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The 13^th VTB Capital Russia Calling! Investment Forum is being held online on November 30-December 1, 2021. Its central theme is Rethinking Priorities, Embracing Sustainability.

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President and Chairman of VTB Bank Management Board Andrei Kostin: Mr President, colleagues,

I am delighted to welcome you to the 13^th VTB Capital Russia Calling! Investment Forum.

This is our 13^th forum, as I said, and it is being held online for the second year. Do you know what we have found out? Every cloud has a silver lining, as the saying goes. Earlier, our auditorium accommodated 2,500 investors, and over 1,000 people arrived from abroad. Last year, three million people, including 180,000 foreign participants and audiences who were able to attend our session online, watched our forum. I am therefore confident that we will also return to the offline format, but, of course, we will continue to take advantage of the opportunities created by the internet to ensure the broadest possible coverage, because people are tremendously interested in our forum, primarily because President Vladimir Putin is speaking here.

We have already held a session on macroeconomics this morning. Our ministers, including the Economic Development Minister, the Finance Minister and the Central Bank Governor, took the floor, and representatives of the business community also took part. It was very interesting.

Sometimes, I get the impression that the very history of our businesspeople testifies to the Russian economy’s capabilities more vividly than any words. One of the speakers at the session, Tatyana Bakalchuk, the mother of many children, came up with an idea for an online company called Wildberries during maternity leave. Today she is the sole owner of this company, which has a capitalisation of US$13 billion. This is an example of a new Russian economy which is being created with the use of new digital technologies and that has nothing to do with oil and gas. This is an amazing success story. I think this discussion was also very interesting.

Today, we begin our main session. It will start with an address by President of the Russian Federation Vladimir Putin, and after that we will have the opportunity to ask your questions and get the questions.

Thank you.

Mr President, you have the floor.

President of Russia Vladimir Putin: Thank you very much.

Ladies and gentlemen,

First, I would like to welcome all of you to the Russia Calling! Investment Forum. By tradition, it has gathered domestic and foreign investors and experts to discuss current issues on the business agenda, key trends that determine the development and investment potential of individual business areas, markets and even whole countries.

Of course, the coronavirus pandemic has been in the focus of the world’s attention for almost two years. There is nothing we can do about this. Its impact on investment, business and cooperation ties is great. It is affecting the entire global economy.

I would like to note that the economy is gradually recovering nonetheless. However, the rates of this recovery are in question and everyone knows why – it is yet another wave of the disease caused by a new coronavirus strain. This compels governments all over the world to resort to restrictions again.

In the next few weeks, we will find out how serious the consequences triggered by the new strain are. But it is explicitly clear that we must be ready for any change in the virus. First, it is necessary to continuously monitor the efficiency of tests and vaccines and use clear-cut algorithms for reducing the spread of infection. The healthcare system must be on high alert; it must have enough reserves of medications, oxygen and beds and use the most effective treatment protocols.

I would like to ask the Government – I address my colleagues in the Government of the Russian Federation – to prepare within a week an updated plan of action to counter the risks of the spread of the new coronavirus strain.

At the same time, considering the global cross-border nature of the disease, we can give an effective response to the pandemic only if we work together – I have said this many times, and not only I. Appeals to pool efforts in fighting this infection are voiced in the United Nations all the time. It is only possible to counter it effectively by coordinating the efforts of the entire international community. I am referring to mutual recognition of vaccines and vaccination certificates, access to vaccines in all regions of the planet and joint work on new anti-coronavirus medications.

I am sure it is hardly possible to counter this idea. The understanding of shared responsibility, especially by the leaders of the world’s most advanced countries, will become a foundation for more vigorous joint actions.

As for the economic agenda proper, a distinctive feature of the current situation is the high inflationary pressure; the world is entering a new wave of the pandemic with this. As experts, as direct participants in global economic affairs, you are well aware that the rise in prices is due to a whole range of reasons that added up.

In particular, consumer demand for services such as tourism, transport and public catering recently has subsided and shifted towards goods, and everyone is well aware of that. At the same time, the closed borders and the COVID-19 restrictions have disrupted many supply chains; there is a shortage of certain goods, and this is pushing prices up.

There is another significant factor that accelerated inflation, perhaps even played a key role – the extremely soft budgetary policy in most developed countries, the growing budget deficits, a trend that persists this year, which means that global inflationary risks are still out there. Indeed, a substantial infusion of funds into the economy have helped them support people and business in difficult times, and we also do this in Russia, but at the same time, injecting money on a global scale, so to speak, provoked a surge in prices on global markets, including commodities markets.

We are witnessing a major crisis breaking out in the global energy market. The first thing it did was send up prices of nitrogen fertilisers, something agricultural producers around the world need as one of the key resources for maintaining soil fertility and stable yields. It is obvious that this situation creates risks for further growth in food prices. Wheat prices have risen sharply on global markets over the past month. According to experts, this trend may continue.

Unfortunately, Russia and Russians are also feeling this global inflationary pressure. The growth of consumer prices in our country has accelerated, largely under the influence of external factors. This is a serious and sensitive problem for the people, especially for low-income families, and addressing it requires the utmost attention.

It is important not only to deal with the consequences of inflation, but also to act proactively and to remove the factors that are driving prices up. We are already providing targeted support to manufacturers of the goods that are most susceptible to abrupt price fluctuations, primarily, food. And here again I want the Government and our colleagues in the regions to keep in mind the fact that an increase in output and an increase in availability of food on the domestic market are the key performance criteria in this area.

We have also expanded financial aid to citizens with low incomes. This year, we made one-time payments to pensioners and families with schoolchildren, and we are launching new measures to support families with children. Next year, we will re-adjust the subsistence level and the minimum wage, as well as social benefits. These decisions have already been taken.

Of course, this is not an exhaustive list of measures to support the people. Based on our financial capabilities, we will work through other solutions in this regard.

At the same time, it is important to maintain a responsible approach in the macroeconomic sphere. Notably, Russia was the first among major economies to normalise its budgetary policy amid the pandemic. Starting next year, we will strictly follow the budgetary rule when forming and executing the federal budget.

Also, all the measures to support the people that we are implementing remain within the budgetary parameters and are carried out at the expense of extra budget revenue and redistribution of its expenditure. Thus, they have no inflationary implications.

With regard to monetary policy, the Bank of Russia continues to stay the course of curbing inflation and timely and proper regulation of the banking sector.

Thanks to responsible and well-calculated actions by the state and businesses, the Russian economy has already exceeded the pre-crisis level. In January-September, the GDP increased by 4.6 percent. It is expected to grow by 4.2 percent as of the year end.

The unemployment rate dropped to 4.3 percent in September which is just what it was before the pandemic broke out. Today, we can safely assume that the labour market in Russia has fully recovered which, notably, we cannot yet say about many leading economies around the world.

Our strategic goal is to support and consolidate positive trends in the Russian economy, to ensure its sustainable and lasting growth or, as experts say, to boost the potential rates of economic growth.

Considering the lessons of the epidemic, current global challenges, and Russia’s natural competitive advantages, we are determining points of growth for capital investment. Importantly, we want this investment to produce a comprehensive effect for the branches of the national economy and the country’s regions, primarily, for increasing the incomes and the living standards of our people.

At this point, I would like to draw your attention to several key areas.

