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After seven years, Wall Street Journal notices GATA

Section: Daily Dispatches

From RIA Novosti
Wednesday, May 5, 2006

MOSCOW -- Russian President Vladimir Putin called Wednesday for work
on making the national currency convertible to be completed, oil and
gas to be traded in rubles on a domestic exchange, and an innovation-
based economy.

In his annual state of the nation address before both houses of
parliament, ministers and reporters, the president also said human
rights and freedoms had to be upheld to ensure economic growth and
corruption had to be eradicated for the good of the nation.

Putin said work on making the national currency fully convertible
should be completed by July 1, almost six months ahead of the
original January 1, 2007 deadline.

"In my address of 2003, I set the goal of making the ruble
convertible," Putin said. "I must say the [outlined] plans are being

In an effort to promote the national currency, the president called
for the establishment of a ruble-denominated oil and natural gas
stock exchange in Russia.

"The ruble must become a more widespread means of international
transactions. To this end, we need to open a stock exchange in
Russia to trade in oil, gas, and other goods to be paid for in
rubles," he said.

"Our goods are traded on global markets. Why are not they traded in
Russia?" Putin said.

Putin also cited stronger property rights, human rights and freedoms
in the country as the key to doubling gross domestic product, an
objective he first set to be accomplished within a decade in his
2003 address.

Putin said this would be impossible without economic growth of over
7%, which, he said had been achieved in the past three years.

However, he warned that growth could slow if macroeconomic
indicators were attained without economic freedoms, equal
competition, and consolidated property rights.

"I am convinced that no important goal can be achieved in a country
without ensuring human rights and freedoms, effective state
organization, democracy and civil society," said Putin, who some
rights activists have criticized for his approach to democracy.

Putin praised the government for seeking to provide an innovation
basis for the economy, reorienting it from the current commodity
bias that has led to billions of petrodollars flowing into the

"We have already started altering the structure of the economy and
making it oriented to innovations," Putin said. "I think the
government's policy in this area is correct."

However, the president called for government investment and
efficient spending as part of a responsible economic policy that had
been selected five years ago.

With the country embarking projects to set up technoparks and
special industrial zones, the president also said investment in
production infrastructure and innovations had to be encouraged.

"We have to work hard to stimulate investment in production
infrastructure and innovation," Putin said, adding that one way to
encourage investment in innovative research was through the
introduction of tax breaks.

But Putin continued that most equipment used by Russian industry was
dramatically inferior to modern levels as it dated back to the
Soviet era.

"Yes, we know that our industry, our economy was built back in
Soviet times, but it is no good," he said. "We must change the
situation, encourage investment in production infrastructure and
innovation, while preserving financial stability."

The president said Russia had to make substantial progress in such
high-tech areas as modern energy, communications, space, aircraft
building, and become a leading exporter of intellectual services.

In this context, Putin ordered the government to intensify work to
create aircraft- and shipbuilding holdings in Russia in a bid to
improve their competitiveness.

"The restructuring of such crucial industries like aircraft- and
shipbuilding has been under consideration for an unjustifiably long
time," he said. "The government must intensify work and at last
accomplish the objective of establishing the holdings."

He also urged the government and financial institutions to support
purchases of technological equipment abroad, and defend intellectual
property rights.

But Putin said corruption remained a major problem that stood in the
way of Russia's economic prosperity.

"We have still not managed to eradicate corruption, which is the
most serious obstacle to the country's development," he said.

He said the government must fight all attempts by state bodies and
business to profit personally at the expense of common good.

"We will continue trying to raise the prestige of civil service and
support private business," he said. "But the government will not sit
by and watch how they jointly benefit using special [friendly]
relations with each other."


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