Press Conferences

10 march, 2009 15:00

Prime Minister Vladimir Putin and Hungarian Prime Minister Ferenc Gyurcsany summarised intergovernmental consultations at a news conference

Prime Minister Vladimir Putin and Hungarian Prime Minister Ferenc Gyurcsany summarised intergovernmental consultations at a news conference
"We certainly discussed major projects, including South Stream, and have attended relevant document signings concerning the construction of the Hungarian stretch of South Stream and of a major underground gasholder in Hungary with a capacity of more than a billion cubic metres."
Vladimir Putin
News conference by Vladimir Putin and Hungarian Prime Minister Ferenc Gyurcsany to summarise intergovernmental consultations

Vladimir Putin's address:

Mr Prime Minister, ladies and gentlemen,

The second round of Russian-Hungarian intergovernmental consultations has just finished. Many ministers and heads of central agencies took part in them on both sides.

In fact, it was a joint Government session. We had it for a second time, and I want to stress how fruitful it was. We can say out loud that we have achieved tangible results.

As I have already said, Hungarian export to Russia has increased nine-fold-really!-within the six years of Mr Gyurcsany's premiership.

Russia has become Hungary's second-largest trading and economic partner after Germany as the result of our latest efforts.

Our meeting analysed the implementation of the Russian-Hungarian plan of joint governmental action for 2008-2009. We determined to develop its principles in an analogous document for 2010-2011.

We certainly discussed major projects, including South Stream, and have attended relevant document signings concerning the construction of the Hungarian stretch of South Stream and of a major underground gasholder in Hungary with a capacity of more than a billion cubic metres. Such a large amount is necessary in order to ensure energy security and the steady work of the Hungarian energy industry.

I repeat, we have made great headway lately and arrived at a $13 billion trade turnover.

The global financial and economic crisis inevitably impacts our teamwork. There was a certain depression in trade and economic relations in the last months of 2008 and at the start of this year. This is nothing new. Similar processes are underway all across Europe. Today's meeting and our other joint efforts are valuable because we are thinking together about how to tackle our problems.

I thank Mr Prime Minister and all our colleagues for their constructive work and the cooperative spirit of our consultations.

Thank you.

Ferenc Gyurcsany's address (as translated):

Good foreign politics involve the use of several instruments at once, and this is what Hungary is doing. It is a European Union member and naturally cooperates with European countries as closely as possible. Hungary maintains all-around cooperation with NATO countries. Hungary has never made it a secret that strategic partnership with Russia is also among its goals, one that it has been working toward for many years.

I believe this to be our goal. Our bilateral relations and Russian relations with the European Union are very fruitful. The closer the partnership, the stronger security is. This is how I see Russian-Hungarian relations and Russia's relations with the European Union.

Though the histories of our countries are not similar, we have similar problems. The world has become a really small place, and Earth has become flat, in a sense. No one-neither Russia nor Hungary-can meet the present challenges single-handedly.

Hungary has gained much in the years since its contacts with Russia resumed. I say it with full assurance, in both the symbolic and economic senses. Symbolically, Hungary has gained, as it can take an unambiguous view of history now, with all its achievements and failures. I think the Russian leadership approves of this; Mr Putin visited Hungary as the Russian President in 2006 and brought us the Sarospatak Library. It was a landmark event.

We have made good educational and scientific progress. Strategic partnership is the key issue, the cornerstone of present-day Hungarian-Russian economic cooperation. Hungary possesses the greatest energy stability in the region, considering its vast regional energy imports. This shows that we have worked well in the preceding years; we have good contacts and sufficient gasholders, and we should continue in in the same direction.

Two pipelines are more than one, and three more than two; we think that the more Europe-bound pipelines cross Hungary, the more lines will reach Europe. Naturally, it is good for Hungary if gas comes from independent exporters. As for the current situation, when we receive the necessary amount of gas along one single pipeline and only via Ukraine, I think it would be much better to connect Hungary with Europe with a pipeline carrying Russian natural gas.

