Putin: Russia strong enough to face market shocks

October 6, 2011 - 10:40 AM
Russia Putin

Russian Prime Minister Vladimir Putin speaks at an investment forum in Moscow, Russia, Thursday, Oct. 6, 2011. Putin has courted investors jittery about Russian stocks amid turmoil in global finances, saying that the country is strong enough to withstand market shocks. (AP Photo/Misha Japaridze)

MOSCOW (AP) — Prime Minister Vladimir Putin on Thursday courted investors jittery about Russian stocks amid turmoil in global finances, saying that his country is strong enough to withstand market shocks.

Putin, who is set to easily regain the presidency in elections in March, told an investment forum that his government will work to reduce the state role in the economy and encourage foreign investment to help industrial modernization.

He argued that hard currency reserves exceeding $500 billion and a low level of debt will help Russia cope with the impact of the eurozone debt crisis.

"Russia is certainly better prepared than it was in 2008," Putin said. "A strict budget discipline, an increase in the efficiency of spending, and limits on increase of state debt have been and will remain our priorities."

He said Russia expects 4.1 percent economic growth this year and that the annual inflation will fall to 7 percent this year, its lowest level since the 1991 Soviet collapse.

Putin said Russia will have a deficit-free budget this year, but will likely run a deficit in the next three years due to economic and social needs.

"We will try not to launch any new grandiose construction projects that aren't of primary importance, but we will complete everything we have started during previous years," he said.

Putin said that preparations for the 2014 Winter Olympics in Russia's Black Sea resort of Sochi and the 2018 World Cup will make a strong contribution to rebuilding the nation's infrastructure. "In the end, all that will remain to serve the country and the people, also helping business," he said.

Putin sought to reassure the audience about the recent dismissal of Russian Finance Minister Alexei Kudrin, whose fiscal hawkishness made him a darling of investors, saying that Kudrin is his friend and will remain part of his team.

Kudrin lost his job after telling reporters that he wouldn't work in the Cabinet once, as expected, President Dmitry Medvedev and Putin swap places as a result of the March election. Putin praised Kudrin as a strong professional, but wouldn't comment on Medvedev's move to sack him.

Putin defended an increase in Russia's military spending opposed by Kudrin, saying the nation must replace its aging Soviet-era weapons and that the military modernization will also help modernize the nation's industrial technologies.

Putin's talk at the forum was his first major speech to investors since he announced his intention last month to reclaim the presidency. He served as president in 2000-2008 and has remained the nation's No.1 politician after shifting into the premier's job due to a term limit.

Putin turns 59 Friday. He is eligible to serve as president for another 12 years, benefiting from the extension of that office's term from four to six years. If he does that, he will be the nation's longest-serving leader since Soviet dictator Josef Stalin.

Putin's rule has seen a steady rollback in post-Soviet freedoms and an increase of the state's influence on the economy. The opposition has warned that his return as president would produce even stronger authoritarian trends.

In an apparent response to liberal critics who have compared his rule to the economic and political stagnation under Soviet leader Leonid Brezhnev, Putin argued that the nation needs stability. "We intend to develop our political system, but we want its fundamental basis to strengthen," he said.

Putin admitted that corruption remains a big challenge, and he acknowledged that the Russian economy continues to rely heavily on oil and other raw materials, making it vulnerable to market fluctuations.

"Our strategic role is economic diversification, and in order to change its structure we must open the way for thousands of new projects and business ideas," he said. "It's very important ... that Russia gets new technologies along with investments."

He promised to simplify and streamline investment rules, allowing foreign businesses a broader access to energy, banking and other sectors.

Asked if Russia hopes to ever join the European Union and NATO, Putin said no. He said that Russia remains interested in joining the World Trade Organization, but will make no more concessions in trade talks.