Wednesday, September 24, 2014

President of Russia

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St Petersburg International Economic Forum

Plenary session of the St Petersburg International Economic Forum.

1/6 Photo: the Presidential Press and Information Office Full captionFull caption|||Minimise

Vladimir Putin took part in the plenary session of the 18th St Petersburg International Economic Forum. The Forum is taking place this year under the theme of Sustaining Confidence in a World Undergoing Transformation.

The Forum, which has been an annual event since 1997, brings together heads of state and political leaders, Russian and foreign business leaders, members of the science and academic communities, the media and civil society representatives.

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PRESIDENT OF RUSSIA VLADIMIR PUTIN: Ladies and gentlemen, I welcome you to the International Economic Forum in St Petersburg.

I am pleased to welcome here today our traditional old friends and new guests too, the heads of major Russian and foreign companies, representatives of leading international business associations, everyone who has long-term, strategic priorities with Russia and who shares the idea of partnership in the interest of global development.

We value highly this desire for cooperation and dialogue. We value your independent and responsible position that is free from short-term considerations of the moment.

Consistency and openness are always met with reciprocal steps and mutual trust. Trust is above all about finding compromises, mutually acceptable solutions, and working and acting together. This idea is the main theme of this year’s Forum – Sustaining Confidence in a World Undergoing Transformation.

The world is indeed changing very fast. We are witnessing colossal geopolitical, technological and structural shifts. The unipolar model of a world order failed, and this is clear to everyone today, even to those who still try to operate within the familiar reference system, try to maintain their monopoly, dictate their rules in politics, trade, and finance, and impose their cultural and behavioural standards.

The global economic upheavals of 2008 were a vivid example of the profound crisis in a development model built on unification and domination, or attempts to dominate in any case. This should serve as a serious lesson to make us see and understand the world in all its diversity and make a sober assessment of the new reality and full complexity of relations as they are emerging today.

But instead, we often come up against an unwillingness to listen to new global development leaders, take alternative points of view into account, and not just in word but in essence change the working principles of the key international financial institutions in accordance with the changing situation in the world. Reform of the IMF is at a standstill and the Doha round, which was supposed to set modern new and fair rules for world trade, is practically going nowhere. 

Ladies and gentlemen, this is an economic forum but there is no avoiding a few words on politics. Politics influences economic processes, and in this respect I note that inability to find compromises, unwillingness to take into account partners’ lawful interests, and blunt use of pressure only add to chaos and instability and create new risks for the international community’s continued development.  

Does anyone gain from disruption to regular cooperation between Russia and the European Union? Does anyone gain from the seeing our joint work on important issues for everyone such as nuclear safety, fighting terrorism, trans-border crime and drug trafficking, and other priority issues come to a standstill? Will this make the world any more stable and predictable? Probably not.

Surely it is clear that in today’s interdependent world economic sanctions used as an instrument of political pressure have a boomerang effect that ultimately has consequences for business and the economy in the countries that impose them.

I understand very well the concerns of foreign businesspeople who have invested billions of dollars in Russia, earned an excellent reputation here and are doing successful business in our country. I understand the representatives of engineering and machine-building companies for which Russian contracts have become a big growth source, or the European tourism industry, which to a large extent has been focusing on Russian consumers.

And now, for the sake of a failing political course, successful businesses have to suffer losses and relinquish to competitors this huge market and the positions they had built up?    

We cannot change the logic of global political and economic development. As I said, the world is multipolar. People want to decide their own futures and preserve their own cultural, historical and civilizational identity.

At the same time, the geo-economic map of the world is changing. New economic growth centres are emerging, new trade and investment routes are forming, new integration organisations are developing and strengthening, and there is greater demand for collective leadership that can draw up common decisions, not imposed by any one party, but decisions reached through consensus and agreement. 

The desire of many major economies and regional associations to expand interaction and establish new cooperation ties, including within BRICS, the G20 and the SCO, is also there for everyone to see.

Russia and its neighbours are implementing a large-scale Eurasian integration project. The focal event for the member states of the Customs Union and the Common Economic Space this year will certainly be the signing of the Treaty on the Creation of the Eurasian Economic Union in Astana on May 29.

The treaty will take force on January 1, 2015. The goal is to create a common market between three countries with a total population of over 170 million, with free movement of capital, goods, services and labour.

Conditions will be greatly improved for business, for joint investment and cooperation projects, and for a coordinated macroeconomic policy and operation in foreign markets.

Colleagues, ladies and gentlemen,

I am sure that our foreign partners will find it easier to work in our common market, in particular, because this integration model is based on WTO principles.

We hope that, given the cooperation of our partners, we will complete the involvement of Armenia in this integration association soon. We are also working on the integration of Kyrgyzstan. We believe that there is a good outlook for cooperation between the Eurasian Economic Union and the EU. Until recently, our colleagues refused to deal with the Customs Union, arguing that the EU is ready to cooperate with each individual member state but not with their association. This is strange logic, because we are willing to work, and we are working with individual EU countries and with the EU as an association. I don’t understand why our approaches should be different.

I’m happy to see many businesspeople from Europe in this hall who are willing to work with Russia. I’d like to emphasise that we value this pragmatic and mature approach on the part of European business leaders.

Europe has traditionally been Russia’s major trade and economic partner. We sincerely hope that it will remain so in the future, with new opportunities emerging for business cooperation and the removal of obstacles to trade and investment.

This is why we are urging the EU and European countries to work consistently towards a new basic partnership and cooperation agreement between Russia and the EU. We believe that this document should include a large and maximally concrete chapter on trade and economic relations.

Of course, we should also strengthen stability and ensure predictability in such strategic sphere as energy security. Russia has always been proud of its reputation as Europe’s reliable energy supplier. Current gas supply risks, which we can see, cannot be blamed on Russia. Everyone here knows that the blame rests with the transit country, Ukraine, which is abusing its status as the transit country for Russian gas supplies to Europe.

This is a paradoxical situation. Ukraine says it recognises the provisions of the gas contract signed in 2009. By the way, that contract was signed by people who still hold the same positions in the Ukrainian government. After signing that contract, Ukraine honoured it for a few years, but now it has refused to pay and demands a discount that is not stipulated in the contract. They cite a difficult economic situation. We are aware of this. Moreover, we are acting like good partners, offering help. You know that last year we issued a huge loan to Ukraine, $3 billion, and also a discount for the first quarter of this year on the condition – I want to emphasise this – that Ukraine will repay all its debts and provide current payments.

Ukraine has not repaid its debts, which have grown, and has stopped making current payments, even with a discount. I say again – they aren't even paying the discount price.

So, the question is: Where is our money? How was the multibillion aid spent?

Since the conditions were not met, Gazprom reverted to the full-payment system as stipulated by the contract, so this is nothing new. We did everything according to the agreements reached when the aid and discounts were provided.

Yes, there are problems, but I believe that they are solvable. All we need is a constructive dialogue. This was my vision that I presented in my address to European leaders.

Unfortunately, we have not received a clear response so far. However, we expect an adequate and balanced reaction from our counterparts, which would line up with our common interests – the interests of Russia, Ukraine and European countries.

Businesspeople make up nearly 100 percent of the audience here. You know, I’m not talking about the debt (which has grown to $3.5 billion by now). But, in fact, we have provided Ukraine with almost 10 billion cubic metres of gas free of charge. This is our annual supply to Poland. How many of you would deliver the same amount of goods for the same amount of time for no money? It is ridiculous. There must be boundaries that we just can’t cross. I will repeat once again: I hope that we can reach an agreement on friendly terms as neighbours. They want discounts. We ask them to repay the debt at least for the discount period. But they refuse to repay even this amount. What are we supposed to do?

At the same time, we intend to expand the horizons of our development and open new promising markets. This concerns energy, investment, industrial collaboration and non-energy exports.

For Russia, as a Eurasian country, it is natural to be highly interested in the Asia-Pacific region. It is both a huge market and an important source of growth for Russia’s Far East and Eastern Siberia.