Hungary will certainly have two independent suppliers. Nabucco promises us gas not from Russia, but if European gas consumption continues at its present-day pace, we should not regard the South Stream and Nabucco projects as mutually competitive.

The construction of each will take a long time, and the world today is embedded in uncertainty. I think Hungary would be right to stand firmly by both projects. The Hungarian Government has determined priorities and has made an independent decision today.

Our seed imports are growing at an unprecedented pace. We have joint programmes. Russia wants to produce sufficient food for domestic consumption; we are aware of this goal. Hungary, with its developed agriculture, also has great opportunities. In particular, we seek partnership with Russia for joint projects to develop plant-growing.

Hungary has great respect for Russian culture. We love Russian literature, ballet, and music. Russian culture has many fans in Hungary. Their efforts have been crowned by the establishment of a centre of Russian studies in Hungary. It is crucial to understand each other's cultures. It is important to know both the culture and the people better because the better you know each other, the fewer conflicts you have. We are working very hard to achieve this goal, and I am glad that we have very civil, rational, and warm contacts with Mr Putin's Government and the entire Russian leadership of recent years despite occasional arguments. We have wonderful working contacts, and I hope that we will continue in the same spirit.

Thank you.

Question: Have you made any decision about Malev Hungarian Airlines during the talks today?

Vladimir Putin: We have mentioned the theme, and we will have a more detailed discussion at lunch. We have also agreed to tackle the problem later. The matter is being settled, on the whole. Funding is the most acute problem we know. Russia has made necessary decisions.

Question: I am addressing both Prime Ministers. In connection with the agreements you have made, could you please give us a bit more details about the construction deadlines of the South Stream Hungarian stretch, UGSF, and the entire South Stream?

I dare to ask Mr Gyurcsany a separate question: You have mentioned Project Nabucco. Are we to understand that South Stream and Nabucco are projects of equal importance to Hungary? How do you evaluate their significance for all of Europe's energy security? Thank you.

Ferenc Gyurcsany: I might be imprecise about the dates. If I am, I hope my colleagues will correct me. Our energy leaders have signed programmes and projects to be arranged on a very tight schedule.

Let us start with the gas storage tank. It will hold 1.3 billion cubic metres. The parties have arranged who will do what and the partners' objectives have been determined with great precision. If I am not mistaken, the tank will be ready by late 2012, early 2013.

As for the Hungarian stretch of South Stream, today's agreement envisages the end of the feasibility study stage. Investment blueprints will be ready by 2011. If we retain the expected pace, South Stream will be built by 2015.

I want my Russian friends to realise that one party being entirely dependent on one pipeline implies the greatest possible hazard. It would be impossible to find a dissenting politician, or anyone else for that matter.

I want to remind you of the latest dispute, of January 2009. Our eyes were fixed on a pipe that was not releasing any gas. We Hungarians managed thanks to our reserves and storage tanks. What decision could be made? To have not one pipeline, but several. It will be better still if two pipelines stretch from Russia. South Stream means that gas will be exported by two lines in two different directions.

There is an even better option. If the second and third pipelines supply gas not from Russia but from another, totally independent exporter-Asia, for example - Hungary will be guaranteed even greater energy security.

The greater the number of independent exporters, the better off Hungary will be. Many in Hungary and Europe ask this question and regard it as political. As I see it, the matter mainly implies national sovereignty. A country can be sovereign only when it is not unilaterally dependent on someone or something matters as essential as resources and energy. Liquefied gas is purchased from seven exporters in Japan, and there is no need for a pipeline to transport it. The purchasers are right. I would also like the opportunity to buy gas not from one or two, but from seven suppliers. This way, regardless of any misunderstanding that might arise with one, I would have another six exporters to deal with.

This is much more beneficial, commercial-wise: it is hard to bargain with one purchaser. Russia has never taken excessive advantage of its situation-but then, Russia would not like to have only one buyer, just as we do not like having only one supplier.

