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Moscow Times
April 5, 2005
Medvedev Says Rifts Threaten The State
By Anatoly Medetsky
Staff Writer

A rift among national power brokers threatens the country with disintegration that could have even more violent consequences than the collapse of the Soviet Union had, Kremlin chief of staff Dmitry Medvedev warned in a wide-ranging interview published Monday.

"If we do not manage to consolidate elites, Russia may disappear as one state," Medvedev told Ekspert magazine. "The disintegration of the Soviet Union would look like a kindergarten party compared to the collapse of the modern Russian state."

The elites should unite around "preserving an effective state system within the existing boundaries," he said.

The normally publicity-shy Medvedev gave the interview -- his most extensive and comprehensive since his appointment in 2003 -- only days after a popular uprising swept away the regime of Kyrgyz President Askar Akayev and as debates continued about what could happen after President Vladimir Putin ends his second, and constitutionally final, term in 2008.

Liberal politicians said Monday that Medvedev's calls for the elites to close ranks could pave the way for a crackdown on opposition and dissent, Ekho Moskvy radio reported Monday. Irina Khakamada, leader of liberal party Nash Vybor, or Our Choice, said Medvedev wanted to scare officials out of supporting dissenting groups, the radio reported.

According to analysts, however, the interview was the Kremlin's response to growing discontent among politicians, businesspeople and intellectuals with Putin's policies.

Vladimir Pribylovsky, head of the Panorama think tank, said Medvedev could be trying to engage regional and national who feel sidelined by Putin's retinue, which mainly consists of his former colleagues in the administration of former St. Petersburg Mayor Anatoly Sobchak.

"The current authorities do not represent all elites," he said. "Many of them do not like that they are being oppressed."

Alternatively, Pribylovsky said, Medvedev could be sending a message to various groups in the presidential administration, including the siloviki, the St. Petersburg economists and the St. Petersburg lawyers. These groups have been at odds recently over control of economic assets, he said.

In his interview, Medvedev -- a 39-year-old lawyer by profession who graduated from Putin's old law school in St. Petersburg -- admitted differences among administration members.

"We are not the Central Committee of the Communist Party of the Soviet Union and we do not campaign for unity of thought," he said. "The main thing is not to lose your ability to criticize yourself, and not to stoop to using primitive management schemes, forgetting about the real goal of statecraft."

Some analysts have speculated that members of Putin's administration have been split over what to do with the spoils of the state takeover of Yukos' main production unit, Yuganskneftegaz. Kremlin deputy chief of staff Igor Sechin is chairman of state-owned Rosneft, which acquired Yugansk after last December's auction, while Medvedev is chairman at Gazprom, which is due to merge with Rosneft. The two companies have openly bickered over control of assets under the terms of their merger.

Pribylovsky said the threat of Russia's disintegration was a very powerful argument, because "80 percent of people believe that should not be allowed."

But Pribylovsky took issue with Medvedev's analysis, saying that the primary threat to Russia's unity was the ongoing conflict in Chechnya and instability in the North Caucasus as a whole, a subject Medvedev did not touch upon in his interview.

Medvedev said another problem that endangered Russia's territorial integrity was the insufficient development of sparsely populated Siberia and the Far East. "If we do not develop the east, Russia will not be unified," he said.

The building of an oil pipeline from Eastern Siberia to the Pacific coast could boost the economy of the vast region, he said, adding that the government had until May 1 to finalize the project.

Medvedev also supported merging Russian regions, saying that this would help strengthen Russia's territorial integrity. But he said regions should unite voluntarily.

Part of why Medvedev fears divisions at the top of society is growing unrest among sections of the business elite, said Sergei Markov, a Kremlin-connected political analyst. Many business leaders who built their empires in the Yeltsin years are increasingly uncertain about what direction Putin's economic policies will take, and they are halting their investments in Russia, he said. The Yukos affair made it clear that the state wants to dominate the energy sector, but they still fear new back tax demands, he said. Businesses are opting to funnel money out of Russia and are abstaining from long-term projects, which is slowing down growth, he said.