First, our long-term priority is the growth of the share of infrastructure investment in the GDP. We have launched a powerful instrument for the development of territories – 15-year-long infrastructure budget loans at 3 percent interest. These are very good terms for our economy. In the next two years, the additional amount of work on the projects carried out with the help of this instrument is expected to exceed half a trillion rubles. We will spend these funds on building roads, networks and communications systems – everything that provides comfortable living conditions and allows us to create jobs, open new production lines and launch advanced projects. These efforts are not merely effective from an economic point of view, but have a positive impact on the environment and create new opportunities for the self-fulfillment of people in all regions of the country.

I have already said that the programme of infrastructure budget loans will last at least until 2026. We will determine its precise scale a bit later with due account for the experience gained and the readiness of new projects, as well as the technological and production capabilities of our construction industry, which are certainly rapidly building up. We will draft simple and understandable procedures here in order to build quickly, reliably, with high quality, in a modern way and without losses and encumbrances.

I would like to note one more important decision. There are plans to allocate 2.5 trillion rubles from the National Wealth Fund (NWF) through 2024. These funds will be invested on a refundable basis in major investment projects, primarily, in infrastructure, and will certainly let us attract additional private investment. At any rate, we are hoping it will.

Second, we support investment aimed at making positive social and environmental changes in our country, which meets the sustainable development goals that Russia plans to achieve. Experts have already drafted a legal framework for launching green projects that will allow us to reduce harmful emissions substantially. Starting July 1, everything will be ready in Russia for launching climate initiatives of businesses, including foreign companies. They are very important for our economy to reach carbon neutrality by 2060. We have already announced this, in Glasgow, in particular.

The new programme to improve the economy’s energy efficiency is going to play an important role. The Government should complete its preparation by October 1, 2022.

We will vigorously develop the infrastructure for investments in sustainable development, and stimulate the inflow of private capital in this area. I ask the Government, as well as the Bank of Russia and the business community, to work out a range of appropriate financial instruments, including tax incentives, subsidies, and government guarantees for enterprises and investors. At the same time, I would like to note that several current projects are already enjoying this kind of support, but again, it is important to make this work systematic.

Third. Digital transformation, the introduction of new technologies in all spheres should give a boost to the development of the national economy, should increase labour productivity and people’s incomes. Even today, Russia is one of the global leaders in the use of digital services and the development of artificial intelligence technologies. We are also well aware that it is important to ensure a balanced development of digital ecosystems, and to define the role of financial institutions there. Let me remind you that such ecosystems are centered on an individual and their so-called digital profile. And, as I emphasised at a recent international conference on artificial intelligence, it is essential to determine a correct model for processing large amounts of information, to ensure the absolute protection and security of personal data, and in general, in a broader sense, the protection of people’s rights and freedoms.

Fourth. The banking sector and the stock market play an important role in the recovery of the Russian economy and in putting it on a long-term growth trajectory. Thanks to their strong financial position, Russian banks are now increasing lending to the real sector. Our host, the organiser of this event, can certainly confirm this. You probably have already spoken about this a lot.

It is important to further increase the availability of lending resources to sustainable, growing firms and companies that need funds to boost production and create new well-paid jobs. At the same time, banks should carefully assess potential borrowers’ credit quality, regardless of their form of ownership.

I will add that, relying on fundamental macroeconomic factors, Russian stock indices have exceeded their pre-pandemic levels, and Russian bond and equity offering is growing. We will make our platforms more attractive, for foreign investors, among others.

Notably, the securities market has become more accessible for small and medium-sized businesses. This year, the volume of bond placements by these companies amounted to 7.6 billion rubles. We will take further action to develop this capital mobilisation tool and provide overall support to small businesses by offering innovative solutions. Thus, small and medium-sized businesses now get a refund on bank commissions when selling goods and services to individual customers. This procedure is convenient for businesses and beneficial for the consumers, and will remain in place until the end of this year. I believe it should be extended for at least another six months.

There is one more important issue. The Russian stock market is actively attracting funds from individual investors. Over nine months, their investments grew by more than a quarter, which adds stability to the securities market and makes it more attractive. This resource should not only become a major source of financing for investment projects, but also work reliably for individual investors and generate a steady flow of income for the people who are willing to invest long-term in the Russian economy.

In this regard, I want the Government to draft additional proposals to this end, including deductions from tax on capital gains from long-term investment in Russian securities. We are doing this for bank deposits to protect private deposits, and this tool is, of course, much sought after. I also propose thinking about the co-financing of such savings by the state. At the same time, I would like to point out that market fluctuations and retracements are part of the stock market. Once again, I would like to stress that it is necessary to protect the interests of citizens and guarantee the safety of their savings. In fact, we are talking about a mechanism that is similar, as I mentioned earlier, to the bank deposit insurance system. Please work through this solution. I know that, overall, the Government sees this as a good idea, is thinking about it, and already has come up with some solutions.

Colleagues, I would like to end my opening remarks here.

I will be happy to listen to what you have to say, your thoughts, comments or suggestions on what you think about working in Russia, what difficulties or problems you have, what you would like us to know, and what advice you have for us. We always heed your recommendations.

Thank you very much.

President and Chairman of VTB Bank Management Board Andrei Kostin: Thank you very much, Mr President.

We have investors online today from diverse regions: the US, Great Britain, Europe, Asia and the Middle East.

However, I would like to give the opportunity of asking the first question to Chief Executive Officer of the Qatar Investment Authority Mansoor bin Ebrahim Al-Mahmoud because he is a major shareholder of ours.

In 2013, Qatar’s sovereign wealth fund purchased half a billion dollars’ worth of VTB shares and subsequently invested hundreds of millions in our projects. It is Pulkovo’s biggest stakeholder, and we are looking forward to the government commission’s decision – which should be affirmative – on QIA buying nearly 25 percent of the Western High Speed Diameter (you attended the opening of this road, it is a high-speed motorway in St Petersburg), and so it is actively involved in infrastructure projects in Petersburg.

I would like to give the floor to Mr al-Mahmoud first. Thank you.

Vladimir Putin: Yes, please.

Mansoor bin Ebrahim Al-Mahmoud: Thank you, President Putin. Thank you, Chairman Kostin. 

My name is Mansoor Al-Mahmoud, CEO of QIA. Mr President, we have been very active investing in the Russian economy, in a range of different industries: banking, retail, energy, and so on. 

I have a very simple question for you, Mr President. Given all the current geopolitical challenges facing the world, from COVID-19 to climate change, or from sanctions to bilateral relations, I would like to ask you what are the issues that keep you awake at night? And, from your experience, what are the best ways to address them and to ensure Russia’s continuing economic prosperity? 

Thank you.

Vladimir Putin: I have already attempted to say it in my introductory remarks. Indeed, Russia is encountering the same problems the rest of the world is facing – climate change, the coronavirus, which stifles economic activity, cuts down on opportunities for travel, personal meetings and so forth, inflation.

Meanwhile, I have just said that we nevertheless managed to organise work in such a way that we are returning to pre-pandemic levels in the crucial macroeconomic indicators. One of them is unemployment declining to 4.3 percent. It was slightly higher before the pandemic here. If memory serves, it was 4.7, whereas now it is 4.3 percent.

