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President of Russia Vladimir Putin: Ms Federal Chancellor, ladies and gentlemen,

First of all I would like to thank our German partners for their constructive and fruitful cooperation. This, the 14^th session of interstate consultations, was significant judged by both the number of participants – almost 30 heads of ministries and agencies from both parties – and the detailed nature of our discussions.

We spoke in detail about a widest variety of topical issues, ranging from the economy and finance to cooperation in security and culture. We confirmed the special nature of our strategic dialogue, which focuses on achieving visible results that benefit both our countries and nations.

Our trade and economic relations are developing well. It suffices to mention that last year, in 2011, bilateral trade grew by 37 percent to a record $72 billion. This year, our trade continues to gain momentum and has already increased by 5.6 percent with respect to the previous year. You agree that generally this is a good trend. it is a very positive element in a difficult economic context, or rather the difficult economic situation in the world and in Europe specifically.

The aggregate German investments in the Russian economy are close to $25 billion and some of them are intended to launch most efficient production and introduce most advanced technologies.

German businesses are represented in many sectors of Russia’s economy, including strategic ones, and operate in almost all of the country’s regions. However, we understand that our potential for cooperation is far from exhausted. Russia's accession to the World Trade Organisation (WTO) has opened new opportunities. I would like to thank again Ms Federal Chancellor and all of our German partners for their continued support of Russia's WTO accession. The negotiations were not easy, but they were constructive and had a positive outcome.

Our countries have already engaged in full-scale industrial cooperation. Innovative breakthrough projects are being implemented in the automotive industry, transport engineering, medical technology production and other fields. I would also underscore our close cooperation in the energy sector.

A month ago the second leg of the Nord Stream pipeline became operational and thus became another carrier ensuring the energy security for Europe as a whole.

I must say that it is well-known that Germany is becoming a major, important hub for the distribution of Russian energy resources to the rest of Europe. I am sure that the documents signed today on railway transport and the production of electrical equipment will help more closely coordinate Russia’s and Germany’s research, industrial, and resource potential.

Following our news conference Ms Federal Chancellor and I will meet with CEOs of major German and Russian companies. I think we will have a very useful and interesting conversation.

Of course during our consultations we touched on humanitarian ties, which largely derive from our lasting friendship, cooperation and the desire to expand these contacts in all areas. We have no small number of fresh ideas, new projects, and initiatives.

This summer the Year of Germany in Russia and the Year of Russia in Germany were launched under the symbolic motto: Building the Future Together. The agenda of these events provides that in April 2013 Russia will act as Germany’s main partner in the world-famous Hannover Messe. In turn, we would be very pleased to welcome Ms Federal Chancellor as the guest of honour at the St Petersburg International Economic Forum that will take place in June 2013.

At our talks we also exchanged views on topical international issues and Russia’s impending G20 presidency.

In conclusion I would like to say a few words about the Petersburg Dialogue Russian-German public forum whose participants we met today. I would mention that this particular forum benefits from a dynamic, engaging atmosphere and a substantive agenda. Over more than ten years it has become a useful forum to discuss the most sensitive, sometimes controversial issues and proved its relevance and effectiveness. It is encouraging to see that more and more young people are participating in its work. This means that all the initiatives, projects, and plans that we are currently making together will continue in the future.

Once again I would like to thank Ms Federal Chancellor and all our partners for the constructive discussion and significant work today.

Thank you very much for your attention.

Federal Chancellor of Germany Angela Merkel (retranslated): Ladies and gentlemen,

I would like to thank the President of the Russian Federation on behalf of our entire delegation for the reception here in the Kremlin. We have just finished our 14^th round of interstate consultations. And the number of ministries represented here and the agreements that have been signed reflect the breadth and range of our ties.

Russia has vast resources while Germany would like to help Russia modernise its high-tech sector and infrastructure which makes us strategic partners. Cooperation in this respect is very close, but it’s just one aspect of our cooperation.

More than 6,000 German companies operate in Russia. The more predictable the investment environment is, the more our trade will grow. The current dynamic is clearly positive.

Russia will be our partner at the Hannover Messe in 2013. I have invited President Putin to be our guest and to continue our discussions there.

Of course we talked about preparations for Russia's G20 presidency next year. What happens within that forum is particularly important. Russia has adopted a very clear position with regards to the problems concerning the indebtedness of industrial countries, and this position will continue to be important within the G20.

We observed a very lively discussion at the Petersburg Dialogue forum at the beginning of our meeting, and it was led by the young people who are present here. We should think about how to improve our youth exchanges.

At the bilateral level we talked about the situation in Russian civil society, and I voiced my concerns about certain legislative projects. We are to talk openly about these issues, and our conversation and dialogue are prerequisites to understanding each other and talking about conflicts.

Overall I am very pleased. A large team from the Federal Republic of Germany and our government came here today, and I think our talks will continue on all levels.

