Russia can avoid crisis, emerge stronger: Medvedev

Russian President Dmitry Medvedev attends a wreath laying ceremony at the Tsitsernakaberd memorial in Yerevan October 21, 2008. Russia said on Tuesday it hoped to bring together leaders of Armenia and Azerbaijan to discuss their dispute over breakaway Nagorno-Karabakh, as Moscow vies with the West for influence in the Caucasus region.

MOSCOW (Reuters) - Russia may avoid a full-scale crisis despite global financial turmoil and can emerge from it with a more effective economy, President Dmitry Medvedev said on Thursday.

"We have a chance to avoid banking, forex or debt crisis and go through today's difficulties without losing the potential we have created," Medvedev said in a video blog posted on his official website www.kremlin.ru

Russian markets have plunged more than 70 percent since their peak in May amid capital flight and liquidity problems, fuelling fears of a financial crunch spreading into sectors of the wider economy.

The rouble collapsed during a 1998 economic crisis but a devaluation coupled with high international oil prices helped the economy recover.

The government says Russia, which has piled hundreds of billions of dollars in reserves during eight years of economic boom and has healthy fundamentals, can weather the storm.

The cabinet has come out with a rescue package topping $200 billion in credits for banks and companies and in tax benefits.

But avoiding panic and maintaining trust in the government remains a top priority in the country, where the 1998 crisis triggered public discontent and led to a political crisis.

Medvedev, dressed in a suit and white shirt but tieless, was calm and confident in a 6-minute address telling Russians that the financial squeezes would not affect the real economy and their jobs.

"Russia has not yet got into this difficult situation. It has chances to avoid this. It must avoid this," he said.

Medvedev said the government would support the banking sector and six key sectors of the economy -- retail, agriculture, construction, machine-building, the defense industry and small businesses.

NEW CHANCE

Critics say the global crisis accompanied by a fall in energy and commodity prices will bring an end to Russia's prosperity, which has revived Moscow's ambitions of becoming one of the leading global economies and a key global political player.

On the contrary, Medvedev said the global crisis gave Russia an chance to modernize its economy and have a stronger international role.

He said the consolidation of assets of Russian companies would make them more competitive and promised a government support and funds to support that process.

He said the crisis would make financial organizations more effective and attractive for investors.

Medvedev said Russian companies would also have to improve their production and management structures "so their effectiveness and productivity will rise to the level which will allow them to compete with most successful foreign companies."

Medvedev said the crisis, which had shown the ineffectiveness of the global economic infrastructure, would allow Russia to have a stronger say in shaping a new order.

"We must actively take part in working out the new rules of the game," Medvedev said.

He confirmed he was planning to attend the summit of the Group of 20 industrialized and developing nations in Washington on November 15.

In a separate gesture intended to show that the Kremlin sees the current economic turmoil as a hurdle rather than a fatal threat, Medvedev's press secretary said the crisis would not top his state of the nation address.

"The issue of overcoming the consequences of the global financial crisis will not be the main theme of the presidential address," Natalya Timakova said. "It will traditionally touch upon basic issues of domestic and foreign policy."

Timakova said Medvedev, who took office in May, would deliver his first address to parliament soon but did not specify when.

(Writing by Oleg Shchedrov; Editing by Richard Williams)