Dmitry Medvedev spoke with Global Watch host Shui Junyi ahead of a meeting between the heads of government of Russia and China.
Shui Junyi (via interpreter): We are in the Moscow residence of the Prime Minister of Russia, and we have an opportunity to interview and exchange opinions with Prime Minister Dmitry Medvedev.
My first question concerns your 21stregular meeting with Premier of the State Council Li Keqiang. What do you expect from the upcoming visit of Mr Li Keqiang? Bilateral trade is expected to reach $200 billion in 2020. How far are we from achieving this goal and what can be done to promote bilateral trade?
Dmitry Medvedev: The situation in the global economy and our national economies is changing. Some 10 years ago, our goal was to achieve $100 billion in mutual trade. We reached this goal by 2014. At the same time, we must bear in mind that the situation in our countries depends on domestic and international conditions. Our trade, which plunged by about one-third during the 2008-2009 economic crisis, soared to a very high level in 2014, when we practically reached the goal set 10 years ago.
We have set ourselves a new goal now, to increase bilateral trade to $200 billion. How can we achieve this goal? Our economies are on the rise. The Russian economy is hindered by several negative processes which have an impact on our economic development, but we also see some positive prospects. At this point, we are working to overcome the consequences of several negative factors. One of the negative factors that affected our trade was the weakening of the rouble, which resulted in a decrease of our imports. Logically, this affected our trade statistics last year.
We have improved bilateral trade this year thanks to the cooperative efforts of our countries, leaders, governments, ministries, agencies and business communities. I am confident that if we carry on in this spirit we will definitely reach the $200 billion mark.
However, this calls for focusing on the key spheres of our cooperation, where we have laid substantial groundwork. I am referring to the energy industry, which has been growing at a commendable pace and where several large projects are being implemented, such as the Power of Siberia gas pipeline. The construction of its eastern route was launched in 2015. Other projects concern oil deliveries via the Skovorodino-Mohe pipeline and the construction of large facilities such as the second phase of the Tianwan nuclear power station. There are also new projects to create new technology, including a wide-body aircraft and a heavy-lift helicopter, as well as several other high-tech projects.
I believe that if we work to diversify mutual trade, the goal we set ourselves several years ago will be well within our reach. I hope our countries will be acting in this spirit. That was my answer to the first part of your question.
As for Premier Li Keqiang’s visit to Russia, we very much look forward to it. It will be a traditional meeting of the Russian and Chinese heads of government, which is held alternatively in China and Russia. This time, we will host it in St Petersburg, my home town, as we agreed with Mr Li Keqiang. I hope that this time it will be not just a productive meeting but also a memorable event for our Chinese friends.
Shui Junyi (via interpreter): You mentioned the bright prospects for Russia-China trade. I hope that the St Petersburg meeting will be instrumental in achieving the stated objectives.
Fairly constructive meetings took place during the G20 summit in Hangzhou in September, where the participants discussed ways to reinvigorate international trade and investment. What do you think about the protection measures that are currently applied within the WTO? What solutions could Russia offer?
Dmitry Medvedev: The G20 countries account for about 80 percent of international trade and about 90 percent of the global GDP. In fact, the issues that the G20 members discuss are relevant for the entire global economy. Among other issues, the summit participants discussed protectionism.
Protectionism is not something new. It has always been a response to external challenges. But in the context of globalisation, protectionism is to some extent the reverse side of the globalised growth of national economies and the global economy in its entirety. As you may recall, not so long ago, there always were groups of self-proclaimed anti-globalists at the G8 and G20 summits who claimed that they were against the trend toward globalisation. We see less of that now, because there are more actual challenges to deal with, such as migration and the economic crisis. The anti-globalisation sentiment is still there nonetheless. Admittedly, it is shared not only by protestors with placards, but also a number of politicians, including members of national governments. Hence, the desire to close off markets, turn their backs on international partners and maintain, in every possible way, the status quo on their respective domestic markets.
This is not as simple as it may seem, because any national government is interested in supporting domestic producers and, in this sense, in one way or another, is forced to consider measures to protect its market. However, such measures taken by national governments in different countries should not contradict general provisions governing international trade, including the ones set forth by the World Trade Organisation.
By the way, it took us a while, just like our friends from China, to join the WTO. Remember how much time we spent in the waiting room, both Russia and China? No country spent more time waiting to be admitted to the WTO than our countries. And now they are telling us, “you know, the WTO is obsolete, it’s time to create new trade alliances.” We disagree. We must make full use of all the agreements that we reached as WTO members. Of course, the WTO has its share of problems and, probably, is not an absolutely all-purpose regulator, but that’s all we have. Any attempt to replace the WTO with some surrogates is a dangerous proposition.
