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Following the plenary session, Vladimir Putin had a brief meeting with foreign guests of the Russian Energy Week who arrived in Moscow to take part in the Ministerial Meeting of the Gas Exporting Countries Forum (GECF). The President wished successful joint work during the Russian Energy Week to heads of the related ministries of the GECF member states.

Representatives from major international energy companies and organisations together with leading world experts have been invited to participate in the forum, which is taking place from October 3 to 7 in Moscow and St Petersburg.

The Russian Energy Week’s official programme includes about 50 business events. The main topics being discussed are the global energy agenda, the main directions of the fuel and energy sector, and the existing challenges in the energy sector.

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Transcript of the Russian Energy Week plenary session

President of Russia Vladimir Putin: Good afternoon, ladies and gentlemen.

I cordially welcome everyone at our representative event. Four hundred companies, including 70 foreign partners, are a large team of those who are engaged in the most important sphere of the world economy – energy.

Today, at the Energy for Global Growth plenary session, we are discussing key, defining questions: what tomorrow's global energy will be, what priority tasks we have to solve in order to ensure a reliable supply of energy to the largest macro regions of the planet and each country separately, and on this basis to increase the competitiveness of national economies as well as improve the quality of life of millions of people.

Today I would like to outline the most important trends that will determine the common energy future of mankind, in our opinion.

The energy community is now actively debating the future energy balance of the 21^st century. The majority agree that hydrocarbons will continue to play a leading role in the next 20–25 years, particularly in the conditions when some countries voluntarily restrict their nuclear power generation.

The new energy layout will inevitably change. Experts believe that mankind will require 30 percent more energy than today in as soon as 20 years’ time. This is due to the global economic development, rising population, better quality of life and growing consumption, especially in developing countries. Let me remind you that, according to statistics, up to 2 billion people on earth still do not have full access to energy sources.

Undoubtedly, this situation will change in the coming decades, leading to the formation of new markets. The geography and structure of energy demand will primarily shift towards Asia-Pacific countries.

Further on. The energy community is now actively debating the future energy balance of the 21^st century.

The majority agree that hydrocarbons will continue to play a leading role in the next 20–25 years, particularly in the conditions when some countries voluntarily restrict their nuclear power generation. At the same time, we can expect competition between fuel resources, above all conventional and new energy sources.

Presently, nearly all developed nations have opted for clean energy development, including renewable energy sources. They account for over half of the global power generation. By 2035, their share in the global energy balance is expected to grow from 15 to 23 percent, and in electric power generation – from the current 7 percent to 20 percent (without hydropower).

However, the traditional power sector will also undergo transformation. For instance, the modern prospecting and production technologies make hard-to-access oil and gas reserves more accessible, including the Arctic potential reserves.

Nearly all developed nations have opted for clean energy development, including renewable energy sources. By 2035, their share in the global energy balance is expected to grow from 15 to 23 percent.

Another key trend will be the lowering of energy intensity of the economy, first of all due to the mass use of modern technology. Internal combustion engines are an example. Twenty years ago, a car used on average 12.2 litres of petrol per 100 kilometres and now it is currently 8.5 litres, which is 31 percent lower.

Another very important trend is the digitalisation of the energy sector. The fast processing of huge amounts of data, artificial intelligence, the introduction of smart energy grids will allow for a system analysis of the production plus consumption of energy and in the future will lower the cost of energy, increasing its efficiency as well as cutting losses.

Another obvious tendency is the increased accessibility of energy and energy infrastructure in general. Regional markets are being integrated, traditional logistics chains see new energy delivery routes, first of all the Northern Sea Route and the Silk Road.

A flexible LNG market is being formed. Thus, the number of LNG consumers has doubled over the past decade.

The traditional power sector will also undergo transformation. For instance, the modern prospecting and production technologies make hard-to-access oil and gas reserves more accessible, including the Arctic potential reserves.

All these trends will make the connection between producers and consumers stronger and will lead to the further globalisation of markets as well as growing energy interdependence between various parts of the planet.

Colleagues, being a leading energy nation, Russia understands well its role and responsibility in providing sustainability and the development of the global energy sector. Our country exports energy to dozens of countries in the world and has repeatedly confirmed its status as a reliable and stable partner.

We scrutinise and take into account the global energy trends. Over a period of the past few years, Russia has created conditions for major investments in the development of new technology, equipment production localisation plus increased added value. All this made it possible to increase the competitiveness of the Russian fuel and energy sector on the global market throughout the world.

We are upgrading oil refineries and creating powerful oil and gas processing facilities such as the Amur and Tobolsk clusters and the Eastern Petrochemical Company. We are concentrating on this sector in other regions of Russia, primarily in Tatarstan.

We are implementing projects that promote infrastructure development and export diversification, such as Yamal LNG. We are building gas pipelines: Nord Stream 1 is operational, and Nord Stream 2 is under construction, just as Turkish Stream and the Power of Siberia are. All this is of crucial significance for Eurasia. We are also increasing the capacity of the Eastern Siberia – Pacific Ocean (ESPO) pipeline.

I want to stress that these are modern high-tech projects. It is also important that our foreign partners are involved in them, which is evidence of our fuel and energy sector’s competitiveness and its attractiveness as a strategic investment destination.

Another key trend will be the lowering of energy intensity of the economy, first of all due to the mass use of modern technology.

Like other leading countries, we want to have cleaner energy and we have attained considerable progress in this respect.

I would like to say in this context that Russia’s energy balance is one of the cleanest among the world’s largest economies. Nuclear and hydroelectric power plants and renewable energy sources produce over one-third of our electricity. Fifty percent of electricity is produced at gas-fuelled stations, which helps to considerably reduce emissions and other negative impacts on the environment. This is why we so calmly pledged to reduce greenhouse gas emissions under the Paris climate agreement.

Taken together, the clean sources of energy produce some 84 percent of our electricity, and we expect this figure to increase to 90 percent by 2035.

The ongoing change in Russia’s energy balance will reduce domestic oil consumption, and the methods for coal use will become more environmentally friendly.

In accordance with Russia’s national energy strategy, renewable electricity generation in Russia will increase several-fold in the next 20 years. Also, the development of renewable resource technology will help us gain the competencies needed to shape the global energy field of the future, including the development our own technologies.

Being a leading energy nation, Russia understands well its role and responsibility in providing sustainability and the development of the global energy sector.

I would also like to note that we are employing effective mechanisms to support investment in renewable electricity generation, so investors can earn guaranteed profits. We will continue to encourage investment in this sector, including from our foreign partners, foreign companies.

I mentioned earlier that, unlike other countries, Russia has not abandoned its plans to develop clean and safe nuclear power. Moreover, Rosatom has become a leader in the atoms for peace market: at this point, Rosatom has received requests to build 34 power plants abroad.

In a bid to increase energy efficiency by 2035, we plan to cut our GDP energy intensity by 33 percent. This will be achieved through structural changes in the economy, as well as efforts to reduce electricity losses in the grids, the introduction of energy-efficient and digital technologies, and cutting the fuel consumption rate in the transport and electricity generation sectors.

No doubt, our energy sector is looking to the future and the future requires innovation. That is why we are paying special attention to research, engineering and design solutions in the energy sector and are creating conditions conducive to attracting private investment in promising projects.

One good illustration of this is the expanded production of modern solar panels using domestic technology, as well as equipment for wind generated power.