Now I think that we can go to questions.

Question (retranslated): Madam Chancellor, you have just mentioned your concern about the pressure on civil society in Russia. What information will you take home with you? Do you think you were able to achieve anything?

Mr President, could you tell us why you see critical individuals and organisations as a danger to your country? And what have you learned from the history of the GDR?

In connection with the Pussy Riot case, you mentioned some effigies of Jews. Nobody can remember such an anti-Semitic stunt. What exactly was it about?

Vladimir Putin: About a year ago, the same group or at least one of its members placed three effigies in a Moscow supermarket bearing the labels “Jew”, “migrant” and one other category, and demanded that Moscow be feed of those people. I believe that this is a direct anti-Semitic attack and I think you should realise what kind of people we are dealing with. I don’t think that modern Germany should support anti-Semitism. We have never seen such stunts in Germany. I just wanted to point out that when we discuss certain things we have to understand all sides of the issue.

As for offending religious feelings and insulting the Church, as far as I know, although I’m not an expert on German law, it is a criminal offense in Germany that is punishable with imprisonment of up to three years.

Angela Merkel: We discussed various legislative measures in great detail. And for my part, I reiterated what I think is very important: if society has a good level of education, the middle class can develop; if there is free economic activity, different groups are formed that have conflicting views. In order for that to happen, a certain atmosphere must be created. The Russian President explained for his part the results of certain legislative initiatives and the motives behind them. When we have conversations like that, it becomes obvious that we have different opinions on some issues, but on other matters our facts and realities are different.

I think that this exchange should be continued. We know each other so well that we can have very intensive meetings. The more we work together at different levels of society, the more it becomes clear how much potential lies in the free development of a society. For me this meeting has confirmed that it is very useful to meet and talk, and we will continue these meetings.

Question: I have a question for Chancellor Merkel and for President Putin.

Madam Chancellor, I assume that you and President Putin discussed gas supplies to Germany. We know that Russia is not very happy with the so-called Third Energy Package of the European Union. We know that the Third Energy Package provides for the separation of the transportation and sale of gas. The European Union believes that this will bring new players to the market and foster competition, which will lead to lower prices for consumers. Here in Russia, there are people who believe the opposite: that this will create additional organisations, the established supply chains will be violated and the prices will rise rather than fall as a result. As they say, if it ain’t broke, don’t fix it. What do you think about this?

I also have a question for Mr President. There are a lot of journalists here, a record number, and we have been talking about various issues. There is a great interest is the fate of the former Defence Minister Anatoly Serdyukov. It was reported recently that he has become an adviser to Russian Technologies State Corporation, but later this was denied. Could you clarify the situation with Mr Serdyukov? Thank you.

Angela Merkel: I would like to say a few words about gas supplies.

The construction of the Nord Stream pipeline has been a great success, and as a result Germany has become a strategic player as regards gas supplies to Europe. The construction was completed in a very short time. The problem is that the European rules require that the raw material that is transported be separated from the pipelines used for this purpose.

The European Union held very heated debates on this matter as pertaining to power lines and railways. The EU has very different philosophical approaches to protecting competition. Germany was not always able to ensure the acceptance of its ideas. This compromise is reflected in the Third Energy Package.

President Putin and I spoke about this very often. I believe it is best to accept these things as they are and use the freedom that they provide. It would be impossible to make sure that a single pipeline is used to transport exclusively Russian gas. However, should there be no second supplier who would use the pipeline, I will advocate in Brussels the use of the existing pipeline to full capacity.

Vladimir Putin: I also say a few words on the subject of energy. Naturally, any one of our partners is free to make any decision under its jurisdiction, and we will always treat those decisions with respect. The Third Energy Package is a harmful document, but that is our opinion. Our European partners have the right to do what they want. The only thing we object to is when laws are applied retroactively. In my opinion, that is absolutely unacceptable and it is an uncivilised way of solving problems.

If we invest money, if Russian and German companies invest billions into a project in compliance with the existing laws and regulations, how can we have any confidence in what will happen to these investments if we don’t know what decision will be adopted and applied retroactively? I think this position is absolutely logical. And we would like to ask our European partners (this is not addressed to Madam Chancellor, but primarily to the European Commission) to bear this in mind and to build relationships with their partners, including Russian partners, in such ways as not to violate the generally accepted principles of international law.

As for power lines and railways, there are different factors at play from gas supply. I hope that this will all be taken into account. We are in contact, we are not overdramatising anything and we expect that we will be able to reach agreement.

Now for the domestic issues and the scandals involving the Defence Ministry. This is a very unfortunate situation. As you know, I made the decision to release Minister Serdyukov from his duties based on the fact that there has been some doubt as to his ability as a minister to resolve property issues. I want to emphasise that there is no legal case against Mr Serdyukov and there is no investigation. The general practice is that a person is considered innocent until proven guilty by the court. Does that mean that he has no right to work anywhere else? Please note that the role of an adviser is not associated with the management of property or staff. It is a purely expert function.

