Press Conferences

2 september, 2008 16:00

After his working visit to Uzbekistan Prime Minister Vladimir Putin answered questions from journalists

"If you look at the taxation structure in the country, at first glance the taxes are a little higher than in Europe. But if we remove the high oil and gas taxes, the other taxes are even lower than in Europe".
Vladimir Putin
Meeting with the journalists in Uzbekistan

Vladimir Putin: Good afternoon. What do you want to talk about? I am all ears.

Question: You were speaking about the need to diversify cooperation between Russia and Uzbekistan. How do you see cooperation in the energy sphere? And the second question, if I may: did you discuss South Ossetia with Islam Karimov?

Vladimir Putin: Regarding economic cooperation. I want to repeat what I have already said: we are satisfied with the way this work is going. Trade is growing. We are already taking measures to diversify our trade and economic links. And growth is impressive. An increase of ten times in eight years, that is just great.

The absolute volume, in our opinion, is not yet very large considering the size of the Russian and Uzbek economies. According to Uzbek statistics it is about $4 billion, according to our statistics, it is a little over $3 billion. In any case, it is substantial growth. More than 40% last year. This year it was a little less though. This is due to some technological questions, including the sometimes different currency regulations. In our country you have to return the currency earnings within 90 days. The deadline is not always met. That is a big brake. These are technical issues, but they still need to be handled carefully.

We discussed it with our colleagues today and we saw completely eye-to-eye. We will work towards that end.

But we have also discussed Uzbekistan's participation in our aircraft-building corporation. You know that there is a large aviation enterprise here that produced IL-76 transport planes in Soviet times. We propose to integrate that enterprise into our aviation corporation. We have some plans on that score.

We have spoken at length about other sectors of the economy. Our Uzbek colleagues are interested most of all in processing and possible Russian investments in modernising the processing industry. Our partners are of course very interested in tariffs, especially railway tariffs. I have to say that we are also to some extent interested in bringing down tariffs, especially during the season when fruit and vegetables ripen so that Russia could get enough of these products, especially for the Far East and Siberia.

And of course, energy, and the extraction of minerals in general. Also nuclear energy. Uzbekistan played an important part in the nuclear energy industry in the Soviet Union; it was an essential and indispensable part of the Soviet nuclear energy system. We will try to restore our former ties.

Electricity is important. Our Uzbek colleagues have evinced an interest in attracting our investments to their power industry. Opportunities already exist for selling Russian electricity to Uzbekistan. Of course, we devoted some time to water resources. That is an acute problem for the region. It calls for a comprehensive approach and concerted actions.

I have already mentioned military-technical cooperation. We will see how to expand this interaction by bringing in the latest weapons systems. And of course, hydrocarbons. Oil and gas. Above all gas. The Uzbek colleagues made us privy to their plans to expand extraction. We have discussed at length the ways to increase transport facilities. It is important for the region as a whole because Turkmenistan's export potential is also growing. All of us - our colleagues from Turkmenistan, from Uzbekistan and Russia, and Kazakhstan, by the way - we are all interested in enlarging transport capacity in connection with the growing export potential.

I was pleased to remind my opposite numbers that we had agreed to start the construction of a new gas pipeline in Uzbekistan. Gazprom and its colleagues are hammering out the technological details. I hope that we will see the signing of corresponding documents soon.

But what is important in our current work is that our experts have managed to agree on the price formula for the gas sold today. It will be the European price formula. At the same time it is complicated work because there are too many technical details: what is to be the base price, how to price the transport, services, Gazprom's costs and Gazprom's profit margin - all these are complicated questions, as we have found. I am pleased to tell you that we have practically reached agreement on all these issues.

Question: I have a question about the results of yesterday's EU summit. On the one hand, they can be seen as an ultimatum, that is, until Russia withdraws all its troops from Georgia all the talks on a new agreement with the EU will be put on hold. On the other hand, not a word was said about sanctions. And then, do you believe that it means an invitation to some kind of negotiations and talks? How do you assess the results of the summit?

