Transcript of the meeting:
Vladimir Putin: So what do you make of Chinese food? Do you like it?
Answer: Yes.
Vladimir Putin: Did you like Beijing? It changes dramatically every year.
Journalist: This past year it hasn't changed much. But over the last five years, it really has.
Vladimir Putin: And now it's Shanghai that will be changing, as it prepares for the 2010 exhibition.
Question: And Sochi?
Vladimir Putin: Sochi will also change. You know, we have started work on specific sites, work is already underway. I hope we'll be able to watch how those areas are transformed. Dmitry Kozak (Deputy Prime Minister) has a real-time camera documenting the work, day and night, so you really can watch it. You can see everything. Then we'll play it in fast motion - so we can see the progress over the years.
Question: Mr Putin, one of the main news stories, from the last two days during your visit, was the signing of documents on energy cooperation: nuclear energy and coal, but most of all, on gas.
Your team sounded quite optimistic, that it would be 70 billion cubic metres of gas, beginning in 2014-2015. That is a sizeable volume. But on the other hand there are no details. What will the price be? That's what interests people, because everyone knows that China has spent a long time negotiating this. When will supplies begin, and what impact will it have on our obligations to our western partners? The volumes are comparable, Europe needs to keep its share from South and Nord streams, or do you think this is China's final warning?
Vladimir Putin: First, I wouldn't focus exclusively on gas and hydrocarbons. I'd like to remind you about something we consider an important result in our discussions, and that is the agreement reached with our Chinese partners regarding Rostom's involvement in the second stage of the construction at the Tianwan Nuclear Power Plant. I think this is one of the most important agreements reached during this visit.
We were told directly. There were several other elements which have yet to be agreed upon. I hope that in the coming two or three months everything will be concluded. But we were told straight out that it was a political decision made by the Chinese leadership, for Rostom to be the general contractor.
It's a serious matter, a large contract, worth many billions, which is sure to keep us busy. And it not only means cooperation on energy, but also on the high-tech areas of nuclear engineering. The construction itself is complicated. That's the first point.
Second, we have started implementing the agreements reached earlier on crude oil extraction. We will extract it on our territory and transport it.
Remember, how few people believed that we could build the pipeline system under the difficulties faced in Siberia: without any transport, communications or energy infrastructure. In a very short period of time, we have built over 2,000 kilometres of pipeline. And it's more than just a big pipe, you don't just dig a trench and put it in the ground, it's a highly complex, state of the art system, and then in addition there's the accompanying infrastructure. We did it. And it was, of course, an absolute success.
Now it remains for our Chinese partners to complete the corresponding section of the system on their side, and supplies will begin. In theory these supplies could also be made by rail.
I invite you to visit, I suggest you visit the Far East, to see what the newly built terminal looks like there. It's interesting. It will be up and running in the very near future.
So, essentially the whole system, leading to the Pacific Ocean, is already operational. As soon as we have the resources we'll start the second phase of construction, the pipeline system built right from the shore of the Pacific Ocean.
And then there's the oil refinery in China. That's the second route.
Third. For the first time in two years electricity has been flowing into China. And here too is a project for the future: increasing this supply.
And another area of cooperation, as you mentioned, is coal. The Chinese have good technology; they convert coal into liquid and even into gas.
And, finally, as you said, there's gas. We are indeed preparing two routes, as planned, the western route and the eastern route. The western route will have a slightly larger capacity: 38 billion cubic metres annually, while the eastern route will have a capacity of 30 billion cubic metres annually. That's once it's completed. Initially, in the first phase, we're looking at about 10-15 billion cubic metres each year.
Question: On the western route?
Vladimir Putin: via the western route, in the first phase. This can happen quite quickly, and does not require significant investment because we already have a functional pipeline system there. We just need to complete the "locking" system, to add a bit here, move a bit there, and these pipeline systems can be functional quite soon.
Now, regarding our resource base. Last year our extraction peaked at 550 billion cubic metres. And the current potential is in excess of 600 billion. As we know there has been a fall in demand. But even if demand volume climbs to last years' peak, we already have sufficient resources to satisfy that demand as well as our long-term commitments to our European partners, and to ensure that all resource base related problems for China are resolved, without bringing anything new on stream.
Further ahead in the future our opportunities are still greater. We have not even begun to develop the reserves I mentioned when we gathered in Yamal. There, on the Yamal Peninsula alone there are 50 trillion cubic metres. And in total, that region has up to 125 trillion cubic metres. These are massive resources, of global significance. That's why this country has no problems at all, in terms of its resource base.
