Vladimir Putin's speech:
Good afternoon ladies and gentlemen, Mr Kilz, participants and guests of the forum.
This is the first time a Russian prime minister is attending this impressive forum, organised by the newspaper Sueddeutsche Zeitung. I would like to thank all of you for inviting me to speak here today.
It would be logical to say a few words about this period in time, about the problems we currently face, about the global crisis and the lessons we learned from the dramatic events we went through in the last two years. We were all in a rather difficult situation, and we all, of course, thought of how to deal with the problems we confronted. We formulated and implemented many important projects together, and now we should evaluate their success.
We must not underestimate the seriousness of the problems we face. The crisis was not just a business contraction in some sectors and some countries: it was structural. Like the governments of other countries, the Russian government launched an anti-crisis programme and provided support for the financial system and the real economy. Many of the people here today probably know all about it. When we did this, when we invested big money in the country's financial system, for example, in order to support Tier 1 capital and provide liquidity for financial institutions, we did not distinguish between Russian financial institutions and financial institutions with a foreign capital.
We provided equal support for all institutions. The same cannot be said about some of our partner-countries, who did not provide any assistance to our financial institutions as part of their anti-crisis efforts; they were denied aid, in fact. However, I want to stress the fact that serious work has been done and, on the whole, it was positive.
We resisted the temptation of simple solutions. It was important to ensure that there was still space in the economy for entrepreneurship, to avoid a government takeover of the economy. We did not feel this temptation, and oddly enough, businesses inquired about it. Businesses were ready to sell themselves entirely to the state, to hand all the responsibility over to the state, but again we resisted the temptation and supported the economy.
Budget support for private companies, as a rule, was given in exchange for promises to modernise and boost efficiency.
We did not curtail key reforms as we carried out our anti-crisis programme. For example, the first law to boost energy efficiency in the economy was passed, and there were substantial amendments made to anti-monopoly legislation.
The anti-crisis measures brought results. The decline in Russia's gross domestic product lasted for just three quarters – until mid-2009. It has been gradually and stably growing since that time. Our economy is now recovering. As you all know, the same can be said for the Federal Republic of Germany and other European countries. I believe this year our economy will grow by a little over 4 percent.
Still, the world has not recovered from the crisis in full, and the systemic problems that caused it remain unresolved. Therefore, a thorough analysis of what happened is called for.
One of the main lessons we learned is that our efforts to counteract the worst stages of a crisis must not be limited to addressing current issues alone; we must not forget about long-term goals, and we must not sacrifice our development principles and interests, or the social standards that have been achieved. We have seen how people react to cuts in social benefits brought about by dire economic times in many countries, including European ones. Countries get caught in a downward spiral, and it is difficult to extricate oneself from it. Problems cannot be resolved by retreating, for example by cutting your country off from the advantages of global finance and trade. Of course, a number of protection measures were implemented in various countries, including Russia. This is true. Still, the fact is that the Russian economy opened up even more during the crisis, if you look at the figures. The Russian government sought to maintain the openness of the economy and did so, on the whole. We showed that we are prepared to continue cooperating with our international partners.
It is telling that the majority of German companies that conduct business in Russia have continued working in our country; moreover, they implemented large-scale investment plans during the crisis. For example, Volkswagen Group expanded car production to reach targets set before the crisis. We welcome this approach to business and will support it in every way possible.
There is one more point I would like to make on this note: the crisis has reminded us that each national economy depends on global markets and on the policies of other countries.
This needs to be said directly, and it has, in fact, been widely discussed in the German media, in Europe and Russia: I must say that neither Germany nor Russia is responsible for the global financial and economic crisis. Russia’s government debt is moderate, and other macroeconomic indicators are good enough. Yet, Russia’s economy was seriously affected by the shrinking demand for our traditional exports. Moreover, Russia has suffered a double blow as its export market contracted and the prices of its traditional exports slumped.
The international community is now trying to decide on some common rules of the game or work out new rules that would prevent imbalances and market bubbles in the future. This is certainly very important and useful work, but we should work more vigorously at the regional level at the same time. In Europe, where neighbouring economies are much more interconnected and interdependent, a regional format could help work out tougher and often more binding rules. This will make it easier to ensure mutual trust and oversight, which will result in greater stability.