Our economy is growing at 4.7 percent of the GDP this year. It is not the world’s highest, we are aware of that, yet it is a fairly good number for us. And the key is that we are trying to do everything based on the principles of macroeconomic policy. It is important to take the necessary decisions in due time, to analyse the outcome of the decisions made and to proceed from them in developing new plans.

This does not mean that the only thing we are thinking about is keeping up appearances on paper, no. We understand perfectly well that everything related to the current problems affects the people. Therefore, we are trying to take balanced decisions here too, both regarding support for the economy and its worst-affected areas above all (I am not going to list them, you know them all too well), and citizens, especially those categories who need state support. They are the elderly, pensioners and families with children. I have already said that we raised the minimum wage and subsistence minimum. It will all affect a whole range of benefits that are all calculated based on those minimums.

And now regarding the main thing. We do not overlook strategic development issues while addressing current ones. We definitely want to support the transformation of our economy on a digital platform, we want to ensure the necessary amount of investment by investing ourselves on behalf of the state, primarily in infrastructure.

We hope our investors will appreciate all our efforts, will trust our plans and will co-invest – the way our Qatari friends are doing.

Andrei Kostin: Thank you very much, Mr President.

Colleagues, please, who is next? I am being insistent as many people want to ask a question.

Please, who is next?

Oleg Kuzmin: Good afternoon, I am Oleg Kuzmin from the London-based Pharo Management investment fund.

Thank you very much for the opportunity to take part in the discussion.

Mr President, I want to ask the following question: back in the early 2000s, the Russian economy was growing fast and modern state institutions were being restored or created. Over the next 10 to 12 years, until the present day, Russia regularly faced sensitive external shocks, including plummeting oil prices, global financial or epidemiological crises, like the one now, and sanctions. However, despite these shocks, Russia has managed to significantly increase the sustainability of its economy, and now there is a popular saying among international investors, particularly investors in debt instruments – in bonds – that Russia has built a sort of economic fortress among developing countries.

You have already identified key areas of future work but still I want to ask, in this context, the following question: what do you see as the top priority for the socioeconomic development of Russia in the next ten years? Now, indeed, the balance of payments and financial standing are favourable and the mechanisms for effectively mitigating, as much as possible, the impact of external factors on the country’s economy have been put in place, including budget rules and inflation targeting. Generally, it looks like a fortress has really been built. What is next?

Thank you.

Vladimir Putin: Our colleague from Qatar has just asked me: “What keeps you awake at night?” In the sense, “What is your greatest concern?”

We have domestic issues typical of Russia, primarily demographic problems. We had two natural declines in our demographic development: during World War II or the Great Patriotic War, as we call it, in 1943–1944, and in the early and middle 1990s after the collapse of the Soviet Union. There was an equal drop in the birth rate. It was the lowest in 1999 – I believe a little over 1,200,000. In 2006, we already had almost two million births – more than 1,900,000.

This problem has acquired a systemic and economic character due to the shortage of workforce in the labour market. We have a little over 80 million there and our losses amount to 1.1–1.2 percent a year.

In this context, demographics is one of our main problems both for humanitarian and economic considerations, and because we need to strengthen our statehood as well.

I will not enumerate all the measures and instruments we are using and intend to continue using in the future in order to tackle this problem. In general, we managed to get things moving in the recent past. Overall, we understand what we can do and know how to do it.

Of course, this miserable disease has unfortunately increased the death rate and this has demographic effects as well. To repeat, we had these natural drops in 1943, 1944 and the 1990s.

This is the first problem that we must resolve. We must make the digital transition, which I would describe as crosscutting and total in both the economy and state government.

You said we have built an economic fortress. If they say so, it is good but we are not striving to build fortresses and to live within the fortress walls. We are simply raising the level of our sovereignty, including economic self-sufficiency, and we will certainly strive to achieve this. But we will also strive to achieve this in cooperation with our partners the world over – wherever there is the desire for it.

Andrei Kostin: Thank you.

Next question, please.

Guido Chamorro: Guido Chamorro from Pictet Asset Management. I have the pleasure to be here in this forum. 

As investors, analysing the macro fundamentals of the Russian economy, such as growth, inflation and debt levels, is no longer enough. Our players are now asking us to also incorporate environmental, social and governance issues when assessing the risk of investing in Russia. 

Mr President, what message would you like to convey to the international community that may want to continue investing in Russia but must also implement and assess sustainability? 

And besides some of the measures on the environmental side, as you mentioned, carbon neutrality by 2060, are there any specific government policies that you would like to highlight, that may improve Russia’s ESG profile going forward? 

Thank you.

Vladimir Putin: We realise how the world is developing, where it is heading and what the basic criteria for today’s investment flows are. The ESG is a comprehensive aggregated indicator of how a state plans its development in the near-term, mid-term and more remote perspective. Naturally, people must be at the centre of attention when it comes to development. The Russian Federation is aware of this and not only because it wants to stay on trend but also because the foundation of our policy, our entire policy, is focused on the people. At any rate, this is what we aspire to. Sometimes we do not succeed but we are committed to working for this.

What does this mean? It means that we must improve healthcare and look after the environment. If we set the goal of decarbonising our economy by 2060, we will consistently, incrementally work toward this goal.

Maybe this looks modest at first sight because other countries set more ambitious goals for themselves. However, I have every reason to believe that we can also achieve these goals sooner if we do everything as planned. We have a whole set of tools to reduce the carbon footprint of our economy. We can make better use of the absorbing capacity of our forests and ecosystems in general. This means we should take better care of them, fight wildfires better and plant new forests where the old ones are gone, and so on.

This entire package, including the modernisation of the economy and, as I have already mentioned, the transition to complete digitisation, allows us to say that we do not merely support all UN-formulated criteria for sustainable development but are also playing a most active role in work with other countries to this end. I am sure our investors will see this. Moreover, if they take part in our work, they will be on trend. The transition, or our contribution to the development of alternative energy sources, to hydrogen energy, in the near future, and so on, will meet the expectations that the world has for us, whether it is the official authorities of the world’s leading economies or the investors that play a direct role in global economic development. So, we are speaking the same language and understand each other.

Andrei Kostin: Mr President, may I ask a sensitive question related to this issue?

Yesterday Rossiyskaya Gazeta published a survey conducted by the famous Swiss bank Credit Suisse, according to which GHG emissions are generated not only by enterprises and the economy in general, but also by people. To reduce the carbon footprint to the target set out in the Paris Agreement, 2.9 tonnes per capita a year, people must abandon coffee, beer and meat, use gyms and treadmills for only 30 minutes three times a week, and take one flight a year. But personal hygiene is the worst part: they should have eight-minute showers three times a week, flush the toilet twice a day, and use washing machines and dishwashers for only two hours per week. Only under these conditions will a person meet the greenhouse gas emissions target.

Would you like to live like that, in such a world?

Vladimir Putin: I would like to live in a world where personal hygiene does not damage the environment, where we will make flights on non-polluting aircraft and our food is produced and utilised in the appropriate way.

You see, Mr Kostin, any target can be achieved if we do not approach the matter mindlessly but as persons who think about finding solutions rather than explanations or justification for their failure to attain the goals set. If we work towards this result, we will achieve it.

Andrei Kostin: Mr President, that is absolutely right. Nevertheless, I suggest that the carbon footprint should be increased for the heads of state to at least 6–10 tonnes per year, considering the specifics of their work.

