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Meeting with members of the Council of Legislators

April 27, 2015, St Petersburg

Marking Day of Russian Parliamentarianism, Vladimir Putin met with members of the Federal Assembly’s Council of Legislators.

Particular focus at the meeting was on issues concerning the state authorities’ efforts to overcome the economic crisis, drafting of a report on the state of Russia’s legislation in 2015, and the draft law On the Regional Civic Chamber of the Russian Federation.

Federation Council Speaker Valentina Matviyenko, State Duma Speaker Sergei Naryshkin, heads of regional legislative assemblies and representatives of the executive authorities and public organisations also took part at the meeting

* * *

President of Russia Vladimir Putin: Colleagues, good afternoon.

It gives me great pleasure to greet the Speakers of the Federal Assembly and the members of the Council of Legislators here in St Petersburg and congratulate you all on this occasion – the Day of Russian Parliamentarianism.

We all understand this commemorative date’s historical dimension and know that it embodies the road that our country’s parliamentary development followed, the road of people’s representation and its evolution over time from the people’s veche to today’s legislative branch of government.

It is symbolic that today’s meeting is taking place at the Tauride Palace. It was here within these walls, on April 27, 1906, that the Russian Empire’s first legislative body began work. All of Russian society had been eagerly awaiting this event and saw it as a national achievement and a very important step in developing Russia’s statehood.

I am sure that like your predecessors, you will use your powers entirely for our country’s benefit. I believe that continuing these historical and state traditions are the guarantee of our country’s stable and democratic development. I want to wish you success in your important work.

Colleagues, you represent the legislative branch of power and our country’s leading public and political forces. Your work reflects the people’s will and interests and gives them form in law. The effectiveness of your work is crucial for strengthening our country, achieving rising prosperity and resolving acute social problems.

The regional legislative assemblies have seen their political influence increase considerably over recent years. Today, you are responsible not only for regional laws, but also play a big part in forming the executive branch’s bodies in the regions, play an active role in appointing representatives to supervisory bodies and regional human rights commissioners, and forming other state and public institutions. Finally, your decisions determined the local government model and procedures for electing the region’s head. This large-scale and comprehensive work reflects the development of federalism in Russia.

The Council of Legislators receives a constant stream of the latest information on life in the regions and people’s concerns, including information on how laws are being implemented in practice. You see the country’s entire legislative landscape. This should certainly help you to respond to the needs of people in general and members of various professional and social groups and the business community. The Council of Legislators is a unique body. I do not think there is an exact equivalent anywhere else in the world, including in the ‘old democracies’.

As we continue developing our parliamentary system, we should draw more on our own experience and be more active in spreading the best practice from our colleagues in the country’s regions, all the more so as facilitating this kind of exchange of parliamentary experience is one of the Council of Legislators’ direct responsibilities.

Representatives of the legislative assemblies of Crimea and Sevastopol, who were elected just over six months ago, are taking part in the Council’s meeting for the first time. Colleagues, you have a unique opportunity to make use of the very latest legislative solutions and I am sure that the Federal Assembly and the regions will give you all possible help.

Just over a year has passed since Crimea and Sevastopol were reunified with Russia. Thanks to the legislators’ efforts, many much-needed laws have been passed over this brief time. The residents of these two new regions have received Russian social guarantees and regional and local government bodies were established rapidly. I want to thank once again the members of the Federal Assembly for acting quickly to resolve these large-scale and complex tasks, and I want to thank our colleagues from Crimea and Sevastopol too.

Now, we need to ensure the full integration of Crimea and Sevastopol into Russia’s legal space. This includes continued work to create the legislative base for a good business environment, creating new opportunities for attracting investment and ensuring its protection, modernising transport infrastructure, and developing tourism, agriculture and the resort sector. In general, we must establish the conditions for Crimea’s sustainable socioeconomic growth and for raising people’s living standards.

Colleagues, we will soon celebrate the Victory Day anniversary. This is truly a holiday that our entire country holds sacred. It unites and brings together our whole society and reminds us of the role our country played in the 20th century’s pivotal events and in saving the world from Nazism.

Sadly, even the most sacred things have become the focus of speculation today. This is not something new of course, and it is not the first time that we see and hear such things. This is not the first time that we have encountered a selective approach to history for the sake of political opportunism. But today, these processes have become a genuinely aggressive campaign. It is particularly worrying to see the attempts to distort the meaning of the victory in this war, turn black into white, liberators into occupiers, and Nazi collaborators into freedom fighters.