Like other leading countries, we want to have cleaner energy. The clean sources of energy produce some 84 percent of Russia's electricity, and we expect this figure to increase to 90 percent by 2035.

Colleagues, existing opportunities, and at the same time, objective problems in the energy sector require that we join efforts to be able to move forward.

We are in favour of joint efforts in order to remove the obstacles that are hampering any further economic growth of countries, primarily developing states, which need a reliable and accessible supply of energy.

Regrettably, however, we often see different trends instead of progress towards this global energy partnership. For example, a number of restrictions (unilateral financial and so called sectoral sanctions in the energy sector) are directly used by some of our partners, by some countries for unfair competition – you can’t say it in any other way – for peddling their own interests and energy resources, even in spite of their non-competitiveness.

The negative effect of these steps is obvious for the entire world economy plus the entire global energy sector. This primarily affects the consumers as well as the countries, which, in supporting these actions, are losing lucrative investment opportunities.

The growing technological inequality is also presenting an undoubted danger for the global energy sector. For example, only three companies from advanced economies account for two-thirds of hi-tech oil services in the world.

In a bid to increase energy efficiency by 2035, we plan to cut our GDP energy intensity by 33 percent.

Today, it is important to consistently remove barriers in the path of a free movement of energy resources and investment in their production, to actively develop energy infrastructure, as well as to develop new technology by joint efforts.

Let me emphasise that we are indeed ready to cooperate in the energy sphere with all partners concerned on the basis of the principles of equality and mutual benefit.

We attach special importance to working within the framework of such authoritative organisations as BRICS, EAEU, SCO, OPEC, plus the Gas Exporting Countries Forum.

A good example of successful joint actions is the agreement that Russia and a number of other countries have signed with OPEC. Not only have we achieved stabilisation on the oil market, but we now see new opportunities opening before us, opportunities for the implementation of promising projects and for technological cooperation, because investment has flown back into this sector of the world economy.

I am confident that we will continue pooling our efforts for the sake of building a stable and fair energy future.

I wish all those taking part in the Russian Energy Week to be able to carry out lots of productive work and also have some interesting discussions.

Thank you.

John Fraher: President Putin, thank you very much for those opening words. I think they very eloquently have expressed the full range of the themes and the topics that we want to talk about today at this forum.

Let me first introduce our illustrious panel. My name is John Fraher. I am a senior executive editor at Bloomberg News. To my left is Mr Seyed Mohammed Hossein Adeli, Secretary General of the Gas Exporting Countries Forum. I am, of course, delighted to welcome our host Vladimir Putin. To his left is the Secretary General of OPEC, Mohammed Sanusi Barkindo. And to his left is Adnan Amin, the Director-General of the International Renewable Energy Agency. Thank you very much for joining us.

President Putin, let me begin with you. You mentioned Russia’s alliance, or recent agreement with OPEC, and you mentioned the fact that it opens up new opportunities for Russia. As you know, there is a lot of talk about whether Russia and OPEC will extend these production cuts, which are due to expire at the end of March. Would you consider extending them beyond the end of March?

Vladimir Putin: I put it a bit differently. I said this creates an opportunity to invest in the global energy industry because we are seeing investment return to the energy industry after prices stabilised. Remember that in 2016, when we agreed on these joint actions toward the end of the year, there was a surplus on the market, production exceeded consumption and reserves were critical. All this led to a critical reduction in energy prices, primarily oil.

In late 2016 we agreed on joint actions and reduced production. By the way, all countries are essentially meeting their commitments under these agreements. Initially, they were meeting them by 103 percent. Russia assumed the commitment to reduce production by 300,000 barrels per day and this is what we did. We fully meet our commitments. As you rightly noted, later we agreed to extend them by another nine months, until March 2018.

I believe all countries – not only oil producers but also consumers – have a stake in what is taking place today because when oil prices dropped below the lower limit, so to speak, investment in the industry stopped. This meant that sooner or later the world energy industry was bound to face a sharp and unexpected shortage of energy resources, and prices would have skyrocketed again. Nobody wants this. To the contrary, all countries want a stable market.

I believe what we did together with OPEC benefits the entire global economy. Whether we will extend these agreements or not will depend on the situation in the world market. In principle, I do not rule it out, but we will proceed from the realities that take shape by March 2018.

John Fraher: But nevertheless, that sounds a little bit to me like you would perhaps be in favour of extending them beyond March. Of course, the end of March is not very far away.

Vladimir Putin: I think this is possible. You know very well that we must be very cautious in our public statements at this point. Many countries that have not joined us have been very positive about our cuts to oil production. I understand that the Libyan leadership, for example, publicly stated recently that they are considering the possibility of Libyan companies signing onto our joint efforts, at least in the part of the country controlled by the forces that said this. I am referring to MarshalHaftar, for one.

Everyone understands this, everyone understand the need for such joint efforts. Again, we will have to see how the global energy balance looks in March 2018. We are in contact with our key partners, both with OPEC and major oil producers. I hope we will very soon have the pleasure and honour of receiving the King of Saudi Arabia in Russia, and we will certainly talk about this. We maintain a regular dialogue and, as I said, we will make a decision proceeding from the realities of March 2018. But I do not rule out that we may also extend these agreements.

John Fraher: I put to you one last question on this. Everyone in this room, of course, likes stability. Everyone in markets likes stability. If you were to decide to continue the production cuts, could you see the extension of cuts lasting until the end of next year?

Vladimir Putin: I am telling him that we do not yet know whether we will extend them or not, and he is asking us for how long we will extend them. When we decide whether to extend them or not we will determine the timeframe. But in general, speaking about a potential extension, it should last at least to the end of 2018.

John Fraher: You’ve always said that Russia would never join OPEC. Has the success of this agreement changed your mind on that? Is it something you would think about again?

Vladimir Putin: No, nothing has changed, all the more so since we all see and analysts see that we can effectively coordinate our work even while remaining outside OPEC. We do not consider it necessary to bind ourselves with administrative restrictions but will continue working with the OPEC countries and major producers on a voluntary, mutually beneficial basis. When we negotiated who must reduce production, by what amount and in what timeframe – and this was a complicated negotiation process – we looked at the production level of participants at the moment and when and by what amount they should cut it. This was not an easy job. We were ready to compromise and we did. Our partners were also ready to compromise to stabilise the entire global energy market. We have positive experience, which we will use going forward.

John Fraher: Mr Barkindo, let me turn to you. The oil market does look healthy right now; prices have rallied and global inventories are falling. Do you feel right now that the deal with Russia should be extended?

OPEC Secretary General Mohammed Sanusi Barkindo: Thank you very much, John, and let me begin by thanking the Russian authorities under the able leadership of President Vladimir Putin for putting together this premier event in the very timely situation that we are in today, and to thank them for inviting OPEC to participate.

I had listened attentively to the very comprehensive address of President Putin, which has covered the entire energy spectrum, and to the very apt answers that he gave to your very pointed questions.

I would like to use this opportunity, on behalf of OPEC, to really thank the President and his Government and his very able Minister Alexander Novak for the role they played in the run-up to these historic decisions that we reached last year. The declaration of cooperation that we agreed on December 10 last year, which the President just referred to, was very historic, and the work that went into each was very strenuous, very challenging. But thanks to Alexander Novak and his colleagues in OPEC, the president of the conference Mohammed Sada of Qatar, who is here with us today, and Bijan Zangeneh, del Pino for Venezuela – we all rallied together despite the fact that Russia is not a bona fide member of OPEC. But they took a leadership role in ensuring that we had this consensus not only within OPEC, but between OPEC and non-OPEC in order to restore stability to this market.