Again, we don't need anything extra in terms of develpment. If we had to start shipment right now, or tomorrow, we would be able to do so immediately, in full and without interruption.
Regarding the eastern route: resources in Sakhalin, Kamchatka, the Far East and Eastern Siberia amount to approximately 65 trillion cubic metres by our estimates. These are not reserves, they are possible resources and additional confirmation is necessary. It could end up being a little less, but it is more likely they will be greater than that, which is you understand, a huge volume. These are, in principle, globally significant resources. And there will not be any problem with filling that system. The crucial point is that we agree on the supply terms and conditions.
Now, regarding the timeframe. We think that we can resolve this by 2015. We can start looking at the eastern route from about 2015 and the process of finding a solution will take two to three years. But in any case, if demand rises dramatically... and demand is another issue. If the relevant contracts are in place, then we can speed this process up, we can start work simultaneously on the eastern and western routes. But currently we plan to finish the western route by 2015, and then we'll start on the eastern route.
Now for the most delicate question: pricing. Not even prices per se but the way they are calculated. You are absolutely right; this has been the fundamental stumbling block in the negotiations with our Chinese partners. I can now say that an agreement has been reached.
And this is a very important, positive, and pleasant piece of news. Yesterday evening Gazprom and their Chinese partners reached an agreement that the price of gas that Gazprom supplies to China would be pegged to the Asian oil basket.
There remain some details relating to the formula, but they are minor issues. In principle the question of how to calculate the price has been resolved.
Question: Mr Putin, during the meeting with Hu Jintao today, you said that you have warm, friendly relations. Could we ascribe the fact that you managed to reach an agreement on energy prices with such an uncompromising partner as China, to these good relations? This is a question about cooperation in politics, on the economy, and in general.
And will these personal relations allow you to discuss such difficult questions like the situation regarding Cherkizovsky market, which has been closed down? And, incidentally, did the Chinese side raise that subject in their meeting with you?
Vladimir Putin: No, that subject was not directly discussed during these meetings, the negotiations yesterday and today. But we understand our Chinese partners' concern. Like any state, it is not in their interest to allow "grey markets" or for national law in the country where they work to be broken.
That's not the issue. The issue is that we approach this from both sides, in order to create the most transparent, comprehensible and regulated rules of cooperation. So that those who are active in trade in the economy understand the framework within which they are working, and so that those who work directly in either country, feel protected.
And I think that you'll agree with me when I say that where these grey or illegal markets operate, nobody can be certain either of the exact volume of supply or that people's interests are being protected.
Once again we have been assured that the official Chinese position is to see our relationship become as civilised as possible. But of course they will continue to try to promote their goods, and to defend their interests, and they do that consistently, but we are prepared.
Yesterday we also signed documents on organising how the customs system should work on either side. This is an example of work in that area, of work to develop a civilised commercial relationship, that is transparent and predictable.
And the first part of the question was...
Question: Regarding personal relations...
Vladimir Putin: We do indeed have a very good relationship. Today President Hu Jintao reminded me over dinner that we first met nearly a decade ago. It is a relationship that has developed gradually.
And of course to a great extent it is thanks to this relationship that we are able to discuss complex questions, in a constructive atmosphere, which at first appear difficult to resolve. But these personal relationships of course do not predetermine the outcome of the negotiations, because negotiations are gruelling and uncertain sometimes right up until the last minute.
The Chinese are difficult negotiators, very difficult. I cannot think of any question which would be free from disagreement: arguing every question until they're hoarse, right up until the last minute. And sometimes the signing is simply delayed, but it is returned to later, and an agreement reached. And the participants on the Russian and the Chinese sides do, in the end, reach an agreement.
This is because at the core of our relations lies a mutual national interest, and our personal relationship accompanies this process. Overall it is, of course, a positive factor.
Question: At the beginning of this year the Russian and Chinese governments talked a great deal about the possibility of converting the valuation of bilateral trade into the national currencies of Russia and China. Was this subject raised during your meetings in Beijing over these two days? And what future does that have?
Vladimir Putin: We did discussed such a possibility between Russia and China. Yesterday, our energy experts, including even those from Gazprom, raised this issue as well. We are not in principle against selling our energy resources for roubles. But this means our Chinese partners must have these roubles.
We are willing to make some purchases in yuan, too, but here we need a balance. This is a question for analysts to study. At the Shanghai Cooperation Organisation we agreed to hold a meeting of finance ministers and central bank governors in Kazakhstan soon to discuss issues of this kind.