And finally, it has become clear that Europe has been losing its position as a major industrial centre over the past decades. One could argue, of course, that relocating industrial production facilities to emerging economies is a logical and predictable process. Even if this is so, where does this logic come from? And in any case, there should be some reasonable limits on this process. There should be a line we should not cross unless we want engineering and R&D companies to leave Europe as well, following their industrial counterparts. This would significantly reduce the demand for qualified engineers and designers and, consequently, for higher education in these fields.
Therefore, I believe that a sense of social responsibility on the part of businesses is a highly important factor contributing to balance in any society, Russian society included. Improving people’s living standards and their welfare is every government’s priority and ultimate mission. This noble goal can only be attained through effective industry in an effective economy. Therefore, the economy should not be burdened with unnecessary obligations; on the contrary, it needs incentives and a favourable environment to become competitive.
I can assure you that we have learnt this lesson as far back as in the Soviet era. I have no intention of exaggerating or dramatising the situation, but you must have grasped my message: my concern is to preserve Europe’s traditional business profile, its leading role in the international division of labour and its key asset – its unique human capital.
Colleagues,
An analysis of the lessons of the crisis shows that we can only cope with systemic problems together. Putting this thesis in the Russian-German context, it is clear that it is extremely important for us to have truly full-scale economic and technological cooperation between our countries.
What does Russia have to offer our German partners, and what do we expect from our friends? I would like to remind you – those who work in Russia and those who study Russia undoubtedly know some figures, but here is one (it may not be astronomical, but still): Russia's GDP is 1 trillion euro and is growing by 50-70 billion euro every year (and this is what's most important, every year). The Russian government is consistently implementing its plans to modernise the economy and create a friendly business environment. We are working to eliminate all sorts of bureaucratic barriers in the constructions sector, in industry, in agriculture and in the social sphere as well.
Recently, the rules for bringing highly skilled foreign specialists to Russia were drastically simplified. Work permits are issued promptly, and there are no quotas. Foreign investors have to seek permission only when they buy shares in enterprises in strategic sectors of the economy. And the procedure of issuing permits will be simplified in the coming months.
Investing in sectors that are not classified as strategic does not require any permits. We are also working actively to make Russian regions more investment-friendly: we are applying principles and approaches that include the creation of special economic zones in the country's regions, and we are setting up industrial parks and addressing the problems of logistics and infrastructure.
Owing to its natural advantages, Russia could become a full-scale partner to Germany. We are talking about getting as much of our industry as possible involved in production chains together with the real sector of the German economy.
We can form stable cooperation in the mechanical engineering industry, pharmaceuticals, the production of medical equipment, building materials, the food industry and many other sectors.
Of course, achieving this will require bottom-up modernisation of many Russian enterprises or the construction of new, competitive ones. Therefore, we hope that modern technologies will come to our country along with foreign orders and investments.
Russian businessmen are also ready to invest their capital in the German industry. But let me be frank: this is often difficult to do, and for reasons that we cannot understand. What is happening? European industrial companies, faced with high costs in the eurozone, sometimes seek to move their production abroad. But when, say, Russian capital is trying to enter European business, it is simply denied entry in the European market. This despite the fact that the Europeans are very interested in it from the economic and even social points of view. I could cite many examples of Russian businesses that have tried to buy into European companies only to be met with politically and economically motivated resistance. Incidentally, Mr Scheffer, a member of the editorial board of Sueddeutsche Zeitung, has written about it in an introduction to my article, which was recently published in that newspaper. I read it just this morning. I appreciate his position. It is absolutely correct, and I am convinced that often the situation I am referring to harms not only potential investors from Russia, but the interests of European business too.
Let us recall the much-publicised Opel affair. Is that concern better off after a deal that had practically been sealed and was then called off? I think not. There have been no fundamental changes for the better there. But I hope there will be. We want it to happen. We have good relations with Opel, and we have good relations with GM, thank God. But it is unfortunate that the deal has been disrupted.
I should also mention some cases involving our companies. Severstal, which has done a great deal to acquire another major company, I think it is called Arcelor, it's located in Luxembourg – the deal was also blocked. Surgutneftegaz, a major Russian private oil company, bought a 20% stake in the Hungarian company MOL. Every trick in the book is being used to freeze out its representatives, to keep them out of the governing bodies in violation of all laws and rules. Another Russian private company, Renova, bought high-tech production facility in Switzerland that produces solar panels, only to find itself dragged to court after court. It appears they have settled the matter at last.
