“It looks like businessmen will soon have to pay every time a civil servant sneezes,” he said.

“Experts say money spent by businessmen on overcoming red tape takes up a considerable part of (businesses’) annual revenues. Straightforward extortion of money also exists, and that is simply disgusting,” Medvedev told officials at Zvenigorod outside Moscow.

Russia needs to move away from its over-reliance on its export of oil, gas and minerals and its heavy industry and build more small and mediumsized businesses which will help it to weather the financial crisis.

Medvedev hopes to grow small businesses’ share in the Russian gross domestic product from the current 20 per cent to 50 per cent. It seems an ambitious plan, given the rampant existence of red tape and corruption, which hit small businesses the hardest.

Unemployment has risen sharply for the first time in a decade because of the collapse of energy prices in the second half of last year and the global slowdown. This has made Kremlin sit up and take stock of the social unrest beginning to form in hard-hit industrial centers.

Medvedev has put a stop to the practice of random inspections of small businesses by agencies such as firefighters, hygiene inspectors, or police. These inspections are often nothing but opportunities for officials to extorting bribes from businessmen.

In the free and easy days of the 1990’s it was estimated by small business consultants that even with the red tape small businesses once operating could yield a 40% profit on investment. However experts say the situation has got worse not better under Putin and the number of small businesses is shrinking.

According to the State Statistics Service, Russia lost 200,000 jobs in April, notching up unemployment up to 7.7 million, or 10.2 per cent of the work force. But Prime Minister Vladimir Putin is confident his job stimulus program will set things right soon.

One of the solutions offered by his 4-part regional stimulus program is to help 56,000 unemployed workers open small businesses. It seems to have found many takers, with 4,000 of Tatarstan’s 61,000 unemployed workers showing interest and 713 already registering new businesses.

Funded federally, the program gives unemployed workers a one-year advance on their unemployment checks worth 58,800 rubles ($1,840) with a rider that they use the money to open a business.