The President has made reference in his speech to stability. The issue is about stability. Without stability, which eluded the oil market in the last 2–3 years, we can all see the consequences on investments that the President had referred to. Investments in this industry have contracted in the last 2–3 years, cumulatively over 40 percent, threatening future supplies. And we all have the shared responsibility, whether OPEC or Russia, to ensure the security of future supplies. We are reliable and dependable suppliers of oil to the oil-consuming markets, not only now, but for the foreseeable future.

So I want to reiterate the vision of the declaration of cooperation and also state here that all the participating countries have been abiding by and implementing their own obligations fully. For the first time in history we are having a joint effort where conformity to these obligations has been extremely well, very high. Russia has played its part. It is actually implementing over 100 percent of its obligations, particularly in the last two months. So, we are all on course. And, as the President has just said, the fundamentals will decide in March of next year whether we have been able to achieve the objective of rebalancing the market. One variable in the equation, stocks, has been out of balance since the fall of 2014. And it was the collective decision of Russia and OPEC that in order to balance this equation we had to address this variable of stocks, to bring it down, to help the market to bring it down to the five-year average, and we are on course. From January to date, we have seen a stock drawdown of nearly 170 million barrels. So there is massive de-stocking that is taking place across the spectrum, across regions, both onshore and offshore. And I am confident [that with] this platform that we have created, thanks to President Putin and Alexander Novak and the ministers in OPEC, we will be able to restore stability on a sustainable basis to this industry. Thank you.

John Fraher: And how quickly do you think you will be ableto get to that point? I mean this restoring of stability. Is that happening more quickly than you would have anticipated maybe three months ago?

Mohammed Sanusi Barkindo: As you have seen, when we started,the stocks had built up to over nearly 380 million barrels over the five-year average, and this was unprecedented in the history of oil. But as a result of the full implementation of the declaration of cooperation, from January to date we have been able to stimulate the drawdown to about 168 million barrels as the latest numbers are showing. Therefore we are on course, the drawdown is ongoing, the market is rebalancing, going forward. And without pre-empting what Alexander Novak and his colleagues, the ministers, will decide on November 30, I think the fundamentals that will be presented to them at that time, as President Putin has just referred to, will inform the decision that they will eventually take on going forward. But all I can say is that the future is looking much brighter than before this decision was taken on December 10, and we are looking beyond the rebalancing of this market to further institutionalise this strategic partnership between OPEC and the non-OPEC through the Russian Federation, so that we will be able to sustain the level of cooperation beyond the issue of supply and demand on stocks.

John Fraher: And finally on that topic, could you give us a sense of what is the mood among the OPEC members? You obviously talk to them all the time, what is the current balance of opinion in OPEC as regards extending production cuts next year?

Mohammed Sanusi Barkindo: I think there is a common understanding, not only within OPEC but on the international oil markets, that for the first time we have got our act together, that for the first time we have shown and demonstrated our commitment of 24 producing countries to take full responsibility in restoring stability to this market. And we have also demonstrated beyond a reasonable doubt that we are committed to sustaining this beyond the rebalancing of the market.

The market in the fullness of time, based on the figures that are before us now, will rebalance, will come back to balance, and the equilibrium will be restored. But what happens the morning after? Now discussions are ongoing among my ministers in OPEC, together with Alexander Novak and his colleagues in the non-OPEC group, on how best we can institutionalise this partnership so that we can begin to address issues like investments that the President has just referred to. Without sustained investments in this industry in a predictable manner, we may be sowing the seeds of future shortages of energy, which is not in the interests of either producers or consumers. What we have done is not only in the interests of producers, but also in the interests of consumers as President Putin has aptly described.

John Fraher: Thank you for that.

Let’s shift gears now and turn to the future of the energy industry. So, governments around the world are throwing their weight behind fighting climate change regardless of what Donald Trump and the US thinks about Paris. Transport is becoming more fuel efficient and electric cars, self-driving cars, may transform societies in ways that are as yet impossible to predict.

Despite all this, a lot of oil producers say that the industry has still got decades of growth ahead of it as it tries to feed the needs of the world’s emerging middle classes.

But Mr Amin, you represent the renewables industry here in this panel. Do you think those predictions are wrong? Is there too much complacency? Do you find too much complacency when you come to conferences like this full of representatives of the energy establishment?

Director-General of the International Renewable Energy Agency (IRENA) Adnan Z. Amin: It’s a very interesting question but let me start by saying how privileged I feel to be here. And to have somebody from renewables on the same stage with the leader from a leading energy country and two leaders from the hydrocarbons is an indication of how this change is taking place. You wouldn’t have expected that a year ago. So that’s the first indictor.

But in a broader sense, if you look at the pulse of what is happening… I had the privilege of listening to President Putin three times this year. First was in Istanbul at the World Energy Congress when President Putin said the advent of green energy is moving fast and it is the right development for the world for the future. In St Petersburg, I was there and I listened to him when he said that we are reaching limits of sustainability and we need to find a new paradigm for development for the future based on more sustainable energy. And today, placing the whole energy discussion in the broader landscape of global affairs and how this is happening. And I think what I am hearing from a very visionary leader of a leading energy country in the world is that he sees the world of energy changing quite fast beyond what we expected. And I think this is what we see from the perspective of renewables.

Now you mentioned some of those trends but let me just give you a sense of what’s happening. And the fact that this is such a destructive force that we are seeing, is that the bulk of new capacity addition in the power sector – and I think we need to segment how energy is used to analyse it properly – but the bulk of capacity and investment in the global power sector, the majority in the last four years has been from renewable energy, and last year added capacity was 62 percent from renewables. What we are seeing here is that business case for renewables and power generation in different countries – and you cannot generalise among countries because every country has a very specific resource endowment – but in general across the world, the cost of renewables has come down dramatically, the technology to integrate renewables in a reliable way in electricity systems has advanced incredibly fast, and now we are seeing the advent…not just talking about capacity addition but talking about system transformation, how systems of electricity in the future are going to look, how they are going to be based on clean energy generation and how the cost of clean energy generation has come down so fast.

Just to give you some examples, solar PV has decreased, technology has decreased in cost by 80 percent in the past seven years. The cost of onshore wind has decreased by 60 percent. And we are projecting from our research looking at all the different sources that this trend is going to continue into the next ten years. And when you look at the cost of generation from some of the new projects, we are seeing wind and solar projects coming in at three US dollar cents a kilowatt/hour around the world. This is a remarkable new development, and yesterday was the most shocking news – the bid for 300 MW of solar generation in Saudi Arabia by Masdar in Abu Dhabi has been made at 1.7 US dollar cents a kilowatt/hour.

Now, I am not saying that the solar endowment in the Russian Federation is the same as in Saudi Arabia. Clearly not, but what I am saying is that the general trend of cost is coming to a point where we can expect transformative change to take place on the business side.

But on your last point in terms of what does this mean for the system. I was with the CEOs of all the major European utilities yesterday morning in Amsterdam to discuss the implications for them. They have gone through a very traumatic restructuring of their industry because they have now to deal with the advent of new technology, digitalisation of energy, demand response from renewables in ways they we had not imagined, and the fact that the renewables mix in Europe is now moving so incredibly fast that traditional utilities have to move to service models and have to change their business model. I think that this trend is something that will become global in a very short period of time. If you start to look at India and China and the ambitions on renewables; if you look at the fact that in Africa and in Latin America, this has become the dominant form of capacity addition to the global electricity sector. On the power sector, I think the future is going to be largely renewable.

