Russia needs to modernize its economy, Medvedev warns

In an unusually blunt appraisal of the state of his nation, Medvedev also warned that Russia has been hit harder than most by the global economic crisis and needs to undertake sweeping changes to build a modern, high-tech economy if it is to remain a world power.

“Our relations with other countries should be focused on the task of modernizing Russia,’’ Medvedev said during a 100-minute televised address. “We mustn’t, as they say, puff out our chests. We are interested in the flow of capital, new technologies, and modern ideas.’’

Medvedev avoided directly criticizing his patron and predecessor, Prime Minister Vladimir Putin, who sat without smiling in the audience of lawmakers and other officials at the Kremlin. But the speech represented a subtle rebuke of Putin’s legacy. In his most stinging remarks, Medvedev said the country had been “kept afloat’’ by Soviet-era achievements, without mentioning Putin’s eight years as president.

“The nation’s prestige and prosperity cannot be upheld forever by the achievements of the past,’’ he said, citing Russia’s nuclear arsenal, oil and gas production, and industrial infrastructure. “This was all largely built by Soviet specialists. In other words, we didn’t create them. We have to admit that in previous years we failed to do enough to solve problems inherited from the past. We have failed so far to dismiss the economy’s primitive structure, the humiliating dependence on raw materials, and to reorient production to people’s real needs.’’

High energy prices have lulled the country into a dangerous complacency, creating the illusion that structural changes could wait, Medvedev said. He said Russia needed to focus on innovation in agriculture, in pharmaceuticals, and in nuclear energy - and perhaps attempt flights to other planets.

Since taking office as Putin’s hand-picked successor last year, Medvedev has often outlined ambitious plans for reform, but he has yet to make significant changes. In recent months, though, he has stepped up efforts to set himself apart from Putin, who remains Russia’s most powerful politician.

Although Putin promoted a prickly foreign policy aimed at restoring Moscow’s clout in the world, especially in the former Eastern bloc, Medvedev said yesterday that Russia should avoid “chaotic actions driven by nostalgia and prejudice.’’

Instead, he said, Russian foreign policy should be judged by a simple criterion: Does it improve living standards in our country?

Although Putin presided over a steady expansion of the state’s role in the economy - it accounts for as much as half of Russia’s gross domestic product - Medvedev said the government needed to step back. He singled out the giant state corporations established under Putin, saying they had no future and should be audited, dismantled, and privatized.