Vladimir Putin: To begin with, Russia has no troops on Georgian territory any more. There are peacekeeping forces. We have warned our partners that the peacekeepers will remain. They will be in the security zone determined under previous international agreements. We have not overstepped that line. And the number of peacekeepers, far from being increased, has even been reduced. We had 500 people, now there are less than 500. Having said that, the principles worked out by the French and Russian Presidents, when the French President came to Moscow, indicate that Russia has the right to take additional security measures. We have not even availed ourselves of that right, of that opportunity. We have not taken any additional measures although we reserve that right.

Now regarding the process itself. First of all, I would like to say that the French President, like other European leaders, for example, Italian Prime Minister Silvio Berlusconi or German Chancellor Angela Merkel, are genuinely anxious to understand the sources of that problem and are trying to find a way out of the situation. It is another question how successful they are. It is another question to what extent our views are shared. But I have no doubt that they are working intensely and in earnest.

The odd thing is that we have previously been used as a bogeyman because allegedly we could use our energy resources for political purposes. Now the European leaders are trying to scare us with some kind of sanctions. I don't see much logic there. But anyway, let us leave that in the past.

Now about the document adopted at the summit. We are aware that a lot of emotions have been expressed during the preparation for the summit. Some proposals were very tough, I would say even extreme in character. Thank God, common sense has prevailed. We see no extreme conclusions or proposals there. That is very good.

At the same time my attention was caught by some of the things that certainly raise questions. Look at point one. What does it say? It says that Russia has taken disproportionate measures in response to some kind of actions. Clearly the reference is to the aggression on the part of Georgia. But why doesn't the document condemn the aggression? This is unclear. Why doesn't the document say a single word of sympathy with the victims of that aggression - I mean of course above all the citizens of South Ossetia? That too is unclear.

At the same time I would draw your attention to the fact that we have a basis for continued dialogue with the European partners. I closely watched the live broadcast of the press conference yesterday, as I was able to. During the press conference the French President, Mr Sarkozy, referred to the Georgian political system as the "Saakashvili regime". Nobody would describe the French political system as the "Sarkozy regime", nobody would describe Germany as the "Merkel regime" or Britain as the "Brown regime". But Georgia could be described as the "Saakashvili regime". I agree with Mr Sarkozy. This is appropriate. It shows that Georgia is not a democratic state, but a personal power regime whose nature must be closely scrutinised. Obviously, there is nothing democratic about its nature. It shows that we have some common ground that may form the basis for further dialogue on this problem.

Question: Are there or aren't there Russian troops in Poti? Most of the claims concern Poti.

Vladimir Putin: There are no Russian troops in Poti. Our troops have withdrawn from Georgian territory, and there are peacekeepers not far from Poti, but they are within the security zone envisaged by earlier international agreements.

Question: Your visit to Uzbekistan is drawing to a close. Everybody is hospitable here. Meanwhile NATO is building up its naval strength in the Black Sea area. We have frequently heard statements from the Russian side that it is not conducive to peace. What is your attitude to this and will Russia respond to NATO's actions in the Black Sea in a concrete way?

Vladimir Putin: If it is about humanitarian aid to one of the parties to the conflict, I believe that if humanitarian aid is to be delivered it should be delivered to the victims of aggression. And the victim of aggression is South Ossetia, I repeat. I do not quite understand what the American vessels are doing off the Georgian coast. At the same time, ultimately it is up to our American colleagues to decide whom to help. But this begs the question: "Why should humanitarian aid be delivered by warships?" What is more, warships which have the latest missiles. That is a question mark.

As for our reaction, it will be calm, without any hysteria. But we will respond. You will know about it later.

Question: Do you think there may be serious consequences for the Russian economy in connection with the Georgian situation? Won't it trigger an outflow of capital from Russia?

Vladimir Putin: No, in general the inflow or outflow of capital is of course connected with political events, the link is often very strong. But in this case the events do not entail any economic consequences. That is impossible. Georgia's economic weight in the world economy and in the economic links with Russia is minimal, not to say negligible.