The issue becomes what happens when you start to look at the future of oil. And of course, renewables cannot compete yet on mobility, transportation, freight and other end-use and industrial sectors. But the advent of electric vehicles is going to be a game-changer because we are now seeing countries like China, India, the United Kingdom, Germany, Scandinavian countries, which are now committing to electric mobility by 2030 or by 2040. When that begins to happen is when you will see real impact in terms of demand for different types of hydrocarbon projects. I believe that, you know, gas will continue to play a very important role because, for the time being, you need some level of stability in systems, and gas provides that quick response capability to balance intermittency from renewables and systems. But, you know, demand for oil is very different from the demand you have for renewables, and there I would never predict what will happen to oil, I leave that to much wiser people to do.

John Fraher: But nevertheless, do you feel there’s still too much complacency?

Adnan Z. Amin: I do, and I think that what we haven’t yet fully grasped is how quick this disruptive force is going to move. When you remember what happened very quickly with IT and mobile telephony, and the fact that the landline became obsolete in very few years. We are now seeing new systems for power generation and distribution that are making the old fixed infrastructure of centralised generation and distribution obsolete. And when you have the advent of storage like in electric vehicles…you know, people normally use an electric, use a car two hours a day. But when you have an electric vehicle you basically have a battery on wheel sitting in your garage, and if it’s connected to the system, you have the storage capability with a one second response time that can help to balance systems. So, I think electric mobility will move much faster than people are expecting, I think that will have very destructive implications for the energy sector overall, and I think that we need to prepare because the advent of new technology and digitalisation and blockchain is going to be transformative in terms of how we generate and distribute energy in the future.

John Fraher: Mr Hossain Adeli, let me turn to you. You are here representing the gas industry, and of course we’ve heard a lot already about the important role that gas will play in the transition from oil to more renewable cleaner energy forms. But yet, there are concerns that we’re about to face a long period of oversupply in the global LNG market, for example. Is it time to make the GEFC a bit more like OPEC in regulating production?

Secretary General of the Gas Exporting Countries Forum (GECF) Seyed Mohammed Hossein Adeli: Well, let me first say how pleased I am to be on this wonderful panel with His Excellency President Putin. Also, I would like to congratulate the Russian Government under His Excellency’s leadership for this timely conference. Also, I would like to say that today we are organising our 19th ministerial meeting under the presidency of Russia. Minister Novak is the president of the ministerial meeting, and we are discussing among the ministers developments of gas.

But talking about the future of gas, I should say that although gas is now facing some challenges – and the challenges are because of the changing dynamics of the market – it has a promising future. Why? I think that there are four main reasons why gas has a promising future.

The first one, as you rightly mentioned and it was also repeated by President Putin, is the environmental agenda of the world. We have the UN 2030 agenda, we have the sustainable global agenda, I mean the Sustainable Development Goals (STG), and we have the Paris Agreement. And all of these would make the countries and energy policies to mitigate CO2 emissions – and they have only made some commitments…I guess even the United States, practically that is not going to happen. At the state level, there are many authorities over there that will go into mitigating CO2 energy. So, the mitigation of CO2 energy and the advance to a low carbon society is a global movement which is going to advance its own way. This is one factor which is a very important factor.

The second factor is the flexibility of gas. Flexibility of gas – by that I mean that gas has become very competitive. We see that LNG is growing, also it’s giving a lot of competitiveness to the trade of gas, as well as we see that there is lots of flexibility in terms of trade terms and conditions. So, this makes gas flexible and competitive. I think that although we hear about the cost of investment in renewable energy is coming down – and I agree that the technology is helping it really to come down – still they cannot compete with low cost gas production which is very much found in the Middle East and the CIS countries. Therefore, the second is the flexibility and the competitiveness.

And the third, which is very interesting, is that you know, gas only has a very rich infrastructure. So, if your country would like to invest in that, instead of creating and investing a lot in other fuels…I mean gas has already lots of investments which you can do all these investments on that.

And last but not least, we are talking at the global level. And our solution should be a global solution. Solution for Africa, solution for Asia, it is not a Europe-centric solution. And that comes to the nature of gas which is accessible, affordable and abundant. Not as much as renewable. Renewable is great but to rely for the majority of energy consumption for an African country on renewables, it is impossible: getting the technology, obtaining all of those things. So, this is why, although we say as a motto that gas is a “AAA asset” because it is abundant, accessible and affordable…but because of these four reasons I see that gas is moving forward.

According to all forecasters, including ourselves, the GECF Outlook 2040 forecasts that the gas share in the energy mix is going to grow from what it is now 22.5 to more than 26 percent. This is the fastest fossil fuel growth of any energy. And when we look at the other sources of energy, for example renewable, renewable is going to increase in the next 25 years from what is now – of course, by renewable I exclude the hydro – the renewable is something around 12 or maybe 13 percent, and when I say “maybe” that is according to our outlook, 12 percent. According to the outlook of the other forecasters it is something more than that, one percent more than that. This is going to increase to something around 16 percent. So, I mean, in 25 years we see that even the renewables will be something like 16–17 or even, according to IEA, 19 percent. So, this is why we see that gas is going up.

And there is one other reason, and I would like to use what Adnan said – also as something which would add to the gas – and that is the growth of renewable. You know, the growth of renewable would add to the growth of gas. Why? Because renewables are intermittent. They need the backup of gas. So, this is why wherever you have more renewables, you have to have a backup of gas in order to have the sustainability of the production. So, in general we see it as very promising.

John Fraher: Thank you very much for that.

President Putin, let me return to you. You are meeting tomorrow with the King of Saudi Arabia. Of course, we’ve heard a lot from the Kingdom about their plans for a post-oil future, especially from the new Crown Prince, with whom I know you have a very good relationship.

Is it time for Russia to develop its own plan for the future after fossil fuels, a plan as ambitious and as radical as what we are seeing in Saudi Arabia?

Vladimir Putin: If you do not mind, I would like to follow up very briefly on what has just been said.

Our colleagues here mentioned electric cars. This is a major topic for the environment and the energy industry, since electric cars offer a good and truly environmentally friendly means of transport. However, before connecting an electric car to the socket and charging its battery, you need to produce power, and for that you need a primary energy source. Today, the world’s number one primary source of energy is coal, not oil.

Of course, we need to move towards transition to renewable energy so that it becomes the number one energy source, but it will be at least 30 years before that happens. For now, it is unclear to us how it will play out, since technology for using coal and oil is also improving. For this reason, most experts believe that the current energy balance is likely to be preserved, more or less.

In this regard, I would like to note that we believe natural-gas-based motor fuel to be a much more environmentally friendly type of fuel compared to electric cars, since coal and fuel oil still dominate as primary sources of energy, while natural gas is used to a much lesser extent. Fuelling cars with natural-gas-based motor fuel would have a much bigger impact in terms of promoting a transition to green energy compared to just switching to electric cars. This is what comes to mind when discussing this matter.

As for LNG, you have also mentioned that the LNG market has become somewhat stagnant, asking whether the time has come to regulate the gas market just as the oil market. It is true that the LNG market is stagnating, as we can see in Europe, where LNG terminals have been operating at their lowest capacity recently. At the same time, the use of gas pipelines is on the rise. What this means is that LNG is currently less competitive compared to pipeline gas. I think that the situation will change gradually.

