Russian Economy Should Be Dominated by Private Sector, Says Russian Leader

By NATALIYA VASILYEVA | June 17, 2011 | 6:44 AM EDT

Russian President Dmitry Medvedev speaks at the economic forum in St. Petersburg, Russia, Friday, June 17, 2011. Medvedev lashed out at the mammoth role the government wields in the economy and warned that the centralization of power in the Kremlin has to be changed. (AP Photo/RIA-Novosti, Mikhail Klimentyev, Presidential Press Service, Pool)

ST. PETERSBURG, Russia (AP) — Russian President Dmitry Medvedev on Friday condemned the government's heavy hand in the economy and the centralization of power at the Kremlin, comments seen as a challenge to the legacy of his powerful predecessor, Vladimir Putin.

Medvedev's statements in a speech to investors at the annual St. Petersburg International Economic Forum were a strong indication that he wants to distance himself from Putin, Russia's prime minister, in the run-up to next year's presidential election.

Medvedev has been widely seen as the weak half of Russia's ruling tandem, a placeholder while Putin awaits the opportunity to return to the presidency. Putin stepped down in 2008 because the constitution limited him to two consecutive terms; neither he nor Medvedev have announced whether they will run in next March's election.

Medvedev acknowledged that the government's expansion in managing the economy and the centralization of authority in the Kremlin under Putin was necessary in an earlier period of the country's post-Soviet development. But, he said, "this economic mode is dangerous for the country's future."

"The proposition that the government is always right is manifested either in corruption or benefits to 'preferred' companies," he said.

"My choice is different. The Russian economy ought to be dominated by private businesses and private investors. The government must protect the choice and property of those who willingly risk their money and reputation."

Putin's 2000-2008 presidency focused on concentrating power in the Kremlin away from the regions and raising the government's influence in the economy, particularly in the lucrative oil and gas sectors.

While Putin has hailed stability fueled by high oil prices as a major achievement of his time in office, Medvedev on Friday attacked the whole concept, warning that attempts to preserve stability could lead to stagnation.

Medvedev said that the country must begin to attack the problem immediately to avoid "the point of no return from the (economic) models that are moving the country backwards."

"Corruption, hostility to investment, excessive government role in the economy and the excessive centralization of power are the taxes on the future that we must and will scrap," he said.