As regards energy, I have heard from Western partners that allegedly Russia's actions in Georgia are aimed at interfering with energy processes. Nothing could be further from the truth. Have we caused any damage to energy facilities by our actions to protect our peacekeepers and Russian citizens? Of course not. Nothing has been damaged, everything is functioning.

Question: What about Baku-Ceyhan (pipeline)?

Vladimir Putin: Baku-Ceyhan is not operating. They may have reopened it by now. But at the time all this was happening, there was an explosion on Turkish territory. According to the Turkish side, this was the work of the Kurdish Workers' Party. I cannot say whether this is true. This is what our Turkish partners told us. Yes, terrorist attacks have occurred, some damage has been done, but this has nothing to do with us. We treat our energy facilities with great care and we have no intention to harm anyone. This is not and cannot be our aim. Therefore the impact of this factor on economic affairs in Russia is insignificant. Climatic changes off the coast of the United States in the Gulf of Mexico will probably have more impact on energy supplies. So far though, the impact has not been great.

As for the inflow or outflow of capital, that is connected above all with the processes in the world economy. We know that the Western financial system is still suffering from a liquidity crisis. The Western financial system itself needs the money invested in other markets, including the Russian market. I am sure that this is what accounts for the outflow. But without doubt at the end of the year there will be an overall “plus”. A very big “plus”. According to the Central Bank, the results of the year will show influx of at least $30-40 billion. A net influx and not outflow of capital. As for fluctuations - speculative capital can come and go - and this happens in all the countries, in every economy.

We won't have as big an inflow of capital as last year, but that is not in any way connected with the events in Georgia. Indeed, frankly, we don't need such a large inflow. In the opinion of the Central Bank president, the 81 billion that we had last year creates additional problems of money supply and spurs inflation.

Question: Russia is so far the only country to recognise the independence of the two Caucasian republics. How will events develop? Is there hope that the Russian position will be recognised by the world community?

Vladimir Putin: You know, this is absolutely not critical for us. What matters for us is that we can take further action to secure peace in the region quite legitimately, we can work with these territories as independent states, we can do it openly, based on international law. As for recognition, that is up to the states. They have to build their foreign policies and work with their partners. You know, water wears away the stone.

Question: You recently visited the Ussuri Nature Reserve. Why did you do so at this particular point in time? And can you share your impressions: you took part in the programme to protect the Ussuri tiger.

Vladimir Putin: Frankly, I invented the programme. True, that was a year ago. I think that we should pay more attention to nature conservation, to environmental problems, to the preservation of the flora and fauna.

In general, only 25% of plants and animals in the world have been described, 75% have yet to be described and studied. But the worst of it is that every year we lose many different species. Russia is particularly sensitive to this because such animals as the Ussuri tiger are to some extent our emblems. It is the biggest cat in the world. Only 500 animals remain. And when I arrived there I was told that only 50-70 Amur leopards survive. But after talking with experts, they told me that only 30 of them survive. They face extinction. That is a shame. We should help nature. We should repay the debts that we incurred in the previous years.

As for the work itself, it is interesting. Because I initiated these studies, naturally I wanted to have a look. After all, we financed this work. I wanted to have a look at how it is organised. What I saw was impressive.

The scientists believe that what they have received under this programme is a lot of money. Actually, it is a small sum. But anyway, they will tell you themselves. We earmarked $5 million over five years. Now of course we will increase that sum. And we will work on the Amur leopard and other animals in the Far East.

In general, it is a very interesting job, but it can be dangerous. You probably saw when your colleague was standing nearby, a tigress became unleashed and made towards her. In the event the situation ended peacefully. But we know of several incidents, and they did not always end as peacefully as on this occasion. I don't know of any deaths but some people have been injured. A tiger broke loose and attacked a scientist not far from the place where we were. True, his colleagues showed courage and impressive competence in chasing the animal away without hurting it. However, the scientist was injured. The tiger bit him.

Question: Have you changed your position regarding the cut of VAT? Alexei Kudrin submitted calculations which show that a cut would not be useful. Has your position changed perhaps?