Just the other day, top-level talks between Russia and China ended. We kicked off a new stage of our comprehensive partnership and strategic collaboration. Our economic relations are also moving forward. In the course of my visit, we signed over 50 agreements concerning both our governments and businesses. Their total value is in the tens of billions of dollars.

By 2020, we plan to double our mutual sales turnover and reach $200 billion. Currently, in the country ranking, China is our top economic partner with a turnover of around $90 billion.

We intend to gradually increase the share of settlements in our national currencies, rubles and yuans, and to form integrated investment and banking institutions. Such a network would provide funding to major global projects in infrastructure, mineral deposit production and processing, machine and aircraft engineering, and knowledge-intensive production. We are also moving towards building a strategic Russian-Chinese energy alliance that would serve as the main framework for guaranteeing the energy security of the entire Asia-Pacific region.

We understand pretty well that this economic partnership could be a powerful incentive to the development of both countries. Taking into account the scale of the Russian and Chinese economies, this could also be a significant factor of global growth.

Let me stress that during my visit to China we agreed on natural gas supplies from Russia for an impressive $400 billion. We calculated the gas price according to a standard formula that is based on the market price of oil and petrochemicals.

Two newly discovered gas fields, Kovykta and Chayanda in eastern Russia, will provide resource potential for these supplies. The confirmed extractable reserves of each of these fields are 1.5 trillion cubic metres of gas, which is 3 trillion in total. We agreed on supplies for 30 years but, in fact, there is enough gas for 50 years. We will also be able to improve the provision of gas supply in Russia, of course.

It is not final, but over four to six years Russia will invest some $55 billion. We will build helium-processing plants and plants for the chemical utilisation of natural gas. We will also build new infrastructure – not only gas, but also road and energy facilities. We plan to create thousands of modern, technology-intensive jobs. Colleagues, I would like to stress that this will be the largest construction project in the world – no exaggeration. China, on its part, plans to invest $20-$22 billion in their infrastructure.

The mining and metals industry – such as pipe production – will also receive a new impetus as will the domestic provision of gas supply, which is very important to us. It is a chain. Pipes are required for building gas facilities. Pipe production will support the metals industry, while metal production serves as a stimulus for miners.

The next stage would be our collaborative work on the western corridor of supplies with Chinese partners. These are supplies from the reserves of Western Siberia. As a result, we will have an opportunity to connect eastern and western gas infrastructure.

In the country ranking, China, along with Germany, is becoming a major consumer of Russia’s natural gas. Once the western corridor project is realised, China will surely become our number one consumer. I know that one of our Chinese colleagues’ motives is environmental improvement in big cities. We know well that using gas in big cities is environmentally much more beneficial.

Ladies and gentlemen,

Russia is changing. The quality of life is improving. Things are getting better, from social issues to healthcare and education. Just now, at a meeting with leaders of global businesses, we discussed some of the problems. Our colleagues pointed out that in the modern world, things like education and healthcare are important aspects of productivity and efficiency. I will remind you that experts and business analysts that assessed the long-term prospects of our economy, including our labour market, argued not long ago that the negative demographic trends in Russia would only get worse, resulting in serious problems. So what have we achieved?

Despite existing challenges, we have the figures to prove that Russia managed to overcome this problem, to make progress in resolving this historical challenge and ultimately to find a way out of the demographic trap, as experts called it.

Last year, for the first time since 1991, there was natural population growth in Russia. The increase is small so far, but we can see a positive trend. For the first time, the average life expectancy in our country reached 71 years. True, it is not the best figure in Europe, but it is a positive development.

Mortality is gradually decreasing, including cardiovascular mortality. I’d like to stress that we currently have the lowest maternal mortality rate in the entire history of our country, including the entire Soviet period and modern Russia.

We have reached a qualitatively new level on many living standards – for example, average income. These demographic and social development changes were achieved in a very short period, while many other countries take decades.

We know that there are still many unresolved issues. The economic situation, for example, is ambiguous.

Of course, we can show results. I’ll give you a few examples. Last year, over 70 million square metres of housing were built in Russia, which is the highest figure for the past two decades. The construction industry, as we all know, is the driving force in any economy.

And the Russian construction industry continues to demonstrate pretty good results. As of the end of February 2014, some 8.7 million square metres of housing were commissioned, which is 33% higher year-on-year.

Growth in the consumer market has been good, up 3.2% since the beginning of the year.

Many industries, including non-energy ones, have attracted sizable investments. For example, last year, investment in vehicle production grew by 26.6%, while machinery and equipment production received 21.6% more investments, and electrical equipment - 17.2% more investments.

In 2013, Russia received almost $64 billion in direct investments, or almost $80 billion if we count the Rosneft and TNK-BP deal, which speaks for itself. It is the best result over the past five years. Foreign rankings place Russia in the third place in the world in terms of direct foreign investment. The role of the Russian Direct Investment Fund in building strategic alliances with foreign investors should not go unnoticed.

Also, I would like to mention the growing volume and better quality and structure of Russian exports. For instance, last year, exports of Russia-produced machinery to the EU grew by over 20%. The absolute figure is still modest, but we can see a positive trend.

At the same time, economic growth slowed in Russia on the back of both external and, to be honest, domestic factors such as systemic imbalances, the build-up of economic inefficiencies and lopsided economic development.

This slowdown, with growth rates below global GDP growth, is a very serious issue for Russia. We must certainly confront this challenge.

We have outlined this course of action, this strategy, and some of these measures are already being implemented. Today, I will also announce a number of additional initiatives.

The gist and logic of our actions are to facilitate major breakthroughs in the national economy.

What is this all about?

The structure of exports must be completely and swiftly overhauled. Our goal is to ensure that annual growth of non-oil and gas exports exceeds 6 percent. To get there, we will introduce new tools for supporting Russia’s non-energy companies on global markets.

At the same time, we will be proactive in promoting import substitution in accordance with WTO rules and our commitments within the framework of the Eurasian Economic Union, which is currently being created. It goes without saying that we will promote import substitution only in promising segments where we can and should be competitive.

The next element is facilitating investment, above all in technological and industrial upgrades.

We intend to focus on modernising professional training and promoting quality growth on the labour market. By 2020, highly skilled workers should account for at least one third of the country’s workforce.

The National Council for Professional Qualifications has been established with input from Russian businesses. In the next two years, this council is expected to devise over 800 new professional standards in line with the needs of the present-day economy. Of this total, 400 standards are expected to be approved in 2014, which is a major effort. I would like to reiterate my call to our business colleagues not to slow down. These standards will be used to prepare new professional training programmes and qualification requirements.

Professional standards will be mandatory for state agencies and state-owned companies. The Government has already drafted amendments to the Labour Code to this effect and is expected to submit them to the State Duma by June 1, 2014.

We will soon hold a special meeting with Government Cabinet members to discuss the important issue of improving labour mobility so that people can move to another place to take up a job, including help with renting an apartment.

This is a matter of principle, and without addressing it we will hardly see any state-of-the-art production facilities emerge in the near future in new industrial zones and promising regions.

Now I’d like to speak in more detail about our measures to improve the business climate and encourage investment. We’ve already made substantial progress in simplifying the registration of property and companies as well as customs and taxation procedures. The Government has established an exhaustive list of permits for construction and considerably reduced the number of approvals. Although there are still many problems in this area, and those involved in construction know all about it, progress has still been made.

All in all, the roadmaps on the National Business Initiative (NBI) provided for the elaboration of about 160 draft laws aimed at improving Russia’s business climate. The plan was for these drafts to be adopted before 2018.

Then we adjusted the schedule and set the task of completing this work before the end of 2015, although I think even this substantial change is plainly inadequate. An investor shouldn’t have to wait and needs the best business conditions now, not sometime in the future. Given the need for higher growth, I believe it is necessary to submit to the State Duma the whole package before the year expires, and I will ask MPs to review them as soon as possible.