But one cannot work like that. And there are some other negative examples in Germany – in the telecom industry and the microelectronics industry.
On the positive side of the ledger, we are cooperating in the transport industry. We are doing some good work to develop high-speed railway links in Russia. We expect the companies Russian Railways and Deutsche Bahn to successfully implement their projects to create new logistical complexes and upgrade the quality of freight handling.
Another priority in our cooperation is creating a common energy space, which is key to any economy. Why is this so important? This not only about basic energy security. Extractable energy resources and leadership in energy efficiency will help improve our competitiveness on global markets.
The big Russian-German energy projects are well known. They are Nord Stream, the asset swap between Gazprom and the German companies E.ON and BASF, broad participation of German investors in the Russian electric power industry, joint construction of nuclear power facilities, including in third countries. These are large-scale projects involving hundreds of millions of euros and dollars in each case and sometimes billions in the electric energy field.
The Russian-German Energy Agency was established in October 2009. It has already come up with a package of projects to introduce energy efficient technologies in the housing sector, in the power industry, and in transport.
I would like to reiterate today that Russia is not opposed to developing new rules and promoting competition in the energy sphere. We recently carried out a sweeping reform of our electric power sector. 75% of it is now operating as a free market.
Nevertheless, I think it would be proper for new and fair rules in such a sensitive sphere to be worked out by our European Union and European Commission colleagues at least in consultation with Russia, as the major supplier of resources, so that the changes be gradual and evolutionary and do not destroy what already works well. Otherwise we will constantly find ourselves in absurd situations or conflicts that sometimes arise out of nowhere.
For example, Russian and German companies are investing considerable amounts in the construction of gas pipelines running on the bottom of the Baltic Sea and on the territory of the Federal Republic of Germany. These gas pipelines are necessary to carry Russian gas via the Nord Stream on to the end consumers.
Investors, of course, count on having priority rights to use this infrastructure to pump their own gas. This is their gas, and they have invested in building the pipeline. The Third Energy Package has been, or is in the process of being adopted. I am not sure that all those present know what is happening. Russian and German investors have built pipelines to deliver gas to the end consumers inside Germany, and now they are being denied the right to pump gas through them.
Listen, companies have invested hundreds of millions of dollars and euros in this project. Everything was honest and above board. Now, retroactively, a different decision has been taken and they are not allowed to use their own assets. You know, we have many problems in Russia and we sometimes do not behave properly, I am willing to admit that. We constantly hear from our partners in North America and Europe variations on the same theme: if you want to be part of the family of civilised nations behave in a civilised way. And what do we have here? Have our colleagues forgotten some basic, fundamental principles? One of them is that laws cannot be applied retroactively. This was formulated during the Great French Revolution. How can they do such a thing?
By the way, it has practical implications for other parts of Europe. Our companies, incidentally, together with their German partners, legitimately bought some assets of the gas pipeline system located in Lithuania. Now, invoking the Third Energy Package, they are being thrown out of there. They say, "Sell it." Now, if this is not robbery, what is it? I think mechanical application of the provisions of the Third Energy Package puts a serious question mark over the plans to modernise energy systems and develop infrastructure. Of course, we hope that a mutually acceptable solution on access to gas pipelines will eventually be found, and that the European Commission and the German regulators will take note of the reasonable arguments of the Russian investors and our European partners. Otherwise what is the point of all these activities, of investing in the security and the future of the European power industry?
Set down the rules for today. Our investors will know that these are the rules. Those who think these rules suit them will bring in investments. Those who do not will move their investments to some other regions. But inviting investments according to one set of rules and then changing these rules 100% and starting to take away the assets, well, really... It will be very hard to work that way. I hope it will not happen.
Ladies and gentlemen,
German politicians and entrepreneurs have long been reliable partners for Russia. We see that you are committed to achieving concrete results. I noted it when our country was still living through a very complicated and difficult period of rehabilitation after the break-up of the Soviet Union when I worked in Leningrad (now St Petersburg). It was already clear then that German partners were coming to the Russian economy to stay. They are not interested in fast money. They do not earn fast money, they invest in the financial system, in production and the power industry.
Russia and Germany have a big, shared agenda for the future. I would like to wish all of us success.
Once again I'd like to thank Sueddeutsche Zeitung for the invitation to address this conference and audience.
Thank you for your attention.
