Dmitry Medvedev tells Davos fears for Russia’s stability are unfounded

The Russian prime minister, Dmitry Medvedev, has swatted aside warnings that his government faces a middle class revolt if it does not embrace deeper economic and political reforms.

A session on Russia at the annual World Economic Forum in Davos on Wednesday heard that the Russian Federation faces several negative scenarios, including the potential threat of civil unrest. A straw poll of WEF associates in the audience found nearly 80% saw better governance as Russia’s biggest challenge.

But the warning was dismissed by Medvedev, who was in the audience and tried to reassure Davos that Russia was on the right path and was a good place to invest.

Alexey Kudrin, a professor at Saint Petersburg State University, said there were “serious, negative” warnings coming from Russia’s business community. He outlined a scenario in which falling oil prices send Russia’s budget forecasts off track, forcing the government to hike taxes and slash spending on social programmes, and freezing reform efforts.

Russia should reform itself now, Kudrin argued, to negate the impact. “Failure to make reforms will eventually mean a burden on businesses through higher taxes, and also hit small businesses and the middle classes. That leads to the stagnation of the Russian economy.”

Sergei Guriev, the rector of the New Economic School, warned that high oil prices could equally lead Russia into a deeper mess, as those in power would be too complacent to maintain reforms. “That is not sustainable in the long term, as Russia’s middle classes will demand reforms. They are too well-educated and too determined to enjoy increases in their quality of life [not to protest]”, said Guriev. “They will demand that the Russian government is less corrupt, and more accessible.”

With Vladimir Putin not present, Medvedev sat through the arguments before delivering his own address in which he told the WEF delegates they were wrong as meaningful reforms were already in hand. He also insisted that the gloomy visions outlined by Guriev and Kudrin would not come to pass, pointing to new funds and development agencies designed to stimulate economic growth and a stronger private sector in Russia.

Russia, Medvedev insisted, was “ready to be partners” with global investors, and was “an open country” whatever its critics claimed. Current oil prices are roughly optimum, he added. Higher prices would not be welcome as it would hit global demand.

From the audience, Russian businessman Oleg Deripaska called for the country’s interest rates – currently as high as 8.25% – to be lowered. “Our high interest rates will hamper economic growth, not just for banks but for small firms too.”

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