Improvement of the business climate directly depends on the regions and municipalities where investors take their projects. The introduction of regional business standards has already improved law-enforcement practice and largely changed the motivation of regional management teams by orienting them towards dialogue with business.

Now we’ll take yet another step forward by launching national ratings of the investment climate in the regions. In effect, this is a mechanism for assessing the NBI’s implementation and standards in every region based on the opinion of the entrepreneurs working there. But national ratings are not just an evaluation system; they should become an effective instrument for making systemic changes at both the federal and regional level and for promoting the best managerial practices.

The results of the first pilot ratings in which 21 regions took part have just been released to the public (I think you know this already). I’d like to congratulate the winners – the Kaluga, Ulyanovsk and Kostroma regions, the Republic of Tatarstan and the Krasnoyarsk Territory.

Starting next year, all regions will take part in these ratings, which will give us an overall picture of the business climate at the regional level.

At the same time, I think it is necessary to develop measures to encourage the regions to improve the investment climate, and I’d like to ask the Government to offer relevant proposals.

Friends,

The experience of our leading regions shows that competent work with investors and support for industrial and high-tech projects has allowed them not only to ensure high growth rates but also to substantially upgrade their production base and enhance labour productivity. In the last few years our carmakers, food industry and metallurgy have been considerably modernised.

Large amounts are currently being invested to re-equip the defence industry, which is producing not only military hardware but also a big range of civilian products. We do understand that even major projects won’t lead to consistently high growth rates. Russia needs a genuine technological revolution, serious technological modernisation. We must carry out the largest technological upgrade of our enterprises in the past half century.

What are we going to do to make this happen? First, we’ll expand access to cheap investment resources. This is easier said than done, but it is still one of our main goals. To achieve this we’ll actively introduce the mechanism of project financing, first of all in industry. It will allow us to grant investors long-term loans on easy and flexible terms. The final cost of such loans should not be above the inflation rate plus one percent. The Government and the Central Bank know about this and have received instructions. They should submit relevant proposals in the next few days.

All legal acts required to launch project financing should be adopted before the end of this year.

Second, it is essential to create convenient conditions for opening new businesses, those that start from scratch on new sites. These so-called greenfields will enjoy tax breaks based on their total capital investment. The math is simple – there are no shortfalls in budget revenues, since the enterprises do not yet exist, but when they mature and start working in real earnest, the tax base will expand and new jobs will appear.              

Third, the capitalisation of systemically important Russian banking and financial institutions will be increased, partly by converting subordinated loans into preferred shares. This will allow banks to grant more loans and reduce interest.

Fourth, the procedures for selecting investment projects and granting state guarantees will be substantially simplified and the time for relevant decision-making reduced.

Fifth, I’ve already spoken today about import substitution. I’m confident that by upgrading industry, building new enterprises and localising competitive production in Russia we’ll be able to considerably reduce imports of many goods and return our market to our national producers. I’d like to emphasise that we’ll do this without violating standards of international trade or imposing any restrictions or barriers. I’m referring to software, radio-electronic equipment, the textile industry and, of course, food industry.

I believe it’s necessary to promptly analyse opportunities for competitive import substitution in industry and agriculture. By next autumn, we will be able to see which goods can be purchased for government and public purposes solely or preferably from Russian producers and companies from the Customs Union member states. When I say “Russian producers” I also mean companies with foreign participation but operating in Russia and in compliance with Russian laws.

We will develop a whole set of measures to support domestic companies that can make competitive products. One of the measures is to establish a special fund for the development of Russian industry.

Sixth, we will develop a strategy to support companies that use the best available, environmentally friendly and safe technology. I also believe it is necessary to localise production of equipment in Russia based on the best existing technology. My task for the Government is to submit their proposals shortly.

Seventh, we must make sure that the outdated equipment and so-called “dirty” technologies are retired. We have to make it economically imprudent and unprofitable to use them.

In 2015, we will re-evaluate all production facilities. Also in 2015 and 2016, we will assess workplaces at industrial enterprises, transportation and communications companies. The purpose is to identify facilities that use outdated equipment, have dangerous or unsafe working conditions, or pose potential environmental hazards and risks. We will impose additional taxes on outdated production facilities. Even though this is a difficult and unpleasant measure, it has to be done. Another task for the Government is to develop resolutions on financial incentives for production upgrades by the end of the year.

We will also accelerate the introduction of modern environmental standards that will directly influence and motivate companies to adopt modern eco-friendly technology.

Eighth, all the measures aimed at providing a technological upgrade to the economy must be fully funded. I am requesting that the Government allocate the necessary resources when drafting the federal budget for 2015 and the 2016-2017 planning period. This work must start well in advance, even now, because we have already begun the budgeting process.

Next, infrastructure and, in particular, lifting infrastructure restrictions for regions and entire industries is our biggest priority. As you remember, at the previous forum we declared our intention to invest some of the money from the National Welfare Fund in infrastructure projects that also involve private investments and resources.

Reconstruction of the Baikal-Amur Mainline and the Trans-Siberian Railway will begin this summer as well as construction of the first leg of the Central Ring Road that will run through the Moscow Region and the newly incorporated areas of Moscow.

Both projects underwent a public technology and pricing audit that involved leading global experts. They will require massive investments and are potentially huge construction projects. Currently, the railway carries around 58 million tonnes of mineral resources a year from the major fields of the eastern range. Experts estimate that this amount will double once the capacities of the Baikal-Amur Mainline and the Trans-Siberian Railway have been enlarged. This project will receive around $16.5 billion.

The first section of the new ring road, the Central Ring Road around Moscow, will be around 50 kilometres long. The total length will be around 340 km. This project will cost some $9 billion.

We plan to significantly increase the scope of work in energy, railway, car and telecommunications infrastructure. Our immediate goal is to double the construction and upgrading of federal and regional motorways. I would like to remind the Government of the need to keep to this goal, which could require public-private partnership and extra-budgetary investments in infrastructure.

Our country has repeatedly demonstrated its ability to tackle large-scale projects. Successful initiatives have inspired the nation to work even harder. We are now united by an ambition to build a dynamic, prosperous and wealthy country that is respected in the world and open to an equal and constructive dialogue.

The Russia that we dream of is being created right in front of our eyes. I believe that the civic energy and solidarity inspired by a shared goal will help us solve the tasks we’ve set for ourselves. We will surely accomplish what we have set out to do. We value partnership and sincere friendship. We are willing to collaborate and continue working together.

Thank you very much.

CNBC ANCHOR GEOFF CUTMORE: Mr President, thank you very much for your address, and I think there was a lot in there that we can come back to on the economy. But I think it would be useful at this point for me to ask you a few questions about Ukraine.

Obviously, Ukraine is going into presidential elections at the weekend. An awful lot has been written and an awful lot has been said about your position on Ukraine, but let's be honest, most of it not by you. A lot of those who have written have said you are nostalgic for a Russia of the past. President Obama said you are on the wrong side of history. Those who have written and spoken widely talk about you rebuilding the past and wanting to create a buffer state between NATO and the EU, and yourself.

Can I ask you, what has motivated your actions through this crisis?

VLADIMIR PUTIN: I was expecting us to focus on economic issues, but let's talk about this as well, if that′s what you want.

Here′s what happened. I’ll break it down for you briefly.

Ukraine was supposed to sign an association agreement with the EU. Using absolutely modern diplomatic tools, we proved that the proposed document is at least inconsistent with Russian interests since the Russian and the Ukrainian economies are closely intertwined. We have 245 Ukrainian enterprises working for us in the defence industry alone.

Imagine that we stop taking products from them tomorrow. What will happen to their enterprises? Most of them will just stop working. You can′t buy Mi-8 engines in the West. They just don′t make them there. Or, similarly, you won′t be buying engines for vessels, as they are not used in the Western industry. On top of this, it′s next to impossible to make it into the Western market. You know it and I know it. There are many other elements, so I won′t take your time listing them. We used our numbers to prove that this document will cause a lot of damage. We proposed – I want to emphasise this and I want you to hear me – holding a discussion with us on these issues and trying to find solutions in an absolutely civil manner.