* * *
Prime Minister Putin takes questions from forum participants
Question (as translated): Mr Prime Minister, I think today one can say that notwithstanding the progress and openness you spoke about, in Russia the government plays a greater and more important role than even in the United States. Don't you think that this will soon bring you benefits in the global competition for better markets and prosperity?
Vladimir Putin: You know, first of all I'd like to say that we closely monitor what our partners in Europe and the United States are doing during this challenging time. My partners speak very highly about Russia, in particular the Russian economy, for which I'd like to thank them. I have known many of those present here today for years and consider them my friends.
We see that Germany has also done a great deal to bolster its economy. And we follow the example of the German government in many ways. For example, we started our car scrappage programme after reviewing how it was working in Germany.
Incidentally, the decisions taken in the European Union benefitted French car manufacturers more than German ones since they applied to cheaper cars. Germany just made one more contribution to increasing the prosperity of the European Union, which is also not bad. At the end of the day, Germany is also interested in it.
Anyway, this programme is underway in our country. Yes, I understand your reaction, but what can I do? It's true that even if Germany pays for someone today, it will certainly reap the benefits tomorrow. Germany does its best to prepare the ground for exporting its products to international markets. It even profited from the introduction of the euro.
But I wouldn't like to go into what the Russian and German governments have been doing. I'd like to say that I appreciate the professionalism and the efforts of German businesses as well, in particular what Mr Josef Ackermann (CEO of Deutsche Bank) has done.
I know that it has been a tough time for all of us. Even Deutsche Bank, a large international bank, was not spared from the hard times. Mr Ackermann and I know each other well; we've been in close contact with each other. But I was really impressed to learn that Mr Ackermann publicly rejected the government's support.
'Here is a real professional,' I thought. The right signal at the right time. And I'm sure you understand that it was a straightforward message for the entire financial system of Europe. Mr Ackermann put it clearly: certain companies do not need government support – they can make do on their own. This stabilised not only the German banking sector but also the European and Russian banking systems since Deutsche Bank is a major and reliable partner of many Russian banks.
The same goes for industries. I have mentioned Volkswagen intentionally. They announced their programme before the crisis and carried it through to the end regardless of the economic downturn. They opened a new facility, not a big one actually, but it was a practical step, a real contribution to the common cause.
We have many big projects with Siemens, including outside Russia. In fact I can't understand why the public in Germany is against nuclear power. But I am not going to comment on it. I just can't understand what fuel you will use. You don't want gas, you are not developing nuclear energy. Will you use firewood? You should realise that you'll need to get firewood from Siberia. You don't even have firewood in your country.
Regarding your question, you said we should look at what is going on in the American economy. But basically, you started with the major centres of power. You didn't mention the United States, but it was clear that you were referring to it.
You know, this has always been the case in history. Some countries develop and become powerful quickly, but then they backslide, losing their influence. I'd like to remind you of the Great Roman Empire. Its decline lasted for 500 years. So I don't think you should rush to judgment. .
The American economy has strong foundations and is very resilient. But I think they've made a lot of mistakes. I discussed it with our German partners more than once; they share my opinion. America spawned those derivatives, turning the whole system upside down. It's not even clear what is more valuable for them, actual production or papers traded by speculators. I discussed it with you, didn't I?
Many of those present here today share this view. I believe that the United States must make serious decisions, and hopefully it will do so. I don't think all problems can be resolved by a printing machine. They will only exacerbate problems. But at the end of the day, given the resiliency and competitiveness of the American economy – and this economy is tougher than the European one – it will overcome these difficulties, I'm sure.
But it doesn't preclude the emergence of other centres of economic power. BRIC countries have shown this very clearly. This process is natural. There is nothing extraordinary about it.
We certainly should respond to developments in the global financial system and the economy. At our meeting three days ago, Chinese Premier Wen Jiabao and I agreed to use only our national currencies, the yuan and the rouble, in clearing. Previously, almost 100% of such transactions were made in dollars, as was prescribed in an agreement of 1995 or 1996. Recently we agreed to use the yuan and the rouble. This is our reaction to the breakdown of the global financial system. We want to protect ourselves from such fluctuations and avoid a situation where we face consequences regardless of our economic policies.
The euro is becoming stronger... We are aware of the problems facing Portugal, Greece and Ireland. The euro is tottering somewhat, but overall it is a reliable, stable international currency, and it should take the place that it deserves, becoming an international reserve currency.