The rumour that he is working in some capacity, say, as an adviser at the Russian Technologies, is false. He is not working anywhere at present. But if he wants to find a job and is employed by someone, I do not think that we should interfere. He has the right to employment. This is not 1937.

Question (retranslated): Madam Federal Chancellor, Mr President,

You said that you spoke about international issues today. Did you discuss Syria? Have your views on the situation moved closer to each other in regard to the assessment of Bashar al-Assad and the opposition?

I have one more question. How concerned are you about the recent events in Israel and Palestine?

Vladimir Putin: Frankly, we mainly talked about the current situation in Palestine and the conflict between Israel and the Gaza Strip. We talked about the deterioration in the relations between Israel and Egypt, which we are very concerned about. My impression was that our positions on the situation are very close. However, we have not yet had the opportunity to talk on the Syrian crisis in detail. We will have a meeting with business people now, which is not the best venue for such a discussion, but we will have a chance to talk about Syria.

Russia’s position on the issue is well known. We believe that first it is necessary to agree on the future, to understand how the legal rights and interests of various ethnic and religious groups will be guaranteed, and only then proceed to change. And not the other way around – remove Assad and then think about what to do next. We have seen problems that arise as a result of this approach in Libya and in other countries. We all know what the outcome of the Libyan crisis has been: the disintegration of the state, the murder of diplomats, including the American ambassador. In short, the country is in chaos. Who wants chaos in Syria? We certainly don’t. It is too close to our border.

Angela Merkel: As for Syria, the situation has changed in the last few days, because the Syrian opposition has rallied together. We will see how strong the coalition will be. Our foreign ministers spoke at greater length about the subject. We talked more about the crisis in the Middle East and the escalation of violence. I stressed that I view this situation with great concern, as does the Russian President. Hamas bears the responsibility for the rocket attacks. There can be no justification for this violence, because Israeli civilians have suffered as a result. We hold very similar opinions that the Egyptian Government should put pressure on Hamas to stop the escalation of violence and adopt a more moderate tone, because the victims of the attacks are mostly civilians. The region is very sensitive, and that was at the focus of our discussion today.

Question: Mr President, I have a question, if I may.

The European Union has recently been awarded the Nobel Peace Prize but is now going through a profound economic crisis that has threatened the very existence of the EU. I would like to ask how Russia views the continued existence of the euro, considering that about 40% of its foreign currency reserves are in euros, as well as the survival of the European Union? Thank you.

Vladimir Putin: We have not the slightest doubt about the viability of the European Union and the euro, otherwise we would not hold 40% of our foreign currency reserves in euros, and they are the third biggest reserves in the world. We are confident that the EU will recover from the current difficulties.

I personally support the Federal Chancellor’s approach to resolving all the complex problems that have arisen in Europe. It is not our business, we are not going to interfere, but I think that first it is necessary to repair the machine, and only then load it with petrol, or money in this case. It seems to me that this is a valid approach. I am sure that in the end the fundamentals of the European economy and European integration will prevail and will help the EU countries cope with the current problems.

Nevertheless, we must think about it, and today we talked mainly about ways to strengthen our cooperation, to emphasise the strategic nature of cooperation between Russia and the Federal Republic of Germany, and not only in the economy but also in other areas, including the humanitarian sphere.

We also remembered today that Russia will host major international sporting events soon, including the 2018 FIFA World Cup. In order to emphasise the special trust-based strategic nature of relations between Germany and Russia, I proposed that in 2018 the German national football team plays for Russia, and the Russian team for Germany. (Laughter.)

Mr Guido Westerwelle is waving his arms, I am not sure if he is delighted or indignant about my idea.

You shouldn’t think that my proposal stems from a lack of confidence in our athletes – we have absolute confidence in their abilities. But I think that the athletes would have a much greater sense of responsibility if they played for a different country.

The question remains open so let’s think about it. But imagine this: you refuse my offer, and then our team completely thrashes Germany. That would be interesting to see. Then you’ll be sorry. In sport anything is possible, you know.

Angela Merkel: I would like to add a few words in answer to your question.

The European Union is going through a very difficult period and yet it was awarded the Nobel Peace Prize at this time, which spurs us on to further strengthen the European Union. Every crisis eventually gives rise to new opportunities and prospects. Now we have the opportunity to work and to strengthen the foundations that perhaps are not very strong at present.

We have achieved more in the past two and a half years that in the preceding periods. The euro has proved itself as a very stable currency. The euro inflation rate is lower than the German mark had in the last 10 years of its existence. The euro has been stable, although there have been variations in the individual member states. The euro will help us achieve successful European growth, and cooperation between the Eurozone and Russia is an important direction for the future.

As for football, I will not accept any proposals.