Various protectionist solutions often conceal a desire to destroy the World Trade Organisation and to replace it with something else. We oppose this. We, the WTO members, should be guided by the international trade principles that are incorporated in the WTO, even if these principles are not always good for the particular situation at hand. We should share the spirit of the World Trade Organisation to make correct decisions. Therefore, it will always be fairly complicated to coordinate the interests of domestic producers while maintaining competition, but we must find the golden mean in this regard.
The Russian Federation is willing to do so. We are promoting our trade relations with all countries. With our Chinese friends, we are trying to develop extensive relations, not only bilateral, but also multilateral, given our capabilities. We will send a message to all other partners to act accordingly, rather than to sacrifice the WTO principles and modern principles of international trade just for the sake of certain political interests or programmes.
Just look at the political battles and debates in the United States and some other countries. They focus on issues such as “how do we close our market” to Chinese or other foreign-made goods. Those who adopt the toughest position often receive extra points. I think that in this regard we should try to adhere to a reasonable and balanced policy and act in a consolidated manner in order to promote the principles of international trade.
Shui Junyi (via interpreter): You mentioned the election campaign in the United States. Have you noticed that both nominees very often mention our countries, Russia and China, in their polemics?
Dmitry Medvedev: These are their domestic elections, not elections in China or Russia. In theory, they should be speaking about their domestic problems rather than resorting to some horror stories.
Shui Junyi (via interpreter): Yes. Now let’s turn to the One Belt, One Road (OBOR) initiative. You said Russia and other EAEU countries will be able to benefit from this Chinese initiative. What benefits and opportunities will they receive? And what is the plan for aligning this initiative with the EAEU?
Dmitry Medvedev: In fact, this is a continuation of the answer to the previous question because to develop our economies we should use not only bilateral opportunities but also broader integration platforms. One of such projects is designed to align the OBOR idea and concept with the EAEU.
Our presidents agreed to do this last year. Now our governments are studying ways of uniting the benefits of the two models. I think this is fairly realistic. We have common interests and common areas of work.
Thus, it is important to understand that the EAEU countries, including the Russian Federation, are enormous transit zones. The alignment of the two projects may directly lead to cargo transportation from China to Western Europe via their territory. We believe these transport corridors and their logistics are a very important and interesting area of focus. Now experts are considering quite a few bright ideas in this regard.
This is just one area. There are also others, including the use of opportunities offered by the national markets and elaboration of proposals on high technology and development of new production lines. We have many projects that we will try to carry out with our colleagues.
Therefore, I think this is a good idea that can be successfully implemented in our economies, especially now that many countries are trying to establish large economic alliances. Needless to say, we are not against them. There is nothing bad about them, but it is important to make sure that this is done on the basis of transparent rules and the WTO principles I mentioned.
I am referring to the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership Agreement. Let other countries go for such economic projects and integration, and we will develop our own integration projects. Eventually, this alignment may turn into a project of fully fledged trade and economic partnership between the People’s Republic of China and the Eurasian Economic Union with free trade areas and some other elements of economic cooperation, on which we are also working now.
Shui Junyi (via interpreter): Mr Prime Minister, this morning I had a cup of coffee at the hotel where I am staying and paid for it with a UnionPay card. I received a confirmation message on my cell phone, saying that I had paid a bill at a hotel in Russia and that the rouble equivalent of the bill was converted into Chinese yuan. I thought that this was very convenient. I am sure that you also know that there are plans for the yuan to enter the Russian market. In the context of our wide-ranging trade and economic ties, I would like you to comment on the prospects for the yuan being used on the Russian market.
Dmitry Medvedev: Everything began probably in 2008, when we, as well as our Chinese partners and other countries, were confronted with a global crisis and the question of whether the world currency system, which is based on one or maybe two currencies, could be trusted. These are primarily the dollar and partially the euro. We came to the conclusion that to ensure the smooth operation of the global economy the currency system should be based on multiple currencies. And one element of this multi-currency system, a more stable system, in my opinion, is the use of the yuan as a reserve currency. The quality of it as a reserve currency corresponds to the level of China’s economic development, and this is recognised by international financial institutions. We are pleased with this. I also have in mind, naturally, the possibility to invest a part of our reserves not only in dollar or euro instruments (securities and other financial instruments) but also in instruments denominated in the Chinese national currency. This is good because this makes the financial situation in the world more stable. This also opens new prospects for our relations. This also includes the national currency swap arrangements that exist between your National Bank and the Central Bank of the Russian Federation. Add to this the possibilities for direct settlements in national currencies, the yuan and the rouble, as well as the possibilities you just mentioned – in other words, opportunities for a great number of people to use the advantages of national payments systems, when your UnionPay card can be used to make payments in Russia.