Hungarian legislation is perfectly explicit on Hungary's interest in gas purchases from independent exporters. This is on our present agenda, and Hungary supports Nabucco and South Stream construction. We are also looking for other exporters. We have recently visited Gulf countries, and want to build an Adriatic terminal to receive and supply liquefied gas.

Thank you. Sorry for such an extensive explanation.

Vladimir Putin: I would like to speak about deadlines first. The feasibility study of the South Stream Hungarian stretch will be completed before the end of the year-possibly by September. The feasibility study of the entire South Stream system must be completed by June 2010, and the construction deadline is December 31, 2015. The system must start working that day. These are the deadlines in place.

Let us discuss volumes now. We intend to pump 10 billion cubic metres of gas along the Hungarian stretch. The entire South Stream is designed for 31 billion, but it might be more. Construction is estimated at 10 billion euros now, but we might do with less as construction material prices are plummeting. There are no problems with financing, though energy prices are dropping and there are other economic problems-in particular, shrinking volumes. There are no problems, either-at least for the time being-with attracting money to this and similar projects.

As for streams, I fully agree with Mr Gyurcsany that they should be diversified. I want to point out some details, though. There are no problems with Europe's gas suppliers -but there are transit countries. That's the whole problem.

Now, what are independent exporters? Either you have gas or you have none-and call it anyway you like. Russia has gas, and has enough of it to satisfy our own growing demands and that of our European consumers for a hundred years to come, or even longer. I say this with full confidence, relying on serious studies.

As for other routes, we have nothing against them. However, Project Nabucco, so frequently talked about now, does not cut the number of transit countries. True, it bypasses Ukraine, but it actually increases the number of transit countries - Azerbaijan, Turkey, Georgia, and even more because the pipeline will not work at full capacity unless, for instance, Iran joins the project.

We will be glad to see the project implemented someday. It will improve the balance of European energy supply. To be honest, I doubt South Stream will be ever ready. If it fails, we can liquefy our natural gas and sell it to you-but you will have it at higher prices because liquefied gas is always about 20% more expensive than gas transported in pipelines. Europe will thus lose its natural competitive advantage in the global economy, which it presently has thanks to its partnership with Russia.

We are not to blame for transit problems. They arise due to many geopolitical and domestic political reasons. Mr Gyurcsany has mentioned the problems we had with our Ukrainian partners and friends. Thankfully, responsible people came forward in Ukraine at last and made a contract for gas supplies to Ukraine on European market terms, and a separate contract for Russian gas transits to Europe. So far, so good.

However, some people in Ukraine are still dissatisfied. As you know, masked people with machine guns tried to get the transit contract from the state energy company a few days ago. I wonder what the people who make such orders think about. One thing is clear-they discredit Ukraine and get us all thinking again about alternative routes of transporting our oil and gas to Europe. I think the construction of such projects will reduce everyone involved to discipline, including present-day transit countries. In the final analysis, it will help to establish normal civilised market relations. Thank you.

Question: I address both Prime Ministers. As you have said, anti-crisis measures are a duty shared by all. Have you thought, in connection with the crisis, about a regional package to help companies engaged in the futures and options market? That is, in a way, outside the European Union, with reviving Eastern markets? Perhaps the state should participate in the Eastern markets in order to keep them at the level they have attained.

Ferenc Gyurcsany: I think Hungary has a smooth and functional system of promoting and guaranteeing exports and overseas activity. Two key companies fund and guarantee exports. 60% of export-oriented finances are channeled to Russia according to the experience we have accumulated over the past years. Our activities include commodity exports, development and construction projects, and so on.

Our Economic Minister Gordon Bajnai has offered a package of measures to the Government and implemented them to shift the emphasis in the next period to financing trade so that we do not spend everything on ambitious development projects alone. We need money to guarantee all sources of financing Hungarian exports. We have everything in place to get the arrangement going now.

As for plans for the future, the greatest risk is in the present situation-for the first time in 60 years, the share of export will shrink worldwide. We have not seen anything like this since World War Two. If these expectations come true, I think export-based economies are in for serious trouble. There are many such economies-suffice in to name Germany, Japan, and Hungary.