Vladimir Putin: Well, thank you.

Andrei Kostin: Next, please.

Jacob Grapengiesser: Jacob Grapengiesser, East Capital.

You have mentioned red lines in relations between Russia and Ukraine several times. In a way, the issue is also connected with the West and NATO. Can you clarify where these red lines run and what can be the consequences of crossing them? Should investors anticipate a potential deployment of Russian troops in Ukraine?

Vladimir Putin: Regarding the potential deployment of Russian troops in Ukraine, the rumour first appeared in early 2021, when we held the Zapad 2021 military exercises, but, as we know, nothing happened. The point at issue is not to deploy or not to deploy troops, to fight or not to fight. The point at issue is to develop relations aimed at fairer and more stable development based on respect for the security interests of all the participants in international affairs. If we work towards this sincerely, nobody will feel any threats.

As for the threats, the people living in the two so far unrecognised republics – the Lugansk and Donetsk people’s republics, threats are regularly created there by the movement of the military contingents near their territory. This is the second point.

Third, the Russian Federation also has certain apprehensions regarding the large-scale military exercises held near its border, including unscheduled ones, like the recent Black Sea drills during which strategic bombers, which are known to carry precision and possibly even nuclear weapons, made flights within 20 kilometres of our border. All this is posing a threat to us.

As for the red lines, they are largely hypothetical. Nevertheless, take a look at what has been going on for the past 20 years: relations between Russia and the Western community, the collective West, were nearly cloudless in the 1990s and early 2000s. Why did they need to enlarge NATO towards our border? What for? Who can answer this question? There is no reasonable answer; it does not exist.

Our relationship was almost idyllic, especially in the mid-1990s, when we nearly became allies. However, despite all our warnings, conversations and requests, the [bloc’s] infrastructure ultimately approached our border. The situation went as far as the deployment of BMD systems in Poland and Romania, and the launchers that have been stationed there, the Mk 41, can be used to launch Tomahawk missiles and other strike systems. This is creating a threat to us – this is an obvious fact.

What has happened in response to all our appeals and requests not to do this? You can see it now. As a result, we had to – I want to stress this – we had to reciprocate by launching the creation of hypersonic weapons. This was our response. But we were not the first to start all this – it all began when our partners withdrew from the ABM Treaty and later from the INF treaty.

You have asked about Ukraine and where the red lines run. They are, above all, the threats to us that can come from that territory. If the enlargement, the infrastructure continues to be enlarged – I have said this publicly, but you are businesspeople and may not have the time to follow this, I will repeat this once again that the issue concerns the possible deployment in the territory of Ukraine of strike systems with the flight time of 7–10 minutes to Moscow, or 5 minutes in the case of hypersonic systems. Just imagine that. Incidentally, you live in Moscow, as far as I know. East Capital is in Moscow, isn’t it? The flight time to Moscow is 5 minutes [for these systems].

Jacob Grapengiesser: Yes, I have been living in Moscow for the past 15 years.

Vladimir Putin: So, what should we do? We would need to create similar systems to be used against those who are threatening us. Can you imagine that?

But we can do this already now, because we have held successful tests, and early next year we will put a new sea-launched hypersonic missile with a maximum speed of Mach 9 on combat duty. The flight time to those who issue orders will also be 5 minutes.

Where are we heading? Why are we doing this? The creation of such threats for us is the red line.

I hope it will not come to this. I hope that common sense and responsibility for one’s country and the international community will prevail after all.

Andrei Kostin: Regrettably, such fake news is affecting the market. Our stock market has grown by over 30 percent this year. Of course, investors did well, but now the market plunged by 11 percent because of this fake news about Ukraine, this fake news alone. Regrettably, this is having a serious impact indeed on the market.

Vladimir Putin: This may be done on purpose, so as to make a profit from this, and then the market will surge again. They are making money from a falling market.

Andrei Kostin: Yes, this is possible. We cannot rule this out.

Please.

Oliver Weeks: Oliver Weeks from Brevan Howard in London.

Mr President, since you returned to the presidency, we have seen in Russia stagnation of real household incomes, rising inequality, and you have had to apply more and more open political repression. If you plan to stay as president after cancelling term limits, do you think that less austere fiscal policy might be a better way to preserve your support?

Thank you.

Vladimir Putin: Regarding the start of my presidency and the falling incomes, it is true that there has been a certain decrease in incomes during the past few years because of the pandemic. There is nothing unusual in that. This has happened in nearly all countries.

As for the start of my presidency, the situation is opposite now: nearly 40 million people lived below the poverty line then. Many of them, 20 million, still do, but the figure has, nevertheless, decreased by half. In this sense, our economy has changed, and people’s incomes have changed radically in a positive sense.

But once again, we know very well that, due to growing inflation and food inflation, which is also growing, personal incomes are dwindling. In these circumstances, we are conducting a well-targeted policy to support the economy and maintain the employment rate, on the one hand, to make sure that people can work and earn money. On the other hand, we are providing targeted support to specific categories of the population that need government assistance. As I said, these are primarily senior people and families with children.

I am not going to list the entire package of support measures but, for example, when it comes to families with children, we start with supporting pregnant women, then children under three, then children aged three to seven, seven to sixteen, single-parent families and so on. We have not finalised this package and it will be improved and expanded further.

By the way, over the first nine months of 2021, there was growth in real disposable incomes, which we also recorded. Although we understand that, if you look at specific categories, people with low incomes are indeed struggling due to the food inflation, which is higher than the general inflation (around 10 percent). We will adjust our policy accordingly. Once again, by developing the economy and supporting specific categories of people, we expect to increase personal incomes in general.

This question is, on the one hand, political and, on the other hand, economic: would it be better to pursue a softer policy? Look, we already said that some countries (I will not specify, as you know them very well) adopted a very soft policy. And what happened? Global inflation growth. Therefore, considering the fundamentals of the Russian economic development (its foundation, its macroeconomic indicators), we will monitor this closely. This is why the Government and the Bank of Russia are taking what I believe to be timely decisions to contain the inflation.

At the same time, we are using the reserves to stimulate economic growth – first and foremost, by developing infrastructure in the broadest sense of this word. I am talking about airports, seaports, roads, railways, utility communications, water and energy supplies. We need to create basic conditions for developing the economy and, standing on this foundation, we will be able to move the entire economy forward and improve the quality of life for our citizens. This is the order in which we will continue to take action.

I think, it is very important that investors also understand that we will not engage in populism. We will not just print money and inject it into the economy to achieve short-term quick-fix results without thinking about tomorrow.

Andrei Kostin: Thank you.

Colleagues, let’s proceed.

Rob Drijkoningen: Good afternoon, Mr President. Rob Drijkoningen, Neuberger Berman. We have several hundred million invested in your country – companies and government bonds.

I would like to ask you a question around your direction on going digital. I know Russia is doing a great job of cracking down on cyber hacker groups. But there still seems to be a significant number of attacks that are serious, that are coming out of the Russian territory. What is the main challenge preventing you from putting an end to these? Thank you.

Vladimir Putin: Dear Rob, what prevents other countries from doing this?

There are far fewer cyber attacks from Russian territory than from the territory of other states, for example, the United States. The largest number of cyber attacks reported by international organisations – not Russian, but international agencies, including US ones – came from the US cyberspace. So, what is preventing them from putting an end to this?