What did we get in response?

They told us to mind our own business. Excuse me, I don′t want to hurt anyone′s feelings, but it′s been a while since I heard anything that snobbish. They just slammed the door in our face telling us to mind our own business.

Well, then, if it is none of our business, we tried to convince our Ukrainian partners to take a look at the possible outcome. President Yanukovych decided to postpone the signing and hold additional talks. What came next? A coup d’état. No matter what you choose to call it, a revolution or something else. It’s a coup d’état with the use of violence and militant forces. Who′s on whose side now? Who is using which tools from the past or the future?

It′s imperative to be very careful with regard to public institutions of emerging nations because if you are not things may slide into chaos, which is exactly what happened in Ukraine. The civil war and chaos are there already. Who benefits from it? Why would they do it, if Yanukovych agreed to everything? They had to go to the voting stations instead, and the same people would be in power now, only legally. We, like idiots, would be paying them the $15 billion that we promised, keeping gas prices low for them and continuing to subsidise their economy...

Let's face it. We are all adults here, right? Intelligent and educated people. The West supported the unconstitutional coup d’état. It did in fact, didn′t it? Not only by way of the infamous cakes, but through informational and political support and what not. Why did it do so?

All right. And now you think that it′s all our fault? We proposed a dialogue and were denied it. What's next? The last time I was in Brussels we agreed to keep this dialogue alive. That was before the coup. Mr Ulyukayev (he is sitting there across from me), a man of respect, speaks decent English, has absolutely market-driven brains, one of our top specialists in the economy, went for consultations. Ask him about it after the session is over. I won′t dwell on it now. But there were no consultations. Nothing but slogans.

What's next? They made a ​​coup and don′t want to speak with us. What are we supposed to think? The next step will take Ukraine into NATO. They never ask us about our opinion, and we have found out over the past two decades that there′s never any dialogue on this issue. All that they ever tell us is, ″It′s none of your business, none of your concern.″ We tell them, ″A military infrastructure is approaching our borders.″ ″Don′t worry, it's not aimed against you.″ So, tomorrow Ukraine may end up being a NATO member, and the next thing you know, it will have a US missile defence complex stationed on its territory. No one ever talks to us on this subject, either. They just tell us, ″It′s not against you, and it′s none of your concern.″ You see, we are tired of this kind of discussions where nothing gets discussed. We start having concerns regarding economic and security issues. What are we supposed to do in this situation?

The people in southeastern Ukraine, including Crimea, were scared by such developments, and Crimean residents expressed the desire to hold a referendum on possible accession to Russia. What have we done in this situation? We have just secured their freedom of expression. And I′m here to guarantee you (this time, I believe, you will agree with me, and the vast majority of the people in this auditorium will agree as well, and people all over the world understand what it′s all about, there are no fools, actually) that if we did not do what we did in Crimea, Crimea would have it much worse than Odessa where people were burned alive. And there are no explanations, no real condemnations by anyone. It′s still not even clear who did it, I mean the tragedy in Odessa. Now you tell me: who is acting in the old way, and who is acting based on current realities?...

GEOFF CUTMORE: Mr President, I think we've all been astonished at how quickly relations between apparent former friends have broken down as this crisis has escalated. There is an opportunity here for statesmanship. There is an opportunity for you to step up and say something. Is there something you can do at this stage, or at this point, to encourage pro-Russian groups in Ukraine now to reduce the level of tension and the violence, to allow the democratic process to go ahead on Sunday, and perhaps come back to a settlement or a resolution that would be acceptable to you?

VLADIMIR PUTIN: You know, we believe, have always believed, and I′m absolutely convinced that all conflicts (we have said this many times and keep repeating this formula) end with negotiations, and the sooner they start, the better. Thus, we always encouraged opposing sides to start direct contacts soon. The first contacts took place, including with our direct participation. Unfortunately, the situation is further exacerbated by the fact that the Kiev authorities continue their punitive operation in southeastern Ukraine. The fighting is still on. Look, they are already using artillery, armoured vehicles, and tanks. Shells hit houses and kill peaceful people, people without weapons in their hands. Of course, we hope that these direct contacts will bring positive results. I'm counting on it.

But, without a doubt, the violence must be stopped no matter where it comes from before such results can be achieved.

GEOFF CUTMORE: You have said we are a room full of adults, so let's have an adult conversation. President Obama has accused you, as you know, of untruths when it comes to supporting some of the separatist groups in Ukraine...

VLADIMIR PUTIN: Who made him a judge? He′s not a judge. Why doesn′t he get a job in the judicial system then and work there?

I think that your wording was a bit off. I don′t think Mr Obama is accusing me of anything. He has his own perspective on certain processes, I have mine.

So what exactly you are interested in regarding his stance?

GEOFF CUTMORE: President Putin, you appear to now accept that the election will take place on Sunday – at least, this is what I read, but as I said to you at the beginning, I read an awful lot about what you think, but I don't hear it from you necessarily directly. Can I ask you, just to put this on the record for your audience here: Do you accept the legitimacy of the election that is going to take place on Sunday in Ukraine?

VLADIMIR PUTIN: There you go again! Time and again. Who found this guy and brought him here? You know, we realise that people in Ukraine want their country to get this drawn-out crisis over and done with, and, without any doubt, we will respect the choice of the Ukrainian people. Of course, we will keep track of the events.

You know, it would be much wiser to do as President Yanukovych and the opposition agreed in Kiev on February 21. They agreed to hold a referendum, to adopt a new constitution and, based on the new constitution, to form administrative and public bodies of authority, including a parliament and president. Presidential elections will be held in Ukraine soon. I′m not sure if you′re aware of it, but, strictly speaking, no presidential elections can be held under the current constitution, as President Yanukovych hasn′t left presidential office in a constitutional manner. There are only four ways to bring a president down under their constitution: death, and I believe that they wanted to destroy him; a disease that precludes him from performing his duties; impeachment (impeachment was not conducted in accordance with the constitution); and personal resignation, which the president must submit to parliament in person. None of this has been done, and, strictly speaking, he′s still president under the constitution.

Why create new problems that may lead some to think that future elections in Ukraine are illegitimate? Wouldn′t it be easier to hold a referendum, ensure human rights in the east and south of Ukraine, explain how these rights will be guaranteed, enshrine it in the constitution, hold elections and feel good and confident about themselves with the mandate to rule the country issued by the nation? But those who are in power in Kiev today have chosen a different path. I want to make it clear that we also want things to calm down eventually, and we will respect the choice of the Ukrainian people.

GEOFF CUTMORE: The frontrunner at the moment in the voting I'm told is Mr Poroshenko. He has told CNBC that he would happily engage with Russia if elected. Is he a man that you could do business with despite his desire for stronger ties to Western Europe?

VLADIMIR PUTIN: This is a business forum, right? Let’s not mince words. They owe us $3.5 billion. If they want better terms, they should first pay back the money. Only then we will start talking.

GEOFF CUTMORE: You'll forgive me, Mr President, if I have one more go on this before I move you on. I'm not quite clear whether I heard you say that you will accept and work with the outcome of the election.

VLADIMIR PUTIN: I told you. I’m not kidding or being ironic. We want peace and reconciliation in Ukraine. We want the country to finally overcome this crisis. We are sincerely interested, without any irony, in peace and order across our western borders in the fraternal nation of Ukraine. Even now, we are cooperating with the people holding power. We will by all means cooperate with the newly elected institutions after the election.

You know, just to be clear: I hope that after the election, all military action will immediately stop and be replaced with negotiations. Can you imagine us sitting around a table and talking while civilians are being attacked?

They must make at least some progress. You have heard about the arrests of journalists. They arrested our journalists and have been keeping them within those “Gestapo walls” for three days now. We don’t know what is happening with them now. All access to them is blocked. What kind of election rules do they have? We can see that it goes against all modern standards. Well, any election is better than nothing at this point.

