Medvedev Moves to Calm Markets
Russian Regulators Get Warning in Sign Of Break With Putin
By ANDREW OSBORN
August 1, 2008; Page A6
MOSCOW -- Less than three months after he took office, President Dmitry Medvedev showed his first signs of independence, calling on the authorities to stop harassing the business community days after his predecessor, Vladimir Putin, triggered a collapse in the share price of one of the country's largest firms.
Moving to calm market jitters about Russia's investment climate, Mr. Medvedev made his strongest comments yet on the subject, saying officials should stop shaking down companies for bribes and respect the rule of law.
"We need to create a normal investment climate in our country," he said in televised comments. "Our law-enforcement agencies and government authorities should stop causing nightmares for business."
Dismissed in some quarters as a yes man and as a puppet handpicked by Mr. Putin -- now prime minister -- Mr. Medvedev may now be serious about forging his own identity, analysts said in interpreting the comments.
Mr. Medvedev has spoken of reducing the state's role in the economy, setting him apart from Mr. Putin, on whose watch the state's role in business substantially broadened. The new president has also said he wants to stamp out "legal nihilism" and eradicate corruption. But skeptics say Russia's problems are too ingrained to be swiftly solved and that his rhetoric has so far been little more than fine words.
In Thursday's remarks, Mr. Medvedev didn't mention Mr. Putin by name. But his critique came just days after Mr. Putin caused stock prices to plunge by severely criticizing steel and coal producer OAO Mechel for price-gouging and alleged tax dodging. Stocks fell nearly 9% at one point on the unexpected outburst, which spooked investors worried about the Kremlin's attitude toward the private sector. In New York, Mechel's American depositary receipts lost at least one-third of their value. Investigations by the country's antimonopoly service and by criminal authorities swiftly followed.
Investors' fears have also been fanned by the treatment of BP PLC's joint venture TNK-BP Ltd. BP is in a dispute with the venture's Russian shareholders. TNK-BP has run afoul of numerous regulatory bodies, complicating its operations to the point that its chief executive, an American, left Russia last week, complaining of harassment.
In Russia, official bodies from the police to the fire brigade regularly conduct spot checks on businesses, levying fines for alleged irregularities. Business competitors often hobble their rivals by hiring a regulatory body to go after competitors. One of Mr. Medvedev's first actions was to outlaw such spot checks. He said Thursday that he had signed an anticorruption plan, and told his audience that he was sending a signal that he was serious about clamping down on graft.
"In this country people attach a special importance to signals" from the Kremlin, he said. "You can consider I gave you such a signal."
His comments came just one day after one of his advisers lashed out at Mr. Putin for rocking the stock market, fueling speculation about a rift between Mr. Medvedev and Mr. Putin.
"It is not correct to destroy your own stock market...and wipe off $60 billion," said the adviser, Igor Yurgens. "It's just not the right thing."
Mr. Medvedev's criticism came as the Organization for Economic Cooperation and Development issued a report saying that Russia had record levels of investment last year, while warning that businesses remained scared of the Kremlin.
The OECD said foreign direct investment in Russia rose to $52 billion in 2007 from $32.4 billion the year before. Investment in natural resources tripled to reach nearly half of the overall total.
"The biggest obstacle to further domestic and foreign investment in Russia remains uncertainty over government policy," the report said, adding that the risk of state interference threatened the country's progress.
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