Vladimir Putin: It is not the question of the budget. It is the whole economy. We have to understand how effective the cut of VAT will be for the economy in general and for individual sectors and how a VAT cut will affect the economy. Will market participants be more willing to invest or will it simply lead to more saving? What needs to be done in other spheres of taxation for the system to yield tangible results?

All this has yet to be cleared up. There is no haste. If you look at the taxation structure in the country, at first glance the taxes are a little higher than in Europe. But if we remove the high oil and gas taxes, the other taxes are even lower than in Europe. We should take a close look at all this. We will not tolerate undue haste here. But on the whole we will seek to reduce the tax burden. We will try to do it. But we must bear in mind that we face major challenges in reforming the socially sensitive sectors: public health, education and the pension system. All these reforms will involve considerable budget outlays because all these changes should improve living standards and not lower them. So, budget expenditure will have to increase. That is why we must think about tax cuts, but we should tread warily.

Question: Did you and President Karimov discuss South Ossetia today and yesterday evening?

Vladimir Putin: We did. But I don't think I have the right to speak on behalf of another country's leader on such sensitive issues. If you want to know his opinion, I think you should direct your question to him. But I would say that in general our positions on the key issues are the same.

Question: You have agreed on the European price formula with Mr Karimov. Does it mean that the price will constantly change?

Vladimir Putin: Yes, it will change in accordance with the components that make up the price formula, that's gasoline and fuel oil. Their price in turn depends on the world price of crude oil. So, prices will be formed by the market and not by edict.

Question: You have spoken about taxes, and new proposals have been made by the Finance Ministry. They are seen as a rise of the income tax. Couldn't it have been done differently? People feel that the Government is going back on its promises because it had promised not to touch the income tax.

Vladimir Putin: For starters, no such decision has yet been taken. Secondly, people feel that it is unjust. We have a lot of people, 145 million. Some feel that it is fair, others that it is unfair and that the tax should be differentiated.

But you are right that there should be no undue haste in the tax sphere. So, I would like to stress again, if any tax decisions are taken we will think twice before acting.

Question: Could I ask you about the AirUnion alliance? Several high-ranking officials last week said that the Government would not allow it to go bankrupt. But the situation is not improving. It is the end of the season, and fuel stocks released by Rosrezerv on your orders are running out. I would like to know if any options other than bankruptcy are being considered. For example, crisis management, etc.

Vladimir Putin: It is up to the relevant government agency to think about it. And the company itself, Russian Technologies, should have thought about it. We talked about it yesterday with the Transport Minister. It is too early to say what decisions will be taken. Clearly, the Government will have to step in. Obviously, if the amount of aviation fuel made available is not enough, more will have to be made available. But we will see to it that the people who are stuck at the airports have a chance to go home.

Question: Is there a chance that we will be stripped of the Olympics and the APEC summit or some other events? After all, there are influential forces.

Vladimir Putin: No, these events won't be taken away from us. Let them try. For us these events are just a pretext for developing our own regions. I have said it a hundred times.

I think it would be absolutely wrong. Such things cannot be politicised. It is enough to do it once for this to happen again and again. That would destroy the relevant structures and movements, including the Olympic movement. I don't know if anybody is interested in that. I don't think there is anyone who is interested in that.

Question: Could you share your impression of your first few months working as the Prime Minister? Don't you have an itch to make some radical changes?

Vladimir Putin: I have no itches. I am fine. There is plenty of work. The work is interesting. You know, I think I even benefit from it because performing these duties you have to go into details that I previously could not get around to for lack of time.

Today we discussed the tax system; I have just mentioned the reform of the pension system, public health and the education system. There are a lot of very complicated and sensitive questions there. And on every problem, at every step there are several forks in the road. You have to discuss everything, to grasp everything, to understand and make a decision as to which way to go. The decisions that we make today will determine how the country and millions of our citizens will feel in 10-15 years' time. It is a very interesting job. I am content with it.

Question: You are stocking up on experience for your future?

Vladimir Putin: You'd better think about your own future. We all depend on each other. Is that all?

Thank you very much.