GEOFF CUTMORE: Mr President, can I move you on to the international reaction? I think in 2009, we were all very excited to see the reset in relations with the United States. Today that reset lies in tatters. What went wrong?

VLADIMIR PUTIN: You know, it is the result of unilateral action. Some of the United States’ allies agree to play by the ′either you're with us or against us′ rule. First, the US goes ahead and does something and then uses these allies to create a coalition to put a good face on things. Russia doesn't work that way. Agreements must be made well in advance, in strict compliance with international law and with consideration for each other’s interests. Only in this case can we promise a reliable partnership.

GEOFF CUTMORE: So given the level of hostility at least that seems to be played out in the international media, is there a road back in the relationship with President Obama and this current administration?

VLADIMIR PUTIN: First, we did not ruin this relationship. Second, despite the tension and perhaps diametrically opposed approaches to some critical situations, we still continue this collaboration.

For example, our American partners announced they would suspend military cooperation. Really? And where exactly did we cooperate before? Well, maybe in anti-piracy patrols. We are ready to continue. Do you think nobody needs us? Of course, they need us.

The US is interested in continuing military transit to Afghanistan. They say they will suspend military cooperation but they did not suspend transit of their military cargo via our territory to Afghanistan and back because they can’t do without it.

By the way, we did not refuse to cooperate. We are still working together on the Iranian nuclear programme. Only recently, I met with the President of Iran in Beijing at a well-known international event. We spoke of the possibility of further joint action that would involve Iran but take into account the US approach to the Iranian nuclear issue.

Syria is another pressing and unresolved issue. We see this issue in a different light, but we still cooperate and we hope to find some points of contact here.

As I said in my speech earlier, nobody is forgetting about the counter-terrorism agenda we share. We continue to work on this. There are many overlapping areas of partnership beneficial for both the United States and Russia.

We are not going to isolate ourselves, but we can’t make people like us. Still, we hope that common sense and an understanding of their own interests will encourage our partners in Europe and the United States to continue working with Russia.

GEOFF CUTMORE: If I could just ask one more question on this situation now with Washington: Did President Obama misunderstand the depth of feeling in Russia about Ukraine and the situation there, or was the relationship already breaking down over things like the Snowden affair?

VLADIMIR PUTIN: Speaking of Snowden, I said it before many times. Technically, we have nothing to do with this. He happened to end up in Russia due, in my opinion, to the lack of professionalism of the US officials that tried to apprehend him. I know because I used to work for the security services.

Why did they have to scare the entire world? If they were willing to force planes with presidents on board to land, they could have forced the plane with Mr Snowden to land anywhere. They scared the whole world. The plane arrived in our transit area and then nobody wanted to accept it.

If the US security services had not scared everyone, the plane would have taken off and flown to any country. They would have forced it to land and Snowden would be sitting  in a zindan or some other prison. But they scared everyone and he stayed in our transit area. What were we supposed to do? Russia is not a country that extradites fighters for human rights. (Applause)

Thank you for this response. It’s true, I’m not being ironic. Mr Snowden believes he is fighting for human rights and he has devoted his life to this. He is very young. I don’t know how he is going to live. I’m not kidding. How is he going to live? For now, he is in Russia. But then what? He chose this fate himself, you see? We only gave him asylum. He is not our agent. He did not give away any secrets, although the rascal really should have given us something  – we gave him asylum after all. But he won’t tell us anything. He uses channels that only he knows of and makes statements when he thinks it’s necessary, and that’s it.

Returning to Ukraine, you know what the problem is? For us it is an issue of vital importance while the US only dealt with Ukraine only superficially. I was personally involved and many of the top officials present in this auditorium were personally involved, because it is vitally important to us. I don’t think it is for the States.

But in the long run, we should rebuild mutual trust and be attentive to each other’s interests. I’m not just saying that. You know it yourself if you specialise in international affairs. It is in the news every day. We constantly expressed concern over the enlargement of NATO but our concerns were ignored. They just said, “Every nation has the right to choose how best to protect itself.”

Of course, every nation has the right. Why don’t we have the right to evaluate events from the standpoint of our security? There are many ways to protect yourself. For example, the United States could have just signed a bilateral treaty on friendship and collaboration, including military collaboration. How is this treaty different from a country’s accession to NATO? There is no fundamental difference. The only responsibility they can impose on the alliance members is to contribute money to the joint military budget, which they don’t do anyway. Do you know that the spending of the alliance members is far less than that of the United States? The US always pushes them but with little success.

The same is happening with the missile defence system. They keep saying it is not directed against us.

President Medvedev, who did very much to advance relations with the United States (it was his initiative after all), said: “Well, let’s sign some document, even a trifling legal document saying this is not directed against us. Just write on this paper what you are saying verbally.” No, they refused pointblank. So, what kind of dialogue is that? Just generalities. If we have the guts to talk with each other openly and honestly and to consider each other’s lawful interests, our relations will certainly change for the better. But I’m an optimist and I’m still confident that the situation in Ukraine will settle down in some way and we’ll find the strength to normalise our relations.

GEOFF CUTMORE: Mr President, I'd like to move on to the economy, and I'd like to talk a bit about the business conditions in Russia, and how some of the sanctions that have been imposed from the West may be having an impact. And I'm pleased that we have with us a panel of international businesspeople who work very closely with Russian companies and have their own investments here. So I'd like to involve them, and I'd like them to feel comfortable also asking questions of you. Perhaps you can offer some guidance to them as to how they work here in Russia.

Last year, Angela Merkel sat on this stage with you. She appeared to be a bulwark against sanctions driven mainly from Washington, and yet ultimately, the sanctions were imposed. Today, many companies are wondering how they're going to get funding, what implications it has for the extension of credit from foreign banks. Can I just ask you very briefly, just to give us your thoughts on what the immediate impact has been so far of the sanctions that have taken place on the economy?

VLADIMIR PUTIN: I’ve expressed my view on what’s been happening in Ukraine. I think to a large extent responsibility for everything that took place there lies with our European and American partners. They supported this coup d’état and plunged the country into chaos, and now they want to shift the blame to us and make us clean up the mess they made. This is what the sanctions are for.

But for the time being all the sanctions target my friends, people who are close to me personally. These sanctions are designed to bust them, as our intellectuals say, to punish them for God knows what. If I were in such a position I would have taken the matter to court a long time ago because they have nothing to do with the events in Ukraine or Crimea. And whom have they selected? Two Jews and one Ukrainian, can you imagine? Are they kidding?

Yes, these people are my friends and I’m proud to have such friends. They are true patriots and their business is oriented towards Russia. Have these sanctions done damage to them? Yes, they have. If I’m being honest, they have. But they are seasoned entrepreneurs and brought all their money back to Russia, so don’t worry about them too much. But still, they have sustained some losses.

I think this is unfair and illegal, which is the main point, because sanctions may be imposed on a country only by decision of the UN Security Council and it has not taken any decisions on this score. In this context these sanctions are absolutely illegal and certainly deteriorate relations between our countries. We are being told now that there might be a third round of sanctions, and I have to wonder what for. 

Okay, our partners didn’t like something about how the crisis was unfolding, including Crimea, and so they imposed sanctions. Now we are being blamed for something else and told that second and third instalments will follow. I don’t quite understand – in connection with what? Quite recently there was an earthquake in Thailand that resulted in loss of life. Maybe we are to blame for that as well? Civil war is breaking out in Ukraine, but what do we have to do with it?

Understand that these are improper means and they are certainly destabilising our economic relations with the United States and Europe. While our trade with the United States is $27.8 billion, it is $440 billion with Europe. The difference is huge, as we can see. I even suspect that our American friends (and they are smart guys, aren’t they?) pushed for sanctions to gain some competitive advantages in trade and economic ties with Europe. I don’t see any other serious motives. I simply don’t understand this but hope that common sense will prevail and there will be no damage to our trade and economic ties. After all, we are doing everything we are supposed to do on our side.