I will answer your question in a minute, but before that, I would like to respond to your remark regarding the gas market and whether it should be made the same as the oil market. This will be possible and expedient only when the gas market becomes global rather than regional. Because today it is still regional: Europe has one gas market…

John Fraher: How long could it take until it becomes that?

Vladimir Putin: This is unclear, and I will tell you why. For example, Asia Pacific mostly uses LNG, while Europe consumes large volumes of pipeline gas. When these two markets change to become similar, and when gas spot trading becomes more widespread, including with regard to pipeline gas, and all these elements blend together, we will be able to discuss the transition to the regulation standards and rules that are being used on the oil market now.

It is difficult to say when this may happen, but we are already analysing this and preparing for this eventuality.

Of course, the cost of LNG production and delivery will decrease in the future, but they are very high now. These costs include spending on the production, liquefaction, transportation, dilution and delivery to consumers. All of this is very expensive, but we are preparing for changing this.

You know that one of our largest projects in this sphere is Yamal LNG. It is our largest project in the gas sector, which we are implementing with our foreign partners, including investors from China, Japan and France. It is an international project.

We also plan to continue to develop the LNG-based power generation sector in the Far East and Sakhalin. We plan to increase LNG deliveries to Asia Pacific and Western Europe.

Development of the Northern Sea Route will absolutely contribute to this. If we look at the shipping times and the delivery costs of certain goods, including LNG (say, the most advanced and well-known route is from Rotterdam to Yokohama), transportation becomes faster by one-third and probably cheaper and more cost effective by the same amount.

We are working in this area realising what is happening to the global climate and understanding that the navigation time is increasing. But we do not expect the Arctic to have the Mediterranean climate any time soon and, therefore, we are building a fleet of nuclear-powered icebreakers that no other country in the world has. And Russia has one. It is the only country in the world with such a powerful nuclear icebreaker fleet.

We are about to launch the next icebreaker in line, Sibir (Siberia), which will cut three-metre-thick ice. Construction of two more icebreakers of this type has started. Within several years, we plan to launch an icebreaker that will cut any ice with no limits at all. Our aspiration is to make the gas market truly global and we are preparing for it.

We are also getting ready to work with renewable energy. In my brief speech I already said that, for example, we have developed competencies to produce solar panels and we are building production. Moreover, products in this industry made in Russia – and this is a commonly known fact – are more competitive than many similar products made by their traditional manufacturers.

We are certainly considering practical implementation of hydrogen energy projects. We have capacities to develop wind power, especially in some Russian regions such as the Far East. We have a huge territory where this type of generation could supply power to entire regions. And we are preparing for this, not only like Saudi Arabia, but like many other countries.

Therefore, I am certain: our country, Russia, will not be caught off guard by any surprises.

John Fraher: Can I just ask very quickly? I’d love to move on to foreign policy in the Middle East in a minute, but I’d just like to get back to something that you said about electric cars. We all know, I think everyone in this room knows, how much of a car fan you are. We’ve seen you driving a combine harvester. We’ve seen you flying a fighter jet. We’ve even seen you flying a glider. When will we see you driving an electric car? Could you ever imagine buying one yourself?

Vladimir Putin: Yes, of course, I can imagine that. But I will make sure to declare it. This is for those who watch my financial affairs very closely.

I had an opportunity to drive an electric car. Russian car manufacturers who dream of producing electric cars showed me some prototypes. Of course, I am aware of US, Asian – particularly, Japanese – manufacturers. I drove all these cars when they were shown to me. I took them out for a test drive. And I must say I like them, especially the most up-to-date models. They have good accelerating capacity. They are agile, fast and efficient. It is a very good mode of transportation for large cities where you do not want car exhaust. But once again, I believe that at the end of the day, the cleanest fuel today is gas.

John Fraher: Could we imagine you one day driving one of Elon Musk’s Teslas?

Vladimir Putin: Why not? We are open to it. We buy everything useful and sell everything that brings profit. I do not see anything special about it. Do you think we only ride around in horse wagons? No, we do not ride horse wagons anymore. Or maybe tanks? Tanks were pretty good, though.

John Fraher: So, let me now turn to foreign policy and the Middle East, which is of course a region of great importance for energy markets.

In many ways you have become over the last few years one of the most important players in the Middle East. In fact, Bloomberg wrote a story yesterday arguing that it is very difficult to get anything done in the Middle East these days without going through President Putin.

But, of course, I also know that you are a keen student of history, and the Middle East, historically speaking, is a dangerous place to do business and to play politics.

So, I’d like to sort of talk through some scenarios, some of the particular situations in the Middle East, and get your insights into how you see them.

So, let’s start with Saudi Arabia. As we said, the King of Saudi Arabia is coming tomorrow. Saudi Arabia we heard this week in fact is investing, there are lots of deals in the pipeline, Saudi is investing a lot of big money in Russia. We have the OPEC deal that we’ve been talking about. And of course, you’ve often stated your admiration for the new Saudi Crown Prince. But let’s face it, Saudi’s major ally is always going to be the United States, when it comes to its geopolitical interests. Do you worry that the Saudis are using you?

Vladimir Putin: You said “is always going to be.” Is there anything permanent in the world? I think, on the contrary, the world is changing all the time.

As concerns some countries, our partners are pursuing their independent foreign policy, which is completely natural. As we build relations with a country, we are aware of this, understand this circumstance and take it into account.

But it does not come in the way of our relations with this country. In fact, during the Soviet times, for example, our opportunities were limited due to various ideological stereotypes and, I should say, the closed-minded Soviet ideology. Now the times are different, we are open to cooperation and our partners can see that.

As concerns Saudi Arabia, several decades ago our relations existed but were rather superficial. Now they have turned around completely. Yes, we have certain disagreements and our visions differ regarding which solution could successfully solve a problem.

But do you know what our advantage is – and not only in relations with Saudi Arabia but with many other countries in the region? I will tell you. Believe it or not, you can ask our partners if you wish, but our advantage is that we never play double games with anyone. We are always honest in relationships with our partners. We voice our opinions openly.

If we do not agree with something, we will say it directly that our opinion is this and this. We take your views into account, we respect them but we will do this and this. That gives us a great advantage because we are predictable, unlike many other countries. I think this, and not our military potential, is exactly what motivates our partners to develop relations with Russia.

It goes without saying that the military potential and economic opportunities often play an essential, if not a decisive role, but this should not be reduced to our growing defence and security capabilities, or the potential of Russia’s defence industry (Russia has traditionally been a major arms exporter in the Middle East, since historically we enjoy positive and deep ties with many countries in the region). Russia is also committed to promoting economic cooperation.

Trade with Middle Eastern countries has been on the rise recently, despite the economic challenges we faced two or three years ago. Last year, I think trade was up 12.5 percent, and in 2017 we achieved the same result in the first six months of the year, which means that the annual result will be even higher. In addition, trade is quite diversified, since these are energy producing countries. For this reason, vehicles, equipment and high-technology products account for a substantial share of our exports, and as I mentioned, these exports are on the rise.

Today, short-sighted policies by certain countries to impose sanctions against us have forced us to respond, which has opened up the agricultural market for many Middle Eastern countries, and they were eager to benefit from this situation, and develop agricultural cooperation with Russia.