What is preventing them is that hundreds and thousands of people invent laws, while millions invent ways to evade them. This is also true in this case: considering the speed of global development, the training of professionals and the temptations those with relevant skills and competencies are facing, the state is often lagging behind them.

We are taking the necessary measures in this sphere. But to be able to work effectively, just as in the case of the pandemic, we need to unite the efforts of all states.

I would like to note that we have urged many of our partners, including our US partners, many times, including during the last year of President Obama’s term, to work together on this issue. Initially, the Obama administration seemed to be interested, but later it had no time for these initiatives. Later we made the same offer to President Trump. After my meeting with the incumbent US President in Geneva, we agreed to launch this work; expert groups have already been formed and are working together. I hope that this will have a positive effect not only for the United States and Russia but will also give a positive impetus to global cooperation, primarily on the UN platform.

We are resolved to do this, and we will do this. We are interested in this, because the number of cyber attacks against our resources is not decreasing but, on the contrary, has increased. Moreover, the number has increased many times over – I don’t remember the exact figure for the first nine months of this year compared to the year before. This is affecting us, and we are aware of the importance of joint efforts in this sphere, and so we will do this.

Andrei Kostin: Cyber attacks are one of the reasons why I have been put on the US sanctions list. I have no notion of how to stage such attacks, yet I have been accused of hacking activities.

Vladimir Putin: You, a hacker? Really?

Andrei Kostin: Yes, this is what the US side thinks.

Vladimir Putin: Maybe you are a surreptitious hacker?

Andrei Kostin: Yes, I must be a very surreptitious hacker.

Vladimir Putin: Maybe we just don’t know this. (Laughter.)

Andrei Kostin: Yes, I’m a very surreptitious hacker, even if I am not a smartphone user. (Laughter.)

All right, colleagues, let’s resume our work.

Vladimir Putin: We will definitely do this.

Andrei Kostin: Who is next?

Richard Xu: Hello, Mr President. This is Richard Xu from Cathay Life, and we are active investors in the Russian sovereign banks. And thank you for this rare opportunity.

I would like to ask about Russia’s fiscal policies, as we are seeing lots of energy exporting countries preparing for the post-oil era. And currently, 30 percent of the federal government’s revenue comes from the oil and gas sector. So, what is Russia’s long-term fiscal plan? And to navigate this kind of situation?

Thank you.

Vladimir Putin: This is a traditional question for us.

Indeed, oil and gas proceeds account for a considerable volume of our budgetary revenues.

But I should note that oil and gas and other energy carrier proceeds continue to dwindle all the time, year after year. At the same time, the share of other, non-oil and gas, proceeds is increasing. And we intend to continue doing this by addressing a key matter of our development, that is, by diversifying the Russian economy. But this is the subject of a separate report and discussion. In any event, we will tread this road. This is the first thing.

Second, I would like to draw your attention to the fact that the world’s population is growing, and that it will continue to grow. Moreover, the economy is growing, and it will continue to grow. The global economy will require more power and energy than it needs today, and it is now hard to predict how the structure of the global energy sector will change.

By the way, various specialists voice different approaches and assessments. For example, the International Energy Agency experts believe that, in principle, the structure of the global energy sector will change only slightly, if at all, in the next two or three decades, and that hydrocarbons will remain.

First, we are keeping this in mind, but we assume that our hydrocarbon reserves, including oil, first and foremost, can be used not only by the fuel and energy sector, but also by the chemical industry. This, too, will provide us with some revenue. This is the first aspect.

Second, an extensive oil and gas infrastructure can be used to produce “green” hydrogen and supply it to the global market. This hydrogen is slightly more expensive than conventional hydrogen. On the whole, this is possible, and this is a promising direction for the development of our energy sector.

And, finally, gas is the most convenient hydrocarbon product, and it is also the cleanest product, so to speak. One can safely say that gas supplies will be retained, and they will expand, especially in Russia, at a time when our main European clients are downsizing production. In 2020, gas production dropped by 24.5 percent there, and their gas demand continues to increase, especially during the transitional period. We are also keeping this in mind.

We will develop other energy sources, we will certainly develop alternative energy sources, solar panels and windmills. We are working on this, we are working rather intensively, and the share of these alternative energy sources continues to increase all the time in our energy balance.

Today, the Russian energy sector ranks among the “greenest” in the world. Hydropower plants, nuclear power plants and renewable energy sources account for 40 percent, and their share reaches 86 percent together with gas. Far from all countries achieve such parameters, and they can be counted on the fingers of one hand. Only two, three or four countries are outracing Russia, that is about it, and the rest are posting much lower parameters. And I believe that these are also our initial competitive advantages allowing us to think about the steps that we will have to take in the near future.

I am therefore confident that we will have something to work on, including together with our foreign friends and our investors.

Andrei Kostin: Thank you.

Let us go on please, colleagues.

Mehak Bkhatai: Thank you, Mr President. This is Mehak Bkhatai from Wellington Asset Management, based out of Boston.

My question is regarding the security situation in the Middle East, especially in light of what happened in Afghanistan this year. I would like to ask you how you see Russia’s role in the security situation in the Middle East, and here I ask not just about its political future but also about the economic future.

And, related to that, do you see over the next few years that Russia and China can work together in the Middle East towards the economic future of the Middle East? Thank you.

Vladimir Putin: First of all, let us discuss the Middle East.

The Middle East is a region, with which we traditionally have had very close and very good relations – I mean, with practically all countries in the region. These relations have grown even better, stronger, more pragmatic and effective over the last few decades. I think that this is certainly a success for our foreign policy in this area.

What is the key to success all about? It is about respect for the partners, for their traditions, religion and history. It is about absolute non-interference in their internal affairs and a search for points of contact and methods for making these contacts effective. And if they are effective, we get the required result that is of use both to Russia and our partners in the region.

Let us recall what was happening a decade ago. The entire “civilised world,” I think, was applauding the Arab Spring. OK, where is this “spring” now? Nothing but tragedy came out of it. Why? Because outside forces began exploiting the objective difficulties in some countries to rock the boat and remake the pattern of living there along their own lines. Properly speaking, practically the same, an identical attempt was undertaken in Afghanistan. All of us are well aware of what it all came to.

We see, therefore, that on the one hand many of our partners say: “Yes, we made a mistake, it was impermissible to behave like this in Afghanistan,” but that, on the other, they continue to do the same in other regions. Regrettably, the hard-learned Afghan lesson has taught them almost nothing. I will not give you names now, but I often heard my colleagues say: “Yes, we overdid it there, we failed to take into account this and that.” But the same is continuing in other regions, including, incidentally, in African countries and in the Middle East.

 I think, therefore, that we should proceed from what I have mentioned – respect for our partners. And if we base our policies – by “we” I mean the global community as a whole – on these principles, it is certain that success is in store for us. Although occasionally this is a difficult process that requires time and patience, there is no other method to achieve the long-term settlement of one crisis or another and get a head start on development.

What I said about the Middle East also concerns Afghanistan. The country is going through difficulties. It is not the right time or place to give opinions about the Taliban and so on, but the Taliban is controlling the situation in Afghanistan right now. We need to help Afghan people, at least by releasing the Afghan funds in the Western bank accounts, primarily in the United States. These funds must be released so that people can have the opportunity to do basic things. This money could be released specifically for humanitarian purposes such as purchasing medical equipment, medications, etc., supporting children – at least for that. It is possible to release the money for a specific purpose. It will not be spent on weapons. The Taliban does not even need more weapons because arms worth billions of dollars were left behind, just abandoned there in Afghanistan. I believe it is necessary to look one step ahead.