Has there been real damage? There has. What damage has been done to the economy? Well, our companies no longer have access to resources they had before and some systemic things have deteriorated. But for the time being this is not having a serious, systemic negative influence on our economy, and I hope it won’t in the future.

GEOFF CUTMORE: If I could ask our panellists to join us in this conversation – Khaldoon, maybe I can start with you, from your perspective. You run effectively an investment business. What are the challenges now coming to the Russian market, not only because of some of the near-term sanction issues, but maybe some of the longer-term structural challenges as well?

CEO AND MANAGING DIRECTOR OF MUBADALA DEVELOPMENT COMPANY PJSC KHALDOON KHALIFA AL MUBARAK: Well first of all, I'd like to thank President Putin for his kind invitation. It's a pleasure to be here. Thank you for organising this forum. It's really wonderful to be in St Petersburg in May.

Russia is a very important market. And for us, it is a market that is very promising. We look at markets around the world. We look at areas and countries where we can invest sustainably for the long run. Today, we have a focus on Russia. Why? Because we believe in the fundamentals here. We have a great partnership that we've established here in Russia through RDIF. Any country, any market we enter, we like to find partners that match our skill set, that match our view in terms of how to operate, how to run businesses, how to invest. And we found that in RDIF. We found an institution that has good governance, a good management team, a supervisory board, an advisory board that runs very well, a high level of professionalism. We found a set of partners from around the world, from China to Korea to Japan, Europe, the Middle East, that also share with us the same set of values. There is an integrity in the way this business is run, there's a belief in the opportunities in Russia. And more importantly, we invest together dollar for dollar. And that's a very important thing for an institution such as ourselves. We look at investments from a risk-adjusted perspective. We have a premise in terms of having downside protection, in terms of any investing we look at. These are all very attractive fundamentals for us, and accordingly, Russia and our partnership with RDIF present an attractive proposition to someone like Mubadala.

GEOFF CUTMORE: Can I – Shiv – bring you into this conversation? SUN Group has been in Russia, what, since 1958? It's a 112-year-old family business. You have assets in Russia at this moment. But the tightening in liquidity that we've seen partly as a result of sanctions, but partly also I think as a longer-term structural issue of funding through the banking system here. To what extent is that hindering your ability to expand your operations, or indeed, perhaps to sell assets that at this point in time don't fit your business mix?

VICE-CHAIRMAN AND CEO OF SUN GROUP SHIV VIKRAM KHEMKA: Thank you. I'd also like to thank President Putin for having me here. It's wonderful to be in St Petersburg. I am proud to say, I was here for the first forum 18 years ago. It's really a wonderful thing to see how it's grown and developed into a major global platform for discussion about a global agenda.

In terms of our own business, we've been here since 1959. I moved to Russia to live here in 1990. My father sent me here. I spent 22 years here, I have many friends here, and I'm very pleased, I feel partly Russian. We have a business here, we've done various things over the years in various sectors. We have a mining business at the moment in Chita, in Chitinsky Oblast . Unfortunately the current tightening in the global markets means that any financing that was going to come in from the West, or from global investment sources, has taken a much more cautious approach – not because of sanctions, but because, I think, of the threat of sanctions. So there's a certain nervousness for people to enter this market. However I think there are institutions in Russia – Sberbank, VTB, VEB – great institutions that have been created in the last 15 years or so. And we believe that we will find solutions within the domestic context to continue with our financings and to continue to build a business.

GEOFF CUTMORE: Thank you. Fredrik, Telenor is investing in a telecom partnership effectively here. You have been, again, in Russia for many years. The company has a long experience of this marketplace. But again, I have to raise the question with you: If you were to put money today into Russia as a foreign businessman, to what extent would that threat of sanctions issue be a deterrent, or is it something else about the flow of capital out of the economy at the moment that would deter you? Or would indeed you feel happy to rush in?

PRESIDENT AND CEO OF TELENOR GROUP JON FREDRIK BAKSAAS:  Also from me, thank you for the opportunity, and also thank you for the frank speech from Mr Putin on this occasion. And there have been other occasions as well that there have been issues to address. But Telenor has a long-standing relationship to Russia, and we are neighbours in geography, so it came naturally when things started to happen here in the beginning of the 1990s. We did our first investment in 1992, and today we hold roughly a third, a little bit more, in VympelCom. And it's been a tremendous development in the economy over those 20 years-plus, no doubt about that.

But how do we move from here? And of course, without this experience right now, would we have done the same under these conditions? Maybe, because we are neighbours, but also maybe not, because of the underlying issues that were so well-described by my colleague. So I think it's a more difficult situation for newcomers. We are here, we have been here for many years, we are naturally taking business interest on how do we move from here. And my question to both the Government and President Putin would be elements to which you referred in your speech, namely, how to put the economy back in growth. How can the technology be used for that purpose? The digital economy is coming up at great speed. There are plenty of issues, but there are also plenty of potentials, both for reforms to the economy, and to put greater productivity into the economy. And aspects of that will of course be important to listen to.

But we also have to be frank and understand that the situation in Ukraine does need a negotiated dialogue solution, and I hope that platform will be established as soon as possible, that we can move forward in that direction and be optimistic in that direction.

GEOFF CUTMORE: Okay, thank you very much for your comments. Mr President, I'll come back to this if I might, because I'd just like to get Patrick to talk a little bit about the infrastructure side of what's going on. You referenced it many times in your presentation to us – Patrick Kron, of course, from Alstom, a major engineering business in power and transport.

CHAIRMAN AND CEO OF ALSTOM PATRICK KRON: Thank you, Mr President, and thank you for the invitation, both to the panel as well as for the participation in this great forum. I'm a regular participant, and I find it year after year extremely fruitful.

Yes, our company is involved in infrastructure, power generation and transmission, and rail transportation. And we are active in Russia through localisation, plants, and through partnerships with great partners.

I'll come back to what has just been said. For me, there is a key element, obviously, which is economic growth. We see currently – it's not Russian-specific – a slowdown in economic growth. And in this context, usually, unfortunately, investments are cut, or harmed. In your speech, you mentioned a number of large projects, and I would like to get your views on what will be the policy in infrastructure in general. This is a heavy industry, and for economic actors to move, you need strong signals and some visibility. So I'd be happy to hear what will be, in spite of the constraints on budgets and spendings, the policy in preparing the future.

GEOFF CUTMORE: So if I could wrap those two questions together, Mr President, and ask you just to comment.

VLADIMIR PUTIN: I have already listed these measures and wouldn’t wish to come back to them. I’d like to make the point that we are facing several problems and at least two of them are very serious – we must ensure the necessary economic growth rates and change the structure of our economy. We talk about these problems all the time. It is clear at the expert level, as we’ve said many times, that we cannot provide the required economic growth just by expanding the production of hydrocarbons – this is no longer enough because there are no customers. Gazprom, for one, has produced 460 billion cubic metres of gas and can well produce 660 billion. But we can no longer ensure the required growth rates in this way alone because we cannot continuously step up the pace as we did in the early 2000s.

The price [of oil] has reached a certain level – about $108-$109 per barrel – and it is maintaining that level, but we cannot produce the necessary growth rates by increasing sales because we need structural changes, as we are well aware.

Everything I’ve talked about today, all eight or nine points I made, is about making sure these structural changes happen. There is probably no need to repeat this now, and we may return to this later, but we’ve established a very good dialogue with our business community to keep abreast of all problems. We don’t just meet for tea – both the former and the current governments have established mechanisms of regular contact whereby representatives of our business community take a direct part in drafting decisions both on laws and bylaws.

The business initiative I spoke about is essentially a package of measures aimed at ridding the economy of red tape, adopting more effective and balanced decisions in the economy and the training of personnel (this is a joint effort with the business community, and business agencies are now drafting proposals for us on qualifications – I’ve spoken about this as well). A whole package of measures is aimed at this goal, and I hope we’ll carry them out with your cooperation.