Many analysts saw former Prime Minister Mikhail Kasyanov's return to politics and his statement that he could possibly run for the presidency as a sign that the divisions were coming out into the open -- and that some, particularly among the business elite whom Kasyanov represents, were daring to move into open opposition. Kasyanov rose to power under former President Boris Yeltsin and is seen as close to the group of businessmen who made fortunes on the back of 1990s privatization deals.

Growing fears of a backlash from business appear to have pushed Putin into a damage limitation exercise in recent weeks. Two weeks ago, he attempted to draw a line under 1990s privatizations, saying the statute of limitations on these deals should be cut from 10 years to three. Last week, he also called for taxes to be streamlined.

Now Medvedev appears to be joining the drive to ease fears among the business elite. But in the interview he defended a greater state role -- at least temporarily -- in some strategic sectors of the economy, especially transportation and the defense industry. "The experience of a number of countries, such as Norway, shows that major state companies can be effective too," he said. "I think that our state companies have also not exhausted their potential."

"Today the role of major state-owned companies is extremely important. Their role lies in supporting the necessary level of production in strategically important sectors, and also in providing public services in socially significant spheres, such as in transportation and some forms of communication," he said.

The state's role in the economy will eventually diminish, he said. "My position has not changed: Traditional state capitalism is a dead end for developing the economy," he said. "State-owned companies cannot ensure the growth of small and medium-sized businesses on their own. And this is the basis of any economy, the basis for civil society."

But Medvedev also said that Russian, not foreign, capital should control such industries as natural resources, transportation and finance.

He called for more measures to improve the business climate, including a "sensible" tax regime and stable property rights. He also said priority should be given to developing small and medium-sized businesses.

Medvedev admitted there was a "certain" slowdown in economic growth this year, but said it was not critical.

When asked about the impact of the Yukos affair on property rights, he avoided mentioning the company directly but said a lack of stable property rights was the main problem. Because property was transferred in a revolutionary manner in the 1990s, people fear their property could now be seized in a similar way, he said. He said these fears should be eliminated by legal means -- perhaps in a reference to Putin's proposal to shorten the statute of limitations on privatization deals.

Medvedev called, however, for a more independent judicial system so that laws, including those on property, could be implemented. He complained that in the past business groups had manipulated courts to their own advantage, for example by paying bribes.

He cited the replacement of direct gubernatorial elections with a system of nominating governors as another unifying effort. The system "should consolidate regional elites and create conditions for a greater efficiency in carrying out executive decisions," he said.

Medvedev said there was still a risk that the country could sharply change course, although it was not so high as when the Communists mounted a solid challenge to Boris Yeltsin in the 1996 presidential elections. Now communism takes a back seat to terrorism, economic mistakes, poverty and crime, he said.

Medvedev said the 2008 presidential elections would be an opportunity for a democratic transfer of power. "Today we have an opportunity to create a tradition of transferring power legally, based on real democracy," he said. "Repeating this tradition will create a robust basis for democratic power in the country and will make a qualitative difference to the development of the state."

Asked whether the West was pressuring Russia, Medvedev said the West disliked the fact that Russia had grown stronger and reclaimed its position as a significant global player. "This is not liked, it causes annoyance and changes the current geopolitical state of affairs," he said. "However phantom and irrational the fears of Russia might be, unfortunately in a number of cases they lead to splashes of political activity."

He said Russia had to remain open to the world and consolidate its position on key domestic and international issues.

Medvedev criticized existing right-wing parties for what he called a lack of identity. "Look at the behavior of many of those who regard themselves as on the right of the spectrum, during the so-called monetization of benefits," he said. "Not one of them said clearly that replacing benefits with cash is one of the most basic conditions for the initial development of the market." He said he could not rule out that a faction within United Russia might spin off to form a new right-wing party.

Staff Writer Catherine Belton contributed to this report.