Question: Do you think any additional sanctions against Iran are necessary if the current ongoing talks fail?
Vladimir Putin: If talks do not take place, or fail, then we can speak of further steps. But now, before making any definite moves, if we announce sanctions, we will not be creating favourable conditions for bringing the talks to a positive end. I therefore believe it is too soon to speak of sanctions.
Question: Mr Putin, your trip started off in Vladivostok. You visited Russky Island and have seen the APEC meeting preparations there. Can you share your impressions, please? How realistic are the prospects for putting this much-touted fairy-tale into real life? Our colleagues and us have doubts. After all, there are only two years left.
Vladimir Putin: Who does not believe it? Those who don't, please raise your hands. Everybody believes. And you say no one believes. I don't see these people.
Journalist: It is clear that something will be built - the question is how long it will last, roughly speaking?
There are doubts that everything will be constructed as planned.
Vladimir Putin: You know you should be less ... How could I put this in a more civilised way...
Journalist: Say it as it is.
Vladimir Putin: No, I won't. Everything will be built. I have no doubt about these projects after seeing the progress.
I saw the latest technology in use. I saw the amount of current construction and upcoming projects. All the financing issues are practically solved. Of course as is usual in these projects, and there is nothing surprising about it, they say this or that will cost more, a different kind of ground. But these are small details. You see? On the whole, I have no doubts. I am confident we will build everything.
But you were right to say this is a splendid project. In the east of Russia, we are establishing a major research and education centre. Not only is it an absolutely new site, but it offers new research and education potential.
Please note that an oceanarium is also being built next door. It is not only for tourists. How did the idea arise? Several years ago, I visited the Far Eastern Centre of the Russian Academy of Sciences. They work in marine biology, and I wanted to see the conditions the scientists worked in. I found the potential there promising. We then agreed to open a new Academy centre, in fact to establish a new facility for studying marine biology.
I see both the first and the second facility - the university and this oceanarium with a research centre - as key humanities and intellectual hubs of the Far East: for our country and for our neighbours.
Vladivostok already has many students from other countries studying at its existing university. I am confident that if we create conditions for our teaching staff and for staff from abroad - we will try to select the best - they will do great work. They will live in descent conditions, draw handsome salaries and teach and instruct gifted young people ... I think it will be a real knockout. I have hope that it will.
At any rate, we need some growth points in the Far East. If we create such an intellectual centre, I am sure, others will follow.
Question: If I may, I have a question on Iran again. Some analysts say that Russia lacks a consistent stand on Iran. The President sometimes says sanctions against Iran are inevitable. The Prime Minister says it is too soon to apply sanctions. Do you think sanctions are inevitable?
Vladimir Putin: Russia's foreign policy is formulated by the President. If Mr Medvedev says they are inevitable, they are. But if you take a closer look at his remarks and statements, and the context in which he makes them, you will see he is not dead set on a sanctions policy.
Why am I so confident about this? It is because we discuss these issues by putting our heads together at Security Council meetings. I know Mr Medvedev's position. It is formulated, I want to emphasise it once more, by group consensus. Generally, we think the approach should be cautious - there is no need to frighten Iran. We should seek agreements and compromises. If we fail, then we must pause and look at further options.
Question: Mr Putin, can we drop Chinese topics and go back to Russian realities? The party you head - United Russia - has confidently won regional elections throughout the country.
Vladimir Putin: Do you want to congratulate me?
Question: Of course, we do. The most impressive result, as you know, is reported from Moscow - where 32 out of 35 seats went to United Russia. On the one hand, this is evidence of the party's rating and your own rating as the party's bulwark and cornerstone. On the other hand, many people abroad and in Russia do not see that these ratings are fully supported. Three Duma parliamentary parties have walked out today. The situation is serious and says a lot. What does it suggest to you? Will the opposition not be ousted from the political playground?
Vladimir Putin: You and I are now here. On Sunday, I cast my ballot and left immediately. So I do not have the details and do not know what happened there.
But, as far as I know, what happened follows largely the trends established in public surveys. And in some cases, they told me, by exit polls. Those who lose are always dissatisfied, and those who win should be more restrained and not enthuse too much.
At any rate, any dialogue with one's colleagues should be right and proper. If some breaches are suspected, there are appropriate procedures to investigate them. Disputes should be resolved in courts of justice.
As for eliminating the opposition from the political playing field, I think it would be counter-productive. I consider that opposition is needed, and I am confident it has room to exist in this country.
This is because there always are people critical of what authorities are doing. And it sometimes serves the authorities right! The authorities often make mistakes, and those in high places often think they are there for life and make double and triple mistakes. By definition, this provides scope for opposition activity.