GEOFF CUTMORE: Thank you very much for your answer. Of course, we all know that you have just come back from a trip to Shanghai, and you have signed, while you were there, a significant gas contract with the Chinese government. So at this point I'd like to invite on the stage Mr Li Yuanchao, the Vice-President of the People's Republic of China. He is to come and address us. So, if I could ask you please to come up on stage. If you could move to the end?

This of course is a significant deal that runs over 30 years, and has been, what, a decade in the negotiations.

Thank you very much. Please.

VICE PRESIDENT OF THE PEOPLE’S REPUBLIC OF CHINA LI YUANCHAO (retranslated): Mr Putin, participants of the forum, ladies and gentlemen. It is a great pleasure for me to be in Russia, its northern capital and attend the 18th St Petersburg International Economic Forum upon the instructions of the President of the People's Republic of China Xi Jinping. On behalf of the Chinese Government, I would like to congratulate you on this successful forum.

China commends the St Petersburg International Economic Forum, which became an important platform bringing together international elites to discuss global economic issues. It is evident that the primary purpose of the forum is to promote mutual understanding and facilitate joint development efforts. Mr Putin has just delivered a remarkable speech. The way you have addressed relevant issues was profoundly touching for us. China values this forum highly.

The global economy is currently undergoing fundamental changes. Swift economic recovery is not around the corner. On this backdrop, the topic of this forum, Sustaining Confidence in a World Undergoing Transformation, is even more relevant.

I’m deeply honoured to share with you some considerations as to how we can work together to overcome the challenges of change and bring about development for all.

First, we must reinforce trust in the spirit of openness and promote openness in the spirit of trust. With globalisation rapidly moving forward, openness is the only way towards prosperity and development, while trust is an important prerequisite for cooperation. In the aftermath of the Second World War, 13 national economies demonstrated aggressive growth during the following 20 years by choosing to open themselves up to the outside world.

Life teaches us that protectionism is the biggest obstacle to a global recovery. Initiatives by President Xi Jinping to promote international efforts in protecting and developing an open global economy are in tune with present-day needs. It is high time that we open ourselves to each other to bring about global development, join efforts in fighting protectionism and enhance economic cooperation by building a single global market and creating a free, open and just economic environment.

Second, we need reforms to promote innovations. Promoting reforms is about innovations. Thirty years of reforms in China taught us that reform leads to innovation, since it stimulates creativity and bold decisions. Today’s innovations, ideas and approaches, new science, technology and institutions provide an additional impetus and set new requirements. It is no accident that reforms were key to economic recovery and prosperity during the latest international financial crisis, while innovations in research and development were crucial in improving economic competitiveness. Although some progress has been achieved in the global economy, remaining focused on reforms and innovations is still relevant. It is time for us to step up efforts to coordinate macroeconomic policies, accompanying domestic reforms with efforts to reform global economic governance to bring about a new economic world order that would be fair, rational, stable and civilised, balancing the interests of all countries.

Third, we must all win from cooperation, and therefore develop cooperation in the spirit of mutual benefit. All countries across the world are opting for cooperation in the face of global challenges. The purpose of any cooperation effort is to benefit everyone. This is the only way to ensure long-term sustainable growth. The global economy has now become so intertwined that success or failure of one are bound to affect everyone. This means that we are bound by common interests, that we must promote mutually beneficial cooperation in the long run and pursue common interests. China’s initiatives to create the Silk Road economic belt and Silk Road on the Sea in the 21st century are aimed at expanding cooperation between countries along these routes and bringing it to a new level in the spirit of mutual gain and benefit.

Fourth, we must strengthen peace through development, and use peace to protect development. This year is marked by commemorations of 100 years since the start of the First World War and 75 years since the start of the Second World War. History teaches us that development is a foundation for peace, and peace is a prerequisite for development. Ensuring peace means promoting development and the happiness of the people. Development should be viewed as a national priority by all countries of the world. Global economic development should be interconnected, balanced, inclusive, and sustainable. We must work out a new security concept based on mutual trust, mutual benefit, and equal cooperation. We must overcome disputes and join efforts in creating an environment conducive to peaceful development.

As President Putin said, economic cooperation between China and Russia is an important factor for sustainable and stable economic growth. Several days ago, President Putin and President Xi Jinping held a successful meeting in Shanghai and reached important agreements on the comprehensive expansion and strengthening of bilateral cooperation, thereby bringing strategic cooperation and partnership between China and Russia to a new level.

I think that both countries should move forward along the lines traced by their heads of state, strengthen strategic and economic cooperation and promote bilateral relations in the spirit of equality, trust, mutual support for mutual prosperity and eternal friendship. This would serve the peace cause around the world.

Friends,

China views deeper reforms as a key factor of global economic growth and sustainable development. In 2013, China’s economy grew by 7.7 percent, and added 7.4 percent in the first quarter of 2014. The situation is stable and keeps improving. Reform and development in China create opportunities for the whole world. By actively standing up for peace, cooperation and mutual benefit, China is committed to mutually beneficial openness. We will join efforts with all countries in responding to the challenges of change in the pursuit of prosperity and global economic development. Thank you for your attention.

VLADIMIR PUTIN: If I may – you know, I would like to add to the speech of our colleague. As both President and Prime Minister, I have signed and attended the signing of many documents but, honestly, I don’t remember – even during my time – so many powerful documents signed in the course of just one visit. I will agree with our Chinese colleague who said that even with the advanced level of Russia-China relations we had before, with the signing of these documents and the agreements we reached during this visit, our relations with China are indeed entering a higher and qualitatively different stage. Of course, we are thankful to our Chinese partners and President of China Xi Jinping for his personal contribution to these issues.

GEOFF CUTMORE: Patrick, this again figures in your part of the world, it's an energy deal involving a great deal of infrastructure. China is an economy that also has, if the Vice-President will forgive me for saying so, some challenges at times with capital and allocating capital in the right places, and creating the right opportunities for international businesspeople to come and engage in operations. Could you just say a few words, perhaps, on how you see now the relationship between Russia and China, and maybe some of the benefits for international businesspeople like yourself who work in this sector?

PATRICK KRON: I try to exercise our modest talents downstream, not really in this field. But you mentioned China, we are very active in China, and we try to be active in Russia as well. You know, sometimes, it is easy to do business? Actually, the conclusion is, the only countries where it's easy to do business are the countries in which you are not in – every one, everywhere, it's difficult to do business, you have to adapt to the reality. We have strong challenges, strong competition, et cetera. I agree with what was said in terms of protectionism. I think open markets are a must for the way we do business. We look for open markets. At the same time, we look for fair treatment. Mr President mentioned that in the development of infrastructure of Russia, companies are welcome, whether they are foreign equity-owned or whether they are domestic players. We are very happy to hear that, and we try to do that, both in Russia and in China. But I hope that in spite of the high level of commitments taken in this visit, there will still be some opportunities for us, Mr President.

VLADIMIR PUTIN: You see, these infrastructure plans and projects… My colleague on the right said when I cited some figures – quite impressive figures, investments of $16.5 and $10 billion. Of course, both the technology and experience of our partners will be in demand. Russia is a good market for our partners to put their capacities to use.

Speaking of our plans with China – and I’m not mentioning gas although, as I said, it will be the largest construction site in the world, with $55 billion invested by Gazprom alone – these include construction of a helium plant, a plant for the chemical utilisation of natural gas and infrastructure. Of course, at this scale our partners will definitely have a chance to use their resources and assets to gain profit.

GEOFF CUTMORE: You talked a lot in your presentation about opportunity and engagement, I think, in Asia, and I want to continue this theme just a little bit more as we run down the group. Gentlemen, very quickly, because we're very close to wrapping up. But if I can start here, and just get perhaps a few thoughts on India, with the new government, the Asia opportunity, as it comes to Europe, in essence, and things change there, and maybe just run down the group and get a few comments.