This is to say that there is great potential, and we are confident about the future of Russia’s relations with Saudi Arabia, as well as other countries in the region: Egypt, Jordan, Israel, and Syria, of course. Turkey is not technically a Middle Eastern country. But still, both Turkey and Iran are Russia’s traditional partners. These relations are well-balanced, and I strongly believe that this will help us further develop our relations.

John Fraher: One of the countries, of course, where it’s going to be most difficult to balance all those relationships, I’m sure, will be in Syria. Things… You know, it is looking like we’re perhaps closer to the end of that horrible conflict than we are at the beginning. But, of course, there are lots of different views of what the future of Syria should look like.

Now, again, as I said earlier, you have an increasingly close relationship with Saudi Arabia. But, of course, they are not very happy about the influence that Iran has in Syria. What sort of role do you see for Iran in Syria in a post-war world? And, you know, will you… would you… could you guarantee to the Saudis that all Iranian forces and militia will leave Syria after the conflict?

Vladimir Putin: We have no right to prescribe the path for another country to follow. This is a sovereign right of the people of a given country. The same applies to Iran. Russia has always respected sovereignty of all states and their domestic and foreign policy choices.

Iran is our neighbour and long-standing partner, and we value this relationship and respect Iran’s national interests. However, Iran is not the only country pursuing its national interests. So are Russia, Turkey and Saudi Arabia.

We are aware of these concerns. In fact, all sides have their own concerns that may be contradictory. For example, the situation in Iraq and the way it develops has become a matter of concern for everyone after the referendum in Iraqi Kurdistan. There are many internal and regional issues.

Focusing on finding compromises and solutions that would be acceptable for all participants in this process helps stabilise the situation.

You have probably heard about the establishment of de-escalation zones. Despite all the differences in our approaches, we have been able to agree on a de-escalation zone in the south, taking into account the interests of Israel, Jordan, as well as the United States and Iran, who supported this initiative. Reaching this agreement required extensive and painstaking work with all the parties involved. We agreed on a de-escalation zone in Idlib, taking into account Turkey’s, Iran’s, and Syria’s interests in both cases.

I strongly believe that at the end of the day we will be able to defeat terrorist groups – Jabhat al-Nusra and ISIS – by working together. There are things that unite us, and we must focus on our common interests that bring us together, not on things that drive us apart. In this case, we will succeed.

John Fraher: Let me turn − you mentioned it a moment ago − let me turn to Kurdistan and the Kurdistan referendum. Russia, I believe, is the only major power not to denounce the Kurdish independence referendum. And yet President Erdogan is threatening to cut off oil exports from Kurdistan if their independence drive goes further. Is this helpful, would it be helpful really to cut off oil supplies from Kurdistan?

Vladimir Putin: I do not know.

Everything that happens in a country is its domestic affair. Yesterday at a meeting with newly appointed ambassadors to Russia, I said the same thing about the situation in Spain, with Catalonia. The same goes for Iraq. We understand how sensitive this subject is for Turkey, as well as for Iran and Syria – I am not just talking about the situation in Iraq (we all know that) but about the Kurdish issue in the region in general. By the way, we have traditionally maintained good relations with the Kurds.

We are not trying to provoke anything. We are not pushing anyone to act. We are not interfering. Therefore, our statements are weighed-up and careful, their aim is not to incite, not to escalate the situation. The intention is for the parties to be able to find a way to a dialogue, cooperation and a mutually acceptable solution even in the most complicated conflicts.

As concerns sanctions, I already covered this. This depends on a particular case.

John Fraher: For the Kurds, nevertheless, oil is their lifeblood. Do you think, if the oil supply was cut off, it would hurt them massively. Do you think these threats from Erdogan are useful?

Vladimir Putin: I think it will have a positive effect on the global energy markets. Prices will go up. But few people are interested in that. Therefore, we should follow closely what happens in reality. Assumptions must not provoke a crisis.

John Fraher: Turning to Iran. Of course, there is a lot of talk that President Trump will pull out of the Iranian deal. And certainly, when you talk to people in Tehran, there is almost an assumption in the Iranian government that somehow Trump, the new US administration, will find a way to pull out. If that happens, will you still support the deal as the Europeans said they will? Can we make it work without the United States?

Vladimir Putin: Are you asking me?

John Fraher: Yes, Mr President.

Vladimir Putin: Are we going to continue a one-on-one discussion?

It is not Russia that determines whether Iran is performing its obligations under the nuclear agreement or not. Primarily, it is up to the IAEA to decide, a specialised organisation respected and recognised by the international community. And all IAEA reports indicate that Iran is fully meeting its obligations.

We are guided by these arguments and will support the agreement that was closed with the former US administration, although we had many disagreements with them, as you know, on other issues. But as long as all the parties perform their obligations, and their conduct fully complies with the respective UN Security Council resolution, we will support the deal.

John Fraher: Turning further afield now, to North Korea.

North Korea, of course, is another major story that’s of key importance to everybody in this room.

President Trump has used some extremely provocative language when it comes to North Korea, even going so far as to threaten the country with annihilation during his UN speech a few weeks ago. President Putin, your good friend Dr Kissinger might argue that Trump is deliberately appearing to sound crazy, in a way, to keep his opponents off balance. This is the famous Mad Man Theory. Other people just see chaos in US policy when it comes to North Korea. What do you think? What do you think of the president’s approach?

Vladimir Putin: You are an American. You can see it better and you know better what to think about your president’s policy.

John Fraher: I am completely neutral here.

Vladimir Putin: Are there any neutral people? You are the first one I’ve seen.

At any rate, it is not up to me to evaluate and judge the US president’s policy. I have already stated this publicly, and it is not a secret. I can only repeat what I said before. This rhetoric should be toned down on all sides in order to find a way to a direct dialogue between the United States and North Korea, between North Korea and the countries in the region. It is only in this way that a balanced and acceptable resolution is possible. Everything else will lead to a very dangerous dead end.

One thing occurs to me, by the way. Everybody is saying that it is necessary to increase the sanctions against North Korea even more. But North Korea is not a big country. It has lived under sanctions for ten years, and what?

In 2001, I think on my way to Japan, I stopped in North Korea and met with the current leader’s father. Even back then, he told me they had a nuclear bomb. Moreover, he said that even with relatively simple artillery systems they could easily reach Seoul. It was 2001.

Now it is 2017, and the country exists under constant sanctions. Instead of an atomic bomb they now have a hydrogen bomb. Instead of primitive artillery systems they have medium-range missiles with a range as far as 2,700 km and maybe even more, maybe 5,000 km. Has anything changed? Is this really the way to solve the problem? No. We can see that the result is the opposite.

There was a moment when the agreement with North Korea was actually reached and the country undertook certain responsibility on terminating its nuclear programmes. But instead, certain accounts of North Korean banks were blocked a week later because someone thought North Korea's responsibility was too little and they could and must do more.

But the agreement was what it was; there was nothing more to it. Why did they provoke North Korea? The country immediately withdrew from all treaties for good and started developing its missile and nuclear programme. And now we have what we have: a hydrogen bomb instead of an atomic bomb, plus missiles in addition to artillery systems, including multiple launch rocket systems with a minimum range of 60–70 km, and the location where they are hidden is unknown.

So, this hostile rhetoric is just dangerous.

Let us be clear: is it possible to make a global pre-emptive strike? It is. Will it accomplish the goal? No one can say because no one knows for sure what they have, as the country is isolated. That's all, that's the answer. Is this rhetoric needed? I think not.