By the way, we are currently considering ways of harmonising our national payments system and the card that we are going to issue, the Mir (World) card, on the one hand, and the UnionPay system, on the other hand. We believe that this would enhance the reliability of financial settlements. After all, what should we be guided by in building a modern financial system in China and in Russia? We should build a modern, well protected and at the same time sufficiently independent financial system that would be less exposed to political risks.
We know that in today’s world, under various circumstances, countries try to use all sorts of tools to exert political pressure. There is no hiding the fact that, for example, US financial institutions, financial authorities periodically fine European banks. They say: We will take 10 billion euros from a French bank and 7 billion euros from a German bank. Our European partners agree with that. I am not even talking about the nature of these disputes but the fact that we should protect our financial systems: the Chinese should protect their system while Russia should protect its own system. In this respect, this kind of cooperation is very useful because in this situation no one will be able to block the development of financial traffic. At any rate, this is something to look to, taking into account that at present all financial institutions are going through a new wave of development and the use of the most advanced financial technologies, including the much-touted blockchain technology and everything that is related to it, is just around the corner. If these technologies are put into financial practice then, to all appearances, many regulating tools will disappear, including those that we have actively discussed until recently and that are widely used today, for example, SWIFT notices, among other things. This is the future but we all need to prepare for this. So I believe that the use of the yuan in mutual settlements, the use of positions opened in yuan and roubles, mutual financial transaction technologies, and the use of co-branding cards – all of this is very useful for our countries.
Shui Junyi (via interpreter): Speaking about Western sanctions against Russia, you have said that this is a road to nowhere, that you cannot use the policy of force and pressure against Russia. The last time we talked the economic situation in Russia and the world was good, but since then the price of oil has plummeted. These factors affect the Russian economy. What is the situation in Russia now, considering the global financial challenges?
Dmitry Medvedev: Last time we met was in 2011, if memory serves. It was a time of economic recovery, when the global economy resumed growth, and this was also true for the Russian economy. The situation is more complicated now, for reasons that everyone knows. One of the biggest of them is low energy prices. Russia still has some problems connected with the structure of its economy. Sanctions are having an effect, too, but it should be remembered that sanctions affect both parties. Sanctions are a double-edged sword: those who adopt sanctions endanger their own businesses. I would like to remind you that sanctions were slapped on the Soviet Union about a dozen times in the 20thcentury, and they did not achieve their goals. On the contrary, in some cases they resulted in the breakthrough growth of several technologies and industries, thereby strengthening the country’s focus on certain areas.
Therefore, I view the current situation as normal on the whole. We expect this phase of GDP decline will be replaced with a growth phase as soon as this year, which is very good. We have already registered growth in a number of economic sectors and industries. In particular, our agriculture has reported unprecedented annual growth rates for the Soviet and post-Soviet periods – about 3 or even 4 percent. Russia has become the world’s largest grain exporter, and we are also making great strides in livestock production. By the way, we expect to develop full-scale trade in agricultural products with China, which is a large country and a huge market that needs a great amount of products.
Our chemical and pharmaceutical industries are developing at a fast pace, and we are also implementing several large industrial projects. Life is not without problems, of course, but I believe that the macroeconomic situation has stabilised. It is a major achievement that we have slowed the inflation rate to about 5.5 percent this year. We expect to reduce it to 4 percent next year, which will allow us to adopt a lending policy that will be easier on the business community.
This is what the situation is now. We are not overoptimistic, and we are not closing our eyes to problems, primarily structural problems in the national economy. We are set to deal with them, including in cooperation with our Chinese friends. Speaking about cooperative projects, I believe that we should join hands to develop the Russian Far East, where Chinese investors have decided to contribute to many investment projects worth tens of billions of roubles. I hope these projects will succeed; at least, the Russian Government is working towards this end, including with the help of China’s experience. We have adopted a programme of priority development areas and a corresponding law, and we have created many such areas based on the experience of other countries, including China.
Shui Junyi (via interpreter): Following the global financial crisis, certain countries, such as the United Kingdom and the United States, put forward new industrialisation concepts. Please discuss how Russia thinks about this strategy and whether there are any specific steps to promote industrialisation.