As for our cooperation with China, we have many areas of cooperation with the People’s Republic of China. One of them is, obviously, our cooperation in third countries. This cooperation has been going on for some time and it can be expanded. Why? Because we have similar approaches and principles.

We support our Chinese friends in their efforts as part of the Belt and Road strategy. I would like to point out that today, China is the largest investor in the Middle East. Naturally, we welcome these efforts by China as they benefit the region’s development. For our part, we will do all we can to ensure security (like we do in Syria, for example) and contribute to maintaining stability in other countries of the region. Of course, we will look for opportunities to use our technology to participate in these countries’ economies.

Representatives of countries that invest significant resources in the Russian economy are taking part in this meeting. We jointly produce high-tech products here in Russia. These products are exported to third markets, including the investor countries. Our cooperation is expanding and becoming more fruitful. We hope this will be the case for a long time.

Andrei Kostin: Colleagues, let’s continue.

Please.

Yekaterina Ilyushenko: Good afternoon.

Mr President, VTB Capital, thank you very much for this opportunity to ask a question.

In the next decade or two, the Russian economy is going to face certain factors that will slow its potential growth. You have already mentioned some of these factors in your address, such as two demographic waves and, unfortunately, the pandemic that is also having a certain negative effect on the population. Also, there are, unfortunately, slow labour productivity growth, possibly due to the fact that the share of value-added industries in the economy is still small, and the energy transition, the global departure from hydrocarbons.

My question is, what do you and other senior officials believe is the most serious obstacle to economic growth? How will it be outlined and in what kind of timeframe?

Vladimir Putin: I have already mentioned this and you said it as well. You basically answered your own question. These are demographic issues, labour productivity and diversification of the economy thanks to modern digitalisation trends.

I will not go into other areas right now, the areas related to new economies so to speak, involving biology, genetics and so on. But we simply need to put the economy on new modern tracks in the broadest sense of this word. But the demographics, investment and labour productivity that must be based on this new economic structure, on a new quality of economic development – all these things are actually specified in our economic development goals. Of course, everything revolves around people but securing people’s interests requires positive resolution of the issues in the areas that I have just mentioned and some of which you have mentioned as well.

I think there is no point in listing everything right now as it is set forth in the economic development goals and the strategies for a whole number of areas of focus. For demographics, it is, once again, healthcare, helping families with children and so on. For investment, it is creating conditions for investors, eliminating red tape, creating stable macroeconomic conditions, which we have been able to achieve. As for upgrades and transitioning to modern knowledge-intensive industries, we have also developed strategies to approach this issue and will continue to develop them.

Overall, we have managed to achieve a great deal but, of course, there is still a lot to be done. Perhaps even more than has already been done. But the results of the past 10 to 15 years still give me reason to believe that we will continue to develop as fast as we need. At any rate, we really want the Russian economy to grow slightly faster than the average global rate, or 3–3.5 percent. This year, we can achieve 4.7 percent. I do not know if we will manage to maintain this rate in 2022. There are different opinions on this matter but I really hope that it will be higher than the average global rate. I am confident that we are able to achieve that but we will see how it goes.

Andrei Kostin: Thank you.

Colleagues, next, please. Let us speed it up.

Michael Cohen: Michael Cohen, from Capital World Investors. I am based in London. Thank you very much, gentlemen.

I wanted to ask: President Biden has recently announced his intention to run for another term. I would like to ask, Mr President, do you intend to do the same? What goals would you like to still achieve for Russia? And what do you think about the next generation of Russian leaders?

Vladimir Putin: Have you asked, or was it the translation: which other goals for Russia besides possible re-election? I believe that my re-election is not a goal for Russia.

I believe that President Biden did right by announcing his possible re-election, because if he starts preparing for election in the United States, then the governance of the country will be greatly affected. Therefore, the US President does not need my assessments, but I think that he did absolutely right.

Speaking about my plans, do you know what the trick is? The trick is that according to the Constitution I have the right to run for another term. I have not decided yet whether I will do this or not. But the very fact that I have this right stabilises the domestic political situation, almost like President Biden’s announcement that he will run. The fact that I have this right is enough, for now, but it is too early to say who plans what for 2024.

What would I like in the future? Of course, I would like to fulfil the plans we have announced, the goals we have set to develop the country. This also goes for human resources. We have very talented and ambitious young people, and I would like to see ambitious and patriotic young people on the political stage, in the economy, in art who would not be afraid to take the responsibility for the future of Russia and search for ways to develop it and find them, as well as have the strength – creative and physical strength – to fulfil the tasks they set. I do not doubt for a second that this is exactly what Russia’s future will be like.

Andrei Kostin: Thank you.

Colleagues, next, please.

Abdulla Al Marzouki (in Russian): Good afternoon, Mr President.

My name is Abdulla Al Marzooqi, I am the head of Mubadala office in Moscow.

Mr President, the United Arab Emirates and the Russian Federation, through our various sovereign investment funds and financial institutions, have established a strong platform for co-investing. Mr President, you mentioned high-tech products in one of your previous answers. Where else do you see the biggest investment opportunities for our two nations? Thank you.

Vladimir Putin: You know that Mubadala fund is a reliable and close partner of ours. I know that you cooperate closely with the Russian Direct Investment Fund. Together you look for opportunities to co-invest and make decisions on automatic co-investment with the RDIF, and there are many areas of co-investment.

Of course, we would like to see investments first of all in high-tech spheres of production. I will not list them all now, but I know from Kirill Dmitriev’s reports that you are constantly working on this. In fact, he stays in contact with you weekly – with you, with the leadership of the United Arab Emirates.

You have already invested 10 billion, if I remember correctly, right?

Andrei Kostin: Is the volume of Mubadala’s investment in Russia US$10 billion?

Vladimir Putin: The platform is worth 10 billion, I believe.

Abdulla Al Marzooqi: About 10 billion.

Vladimir Putin: Yes. So, first of all, high-tech spheres. However, I know that you are also looking for opportunities in metallurgy, in energy. We have no restrictions on investment from the United Arab Emirates in any economic sector. I know you have good plans for transport. We will support everything you find acceptable and interesting.

Andrei Kostin: Thank you.

The next question, please.

Yerlan Syzdykov: My name is Yerlan Syzdykov. I represent Amundi Asset Management, the world’s largest manager of ESG and sustainable development assets and the largest European asset manager.

Mr President, in the recent past, Russia has been building stronger ties to China as Western sanctions intensified. As the West designated now, China is a key strategic competitor, and some voices in the West are calling for so-called reverse Nixon policies towards Russia. Will Russia respond and rebalance its relationship with the West and China?

And what would be the conditions under which Russia could consider such a rebalancing? And, Mr President, you also mentioned the threats to Russia, Russian security. Given that China is planning to quadruple its nuclear arsenal and recently successfully tested supersonic missiles, at what point will Russia consider the Chinese military buildup as a threat to its national security? Thank you.