At our meeting with President Trump, we talked about this, and I told him the things I am telling you now, and anyone can listen to it. We had a discussion. As I said, this is Mr Trump's first term and he is gaining experience in this regard. I think we argued a bit on this matter, but he understands the arguments.

I understand that what is taking place in North Korea is annoying. We condemn North Korea's actions that undermine agreements and UN Security Council resolutions. But we believe that this should be handled in a different way.

There is a Russian-Chinese initiative, a road map. If you don't like that it was proposed by Russia and China – then disregard the fact that it was proposed by Russia and China. Let us handle it differently and call it something else, but we should do the same thing: stop the escalation from both sides and develop a joint action plan to resolve problems.

John Fraher: But you say that President Trump listens to you, but, sir, when you listen to his rhetoric on North Korea, that wouldn’t seem to be the case. You’re saying that we should de-escalate the situation, de-escalate the rhetoric, and yet with every single day that passes his rhetoric seems to increase. Just two days ago, he very publicly said to Rex Tillerson, you know, forget about it, there’s no point even talking to the North Koreans, I’ll deal with it. Are you sure that he’s listening to you?

Vladimir Putin: You know, our conversation took place some time ago, while the situation changes every day and new irritants emerge. North Korea conducted new nuclear and missile tests. Everything changes.

I do not know everything he said to Tillerson. I do know something, but not everything. This is a question you have to ask back home, in the US. Why would I comment on this matter?

I have expressed my opinion, so let us move on to the next question, this would be more interesting, at least for the audience.

John Fraher: I think I’ll have one more follow-up on that. And I know deep down you love talking about Russia’s relationship with America.

You said that you talked to Donald Trump on quite a lot of things, and he agrees with you on certain areas. Can you just give us a sense of how your relationship is developing? I know you met with him in Hamburg, but, you know, in your conversations with him on the phone. Can you give us a sense of what your personal relationship is like?

Vladimir Putin: Personal relations between us are practically non-existent. We have met once, and talked on the phone several times to discuss various matters of mutual interest, including the Syrian issue.

By the way, in this area we cooperate with the US on many things, and although there are challenges and in some ways our positions are contradictory, nevertheless we come up with joint approaches and solutions, which I am pleased about.

As for our interstate relations, you can see yourself how they are evolving. Our relations have become hostage to the domestic situation in the United States, as I have repeatedly said. Some forces are using Russia-US relations in pursuit of their domestic agenda.

We are patiently waiting for this period in US politics to end. There are fundamental matters of mutual interests, such as non-proliferation of weapons of mass destruction, fighting cyber-crime, energy policy, by the way, regional conflicts on which we continue to work together, as in Syria, fighting organised crime, terrorism – all these are our common interests. I do hope that sooner or later these fundamental matters of mutual interest will help change the Russia-US relations for the better.

John Fraher: But do you think, just getting back to what you said a moment ago, do you think that Donald Trump has become a hostage of the American political system? That seems to be what you just said.

Vladimir Putin: I think a person like Mr Trump, with his personality, will never be anybody’s hostage.

John Fraher: What would be your advice to him then?

Vladimir Putin: Why don’t you give him advice as a voter? What can I recommend? I get my advice from my voters and the US President must get his advice from his. You are one of them. Present your views as instructions from a voter, on your own behalf or on the behalf of a group, a party, a professional community or a business.

I know that businesses would definitely recommend him to build normal economic ties with Russia, and not allow competitors to take advantage of the Russian market, and work together for the sake of the US economy. There are many companies that would say this. American companies had the largest representation at the St Petersburg International Economic Forum this summer.

We know that we have many friends in the United States who really want to develop relations with us, to establish full-fledged, full-scale cooperation and to improve it. We will maintain a relationship with them regardless of the political climate.

John Fraher: President Trump told you that he personally wants to re-establish normal business ties between Russia and the US?

Vladimir Putin: You should ask him that yourself. I cannot tell you what he told me. You want me to tell you what he said.

John Fraher: I will next time.

That would be nice if you could.

Vladimir Putin: Sure, it would be nice.

John Fraher: I’m a journalist. I’m a journalist, I need to ask these questions.

Briefly, getting back to North Korea, so, you, President Putin, you are one of the, you know, you are the senior figure on the international stage. Of all the major countries, you’ve been around for the longest. And I know North Korea is an extremely difficult country to analyse from the outside. How do you analyse the stability of the regime? Is that something you worry about? Is that something you think about? There’s so little we know about how North Korea works. How stable do you think the regime is?

Vladimir Putin: Those who are trying to communicate with North Korea from a position of power, strengthen the North Korean regime. This is my short answer to your question.

John Fraher: And we read this week that North Korea now has a second route to the internet. The first one was through China. And now they have a route to the internet via Russia. Is that the right signal to send to North Korea after their repeated violations of UN resolutions? Do you intend to allow this second route to the internet to remain open?

Vladimir Putin: What route? Listen. We share a border, the nuclear test grounds on the North Korean territory are 200 km from Russia. Where is the United States, where is Russia and where is North Korea? We are worried about this not less than you are, maybe even more.

As for our trade and economic ties, I have already spoken about this publicly very recently. They basically do not exist. We export 400 million tonnes of oil to external markets and only 40,000 per quarter to North Korea. This is nothing. None of the Russian vertically integrated companies supply anything. These are mostly local re-traders, small companies we do not even know about. This is zero, nothing.

Some 40,000 North Korean nationals work in Russia who, by the way, have relatives here, and that’s it. What is it? This is nothing, this is not cooperation. There is simply nothing to talk about and nothing to discuss.

John Fraher: So, President Putin, let’s talk a little bit about your legacy as President of Russia, the Russian economy and its future. I think these are questions that…

Vladimir Putin: Do you want to hear a joke about the Israeli army? A young solder is asked what he would do if attacked by 20 terrorists. “I’ll grab an Uzi gun and start shooting,” he says. “Good. And if you see tanks approaching?” “I’ll grab a grenade launcher and defend myself.” “Good. And if there are aircraft, tanks and terrorists all together?” He says to the general, “Sir, just one question: am I alone fighting in our army?”

So I want to ask you: am I alone here at the panel session? I see other people here as well.

John Fraher: I promise, I promise I will bring in the others in a moment.

But, you know, we have elections here in March. And, as you know, the Russian economy is showing some signs of recovery. There was a measure of competitiveness recently that showed that Russia’s risen, I think, five places, so it’s now roughly around the same level as where Poland and Spain are. On the other hand, if you look at surveys of wealth disparities in Russia, you see that Russia is more divided economically than it has been since you became President, and the gap between the rich and the poor is the most extreme of any major country. Do you see this as the biggest failure of your presidency?

Vladimir Putin: This is not so much a failure as a trend in the development of the Russian economy and the social sphere, where, it is true, the recovery process is underway.

This trend is not good, and I will say a few words about it. It emerged quite a while ago, back in the early 1990s, when the Soviet social system was being dismantled and the shock therapy was used to introduce market relations. That is where it all started.

The recovery is indeed underway, and we have seen sustainable economic growth. In the fourth quarter of 2016 it was 0.3 percent, in this year’s first quarter 0.5 percent, and in the second quarter it was 2.5 percent. Industrial production has increased by 1.9 percent. We see a sustainable growth in investment in fixed capital and a favourable balance in trade. I will not cite the exact figures because I may make a mistake, but in absolute figures it would be would amount to some $180 billion of positive balance.