What we should do away with is the excessive monopoly of the dollar, the only international reserve currency, which has definitely had an adverse effect on the global economy in the past decade, making it imbalanced and vulnerable.
There is nothing bad about a multipolar financial global system, which I've been speaking about, and the same goes for the multipolar political system I spoke about before. But I wouldn't say that everything is over there and that the United States will lose its position soon. We have no interest in seeing this happen. We don't need new collapses and crises. Everything should develop in a natural way. And we should work together with you to enhance the stability and sustainability of the global economy. And I think we have every opportunity for it now.
Thank you.
Question (as translated): Russia demanded more transparency from European companies claiming that Russian companies have difficulty entering the European market. But we would also like Russian companies to be more open to their European partners, in particular in the energy industry. Are you going to make companies in strategic sectors more transparent?
Vladimir Putin: I think you're playing up to me. You mentioned the critical sector of the Russian economy, energy. It is no exaggeration to say that Russia is the most open country, compared with other countries where energy plays an equally important role. I'd like to stress that all major international companies operate in the Russian market. These include Exxon Mobil, Chevron, ConocoPhillips, as well as Chinese, Indian, German companies, such as E.ON and BASF, which have been our partners over years. We do not have any excessive restrictions, and we diversify our cooperation.
Now I'll speak about hydrocarbons, about oil and gas. For instance, we cooperate with Siemens on nuclear projects. Clearly, such companies cannot confine their business to one country only. So we invite Siemens to participate in our international projects. For example, we have built two power generating units in China and will construct another two at the Tianwan nuclear power plant, and we have a programme for up to 16 large power generating units in India. Believe it or not, we give Siemens 25-30% of the total investment. This is because Siemens is a global leader in several sectors, and we do not try to scrimp on anything or rush for profits. We want to develop a high-quality product that conforms to international standards, and we are succeeding at it.
In terms of electricity, we have opened up our market in general. European companies, including German ones, have made multibillion-euro investments in our electric power industry, including in very sensitive areas of the country where electricity is closely related to, say, the nuclear power industry. We are even considering granting controlling stakes and generally 100% ownership of power generation plants.
Regarding the production of hydrocarbons, as I have already said – everybody is working on oil and gas too – almost all of it is out in the open. We have restrictions on those recognised as deposits of national importance, the vast fields that are, without exaggeration, significant on a global scale, world-class reserves. But there is no ban; we've just introduced a rule that requires decisions to be made through a specially-created government commission. And I do not know of any rejections. I head this commission. There are technical issues, but we come back to solving these problems later. So I want to thank you for your question and I want to say that the Russian energy sector is open to foreign investment.
Just now, Mr Knauf (Nikolaus Knauf, owner of Knauf Gips KG) spoke and said that our market is 110 million strong. We just conducted a population census, and we determined that we have more than 140 million people! This number really means something. Almost all of Germany.
And besides, we are developing the Customs Union – it has already been established. We are establishing a common economic space with Belarus and Kazakhstan. This is a total of 25-30 million people. And this market is also open to our partners, including Germany.
As regards macroeconomic indicators, our biggest problem is inflation, of course. But in previous years inflation in Russia was measured in double digits - 10%, 11%, 13% and higher. For the first time we have reached single digits and not only that but today we have a historic low. It's still too much, but it's still a historic low for modern Russia. Inflation will be somewhere around 7% or 8%. The budget deficit will be 4%, slightly above 4%. We thought it would be 6%-7%, but really it will be about 4% at the end of the year, I think.
As for the national debt, it is not 19% of GDP, but only 11%. And in general, of course, we can even regulate it. We intentionally maintain this figure. We can reduce it, but we do not consider it necessary to do so. I mean that Russia's gold and foreign currency reserves are growing, and today they are the third-largest in the world – more than $ 500 billion.
Question: What new areas of cooperation with German industry do you expect there will be? In attracting foreign investors for the construction of industrial enterprises in Russia, aren't you afraid of the competition? Is there a possibility that a common currency area will be created in the future between Russia and Europe? And are you willing to have Russia adopt the euro for this purpose?
Vladimir Putin: If I may, first a word about about the placement of specific industries. For example, Volkswagen. Is this scary for the European manufacturer? Have they created a competitor or not? And if Asian manufacturers come to our market? And they have come! Both Toyota and Hyundai. Not only do they exist on our market – they are there to create a very competitive product for the European market. This may be more frightening for European manufacturers than coming into the Russian economy and controlling the process with Russian partners. I think that German manufacturers are absolutely right in making such decisions – decisions about investments. Well, these are just some comments.