It is our task to resist actively any falsification of history. We have a common responsibility for ensuring that people know the truth about the war, honour the real heroes, and never forget what catastrophes result from ideas of national exclusivity and aspirations for world domination. Resolving this task depends in large part on politicians, parliamentarians, public figures, and on you, colleagues. We must always remember and be guided by this.

In conclusion, let me congratulate you and your colleagues once more on this day – the Day of Russian Parliamentarianism.

Thank you for your attention.


Vladimir Putin: Colleagues,

The theme you have chosen for today’s meeting is highly relevant: overcoming the crisis. The second theme, which our colleagues spoke about just now, is the upcoming anniversary of Victory in the Great Patriotic War.

Both of these subjects are exceptionally important for us. I will not speak about the historic event that is the 70th anniversary of victory. We all know how important it is and I spoke about this in my opening remarks.

As for overcoming the crisis in our economy, in order to decide what we need to do, we must first understand the causes, as the specialists say, understand the origins of the developments taking place. So, what are the causes? There are external causes of course, but the causes are above all internal in origin.

As I said during Direct Line, what was the situation we had ended up in of late? We were right from a social point of view to press ahead rapidly with raising wages and giving people higher incomes, in part because wages had for many years been quite low.

But ultimately, this led to some economic imbalances because labour productivity lagged behind wage growth, and this always creates distortions in the end.

What does this mean in practice? This is not the Direct Line now, thank goodness, but a professional meeting. What this means is that if our total GDP comes to such and such an amount and wages grow, consumption grows too, and to cover this increasing demand, we turn to imports.

 Imports increase and to cover the cost we draw on the reserves that we built up from revenues earned from sales of hydrocarbons and other raw materials. This is one cause of our problems. Now I will say a few words about the others too.

As soon as prices for hydrocarbons, oil prices, halved in value, this created problems. These problems came through above all in budget spending. With lower revenue, we have no choice but to cut budget spending. This is the crux of the matter.

Is this an inextricable situation? No, this is not the case of course, but recovery can be painful. This is the only problem. This crisis has not destroyed anything; on the contrary, it is getting us into better shape in a sense because we all need to understand that the oil and gas deficit, which over these last years reached slightly more than 10 percent, was not a good thing for our economy and we were always pumping money from that sector. This was the most serious, systemic cause.

What do we need to do to resolve this problem? We need to do what we have been talking about all this time, but which is not easy when prices for our traditional export goods are high. It is very difficult to encourage economic actors to move into a business that is less profitable than oil and gas and their derivatives, things like mineral fertilisers, which are produced using gas. It is as simple as that.

This is something we need to do on an ongoing basis, with the help of various budget allocations or through tax policy. The Government has been doing this, but it is not an easy task because if we go too far in subsidising one sector we think important, we can end up harming other sectors.

As I said, we are already pursuing such policies, but all of this takes time. The changing circumstances now force all economic actors in general to start investing in other sectors too. Ultimately, this will make our economy healthier. This is the first component of the crisis situation we are looking at.

The second component is linked to the first. When prices for our traditional exports such as oil and gas fall, this has an impact in one way or another on our currency. In this situation, the Central Bank either has to dip into our reserves to maintain the exchange rate, and play into profiteers’ hands, or it is forced to do what it did and go over to a floating exchange rate.

Yes, this weakened our national currency. But let me stress that this was the only economically justified way of balancing the situation in our economy in general. Of course, this did lead to a number of unwelcome consequences.

Above all, it made all imports more expensive, across all sectors. This inevitably has an impact on companies’ activities and ability to survive. Perhaps it does not affect their actual ability to survive, but it certainly does have an impact on their activities.

We just need to get through this period. The economy and the manufacturing sectors need to adapt to this situation, understand their possibilities, and assess their investment prospects. This takes time.

Overall, we are getting through this period and our economy is adapting to the new conditions. We see this reflected in the ruble’s exchange rate and this is not just the result of a slight rise in oil prices.

The next component is man-made, as we created it ourselves. In response to the sanctions imposed on the Russian economy, we imposed certain limitations on access for agricultural products to our markets.

It was clear from the start that this was bound to lead to a certain price rise. However, this was also a chance to clear our domestic market for national producers as we retain our membership in the WTO.