(Addressing Presidential Aide Andrei Belousov): Andrei, is it 180? What is the current amount?

It is about 130, but the positive balance is over 100 billion.

As I said, there has been solid growth in direct investment in fixed capital, which is occurring amid record-low inflation (which is now at 3 percent) and a record-low unemployment level (5 percent). The Central Bank’s foreign currency reserves are increasing; they amount to $400 billion now. Real incomes have begun recovering, which I am very pleased about.

As for the income gap between the wealthy and low-income people, this is a real issue. There is no doubt that we have to work on it. However, I have to say that some things have to be pointed out in this area as well. Otherwise, the picture will not be full.

What am I talking about? Since the 2000s, the number of people living below the poverty line has changed in Russia. In 2000, almost 40 percent of the population lived below the poverty line, about 38 percent in fact. Today, the situation is dramatically different. Over the past two years the indicators were slightly down, but are beginning to recover.

Of course, there are a lot of things that we need to change in terms of social policy. We need to create a system where government support targets people and social groups that need it, instead of creating entitlements for everyone, as is now the case in healthcare, social safety net, etc.

This is how the situation looks. We are aware of these issues and understand what needs to be done to make things better.

John Fraher: That sounds a little bit like a campaign speech. Have you decided yet whether you are going to run again? This is the question that everyone is waiting for.

Vladimir Putin: No, I have not decided whether I will run for president. Under the law, I think that the presidential campaign starts in late November or early December. I think that by that time the main candidates will come forward and make their programmes public.

John Fraher: I promised I would bring in the other members of the panel, so as a quick round-up, because I think we are at the end of our time now, I would like to ask our three energy, our three industry experts to answer two quick questions for the benefit of this audience.

The first question is where do you see the optimal price of oil for your industry. And the second question is in what year, or in what decade, do you think that global demand for fossil fuels will peak.

Well, let’s start with you, Mr Amin, at the end.

Adnan Z. Amin: I will never make that prediction because there are much better qualified people to make predictions on the price of oil. I think that the world of energy is changing; we talked about some of the global things. But I just wanted to mention a couple of things about the Russian experience, which I’ve seen…

John Fraher: Briefly, because I think we’re out of time.

Adnan Amin: Since we’re in Russian Energy Week, is that I found it really quite impressive to look at the capacity they have in research and development and scientific capability. President Putin mentioned the competitiveness of Russia on solid modules. I’ve met with young researchers in the Moscow State University. We’re pioneering new thin film research on bellows that have the potential of dramatically increasing the efficiency and reducing the price. I think the challenge is, how do you commercialise this kind of research, and how do you go to market in a commercial sense.

But I think the second part of this is, we know, we’ve been engaged in a discussion with Minister Alexander Novak and his colleagues and experts on what potential pathways there are for Russia, and it’s very exciting to see in just one year, we have the first 2 GW wind option, we have retrofitting of factories to produce wind turbines in Russia, and we have just announced three major solar PV investments that are coming on stream.

So, I think, you know, even to see in a large economy which is based on hydrocarbons, like in Russia, that the potential for renewables is coming. So, I think my last point on that would be, it’s not a question of competition between one source or another. It’s a question of which solution makes sense in terms of technology, cost and economic viability at any particular time. And I think from that point of view we’re going to see a healthy mix in the future.

John Fraher: Mr Hossein Adeli, very briefly?

Seyed Mohammed Hossein Adeli: Well, about the oil, I’ll leave it to Mr Barkindo to talk about the oil price.

But on the matter of peaking the fossil fuel, I would say that the world actually is moving towards having more resilience and resilience by having more diversification. So, this is why actually we would see the world and many countries would like to diversify the energy mix.

This is why I think that the fossil fuel, the share of the fossil fuel, would diminish, would reduce, but not to the extent that some people may think. For the time being, the combined share of oil, gas and coal is something around 85 percent of the energy mix. And in the next 25 years, under the basic scenario of many forecasters, whether exporters or importers, it is going to come down to something around 70 percent. So still it would be a dominant, a quite major and dominant fuel of the world. But even under various kind of scenarios, which we have seen under the scenario of 450 degrees of IEA, it comes to something around 60 percent.

So still we see that the fossil fuel would be dominant, but in this, I should, I would like to take this opportunity to say that gas would be the fastest growing one. Actually, gas would gain, and coal would lose, would be the major loser, and, of course, the share of oil also would be reduced.

John Fraher: Mr Barkindo? Briefly?

Mohammed Sanusi Barkindo: In the opening address of President Putin, he did make a reference to the nearly two billion people on this planet today who have no access to energy. And the vast majority of these two billion live in the south, in the developing world of Africa, Asia and South America. Therefore, the issue of energy poverty will continue to be on the top agenda of not only energy-producing countries like OPEC and Russia, but the consuming countries as a whole.

In addition to that, in our forecast, in our outlook to 2040, the OPEC World Oil Outlook, we estimate nearly two billion additional people will come into this world by the year 2040. In addition to the current two billion that have no access to energy, these two billion, the vast majority will also come from developing countries. Therefore, the issue of peak demand for oil in particular, and peak demand for energy in general, is not a similar forecast for the foreseeable future to 2040.

This world will continue to need energy. Of course, we are moving into a transition, but as the President also said, this transition has to be all-inclusive; it has to take into account those who are deprived of the right to have access to energy, those who are currently in deficit and those who will join this planet in year 2040. As you know very well, John, it’s matter of policy, we are not in the business of forecasting prices or such in OPEC, but we remain consistent on the issue of obtaining stability in the oil markets, on a sustainable basis, in the interest of all producers, in the interest of all consumers, primarily to ensure predictable and sustainable energy investments, to ensure that future supplies are guaranteed to continue to fuel growth not only in the developed countries, but also in the poor developing countries.

And I would like to use this opportunity once again to thank the Russian Federation who have consistently stayed together with developing countries, be it in the issue of climate change, issues of sustainable development, issues of energy poverty. The climate change framework as we know it today, the Framework Convention on Climate Change would not have been possible without the collaboration of the Russian Federation, OPEC and the developing countries. And a number of our countries, almost all OPEC member countries have already signed up to the Paris agreement. Several of them are already in the process of ratification, so despite the fact that we are oil producing and exporting countries, we are also mindful of the fact that we remain citizens of this world, our countries are impacted by climate change, and we are also impacted by the response measures of the rich industrialised countries, yet we remain responsible for our destiny, and therefore we are joining the rest of the world in ensuring that we fulfil the objectives of the climate change convention going forward. Thank you.

John Fraher: President Putin, I’ll give you the final word.

Vladimir Putin: As I already said, and I would like to repeat, I believe, and this is a fact, that the demand for energy resources is set to increase. This goes for hydrocarbons, as well as renewable energy. But hydrocarbons will remain relevant for decades to come, and let me emphasise one more time that the need to use hydrocarbons will be obvious and will grow.

The situation on the global markets will depend upon a well-weighted approach of energy producing countries. Our latest agreements with OPEC and other energy producing countries, which are not OPEC members, show that deals of this kind are possible.

Russia will remain a responsible actor moving forward. In my opinion, we have every reason to believe that we will be able to rebalance the global energy market in the near future.

John Fraher: With that, thank you everyone here today for coming and listening. Thank you to our panellists: Mr Barkindo, Mr Adeli, Mr Amin, and, most of all, thank you to our host, President Vladimir Putin. Thank you.