Now, regarding the free trade zone and the possibility of Russia's entry into the common currency area. I could not have a look in detail to what really my colleague Ms Merkel was talking about the proposal to establish a free trade zone with the EU, although this issue was initiated, and not by us, long ago in fact. Incidentally, from what I saw, I see only positive signals. Well, first of all, it means that Ms Merkel read my article. That's good. Secondly, she gets reports on the signals coming from Russia. So, she wondered what was happening in Russia – this is the second very strong positive signal. She says that there are some problems. And I agree with her on this, of course. And did I not mention the challenges we face in Europe when I spoke here? And I assure you that I can say in absolute honesty that our investors have more problems than yours in Russia. But we should not have to tally up our problems, and we should not go down dead ends. We need to find a two-way street. This could be a possibility – if we assume that Russia and Europe would be in the same currency area. You know, my first experience with the top political leadership of the Federal Republic of Germany took place in 1993, I think it was. The chancellor of Germany at the time, Mr Kohl, invited my former boss, then-Mayor of St Petersburg Anatoly Sobchak, to Bonn, and I was present during the conversation during this trip. For me, as a person who until recently worked for an organisation called the foreign intelligence, the KGB, the conversation that I was present at and even partially translated was somehow a turning point in my consciousness. Mr Kohl is absolutely sincere, very convincing. And, armed with the facts, he spoke about the necessity of rapprochement between Russia and Europe, and he finished by saying, “It's inevitable.” If Russia wants to continue as a significant player in the world and if Europe wants to take its rightful place, we must combine their efforts. I totally agree with that idea. For me, honestly, it was totally unexpected at that point. I was not prepared for such an understanding of the processes. And now, more than 15 years later, when I assess what is happening in the world, assess the crises that happen in the world and look at the prospects, I think that Mr Kohl was absolutely right. And I do not know what form our cooperation should take, what forms will bring us closer together – whether it a common market, a free one or our associate membership in the European Union – but the rapprochement between Russia and Europe, if we are to survive as a civilisation and be successful and competitive, then the rapprochement between Russia and Europe is inevitable.
Question (as translated): Do you, as prime minister, think that there is a future for the euro, despite the problems of Greece, Spain, Portugal, and Ireland?
Vladimir Putin: It is absolutely necessary for the global economy. We are all interested in this. I've already spoken about this. All of our other colleagues, including Mr Ackermann, supported the idea of a multipolar world in terms of currencies. For it to be stable and reliable, we cannot stand on only one leg – the dollar. But the euro has already taken the first steps, it has gained a foothold. Yes, there are some problems; there are problems in Ireland, Greece and Portugal. I will not name other countries in which problems may arise – it's possible anywhere. But the economic policies of the European Central Bank, the economic policies of the governments of the leading European economies convince me that the stabilisation of the euro will be assured, and we look forward to it.
Question (as translated): Will you run for president in a year and a half?
Vladimir Putin: You know, this is a question that the current president of Russia, Mr Medvedev, and I are used to hearing. We have a standard answer for this question, and I will not tell you anything new. We'll see what the social, political and economic state of the country is, and then we’ll make a decision in the best interest of the country.
Question (as translated): Mr. Prime Minister, what do you think the three main challenges of the future are?
Vladimir Putin: Terrorism, national and religious intolerance and economic insolvency. Misguided economic policies, which we have seen over the last year, can lead to very serious consequences. We all hope that we can avoid all three of these dangers.
Question (as translated): Would it be possible in the future to shift payments for Russian oil from dollars to euros? And the second issue. In St Petersburg, you were working to protect Russian tigers. I want to thank you on my own behalf and on behalf of my young daughters. It’s really great.
Vladimir Putin: Send my best wishes to your daughters. And I would like to note that it was not only about protecting the Russian Siberian tigers – it was about protecting all the tigers in the world. But this was just an occasion to talk about wildlife conservation. This issue is so important that I forgot what you started with. Just kidding, just kidding.
As for the euro and payments in euros, then we will, first of all, make part of our calculations in euros and use the euro as a reserve currency for the Central Bank, and I think that the ECB welcomes this decision from the Russian government and the financial authorities in Russia.
