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On the eve of the St. Petersburg Economic Forum on Juneï¿½4 and as North Korea reportedly moved closer to testing an intercontinental ballistic missile, I had an extensive interview with Dmitry Medvedev. The Russian President spoke forcefully about Pyongyang's recent nuclear and short-range missile tests; plainly addressed Russia's economic woes and the need for structural reform; and said it is a top priority to reassure foreign investors that they will be treated fairly by the legal system. Clearly Medvedev, a protÉgÉ of former President [and now Prime Minister] Vladimir Putin, is coming into his own as a world leader.
What is your reaction to North Korea's recent actions?
This is by no means an economic topic, is it? But it is, unfortunately, by no means less topical. What has happened is very tragic and pitiful indeed. We were working through a consolidated international effort to help North Korea get out of its very difficult economic situation so that the nuclear program that it is implementing would be peaceful in its essence and would not create any harm to adjacent countries. But we have to admit that North Korea is not only close to South Korea and Japan, it is close to us also. We have always had good relations with the North Korean leadership. But what has happened raises great alarm and concern. I have had quite a number of telephone talks with the Prime Minister of Japan and the President of South Korea. We need to think about some measures to deter those programs that are being conducted. We hope the North Korean leadership will get back to the negotiating table, because there is no other solution to this problem. The world is so tiny—as we see from the economic problems common to all of us. But indeed, WMD development or [nuclear] proliferation is a danger that is even higher than that. I'm prepared to discuss this matter in more detail during our meeting with President Obama in Moscow in early July. And we're going to discuss this in other forums also.
We just saw a sharp contraction in Russia's GDP. What is the state of your economy?
Our economy has indeed suffered from the international financial crisis. The slowdown in GDP will be six or even six-plus percentage points. At the same time, we cannot [help] but mention some other alarming points such as the growing number of unemployed persons. There are about 2.2ï¿½million registered unemployed. But in fact this [number] is higher because some people simply did not get registered. It is no secret that the Russian economy has always been export-oriented, and this has caused difficulty because the prices of oil and natural gas have changed. To a certain extent, we are now hostages of the structure of the economy.
What is your reaction to the uptick in the price of oil? Is it sustainable?
I closely follow oil prices, and we now are between $60 and $70 per barrel. These are the prices of 2006. And at that time we thought the prices were very high. Today I believe these prices are fair, bearing in mind that when the crisis peaked last year, oil hit almost $150 a barrel. What are the reasons for the current price growth? The optimists think it reflects fundamental changes in the world economy. The support programs launched by the U.S., Europe, China, and Russia are finally showing results, and the [global] economy is recovering. But the pessimists believe the current growth in prices is just a random event. To a certain degree, it is a result of the support programs, but a new wave of depression will hit us soon, the prices of oil and gas will go down, and the [global] economy will continue spiraling down as well. I would like to believe that the positive changes in oil and gas prices [show] our efforts are at last bearing fruit. And what is happening in our country gives me reason to believe and to be moderately optimistic.
After this economic slowdown, will you deploy Russia's oil riches differently?
I have to say that this crisis is not only a dramatic event in our lives but it also is a chance destiny gave us to change the outdated and obsolete structure of our economy. It's [too] dependent on raw materials. It neglects innovation to a large extent. Extra revenues from the export of raw materials should be used to support social programs and to radically change the structure of our economy. They should be invested not only in the expansion of our oil-producing sector but into related areas such as petrochemistry, and most important, into new technologies, biotechnologies, and energy efficiencies.
The Yukos story, the TNK-BP story, and Shell (RDSA) being forced to sell a 51% stake in its Russian operations to Gazprom have all caught the world's attention. Will foreign capital be protected? Is it welcome?
I have quite a different point of view [of] what happened. I don't think that the companies you mentioned sold 51% of their shares under pressure or under threats. Nothing like that happened. But if we speak about the investment climate in general, then of course our legislation governing such investments should be further improved. We have walked quite a path already modernizing it. But there's a lot of room for improvement. We now have legislation that treats foreign investments as if they were domestic investments, so investors have equal rights in our markets. But I'm not happy about the protection of investments by the courts. Legal reform in Russia is a must. And I keep track of it daily.
Maria Bartiromo is the anchor of CNBC's Closing Bell.