SHIV VIKRAM KHEMKA: Thank you. Well, first of all, I'd like to say, about China, it's a great country, but mostly it's a great civilisation. And I believe that China's growth is something that India very much admires. And I find that Russia, China and India have a destiny, a common destiny together, in Asia. However, I feel that, unfortunately, although we have a very strong political relationship between India and Russia, a very strong strategic relationship between Russia and India, unfortunately our trade relationship and our investment relationship, don't match up to what it should. Our relationship, just to give you an example, between India and China today is $80 billion of two-way trade; with Russia, it's less than $10 billion. That shouldn't be the case. We need a reset. And I think this is a great moment to do that.

Mr Modi, our new prime minister, first of all got a landslide mandate in India. And I think 551 million people voted out of 800 million voters, and asked for change, asked for growth, economic growth in our country. We still have 600 million people that are functionally illiterate, we have huge issues with water, with housing, all kinds of other issues. Every year we add 20 million people to our country. Every seven years we create Russia in our country, in terms of population. We need help, we need support, and we need to integrate globally, in that. And I think Russia can play a very important role in that connection.

How can we do that? I think we need to restructure, and rethink about our engagement. Because evolution is not going to get us there. To go from 10 billion to 12 billion is not the solution. We need to find a way to go from 10 billion to 30 billion, and from 30 billion to 100 billion over the next 10 years. And the question is, how do we do that? And I think that needs a reset.

GEOFF CUTMORE: Thank you very much. Gentlemen, I apologise, but just can I get very few words from you? If I could start with you, Jon Fredrik.

JON FREDRIK BAKSAAS: You can get a short one on India, I'm not a specialist on India. But we do have $3 billion played into telecoms in India as well, and that's more or less the size of the exposure to the Russian economy. And I think that Mr Modi's coming has created great expectations as to his ability to run through economic reforms, which are highly needed in the direction that was just mentioned. And the potential there is just phenomenal, under the right structures and the right means.

GEOFF CUTMORE: Thank you very much indeed for keeping it brief. And Khaldoon.

KHALDOON KHALIFA AL MUBARAK: The Silk Road, historically, has always been a route that kept us close to countries like China and India – historically. Today as a trade relationship, the UAE has a very strong relationship, trade-wise, with both India and China. Of course, we'd like to strengthen these ties from a trade perspective with Russia too.

From an investment perspective, we have been traditionally conservative. We look at investment platforms in countries where we can see a growth story, but also a risk-adjusted return, I repeat that again.

We are trying hard in China. I think it'll be an area of growth for us, an area of a lot of potential in the future. If you look at the next 20, 30, 40 years, especially for investors like us, long-term investors, we have to be in China, we have to be in India and we have to be in Russia.

India is a little bit more complicated, because the investment platform there, the investment environment there, is a bit more complicated. But we will keep trying, and hopefully with partners like Shiv over here and others, we will be successful.

GEOFF CUTMORE: Sir, thank you very much indeed for that.

So what I'd like to do here, I think traditional for us, to throw forward and be optimistic about the future, and just talk about some of the larger themes. So if we can wrap with that, Mr President. When I was in Moscow in April speaking with Mr Ulyukayev in the front row here, I also met with some young entrepreneurs, some young Russian business people, who've been very excited about the last two decades of engagement with the global economy. And I have to say that they were a little down of heart, and they saw what they thought was some of the unwinding of that interconnectedness that has taken place over the last two decades. I wonder if I could ask you, how does that damage get repaired, if it is indeed damage? How do we prevent the rollback of what's perceived by the young businesspeople in this room to be the engagement that now is rather stunted?

VLADIMIR PUTIN: We need to work together to build trust. This is basically why we are all here today. The motto of this forum is building trust, which is only possible through negotiations that take into account the legitimate interests of all parties. This is exactly what Russia intends to do. We hope for a positive response from all our partners.

GEOFF CUTMORE: The young people, of course, inherit what we leave. And my sense is, from the ones that I've talked to here, they aspire to the safety of a just legal system, they want to have the freedom to criticise the Government without retaliation, and if that means the use of social media, they also would like to use Facebook and Twitter and all these other things. Do you share these goals and ambitions for the young people of Russia?

VLADIMIR PUTIN: I believe it is not just a goal but a key priority. I understand what you are implying. You are talking about possible restrictions in online activity. We don’t have any restrictions when it comes to expressing oneself or using modern technology for one’s own development or for business development.

I would like to stress this. We do listen to any criticism regarding recent legislative decisions. We have strong experience in implementing these laws.

What am I talking about? Did we impose restrictions? We did. What are their objectives? Their objectives are to ban propaganda of paedophilia, child pornography, promotion of suicide. Excuse me, but first of all, there are plenty of restrictions of this kind in legal systems of many countries, including Europe and the United States. Moreover, in certain cases these restrictions are even tougher than in the Russian law. Our restrictions are far more liberal.

And also, excuse me, but what kind of society is it that cannot protect its children? I think a society like this would simply die out. We will not go down this path.

But this doesn’t mean that we are going to seriously restrict the exchange of information or do anything that goes against the modern development trends. We will make sure this doesn’t happen. By the way, we are working on this right now. The Government is developing measures to fund broadband internet across the country, up to every single village in the most remote regions. I would like to stress that our practical steps are aimed at fully employing modern technology.

GEOFF CUTMORE: You'll forgive me just for asking one more on this, because we have obviously seen – and this is what our panel is ultimately about – how we steer a path through what has been a troubled period of time for the planet. And we have seen in many occasions, where there have been difficulties, social networks getting closed down, or banned. And they have become, like, I suppose, the telephone was for my generation, the way that people communicate today. So no ban on Facebook, no ban on Twitter, no ban on the Russian equivalents, regardless of what's on them.

VLADIMIR PUTIN: Firstly, we are not going to ban anything. Secondly, we have no right to criticise those who do that. Every country’s case has its particularities and we are not here to judge. We are not planning anything like this. We plan to develop modern communications and I hope that we will never come back to the times when the Kalashnikov was the only means of communication.

GEOFF CUTMORE: Mr President, can I ask you then just to share with us your global view, if you like, how you see the world as it stands currently – the trends, the opportunities, the challenges?

VLADIMIR PUTIN: You mean in terms of industry? Our Minister of Communications is here. He can answer this question better than me. The higher up you are, the less you need to know. (Laughter.)

But if you are talking about qualifying bloggers as mass media… Is it what you are talking about? Be direct. Our people are straightforward. You can say exactly what you want to say. This practice exists in some European countries, in the UK, in Germany and the United States. It is nothing unusual, but until now there has been a gap in our legislation and now we are closing it. These regulations do not contradict any global trends. Everything is absolutely reasonable.

GEOFF CUTMORE: I should rephrase my question, it really wasn't a question about technology at all. In fact, what I'm asking, as we come to the close, really, of this session, is just to give us a statesman's view of how you see the world developing from here.

You talked a lot in your speech about the tensions between the old world order, the new world order, the connection with Asia and other G20 economies, the challenge of what was a G8 now being a G7 – and I don't know where Russia... whether Russia attends the next meeting coming up... But there are so many big issues that I think it would be useful to get your world view on, if you just share with us.

VLADIMIR PUTIN: This is a difficult task. It could be a topic for another forum, for roundtables and panel discussions. But generally, I hope, despite occasional problems, that humankind will have enough common sense, and that experience of the past decades and even centuries, including tragic experience (our colleague from China mentioned that we are approaching the 70th anniversary of the Second World War and the anniversary of the First World War), will eventually encourage the world to resolve any disputes through negotiations that would take into account interest of the parties.

GEOFF CUTMORE: So let me wrap up here – thanking you once again for having us here, inviting us to be your guests. And if you could just leave our business community with a message before we wrap things up.

VLADIMIR PUTIN: My message would be very simple. Think about the benefits and possible dividends you would derive from working in Russia. Don’t let the pressure and blackmailing prevent you from going your way, and you will succeed. And we will help you with that.

I would like to say thank you to our moderator. I don’t know what you do for living but, on the one hand, you are a frightful person. (Laughter.) On the other hand, you are very talented. You managed to create a to-the-point, while at the same time, very interesting atmosphere for discussion.

Thank you very much.

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D. Medvedev

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