Regarding energy trade, the trading of oil, which you mentioned, does not take place in Russia, but on global exchanges for dollars. And, unfortunately, we have no direct influence on this process, though we should and we have ideas about the organisation of exchange trading in Russia itself. But in this case, of course, the work will need to be organised for roubles – trading in roubles. However, with the enhancement of the euro, I think it quite possible to use it for trade transactions on energy markets.
Question (as translated): Ten years ago you delivered an historic speech in the Bundestag in which you suggested that the European Union establish an energy alliance. Recently, in the Sueddeutsche Zeitung newspaper, you proposed specific new steps to create a new European space. Explain why relations between the EU and Russia have made almost no progress for such a long period of time? What is the cause of conflicts between the EU and Russia?
Vladimir Putin: You know, we have almost no major conflicts. They all have some sort of contrived character. Today we are implementing a project about which I have spoken, one that has caused controversy – the Nord Stream project – to supply Russian gas to our consumers. I am taking this example as the most significant. It was initially very strange to me that there were people in Germany who opposed the project. I could not understand this at all. We have the resources and you need them. After the collapse of the Soviet Union, transit countries emerged that now clearly abuse their transit position and create obstructions and problems. We want to lay pipelines on the seabed that will not get in anyone’s way and that will deliver gas to our consumers, in this case German ones, and ensure that the energy situation in Germany is stable, primarily Germany as a leading economy and then other European countries. We are not taking anything away and are not making things worse for anyone. But people made such a commotion. Do you understand? It was shocking. Why? Honestly, I still do not understand. Those who opposed it tell me frankly, “Yes, it’s about our interests. We wanted to make more money. We wanted to see the pipelines on our soil, so we would make more money on transit.” But why should we suffer? It finally seems to me that people are beginning to understand these fundamental things if they don’t understand them already. This is, first of all, an understanding of interdependence and mutual interests.
Secondly, the scope of our cooperation has expanded. European Union countries are the largest trading partners for the Russian Federation. European countries account for over 55% of Russia's trade and economic turnover. Therefore, it is natural that we are now looking for ways to further develop our relations in such a way as to minimise the risks, which would allow us to work according to common rules that would create a more competitive environment for our businesses. And this would make us look more convincing and more competitive on global markets. So when we combine efforts, and not only in the sphere of energy or mineral resources, but also in the intellectual sphere, we are achieving... Well, take Siemens, for example. I cited this example before. We are in the markets of third countries and can produce a better product than our American or Japanese competitors – Toshiba – can offer. They buy from us not because we have good political relations with India or China, although that is also important. They would never buy a product that was more expensive or lower in quality, but we our products are cheaper and better quality. And we will be successful when we work together. The establishment of a free trade zone is aimed at this goal.
Question: Do you think that only large companies such as Siemens or Volkswagen can afford to invest in Russia?
Vladimir Putin: First of all, there are many problems. My German friends are not very comfortable criticising Russia; after all, we are marketing ourselves together. But, I must tell it like is – there are a lot of problems. There is corruption, and there are major administrative difficulties and obstacles. Incidentally, we are trying to clear this field and make the situation much more attractive to investors. We have already planned and made a number of government decisions on the removal of administrative barriers in various sectors of the economy – in construction, transport and other areas.
Secondly, large companies such as Siemens, Volkswagen, Knauf and Deutsche Bank have many partners. These are big companies and they have access to top government officials and the state. It's easier for them. I must say this openly and honestly. But all the same, work on creating a good investment climate continues not only at the federal level, but also at the regional level.
Now the previous speaker (Martin Winterkorn, CEO of Volkswagen AG) referred to the governor of a small Russian region– Kaluga. There's no oil or gas there, but there is a governor who cares about investors. He gives everyone his personal phone number. They do not call him, but the fact that they could call already gives officials pause. The work is being done more quickly there. This is another fact.
Third, production itself must advance. I just attended the opening of a Russian company to produce the necessary parts for modern vehicles. We have a large, good metallurgical industry. But as strange as it may seem, Russia still doesn't produce the metal for the production of modern cars. Just recently, a few days ago, such a company opened in St Petersburg and began producing sheet metal, with the most modern, advanced equipment. This first required re-equipping the mill itself in Magnitogorsk in the Urals and then building a new steel company in St Petersburg for the production of these components. Companies such as Magna, which has been mentioned here, work on this basis, as do specialised Korean companies and others who specialise in manufacturing automotive parts. And this progressive, and positive, process continues. And I really hope that a lot has changed for the better since the time you arrived here a few years ago.