What happened in the Duma can only be regretted. This is largely connected with inner party rhetoric, I think. It seems to me in these conditions everybody should sit down at the negotiating table, discuss the situation and adopt a decision offering a way out.
Question: As the party leader, are you proud of the result?
Vladimir Putin: Of course, I am pleased with the outcome, but I am not happy about the way we work. In a crisis, we should be more active and energetic in promoting some of our decisions. The decisions are all right, but they should be implemented and realised more quickly and efficiently.
Question: Will this be discussed at a party congress?
Vladimir Putin: This as well. But today, as I have said many times, we should be thinking of how to put the crisis behind us. I think I have already cited several examples. In Tula - many from the press pool visited the city - you must have heard chemical workers say that they cut water consumption by 90%, electricity by 25% and gas by 24%.
The very circumstances are forcing these actions - to make savings and convert to the latest methods. This is what we have always stressed, that a crisis should prod the upgrading of production. But to help these companies, these people and these structures, we must provide the required resources.
When I said that I am not always pleased I meant we should introduce decisions, ideas and proposals, even formulated by the State Duma, more quickly.
Question: Mr Putin, do you believe the elections were really fair?
Vladimir Putin: In terms of honesty, if you have any doubts, you should go to court and prove your point there. You can keep saying this is not fair and that is bad, but can you prove it? You should have proof. Show your proof, present it, but your opponents will say, "Now, this proof has been falsified." Who other than a court can decide such issues? You must go to court, you see? And prove your point there.
If deputies from a party have not been represented in the Moscow City Duma for years, why do you think they should get seats there now? You should look at these processes objectively. On the other hand, I'd like to say again that in such situations much depends on inter-party dialogue, on the moral climate in the State Duma and an ability to talk with ones colleagues.
Question: We spoke about the crisis and related elements. Today the SCO held a meeting. Do you think that the SCO is focused mostly on security issues? Or has it shifted its attention to economic problems, and specifically ways to overcome the global crisis?
Vladimir Putin: As for bilateral talks with our Chinese partners and our work within the SCO, we primarily focus on economic interaction. Unless you consider our agreements with China to notify each other of ballistic missile launches, which I believe a signal event. It is an extremely important achievement that will strengthen trust between countries in a highly sensitive sphere of strategic weapons. It is an additional element of full-scale strategic relations, comprehensive strategic partnership between Russia and China. And a crucial element at that.
Apart from this, we mostly focus on economic matters. As for the Shanghai Cooperation Organisation, it is highlighting the economy. Of course, we touched upon such problems as the fight against drug trafficking, organised crime and terrorism. But we spoke about these issues in general terms, and focused our attention on mutual investments, the struggle against infectious diseases. We also discussed - I have already mentioned this - the possibility of using national currencies in mutual settlements.
Kazakhstan has proposed making electronic settlements in a supranational currency. We will discuss this issue at the next meeting of the finance ministers and central bank governors. We also spoke about investments as I have said, and some practical projects, in particular infrastructure projects. So, 90% of our time is devoted to economic matters.
Question: And will this continue to be the trend?
Vladimir Putin: Yes, of course, it will, because the centre of gravity of all global problems has now, especially amid the global economic crisis, shifted into the sphere of the economy. This is a fact.
Question: Could we speak about gas supplies to China again? Will you use a prepayment arrangement for gas supplies to China, as is done with the oil supply contracts? If so, then...
From the audience: This is not prepayment, it is a loan...
Vladimir Putin: Yes, a loan issued for infrastructure development, for our joint work. However, we have not yet thoroughly considered this issue. In general, Gazprom has enough funds to proceed single-handedly.
Again, we don't need major investment in the western direction. We have a pipeline running to the west, and we need only add some "loops", as professionals say, to increase the throughput towards the border and across it.
This will not cost much, but in general we can imagine that our partners will take out loans for such projects. I would assume that our Chinese partners may offer loan funds to us. However, we have so far not discussed the issue, because we don't need the money now.
You see, the gas business is organised like this: if you have a market outlet and have signed contracts, you can easily take out loans for their implementation in the market. This is not like oil - you produce that, deliver it to the market and sell it on the exchange.
In the case of gas, we mostly sell it under long-term contracts. If you have contracts, financial institutes know that you will sell a certain amount of gas by a specified date, and will receive an estimated profit. And so they easily grant loans under these contracts to finance the construction of infrastructure. There are no problems here at all.
Question: But can you give this money not to Gazprom, say, but use it to cover the budget deficit?