Vladimir Putin: I have been intimidated by China since 2000. Since that time, those who were intimidating me have got frightened themselves and started changing their China policy. In my opinion, it has already changed – hence, the sanctions and different types of restrictions that seem to me to be unjustified through and through and in conflict – in this case I mean in respect of China – with international law.

But it is a fact of life that this rivalry is mounting and, sometimes, I would say, makes little sense, like the creation of an alliance in the Pacific area that comprises the United States, the UK and Australia. Closed alliances established against someone are unlikely to improve the situation in a region – just the opposite, they tend to create tensions. We have always spoken in favour of creating a single security system that considers the interests of all participants in the international dialogue. Well, they did what they did.

As for China’s growing might, we are seeing it, and everybody is seeing it: it is chiefly economic might. Why then must we be guided by third countries’ interests in shaping our policy? We have always been guided, and will be in the future, exclusively by the interests of the people of the Russian Federation – Russia’s interests. At the same time, we always have respect for the interests of our partners in the international arena and appreciate reciprocity. Incidentally, China, in response, is treating us the same way.

So, as for economic relations, there is an implication in your question: are we not thinking of scaling down cooperation with China, something the United States is urging its European partners to do?

Look, last year, in 2020, trade between the US and China grew by 8 percent, while trade between Russia and China by 6.7 percent. Why are they calling on others to curtail relations while they themselves are doing the opposite?

First, we will be guided by our interests. Second, we hear the United States call on its European partners to curtail relations with China. But last year, China became the EU’s top trading partner, having outstripped the United States. It is a natural process, which cannot be halted. So, one should simply be guided by these considerations and, based on them, shape one’s policy.

Our trade with China is growing. Last year, it reached US$104 billion. In the near future, in the next couple of years, we plan to bring it to US$200 billion. Generally speaking, that is a good figure for our trade with China but still it is a far cry from what the United States or Europe have with China.

With regard to its growing military power, you see, China is a country with a population of almost 1.5 billion people. It is probably entitled to build its defence policy so as to ensure the security of that vast country. Who can say no to it? Economic growth leads to growth of military power. It is a natural process.

Look, Great Britain and France have announced their plans to upgrade their nuclear arsenal. Is the United States affected by this? Does this fact concern it? No. Why would we be concerned about the increased military capabilities of our closest neighbour, with which we have an unprecedentedly high level of interstate relations? No, this does not scare us, because we ourselves are building up our capacity as well.

You said that China has tested a hypersonic rather than supersonic weapon. They tested hypersonic weapons, and the test was successful, and we saw our US partners’ reaction. We are aware that our US partners are a little ahead in creating hypersonic weapons. They just do not talk about it, and no one is making fuss about it. By the same token, no one was making fuss about it when they tested anti-satellite weapons 10 years ago, and now have it in their possession. Russia conducted such a test quite recently, and the entire world was set abuzz. But the United States already has this weapon; it obtained it 10 years ago. So, public rhetoric is one thing, and actual events are another.

We will expand our relations with China as we see fit. We are satisfied with the level of our relations. We think that they can be even deeper, more substantive and benefit the people of China and the people of Russia.

We are thinking about our own security and are cooperating with our partners in the areas that we consider important. We consider it important to conduct a dialogue on strategic stability with the United States. We are conducting this dialogue with the People's Republic of China as well. We conduct regular joint military exercises, exchange delegations, and we are aware of current developments. Relations are stable, and, moreover, relations between Russia and China are a significant stabilising factor in the world.

Andrei Kostin: Mr President, it is rumoured that you will go to Beijing for the Olympic Games. What are you looking forward to more, watching hockey and skiing, or talking with Xi Jinping?

Vladimir Putin: I plan to attend the opening ceremony.

Andrei Kostin: I see.

Very well, colleagues, let’s carry on. Who is next?

Maria Luisa Matarrelli: Good afternoon, Mr President. My name is Maria Luisa Matarrelli from Eurizon Capital in Milan.

We are actively investing in the government bonds market. My question is: you have recently declared that the existing model of capitalism has exhausted itself. Indeed, the issue of income inequality and the need for more social justice together with the de-globalisation of supply chains are becoming more and more important issues in the world after the pandemic especially. How do you see Russia’s role in this age of change?

Vladimir Putin: We have already touched upon this subject over the course of this discussion, in one way or another.

What is the existing model all about? You were right to note that I was talking about the model of capitalism as it exists today. How can it be described? There are a lot of imbalances within it, enabling some countries to benefit from their advances in the defence sector to try and impose their rules of the game, impose sanctions in the economy, which makes it impossible for many countries to unlock their potential. All this throws the global economy off balance and has a disruptive effect on social affairs and politics. All this brings about tension in various parts of the globe and gives rise to acute conflicts, including in the Middle East, which we discussed a short while ago. We know this all too well: this goes for Libya, Yemen, Syria, and Afghanistan. Several African countries face multiple challenges. This is how we get migrant flows. This is what I have been talking about.

To avoid all this, we need to build a model of international relations where all members of the international community would feel equal. At the end of the day, we need some sort of common rules, and it is critical that everyone adheres to them. Instead of following someone else’s rules when nobody knows who sets them and how, we need common, coordinated rules that are accepted by the international community. This way we would have a sustainable framework.

If we can make this happen in trade, this would stop the world’s leading economies from imposing their will on weaker economies or dictating trade policies which undermine investment. For example, if we can develop this new kind of relations, which probably can happen only in an ideal world, so this would be a far cry, but still, this would prevent restrictions on settlements in certain currencies. At least if we strive to achieve this, I believe that we can build a more balanced world with a better balance in our relations, which also means a greater effect from the efforts to achieve the goals we pursue.

Andrei Kostin: Thank you.

Colleagues, next question, please.

Chris Kelly: Hello and thank you, Mr President. My name is Chris Kelly. I am a fixed income investor at Invesco in New York, and we invest extensively in Russian government and corporate debt.

You argued that US policies undermine the dollar’s status of the world’s reserve currency, and in line with this, Russia has accelerated its de-dollarisation drive.

What do you see as the future of the global monetary system? And what role do you think Russia will play? Also, what are your thoughts on gold and cryptocurrencies as the old and new alternatives to fiat money?

Vladimir Putin: I did not say that the dollar is no longer a reserve currency or a universal global currency for carrying out settlements. No. All I said was that the policy carried out by the authorities, and I mean the political authorities of the United States, undermines the dollar and pushes us to look outside of the dollar zone.

Chris, do you see what this is all about? It is not that we want to go anywhere else. By the way, Russia’s major oil and gas companies transact in dollars. However, to give you an example, we are being prevented from carrying out dollar settlements with our partners in the defence industry. Do we have any choice? We are being forced to look elsewhere. They impose sanctions on certain goods that have nothing to do with the defence sector, which also makes dollar settlements quite challenging. The American authorities are creating problems with their own hands, which squeezes the dollar-denominated transaction volumes around the world. This is happening not only in Russia, but around the world. I think that there was also a slight decline in the share of dollar-denominated foreign exchange reserves from 61 to 59 percent. The pound sterling and the yen have been increasing their share in international forex reserves, while the share of the dollar has been shrinking.

If the US government continues down this road, the share of the dollar will decline even further. This would happen all by itself, quite naturally, and not because we want to do something and so on. All the other global economic actors also see what is going on and are beginning to think about this.

