Putin says Russia is not building 'state capitalism'

MOSCOW - Russia is not going to build state capitalism with giant government-controlled corporations holding sway over the economy, President Vladimir Putin said on Tuesday.

"State corporations should not monopolise Russia," said Putin after his ally and anointed successor Dmitry Medvedev proposed that he becomes prime minister after a presidential election next March.

Taken together with comments by Medvedev, Putin's remarks suggested that Russia's future leadership will continue to modernise the economy while seeking to ensure that fast economic growth does not exacerbate social strains.

Putin told Russia's Chamber of Commerce that the government had created state corporations such as the Bank of Development or Housing Reform Fund only in areas where private entrepreneurs were reluctant to invest.

This year, Russia handed billion of dollars to state corporations created in areas ranging from construction work ahead of the 2014 Olympic Games in the Black Sea resort of Sochi to aviation and shipbuilding.

Putin did not mention state-controlled energy companies like gas export monopoly Gazprom or oil firm Rosneft, which dominate Russia's natural resources sector and have been aggressively seeking new acquisitions.

"We are not planning to keep state corporations in their present form. After these corporations stand on their own two feet, they I think it will be right for them to work in market conditions," Putin said.

"We need to make sure they don't strangle other businesses."

He said Russia will stick to its policy of stashing oil and gas windfall for a rainy day in its $144 billion budget stabilisation fund but will use some of the cash for pensions and innovative projects. He did not elaborate.

"We cannot allow the population to be robbed as a result of oil price fluctuations," said Putin. He confirmed plans to split the stabilisation fund into two sub-funds next year.

Putin said the $19 billion (9.3 billion pounds) National Wealth Fund, the growth oriented sub-fund, may also be used to finance the pension system and innovative projects through the development institutions.