Vladimir Putin: Well, this has absolutely nothing to do with the matter at hand. We will cover the budget deficit with the money we receive from the growth of the economy, an increase in budget revenues. To do so, we don't have to take out loans from other countries for market projects that pay back soon.
Why should we? This is a different kind of money, and it has a different value.
Mr Kudrin recently discussed the matter with the World Bank. We have no need to take out loans from these international institutes, yet he discussed the possibility. Why? Because it could be cheaper to use their loans than our internal financial resources. Maybe we should save our resources, but use instead cheap international funds? But we don't even need that. We simply don't need it now.
Question: You don't need to take out loans?
Vladimir Putin: Not now. We will use the possibilities in the domestic market. For now, we will not borrow from international financial organisations.
Question: Will you borrow on the foreign market?
Vladimir Putin: We have always borrowed on the foreign market, even in the best years, and also in 2008 and 2009. This is routine. We take out loans even when we have resources.
Question: I was referring to Eurobonds.
Vladimir Putin: Yes, Eurobonds. They were also issued before.
You see, you must decide where, what and when you can borrow more economically. Before taking out a loan, you must calculate how much you will have to pay to service it. How much of our own resources will be spent if we decide to cover the deficit exclusively with internal reserves? You must carefully calculate which option would be more profitable.
Western markets, commercial markets are gradually opening up. And they offer some cheap resources. This is why the Finance Ministry is considering alternatives. In theory, we could do without borrowed funds; we have enough resources. But the Finance Ministry believes that we should save them and use other money instead. But we don't even need that. For now, we do not plan to borrow from international financial organisations.
Later we will look at the international market to see where the crisis is moving, and how fast, and how big our internal resources are, how fast our GDP will grow, and consequently, how fast our budget revenues will grow.
Anyway, we are not planning to take out commercial loans only to finance the budget deficit. If we decide to borrow funds at all, it will not be the government that will take out loans but specific companies. It will implement a project, make a profit, make deductions to the budget, the tax base will grow, and the GDP will grow - all of this thanks to the implementation of projects. So state borrowing is not an issue.
Question: An American official has said that elements of the US missile defence system could be deployed in the Caucasus, in particular in Georgia. Is this possible, and what would Russia's response be?
Vladimir Putin: Should I comment on a statement made by "an American official"?
Vladimir Putin: I don't know about it. Was it President Obama who said it?
From the audience: No, it was Vershbow (Alexander Vershbow, Assistant Secretary of Defence for International Security).
Vladimir Putin: Oh, Vershbow. Well, Vershbow is a legend. Obama says one thing, and Vershbow says something different. I don't know who is in charge of foreign policy in the United States.
We usually look at what the US President says. And he has said that there will be no ABM systems in Europe. We are satisfied. As for trying to forecast what will happen in the future, I don't think this is wise. We don't need to irritate or intimidate anyone.
By the way, I have not seen any euphoria here after the US President's statement. In my opinion, we accepted it in a guarded manner, calmly. At any rate, the country's leadership accepted it with understanding and gratitude. We believe that President Obama took a correct and courageous decision.
And we regard the subsequent attempts by a certain official to disavow the statement of their president as strange. But this is not our problem; it is not to us to restore order in the US administration.
If they take specific decisions, we will respond accordingly. Of course, we will do so; we will ensure our security in any case. We will do so in any case, and we have the resources to do it.
Simply, we believe that we need not do it; we need not push the situation into a dead-end, because unilateral actions in this sphere that can disrupt the strategic balance will provoke a response and an arms race. We believe that this is very dangerous, and very negative, and we will do our best to use dialogue with our partners, including the United States, to find solutions acceptable to everyone, which would not disrupt but strengthen security.
Question: And the last question. You mentioned Tula, and I see you have a new watch...
Vladimir Putin: Yes, since just recently.
Question: I don't think you will have it for long because of the crisis. Maybe you should buy a box of 30-dollar Chinese watches?
Vladimir Putin: Why should I?
Form the audience: Because people will keep asking you for your watch.
Vladimir Putin: If a good person asks me for my watch, I will easily give it to him or her...
Are you satisfied with the trip? Did you like it?
Journalist: Yes.
Vladimir Putin: I think it was a busy trip. Indeed, it was busy and very interesting.
I would like to end this meeting by repeating what I said at the beginning - I liked what I saw in the Far East. The scale of the project is very big. We need to build a whole new city. But if we refuse to undertake such projects, we will never accomplish anything. You must work and not be afraid of challenges.
Thank you.