Therefore, we have been transitioning to settlements in national currencies in our relations with many countries. For example, some international structures like BRICS are creating their own currency baskets. We are also thinking about this within the Shanghai Cooperation Organisation (SCO). Of course, what matters the most here is to make the ruble less volatile. If we think about certain settlements with our partners, at least within the CIS and in our cooperation with the former Soviet republics, where our ruble-denominated settlements are increasing, less volatility is clearly our main objective. This is obvious.

This is also why we are trying to maintain macroeconomic stability and macroeconomic indicators, that’s why all this is interconnected. On the whole, we have succeeded in this. We are aware of the amount and value of the Russian ruble, yet it is becoming a regional currency, up to a point. As for settlements in the economy, they are increasing and have reached an impressive level in relations with some countries.

Regarding gold and digital currencies, some countries use cryptocurrencies, and others have a ban on them. I believe their use is prohibited in China and three or four other countries. They are not backed by anything and are highly volatile, which implies huge risks. Likewise, I believe that we should listen to those who are pointing to these huge risks. On the other and, cryptocurrencies are being increasingly widely used in some countries and economies. Maybe the future belongs to cryptocurrencies, but we should closely monitor the process of their development.

Now, about gold. Regrettably, it happened in a natural way: the gold standard has been abandoned, and now a return to the gold equivalent is hardly possible, at least because the volume of global trade is many times larger than the global gold reserves. Therefore, the use of the gold currency or gold-backed money is a complicated process. On the other hand, the volume of precious metals in our reserves remains considerable.

In other words, the increasing amount of reserve currencies is now the main trend. I know that Arab countries are considering the possibility of creating their own reserve currency, the euro is developing as a reserve currency, and transition to the use of reserve currencies at some international organisations will take traction. And there are also settlements in national currencies. So, we will continue developing in several directions. But we have not abandoned the dollar; we will continue using it as long as our partners want this. If they do not want this, we will reduce the use of the dollar.

Andrei Kostin: I would like to add that we are working with the Central Bank to create an unofficial version of the crypto-ruble, which may have a future.

As for Bitcoin, I would like to say a few words about it, if I may. In addition to speculative transactions, Bitcoin is being widely used to finance all manner of black markets and the like. I believe that it is playing a destructive role. And I believe that there is logic in the decision of some countries to prohibit its use.

Thank you very much. Colleagues, let’s proceed.

We do have some time left, don’t we?

Vladimir Putin: Yes, we do.

Andrei Kostin: Please, there is still some time.

Dominic Bokor-Ingram: Good afternoon, Mr President. My name is Dominic Bokor-Ingram. I appreciate the opportunity to talk to you on behalf of Fiera Capital, a Canadian-based global asset management company.

I have been investing in Russian equities since 1994. I have seen many ups and many downs, and I have seen the impact of government policies, both positive and negative. So my question is, as we move forward, we have seen in recent months the Chinese government has taken major steps resulting in greater oversight and control of many of its digital and online industries. Do you think such developments are appropriate and are they necessary in Russia?

Vladimir Putin: China used to have a rather liberal policy towards various digital companies. This was logical, because the process was only beginning, and our Chinese friends created conditions under which it was profitable to enter and work in the Chinese market. Today the significance of these digital platforms has increased dramatically in the economy, as well as at the political and social level, and so China has toughened control of their operation. This is not surprising or unusual. Why? You may see that the same is taking place in Europe. And the United States is discussing this possibility as well. The issue is being discussed throughout the world, and it is only the matter of the level and amount of oversight and control.

In general – I will not go into detail now, because you understand me, there must be a balance between the freedom of enterprise, the proliferation of information and the interests of the state and people so as to prevent these digital platforms from any abuses. I can understand the logic of our Chinese partners.

As for Russia, we will proceed from the current realities in the country. Yes, we need some forms of oversight and control in Russia, but these measures must not hamper economic activity.

Of course, it is very important to consider all matters related to the protection of personal data – this is very important – and the use of depersonalised information. We need to thoroughly analyse the developments abroad and such practices before taking any action. This is exactly what we have been trying to do.

Andrei Kostin: Thank you, Mr President.

Colleagues, we have very little time left. Please, who will dare?

Jeff Grills: Hello, Mr President. Apologies for my technical difficulties. My name is Jeff Grills from Aegon Asset Management.

First, I want to say thank you very much for taking the time to answer our questions.

You have already commented on Russia’s commitment to carbon neutrality by 2060. I wanted to ask if you could comment more specifically on your expectation for the development of new energy resources in Russia, such as hydrogen power.

And, additionally, what would be the impact to the corporate market from government regulations going forward to potentially align their goals of reducing their impact on the climate? Thank you very much.

Vladimir Putin: I have already mentioned this, including hydrogen, but I will repeat it now. We have hydropower and nuclear power plants, and also renewable sources, which account for 40 percent of our [energy] balance, and the share is 86 percent if we take gas into account. Only three or four, and certainly not more than five countries have this structure.

In this sense, our situation is satisfactory. However, we must also think about the future. As for hydrogen power, we are working on it as well. We have some competitive advantages, namely, scientific schools, good know-how and skilled personnel, as well as available infrastructure, for example, gas pipelines, which can be used to pump green hydrogen, and so on. Of course, we will be thinking about this, just as we are developing wind and solar power projects now. Incidentally, we are often doing this in cooperation with our European partners. Of course, we will continue doing this.

At the same time, the transition should be gradual, without price surges that we are seeing in global energy right now. Nothing good can come from that. Investment in hydrocarbons is dwindling around the world. What can result from that? A deficit. Because it is very unlikely that we can switch to solar or wind energy overnight. We cannot. Hydrogen energy is not ready either.

We even have specific plans with calculations. I will not go into details right now. Based on these figures we know approximately when we can start producing hydrogen and increasing hydrogen production. But that requires time and money. Consumers will also need time to get accustomed to this primary source (and it is a primary source). I have already mentioned that, according to the International Energy Agency, the global energy mix will change in the next two or three decades but not too drastically. The world population is growing as is the economy.

You see, developed countries have accumulated a certain volume of emissions. Developing countries did not do that. The emissions were accumulated by industrially developed economies, weren’t they? And now the industrially developed economies are starting to dictate new rules to the countries with insufficient level of development – rules that, if followed, will never help them achieve the required level of development and eliminate poverty and migration. Is this what we want? Probably not. Nobody wants that, am I right? Therefore, we must, by all means, work together to search for a compromise and make very fine adjustments so that all countries are satisfied. Is this possible? I think it is because everybody understands the risks of unbalanced development.

As concerns hydrogen, we are working and will continue to work on this. Hopefully, together with you.

Andrei Kostin: Mr President, we are running out of time. Thank you very much.

We have several unanswered questions but, like in the previous years, we will put those who did not get their answers at the beginning of the queue for the next forum.

Vladimir Putin: Sounds good.

For my part, I would like to thank our organiser and host and to thank all of you, ladies and gentlemen, for participating in this forum, for your interest in working with Russia and for your trust. We will do our best to live up to it.

And please do not be angry if you did not get a chance to ask a question. We will make sure you get this chance next time or at another event that many of you are also attending, including the St Petersburg International Economic Forum. I would like to invite you all to this forum.

Andrei Kostin: Thank you, Mr President.

Colleagues, thank you.

Vladimir Putin: Thank you.