ST. PETERSBURG, Russia - President Vladimir Putin pledged on Friday that Russia would invest at least $43 billion to upgrade the country's roads and railways to help spur growth and leave a lasting legacy for generations.
Russia is looking at ways to boost its economy, which is expected to grow by only 2.4 per cent this year, the lowest in more than a decade.
Addressing an international economic forum on Friday, Putin said at least half of Russia's $86.7 billion so-called rainy-day fund will be used to build a new highway in the region around Moscow, put in a high-speed rail link between the capital and the city of Kazan, around 460 miles (735 kilometres) to the east, and upgrade the Trans-Siberian Railway. He did not indicate how many years the program of investments would take to complete.
The average speed of rail cargo in Russia is 30 kph (20 mph), an impediment to businesses expanding domestically and increasing their exports.
Putin said the fund, which invests Russia's oil and gas revenues, "shouldn't be spent on small things."
"These funds must work for the Russian economy and future generations," he said. "They should be invested in projects that transform the country and open new prospects for development."
Former finance minister Alexei Kudrin agreed that infrastructure projects are vital, but said he favoured financing them by bond issues rather than tapping the National Welfare Fund. Depletion of the fund, which is the backbone of pension payments, will force the government either to raise the pension age or raise taxes, Kudrin told reporters after Putin's speech.
Putin said he met with foreign investors Thursday night and was assured that Russian infrastructure projects would be attractive to investors if the government took on part of the funding and risks.
Charles Robertson, global chief economist at the Renaissance Capital investment bank, said Putin's speech showed he was embracing both German fiscal prudency and the vast investment program of China. Putin appeared at the economic forum with German Chancellor Angela Merkel and Chinese Deputy Prime Minister Zhang Gaoli.
Putin's message was "we're ready to invest, that's why China grows so well and we can afford it because we've been fiscally orthodox like Germany and can get some rewards for that," Robertson said in an interview.
Robertson conceded that many investors would be wary of investing in Russia because of the dangers of corruption in executing major infrastructure projects there. However, he added, Putin's recent anti-corruption drive and his scolding of officials for cost overruns in preparing for the Sochi Olympics offered some reassurances.
Before speaking before the forum, Putin dropped in on an oil and gas session and handed out Russia state awards to foreign executives, including the chief executives of ExxonMobil and the Italian energy company Eni.
His appearance at the session was a clear sign the Russian government still views its natural resources as the pillar of its economy despite pledges to diversify.
In his Friday speech, however, Putin was eager to show that the Kremlin was aware that the era of sky-high oil prices, which have propped up the Russian economy for more than a decade, was over.
In a much-anticipated move, Putin promised to lift Gazprom's monopoly on liquefied natural gas exports, saying that it will give Russia a chance to "use the potential of gas production in the shelf and on the coast to the full."
Igor Sechin, the chairman of state oil company Rosneft, told the RIA Novosti news agency Friday that he had asked the government to lift the monopoly in view of recent LNG export deals. Rosneft is increasingly focusing on the gas business.
Stripping Gazprom of its LNG monopoly should be followed by a similar decision regarding its natural gas exports, Kudrin said. Gazprom's monopolist market position "has been a reason behind a drop in Gazprom's efficiency," and that the monopolist model has nearly exhausted the potential for delivering growth, he said.
Kudrin, who resigned in 2011 amid a dispute with then-President Dmitry Medvedev on higher military spending, voiced a widespread concern about the Russian economy underperforming and losing a chance for robust structural reform.
"The government's current policy is slow reforms and slow improvements while the challenges and tasks ahead of us are much more difficult," Kudrin warned.
Among those unhappy with the state of the Russian economy, surprisingly, are Russia's richest men, including aluminum tycoon Oleg Deripaska.
Deripaska painted a bleak outlook at the forum.
"We've got lots of ideas and have the best people who understand the technological side of manufacturing, but to turn this into a competitive product extremely difficult without fundamental changes within the country," Deripaska said.
Deripaska said Russia's economy keeps growing because of a high consumer demand stemming from decades of Soviet frugality but fails to tap its intellectual potential. "Can Russia produce its own passenger car in the next 10 years? I can tell you: no," Deripaska said, clashing with Economic Development Andrei Belousov who referred to foreign-owned and run car assembly plants as a success story.
Without structural changes "which are much talked about but never implemented such as reforms in financial markets, reforms of the customs legislation and procedures" and unpredictable rules of doing business a headway is unlikely, he said.