, everybody here will be disappointed. So, I believe it is all about politics now. This can be said about the McLaren report. There are other characters as well, such as Rodchenkov, who has published his diaries, if we may call them that. But this, in my opinion, is more likely a mental problem.
We will keep countering this at all levels of communications, and at all organisations. But it must be understood that this is a political campaign – not a sports-related anti-doping campaign, but a political campaign against our country. And this is the only way to look at it.
On the presidential election
It will soon become clear who will run for president.
If the incumbent President, Vladimir Putin, decides to run for president or accepts nomination, there is no doubt that our party, and I personally as its chairman, will unequivocally support him. We believe he has been a successful president and the country’s leader. In this sense, the election should comply with the law. The nomination is a matter of his choice. United Russia will support whatever method its candidate chooses. If Mr Putin decides to run and if he needs any support, United Russia will provide it, no doubt.
As far as I am concerned, I do not see myself getting involved in the upcoming political season, but I will continue working.
Succession of power
A situation where somebody wins a landslide victory because of overwhelming public support cannot be seen as a breach of law, if the proceedings were in keeping with the Constitution and effective legislation. Look at what is happening in Germany, where one political party and one candidate wins elections and holds leading positions for decades. Anything that takes place within the framework of the Constitution and is based on the people’s will and public opinion is in keeping with the law.
Alexei Navalny’s “investigative” film
I have said everything there is to say about it. I have nothing more to say. The more attention you give to all kinds of blockheads and outcasts, the better for them, because this is exactly what they want.
Films such as this one have only one political goal: to get publicity for themselves and to fuel tensions. Since we know the people who do this, why give them an additional push? I see no sense in doing this. Outcasts are outcasts.
But this does not mean that the people and organisations that have been harmed by this film must remain defenceless. If you monitor the media, you know that several trials have been held and have declared the information provided in this film to be in opposition to the facts, that is, this information is false and hence a refutation is in order, and this false information must be removed from the media space. The question now is how these decisions can be enforced. The authors of this drivel are responsible for the implementation of court decisions, which have come into force. If they do not implement them, they will be held administratively or criminally liable.
The composition of the future Government will be determined by President elect. I would not say that the composition of the current Government is perfect, but it was approved by the President and accepted by the Government as optimal. We have changed it over this period, we established new ministries, such as the Ministry for Crimean Affairs, and we dissolved ministries when we thought they had fulfilled their tasks. We split up some ministries, such as the Regional Development Ministry, and distributed their functions between other agencies. At the same time, we still have the Ministry for North Caucasus Affairs and the Ministry for the Development of the Russian Far East.
Of course, I believe that I know what the Government should do. We have probably failed somewhere, the Government composition can be improved, and the technological processes can be streamlined. The digital agenda also includes the technologies that are used by the Government. The papers we prepare should be replaced with modern digital management systems.
The biggest challenge for the Government
Never before in our country’s history did we see oil prices plunge so low simultaneously with sanctions being adopted against us. There was either one or the other. I am not even talking about the structure of the economy, which has been and remains far from ideal. This double challenge was unique, in a sense.
I believe that many of our decisions turned out to be absolutely correct. We have even recovered from the recession sooner than many people expected, and [the economy] did not fall as low as in 2008 or 2009. Our GDP and industrial production fell by 8 percent then, whereas this time the decrease was only 3 percent. However, we certainly could do more and better.
I am a lucky man – I have always enjoyed my work. I liked what I did as a student, a post-graduate and a young teacher. I liked it when I entered the legal profession and then moved on to business. I liked it when I was invited to Moscow and offered a position in the Presidential Executive Office, where I became the Chief of Staff. And then I moved to the Government and was elected President. And now I am Prime Minister. All of this is extremely interesting.
I will continue to serve Russia, not just because I have enjoyed the work I did throughout my professional career, but because I like to live and work in the Russian Federation.