Hungary's exports make up 80% of its GDP-a stunning figure! This means that our national interests lie in supporting foreign trade, since an overwhelming majority of Hungarian companies work for the foreign rather than domestic market.

Germany, Austria, and the United States are presently the only countries not on our list of customers. The least we can do in this situation is retain the present level and increase export financing. As everyone knows, Hungary has always been working to become part of a big comprehensive European programme for the support of our small and medium-sized companies.

This initiative was made by the EBRD and the World Bank. A 25 billion euro loan has been earmarked. We are working toward greater objectives-including territories targeted on those goals.

Vladimir Putin: We are taking part in international anti-crisis efforts. First, we are doing it through the IMF, to which we are channeling considerable resources.

Second, we have been sufficiently active in project promotion, and are helping our partners in the post-Soviet area. We have formalised a two billion dollar loan to Kyrgyzstan with a $150 million grant and another $300 million soft credit. We have drawn up a billion dollar loan to Belarus, 500 million of which has been transferred already. At any rate, a relevant decision has been made. I signed a Government executive order for it quite recently.

We are entering the financial service market in the post-Soviet area. We have invested billions of dollars there, too. We are willing to consider prospects for the financial maintenance of our trade and investment transactions with our traditional partners, Eastern Europe being no exception.

Your colleague asked about Malev today. I must say that Russia has made a relevant decision and fully funded its part of the job-which amounts to $10 million. As I have said, the volume of Hungarian exports to Russia has grown nine-fold of late. This is a thoroughly commercial job, and Russian partners interested in maintaining this volume will get support from our financial institutions, I am sure. Thank you.

Question: This question is to Mr Putin-a question which, for some reason, has been omitted today. Much has been said about Europe's energy dependence on Russia. I would like you to stress once again that Russia, as an energy, oil, and gas exporter, depends reciprocally on European countries. If possible, would you mention the latest relevant figures? Are there any complications in this field, especially in the context of the new economic challenges? Thank you.

Vladimir Putin: Yes, we have said many times that this is an interdependent relationship. Mr Gyurcsany answered a question that Hungary would like to get energy from, let's say, Central Asia - but then, it is already getting Central Asian resources. We are buying much there, and have been paying European market prices since the start of this year, so our Central Asian partners are happy to sell us gas. They will no longer sell it to other post-Soviet republics for a bargain. They cannot be forced to do so anymore. And when it comes to market prices, they don't care who will buy.

There is a question as to whether or not they should build more pipelines when there are normally functioning transport and pipeline systems. I don't think they need it-but then, everything is possible.

As for interdependence, it is a stability factor. Our companies have problems now, to be sure. The principles on which the entire gas market rests (take or pay is one of the pivotal principles) imply certain problems today because the amount of necessary resources is shrinking and our partners often cannot meet their pledges.

Here, too, we meet our partners halfway. We have talked about our Ukrainian partners in this regard. They twice failed to meet their obligation to take the entire contract amount of gas, and asked us not to impose fines on them. We agreed. Prices have gone down, and our companies are not getting what they expected. Yet all this does not make Russian energy companies all-round failures. We will offer an amended budget now, with prices reduced to $41 for a barrel of oil, to determine gas and profits from it accordingly.

On the whole, I repeat, interdependence between energy suppliers and consumers is crucial to stability.

As for Russian relations with Hungary, they are not limited to hydrocarbons in the energy shpere. They also include nuclear energy. As you know, our Hungarian friends asked us some time ago to troubleshoot for a Hungarian nuclear plant and our experts fully cooperated. A contract has been made for nuclear fuel and materials through 2032 or 2035. These supplies are smooth. Now, if possible, our companies might take part in a tender to build new units. We are supplying power station coal to Europe, Hungary being no exception. We obviously depend on our consumers just as they depend on us. If we take each other's interests into due account, this interdependence becomes not only a stability factor but also one of the key parts and means of overcoming the present-day global economic crisis.