UPDATE 2-Medvedev: Russia not in crisis, calls for liquidity

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By Oleg Shchedrov

MOSCOW, Sept 15 (Reuters) - President Dmitry Medvedev on Monday promised extra liquidity to heal falling Russian stock market, but denied Russia was in crisis or nearing it.

Medvedev told top businessmen that his economic reform plans were not affected by economic woes and war in Georgia, but urged them to use the opportunity and grab a larger share of domestic markets to reduce their volatility.

"Despite all the global economic problems there are today, the situation in our economy is on the whole completely stable," he said. "We definitely have no crisis or pre-crisis situation."

A series of corporate disputes and a global credit crunch have rocked investor confidence in Russia, prompting a sharp sell-off in stocks, bonds and the rouble as money fled Russia.

A brief war with Georgia, in which Russia found itself in an international isolation facing the possibility of Western sanctions, has added to Russia's economic woes.

As Medvedev addressed four dozen of Russia's richest men in a gilded Kremlin hall, markets plunged to the lowest level in over two years, driven down by the bankruptcy of U.S. investment bank Lehman Brothers and falling oil prices.

Russia's RTS index was down over 7 percent at one point at 1,245.82 points.

"The task of the government at the present time is to ensure sufficient liquidity in the domestic market. This problem ... needs to be removed," Medvedev told his guests, summoned to discuss Russia's economic strategy.

Russian markets have lost around 50 percent of their record value since Medvedev, a 43-year-old former corporate lawyer, took office in May promising to modernise the economy and offer a fair plan for local and foreign investors.

Medvedev said the market downturn and new rifts with the West after the Georgia war have not changed his reform agenda or his commitment to keep Russia part of a global economy.

"I know you are concerned by the question of how our economic ties with the European countries, the United States will develop," he said. "I have already said this: we will do everything to continue mutually beneficial cooperation."

"If they try to stop us accessing certain markets ... there will be no catastrophe for the state of for those sitting here," he added. "To some degree, this will only encourage the development of the domestic market."

NO CHANGE IN STRATEGY

Medvedev also ruled out that the looming political confrontation with the West will lead to Russia's self-isolation or change the essence of its market economy.

"Despite what happened in August ... despite the military solution, nothing in the principles of economic policy will be changed," he said. "There should not be a change in priorities. We do not need militarisation of the economy or a statist economy."

"Let no one hope for a change," Medvedev added clearly addressing his remark to opponents at home as well.

The participants of the meeting discussed at large a series of moves, which could help Russian markets recover and give domestic companies cash to upgrade and diversify their business.

Ahead of the meeting, the businessmen said they wanted to discuss with Medvedev easing taxes. But there have been disagreements between various financial and industrial lobbies.

Medvedev also said Russia should learn lessons from both the Georgia war and its latest economic problems.

"Our presence in the domestic stock market is still too small: I mean state financial institutions, private insurance companies and pension companies," he said. "These are exactly the players who stabilise situations on the financial markets elsewhere in the world."

Medvedev promised to push ahead with plans for legislation to reduce red tape and corruption in Russia, reform the courts and encourage small and medium sized businesses.

"We should create conditions for a new investment wave," he said. "We will count first and foremost on the Russian investors, although will welcome foreigners as well." (Editing by Richard Balmforth)