November 15, 2009
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Medvedev Demands End to Oil Dependence

Medvedev Demands End to ‘Humiliating’ Oil Dependence 

   President Dmitry Medvedev renewed his demand for economic modernization and an end to Russia’s “humiliating” dependence on commodities even as rising oil prices ease the steepest contraction on record. “We shouldn’t look for the guilty only outside the country,” Medvedev said in his annual state-of-the-union address in the Kremlin today.

 “We haven’t freed ourselves from the primitive structure of the economy. It’s a question of our country’s survival in the modern world.” Medvedev warned against complacency after the price of Urals crude oil, Russia’s main export blend that accounts for about 30 percent of output and 70 percent of export revenue, rebounded 80 percent from the start of the year. “The habit of living off exports is still hindering our innovative development,” the president said.

Medvedev and his predecessor, Prime Minister Vladimir Putin, are seeking alternative sources of growth after last year’s 54 percent slump in oil prices pushed the economy into a 10.9 percent contraction in the second quarter. Both have said they aim to use the worst financial slump in a decade to overhaul infrastructure and pare back the state’s role in the economy by selling stakes in companies.

 ‘Efficiency’ The government must focus on developing medicine, education and energy-saving technologies to reorient the economy on “meeting the needs of the people,” Medvedev said. The government should consider eliminating some of the country’s 11 time zones to improve “economic efficiency.

The authorities must decide where the state is needed and pull out of companies where it is not, reaching an “optimal” level by 2012, he said. Independent audits should be conducted at state corporations, Medvedev said. “We are talking about the fate of many assets that currently have strategic status,” he said.

The president promised the government will return to the issue of cutting taxes to reduce the burden on businesses. The economy of the world’s largest energy supplier will contract 8.7 percent this year and return to growth, of 3.2 percent, in 2010, the World Bank said in a report this week. The government predicts an 8.5 percent contraction this year and growth of 1.6 percent next year.

Gross domestic product, “aided by higher oil prices and stronger global demand, is starting to turn around -- very slowly,” the World Bank said. Medvedev said more than a million people are at risk of losing their jobs. The unemployment rate was 7.6 percent in September.

The president also said 16 million people live in so- called company towns, where the population depends on one company for employment and social benefits. By the end of the year, 17.7 percent of the population, or about 24 million people, may be living on incomes lower than about $169 a month, according to the World Bank report. It will take about three years for the number of people living in poverty to return to pre-crisis levels.  

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