Here we need to keep a close watch over violations on the market. I urge you and your colleagues from the administrations to monitor this very closely. Unfortunately, I must state that many participants in economic activities in this area are taking advantage of the situation and inflating prices without reason.

However, this will also pass as our own production grows. We should not forget that 40 million people live in rural areas or are involved in agricultural production in one way or another – this is a third of the entire population of the Russian Federation. Therefore, in any case we are moving in the right direction.

Finally, regarding the notorious sanctions and limitations. Let’s consider what happened and what those who imposed the sanctions were counting on, deliberately or not. Look at it this way: the overall volume of foreign currency coming into our economy used to be $500 billion – actually 497, but let’s say 500. After the drop in oil prices from $100 a barrel to $50 we failed to receive $160 billion of the 500 – this is a lot.

Meanwhile, our quasi-partners limited access to refinancing on the European market for our banks. We failed to receive $160 billion and last year our companies and banks had to service their loans to their foreign partners by paying a total $130 billion, with another $60 billion due this year. Some were probably expecting to see some sort of collapse: we were $160 billion short and needed to pay up $130 billion plus $60 billion.

However, there was no collapse. The Russian economy managed to overcome these artificial berries with relative ease. True, we were $160 billion short, however our companies rather easily paid all their debts, which came to $130 billion last year, and they have already paid a significant part of the $60 billion due this year.

We have passed the payment peak. If anyone intended to orchestrate some sort of collapse, it did not work. True, such artificial limitations deal a sensitive blow both to those who did it, our partners, and have a negative impact on us, and generally there is nothing good about this – these are illegal limitations in terms of international law and from the viewpoint of the WTO.

This, naturally, limits our opportunities for active development; however, it will clearly not lead to any sort of collapse. It cannot because it is already a thing of the past. Actually what they are trying to preserve is now counterproductive for them, not for us. It does still have a negative impact on us, as I have said. However, overall we have passed the peak.

What is our task? It has not changed from what we stated in the 2020 Programme – diversifying the economy and putting an end to its unbalanced development. Once oil prices are in the $60–70 range, this will create conditions for those involved in economic activity to see profit in investing not only in oil, gas or mineral fertiliser made with the use of natural gas, but also in other branches of the economy, including the high technology sector. At the same time, there will be state support in the form of tax incentives, among other things – so we can make a new major stride in the development of our agriculture while liberating our market of the preponderance of imported produce that is often of low quality.

If we actively move in this direction, we are certain to make significant progress in enhancing our economic sovereignty and this would be a true, visible step towards the diversification of our economy and ensuring its innovative development.

The same is true of finance. It is ridiculous and mind-boggling: we do not have our own national payment system. Visa and MasterCard occupy the entire market. This does not make sense. We always proceeded from the notion that the economy is separated from politics and our partners always told us that we should not link economic and political matters.

However, whenever anything happens they try to use economic levers. In this case too. It is of course convenient for those who travel abroad to use Visa and MasterCard payment systems. But should they take up more than 90 percent of the home market? It is regrettable that we did not envisage this earlier.

There are quite a few examples of such foolish and pointless dependence. However, the problem is not that we are dependent – mutual dependence is appropriate and right in the modern world. However, it is in those sectors of the economy where we can actively develop that we need to restore our own competency. We should not and will not go for overall replacement of imports. That is not our goal.

I have said this on numerous occasions: can we grow, say, bananas? Yes, we can. However, these bananas will be worth their weight in gold. Why do it? We can buy them in Africa. However, there are things we should definitely do ourselves. Moreover, we can do it. Civil aircraft construction and shipbuilding, for example. We must continue our work in microelectronics, which is the basis of the nation’s current defence capability. And so on and so forth.

There is a very large number of areas in which we have always been highly competent. Unfortunately, we lost this competence for economic and other reasons. We can and should restore it. This is the chance we have now. If it used to be easier even for large production facilities, even in the defence industry, to buy some microchips or electronics abroad and install them even on their systems, now it is not. However, it has now become clear that we can do it ourselves.

Therefore, in all areas that have to do with national defence, we will strive to replace imported goods. We can and should restore our competence in high technology industries wherever we need to. This spells the development of the country, the development of our economy.

I would like all of us, as we understand these things, to work actively and efficiently and to make responsible decisions without fear. Leadership means not simply taking care of the day-to-day matters – which is also very important, of course, but mainly it is about setting goals and working your way towards them.

Thank you very much. I wish you success.

April 27, 2015, St Petersburg