Question: Mr Putin, I have a question in Russian. Did you know that today Germany is home to about four million Russian-speaking residents? We came here in 1990, and we all have learned the German language. Most of us are now German citizens. Our children were born in Germany and were educated here. We all work and pay taxes. And at the same time, we held on to our Russian culture, we read the Russian newspapers and watch Russian television. How important is it for you personally and for Russia as a whole that such a community exists and that it is a potential force for the harmonisation of the two countries not only in politics and culture but also for our economies?
Vladimir Putin: I think it's important for any government, for any country. I would like to note two things here. At least two.
First of all, I think that people from the former Soviet Union and Russia find it easier to adapt in countries like Germany because at the core of our culture – like it or not – are Christian values. This is so. It does not matter that in Russia it is Eastern Christianity and in Germany it is Protestantism, Lutheranism, or Catholicism as in the south. In any case, the core values are the same. And this is very important.
I think that it’s for people coming into a country, choosing it as their second homeland, to respect the culture and language of that country. It is very difficult to build domestic policies in countries where immigrants do not adapt and do not wish to do so. They must respect the laws of the host country. But any civilised country has always encouraged and is supported by minorities. And the country always supports the national culture of the people who come into the country and choose it for permanent residence. I think that Germany is one of those countries. Anyway, I have not seen any systematic problems here. On our part, we will fully support our fellow citizens, and we will help you keep in touch with your motherland, we will help you maintain your knowledge of the Russian language and interest in Russian culture. Well, if we implement the plans we are talking about, carrying out steps for further rapprochement between Russia and the rest of Europe – in this case, we will carry out a rapprochement with the EU – then people like you should be a natural bridge for our country. I would like to see it happen in exactly this way.
Question (as translated): Mr Prime Minister, if I understand you correctly, you complained that there are certain obstacles to Russian investments in Germany. You noted this fact, but did not give the reasons. What do you think, why is that? A question of image or reputation? Perhaps, the public perception of the Russian economy is characterised by oligarchs, which are not considered to be transparent? It is very important now to create a transparent structure in the capital markets, and the banking sector helps this. What do you see as the reason that Russian investments are allegedly blocked?
Vladimir Putin: Did I complain? I think that many of us were taught as children not to apply for something and to never complain. I'm not complaining, I simply stated a fact. This is true. And the reasons for this – it's something for us to analyse and understand together. In part, you just have answered your own question. In some cases, questions arise about the purity of origin of capital. In some cases, it is a fear of competition. There are many reasons, including reasons of a political nature.
For example, there is a refinery called Mazeikiai in Lithuania. It was created back in the Soviet Union especially for the Siberian oil pipeline and pipelines were specially laid precisely in order to function stably. During privatisation, our companies expressed a desire to purchase it, but in contradiction to any economic logic, the Lithuanians gave it to one partner and then to the Americans. Then it turned out that the company could not operate, so now they're gone. The Lithuanians found other partners, but again, it did not work as it should have. And then they come up with something else... I think that in this case it is purely a political decision.
There are some things, you know, that operate on a subconscious level. For some reason it sometimes seems that a company with a capital of Russian origin cannot own a company, it just cannot, and that's all. It’s somehow psychologically uncomfortable. I would not exaggerate anything here.
And I mentioned this not just to complain about it, but to draw your attention to the fact that the problem exists. And we must work together to address these obstacles for the expansion and deepening of our cooperation.
* * *
Vladimir Putin's closing remarks
Regarding the content of our discussion today, I probably have nothing else to add now. You can talk for a long time, a lot, but in general, the organisers structured the conversation so that we could touch on almost every important issue. Therefore, in conclusion, I just want to thank our partners and friends for their kindness and for their appreciation of what we have done, though we may not deserve such a high appraisal yet. We understand this completely, we are aware of our problems and we will work on them, of course.
I hope that we will be heard. Brussels and the German government will hear our concerns. Of course, I want to thank Sueddeutsche Zeitung for organising today's meeting and today's discussion because I really hope that as a result of today's event, the number of friends of Russia in Germany, and in Europe generally, will increase at least a little bit. Thank you very much.
* * *
After the economic forum, Vladimir Putin stopped at a booth with Christmas gifts at the exit of the hotel.