Dmitry Medvedev: As we know, the world is going through the “post-industrial” phase of development. We live in a post-industrial economy and society. Therefore, innovative ideas have come to the forefront, including the concept of re-industrialisation, or new industrialisation. We believe that this is an objective process occurring not only in the United States and Great Britain, but also China and Russia. The question is how to go about it. As you may recall, at some point our countries successfully industrialised our respective economies and took them to the next level, leaving behind backwardness. However, the world does not stand still, and economies don’t stand still either, and now it really makes sense to focus on a new phase of industrialisation. What might this mean? First, this is not the same kind of industrialisation as in the 20th century. This is industrialisation associated with the development of an innovation-driven economy and innovation-based, primarily IT-based, industries. The IT industry itself has morphed into a standalone engine of progress, an important industry in its own right. Therefore, when we say “industrialisation”, we are not talking simply about building new production plants to make machines or equipment. What we are referring to is the comprehensive development of industry and agriculture, because agriculture has also become an industry.
In order to create a new economy and take the economy to the next level, we have adopted a number of government programmes designed to expand industrial manufacturing. We have created a special industrial development fund. The total amount of funds to support the industry stands at about 200 billion roubles this year, which is a fairly significant amount for our budget. This is just state support, I am not talking about private investment now.
We have created a series of new tools, such as a special investment contract, which we offer to foreign investors as well, and provide guarantees that the terms and conditions under such a contract will remain unchanged over a long period of time. We engage in import substitution. In fact, this is also reindustrialisation, or a new wave of industrialisation, because we are forced to create production facilities which we did not have before. This is related to the sanctions and our current economic needs. New industries came to life as a result. This includes the pharmaceutical industry, a portion of the petrochemical industry, and, of course, the high-tech IT industry which I mentioned earlier. All services associated with using the IT industry and programming have, in fact, become a part of the import substitution programme and, therefore, represent a new wave in industrialising our economy.
Last but not least, we’re working every day according to the plan approved by our Government in order to stimulate additional sources of growth, to create new points of growth in our economy, and to spur our growth rates. It is important for everyone. It is important for our country, especially since we dipped into recession some time ago. It is important for the European and the US economies, which do not have high growth rates, let alone the Japanese economy. This is likewise important for the Chinese economy, which has been growing at a very fast pace in recent years but has slowed down lately as well. Everyone is following these developments closely, because the Chinese economy is a crucial factor in global economic growth. Of course, we are interested in seeing the Chinese economy grow in a predictable manner, and in this sense we are interested in working with our Chinese partners.
Shui Junyi (via interpreter): Mr Prime Minister, I know that you like the work of Lao-Tzu and his treatise Tao Te Ching. And I know that you are fond of Leo Tolstoy’s War and Peace. This has prompted my question about war and peace and the Syrian crisis. Are the Syrian crisis and the relevant US-Russian talks likely to get out of hand? What could further developments be like?
Dmitry Medvedev: The problems in our world have not changed much since the time when Lao-Tzu wrote his treatise Tao Te Ching. In fact, I always read this work with much interest, the more so that there are more than a dozen translations into Russian, as well as into other languages, and each translation differs from the other. I am sure that the modern Chinese understand Lao-Tzu’s dicta in their own way.
As for your question about the situation in Syria, the Russian Federation’s position is well known. It has been repeatedly formulated by the Russian President and, as is natural, has been translated into Russia’s foreign policy. The underlying premise is that there is no military solution to the Syrian problem. The forces that want peace in Syria should sit down at the negotiating table and come to terms on Syria’s future and the future political system. This is unrelated to the fate of individual leaders, although, of course, they cannot be dropped from the context. This is unrelated to the discussion of a personal theme connected with Bashar al-Assad, although he is the incumbent President, a legitimate President and should take part in this. The most important thing is to put peaceful settlement on track, where all constructive forces would be involved. But this is precisely where we have the main problem – how to separate those who want peace and adhere to constructive positions from openly terrorist groups. This issue is being debated, rather heatedly. We are locked in a debate with the United States and the Europeans. But the main thing is to make sure that Syria has a predictable future and can exist as a self-sufficient, independent state rather than disintegrate into a number of terrorist enclaves, something that, regrettably, has happened to Libya and some other countries in the Middle East. That is our goal. We honour our agreements with the Syrian Government to maintain the military balance and participate in a number of military operations aimed primarily at destroying the terrorist nest in Syria and at not letting the terrorist forces spread from Syria to other countries. Among other things, this is related to the fact that there are people hailing from the Russian Federation and some other post-Soviet countries that joined ISIS and a number of other terrorist groups affiliated with ISIS in Syria that are likely to come back home some time later and continue their terrorist activities. This is why President Putin has taken the decision to help the Syrian Government to bring peace to this country. We will, naturally, abide by our agreements with them but will be guided by the national interests of the Russian Federation.
Source: Russian Government
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