Russia scolds U.S. for trying to control world markets

Medvedev Blames U.S. for Financial Crisis

By Neil Buckley and Catherine Belton
Financial Times, London
Saturday, June 7, 2008

http://www.ft.com/cms/s/0/a5e38aaa-34bf-11dd-a47c-0000779fd2ac.html

ST. PETERSBURG, Russia -- Russian president Dmitry Medvedev on Saturday blamed the United States and its banks in large part for provoking today's financial crisis -- and pushed for a role for Russia in finding a way out of the turmoil.

Mr Medvedev warned that growing "economic egoism" had contributed to global problems including rising food prices, but singled out the US for particular criticism for its role in triggering a global economic slowdown.

"Failure to take proper account of the risks by the biggest financial companies in combination with an aggressive financial policy by the world's biggest economy led not only to corporate losses," Mr Medvedev told the St Petersburg Economic Forum, a showcase for Russia's growing economic clout.

"The majority of people on the planet, unfortunately, have become poorer. And that is noticeable not only in the economies of poorly-developed countries but in the economies of the most advanced states."

The new Russian president's comments echoed in milder form and in the economic sphere the criticisms by his predecessor, Vladimir Putin, of US attempts to dominate world affairs. They were made to thousands of delegates at an event Russia has aggressively promoted in recent years to the point where it rivals the World Economic Forum in Davos in size and its pulling power for senior global executives.

Mr Medvedev said the turmoil provoked by the subprime crisis had exposed the inadequacy of US-dominated international financial institutions to regulate properly today's complex financial markets.

"The inconsistency of the USA's formal role in the world economic system with its real capabilities was one of the central reasons for the current crisis," he said. "However large the American market is and however reliable the American financial system, it is not capable of substituting for global commodity and financial markets."

Mr Medvedev added that it was an "illusion that one country, even the most powerful, can act as a global government."

Carlos Gutierrez, the US commerce secretary who spoke at the forum, said the US had not engaged in "economic egoism" and was a strong believer in free trade.

"Globalisation is in the national interest," he added.

Mr Medvedev repeated calls made by Mr Putin at the same event last year for a reform of financial institutions so they properly reflected the weight of powerful emerging markets. And he said Russia could help resolve today’s crisis, noting its recent economic history of decline in the 1990s followed by nine years of recovery meant it had largely avoided the problems of more developed economies.

He called for promotion of Moscow as a financial centre, development of the rouble as a reserve currency, and for acceptance of investment overseas by Russia's emerging corporate heavyweights. He said such investment was "neither speculative nor aggressive."

He proposed that Russia should host an international conference of heads of financial companies and leading financial analysts to tackle problems in global markets, which he suggested might become an annual event.

"Russia today is a global player," Mr Medvedev said. "And understanding our responsibility for the fate of the world, we want to take part in the formation of new rules of the game, though not because of often-cited 'imperial ambitions' but because we have the appropriate capabilities and resources."

Some executives said the forum showed Russia was once again becoming a leading economic power.

"Every time you interact with President Medvedev, you can’t help coming away with the feeling that Russia is going to play an increasingly important role as an economic and political force and as a leading nation of the world," said Muhtar Kent, president and chief operating officer of the Coca-Cola Co. Mr Kent was among about 90 chief executives who held an hour-long meeting with the Russian president on Saturday evening.

The weekend's conference in Russia's second city, however took place against the background of the bruising shareholder dispute at TNK-BP, the Anglo-Russian oil joint venture. Some foreign executives said Russia had to improve respect for the law if it wanted to increase foreign investment.

"Russia must ... improve the functioning of the judicial system," Rex Tillerson, chairman and chief executive of ExxonMobil, told a session on energy. "There is no confidence in the rule of law in Russia today. ..." Confidence "will come only with a real track record."

Tony Hayward, the BP chief executive, said Russia could see big investment if it guaranteed "respect for property rights and respect for the rule of law."

He said BP remained committed to Russia. "I am confident that [TNK-BP] has a big future ahead of it and I am confident that we will resolve our well-publicised differences with our partners," he said.

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