Tycoon rails against Russia's "permanent crisis"

Russia can only overcome a 'permanent crisis' of aging infrastructure and rampant corruption with a major Kremlin-backed reform program, billionaire businessman Alexander Lebedev said on Monday.

Lebedev, an outspoken former KGB spy who made a fortune in banking, said the crisis had wiped the mirage that blinded many investors to Russia's true problems -- which he said were now more acute than during the 1991 fall of the Soviet Union.

As such he called for radical reforms to be made to tackle high-level corruption and red tape which he said was holding back growth and hurting Russia's investment climate.

"Our crisis is ongoing and permanent," Lebedev told the Reuters Russia Investment Summit.

"Our crisis is really the massive task of modernization, of structural reforms, the renewal of the infrastructure and the creation of a real market economy," he said.

"Our crisis is ancient infrastructure which is 50 to 60 years old; roads, bridges, electricity stations and the aging way in which society is structured and the kleptocracy," he said.

The comments echo criticisms made by President Dmitry Medvedev last week who lamented the economy's reliance on raw materials and the corruption which pervades all walks of Russian life.

Officials say the crisis, which has pushed Russia's economy into the deepest recession since the mid-1990s, has shown the vulnerability of a model of development highly dependent on exports of oil, gas and commodities.

Lebedev said he had clocked up about $500 million in paper losses since the start of the crisis, though he said a rise in Russian share prices meant his real losses would be close to zero.

"SCRAP THIS ECONOMY"

Russian officials admit aging Soviet-era infrastructure -- some dating back to the time of dictator Josef Stalin -- will need trillions of dollars in investment to upgrade.

An accident at the Sayano-Shushenskaya hydroelectric power station last month has underlined those concerns.

Lebedev said the economy needed a complete overhaul with foreign technology and laughed off Russia's Sukhoi Superjet project, the first Russian passenger jet since the fall of the Soviet Union, as prohibitively expensive.

"I don't think we can, with the technological and production base we have in the country, do anything at all based on our own resources," he said.

"We need to completely scrap this economy and build a new one relying on foreign technology. Look around we are not producing anything."  

He said he had been plagued by poor managers and corrupt officials in his investments, which range from building development and banking to airlines and potato farming.

The Kremlin should push through judicial and electoral reform and allow bigger media and parliamentary scrutiny of corrupt officials, Lebedev said.

"The investment climate is simply terrible," he said. "I simply cannot cope with this Russian bureaucracy."

When asked if he feared falling foul of the Kremlin, he said that he had received threats from low level officials after criticism of the authorities but that he was not afraid.

"You do what you do and what happens happens," he said.