July 12, 2010 / 11:44 AM / 7 years ago

Kremlin seeks investment alliances with U.S., EU

<p>Russian President Dmitry Medvedev addresses Russian ambassadors at the Foreign Ministry headquarters in Moscow, July 12, 2010. REUTERS/Pool/Sergey Ponomarev</p>

MOSCOW (Reuters) - President Dmitry Medvedev called on Monday for alliances with the United States and European Union in a new Kremlin strategy aimed at attracting investment to Russia’s resource dependent economy.

Signs of a warmer foreign policy toward the West have been growing since the global financial crisis exposed the weakness of Russia’s dependence on oil, gas and metals exports and the need for massive investment in aging Soviet infrastructure.

“We need special alliances for modernization... first of all with Germany, France, Italy, the EU in general, and with the United States,” Medvedev said in a speech to Russian ambassadors.

“The foreign policy of our country... pursues one sole aim: to promote the growth of our citizens’ prosperity in every way possible,” he said.

Since replacing Vladimir Putin as president in 2008, Medvedev has toned down Cold War-style attacks on the West which were the hallmark of Putin’s presidency.

Medvedev’s key foreign policy success has been to improve relations with the United States as part of President Barack Obama effort to “reset” ties which fell to a post-Cold War low during Russia’s 2008 war with U.S. ally Georgia.

The Kremlin chief mixed his call for an alliance with a warning that Iran was moving closer to getting nuclear weapons, the Kremlin’s first such outright warning that the Islamic Republic may be seeking to build an atomic bomb.

“Iran is moving closer to possessing the potential which in principle could be used for the creation of nuclear weapons,” Medvedev said in a speech at the Foreign Ministry.

Iran denies it is trying to make nuclear weapons and says it has a right to nuclear power.

ALLIANCES FOR INVESTMENT

Medvedev is trying to re-brand Russia after the crisis revealed the weakness of an economic model based on exports of natural resources and high corporate borrowing abroad, diplomats said.

His plan, Russian officials say, is to attract at least some of the trillions of dollars in investment that Moscow says it needs for upgrading infrastructure ranging from roads and pipelines to oil fields and hospitals.

Foreign investment remains comparatively small at $265.8 billion since the 1991 collapse of the Soviet Union, and investors complain of rampant corruption, poor property rights, crooked judges and stifling red tape.

“We believe in the triumph of law and that we can stamp out corruption... for the success of modernization,” Medvedev said.

Investors said a genuine change in policy could clean up Russia’s image as a speculative boom-bust economy where the giant potential rewards of putting money into Russia are checked by an array of risks including the expropriation of property.

But critics say Medvedev remains the junior partner to Putin, who is prime minister and leader of the biggest political party in a system which is unwilling to change.

“The Russian establishment sees no systemic change as a key precondition of the country’s modernization,” said Fyodor Lukyanov, editor of the journal “Russia in Global Affairs.”

“This is mutually beneficial cooperation based on borrowing some projects from the West which look interesting to Russia and doing them with the support of the EU and the U.S., and this can be done without any significant change in foreign policy.”

Writing by Alexei Anishchuk; Editing by David Stamp

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