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Taking part in the meeting were Prime Minister Dmitry Medvedev, Federation Council Speaker Valentina Matviyenko, State Duma Speaker Sergei Naryshkin, Chief of Staff of the Presidential Executive Office Sergei Ivanov, Secretary of the Security Council Nikolai Patrushev, Interior Minister Vladimir Kolokoltsev, Defence Minister Sergei Shoigu, Foreign Minister Sergei Lavrov, Director of the Federal Security Service Alexander Bortnikov, Director of the Foreign Intelligence Service Mikhail Fradkov, Deputy Secretary of the Security Council Rashid Nurgaliyev, and permanent member of the Security Council Boris Gryzlov.

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Beginning of meeting with permanent members of the Security Council

President of Russia Vladimir Putin: Colleagues,

We will discuss routine matters today, but we will also examine the biggest current issues too of course. Let’s start with the situation regarding Ukraine and Crimea.

Mr Lavrov, what do you have to say on these matters? What can you tell us?

Foreign Minister Sergei Lavrov: The situation is developing quite rapidly and our Western partners continue to propose unilateral action. Following the first wave of sanctions against individuals, taken several days ago, President Obama has now announced new sanctions against some 20 individuals and one financial institution – Rossiya Bank. There are rules that usually apply in diplomacy in such situations, and so we are currently drafting proposals for countermeasures.

Vladimir Putin: How many individuals are affected?

Sergei LAVROV: Around 20.

Vladimir PUTIN: We ought to keep our distance from them or they might compromise us. (Laughter)

As for the financial institution concerned, as far as I recall, this is a medium-sized bank. Personally, I did not have an account there, but I will definitely open one on Monday.

What other information do you have on this matter?

Sergei Lavrov: Our Ukrainian neighbours continue to make contradictory statements regarding relations with Russia. In particular, they said that they are ceasing or suspending their participation in the Commonwealth of Independent States and plan to introduce visas for Russian citizens. If this does happen, we will brief you on our proposals.

Vladimir Putin: In both the first case, the US sanctions, and the second case, the Ukrainian proposal to introduce visas, I think that we should refrain from taking any countermeasures for now, especially as concerns visas for Ukraine, because if we introduce visas for Ukrainian citizens, millions of innocent Ukrainians would suffer, people who are not well off as it is and come to Russia to work and earn a bit of money here to support their families. We should not take such a step.

Sergei LAVROV: If I may, regarding another aspect of the current international developments, our partners in NATO have suspended a number of cooperation activities within the  Background information NATO-Russia Council (NRC) Russia-NATO Council. This raises a practical question. We have one joint project – the helicopter project – which is jointly financed by Russia and Western countries and is a programme that will help the Afghans to repair Soviet- and Russian-made helicopters and train the needed people to repair, service and maintain this equipment.

The helicopter project’s first stage has already been implemented quite successfully. Everyone agrees that it has helped to strengthen Afghanistan’s capabilities for ensuring its own security. The time has come now to organise financing for the project’s second stage, but given that our partners are now trying to freeze cooperation within the Russia-NATO Council, I wanted to ask your advice on what we should do in this situation. 

Vladimir PUTIN: We should continue this cooperation even if our partners from NATO freeze our joint activities. I think that we all have an interest in seeing this project continue. We need to strengthen Afghanistan’s government, and so I ask you not to halt any of this work and I ask the Government to go ahead with the required financing, which was provided for in the Russian budget.

As you know, UN Secretary General Ban Ki-moon raised the question yesterday of sending an  Background information Organization for Security and Co-operation in Europe (OSCE) OSCE mission and UN observers to Ukraine’s eastern and southeastern regions, and I ask you to continue cooperation with our partners on this matter too and find a solution.

Sergei LAVROV: We have nearly finished work on a draft resolution by the OSCE Standing Committee, and have ensured that OSCE observers will be sent not just to Ukraine’s east and southeast but to central and western regions too, where many unpleasant incidents have taken place over the recent months.

Second, we have agreed on the number of observers and the regions where they will be sent. Any changes to these agreements, such as an increase in the number of observers or the regions, would be decided by the OSCE Standing Committee. We will follow your instructions here.

Vladimir Putin: Thank you.

I have a question for Mr Shoigu on the situation with Ukrainian military bases in Crimea.

Defence MINISTER SERGEI SHOIGU: As things stood yesterday, 72 units had decided in their entirety to join the Russian Armed Forces. The commanders and officers raised the Russian flag themselves at these garrisons. We are now taking care of the formalities regarding the servicemen and officers serving in these units, settling the citizenship issue and acting in accordance with the decision you signed yesterday on recognising officers’ rank and educational qualifications.

The second aspect in this work is that this is taking place on a totally voluntary basis. In terms of the future possibilities for military servicemen in Crimea, we see three options. First, if people there want to serve in the Russian armed forces, we will of course offer them a place. If they do not want to serve in our armed forces but wish to remain in Crimea, this is also possible. Third, if people want to continue their service in Ukraine’s armed forces, they will have this possibility too and will be free to leave Crimea and continue serving elsewhere, in the Ukraine army's units.

We have already encountered such cases. The coast guard commanders, for example, said that they wish to continue their service in the Ukrainian army and will leave Crimea. We are organising transport for their families and property so that they can depart for Ukraine without problem.

I particularly note the executive order you signed yesterday about reopening the Black Sea Fleet Higher Naval School. Everyone there, including the students, swore the oath yesterday and it will continue work now as the Nakhimov Higher Naval Academy.

I also want to note one other significant fact, namely, that we are offering Ukrainian military personnel studying there the opportunity to continue their studies at the academy and obtain their diploma, after which they can choose which direction to take next.

Vladimir Putin: Good.

Mr Shoigu, I ask you to ensure a friendly and respectful attitude to everyone, no matter what their decision, and respectful treatment too of Ukraine’s state and military emblems.

Does anyone have anything else to add?

Prime Minister Dmitry Medvedev: Yes, there is one matter that I want to raise. It takes us back a few years.

I remind you that when I was President, I signed the Kharkov Agreement with President Yanukovych. Under the terms of this agreement, we extended our use of the naval base [in Sevastopol] for a long period – 25 years. At the same time, under this agreement, Ukraine gained financially under a deal that exempted it from compulsory payments that would otherwise have been made to the Russian budget. What’s more, we started applying the new agreement’s terms immediately, even though our use of the base was still covered for quite a long period by the old agreement. This enabled Ukraine to save around $11 billion, and the loss to Russia’s budget thus also comes to around $11 billion.

The point I want to make is that now that the circumstances have changed and Crimea is now part of the Russian Federation, there are no grounds for keeping this agreement in effect. There is a principle in international law, in accordance with which an agreement remains in force only so long as the circumstances that gave rise to it prevail — clausula rebus sic stantibus – excuse me for the Latin.

Vladimir Putin: That’s all rather clever sounding, but it does make a substantial point.

Dmitry Medvedev: Yes, it sounds rather weighty, but what we have before us is precisely this kind of case. If this is so, then we should revoke the agreement in accordance with the set procedure. But this raises the matter of the $11 billion that our budget has lost. I think it is perfectly fair to raise the question of having Ukraine’s budget compensate these funds. This could be done through the courts, in accordance with the revoked agreement’s terms. Of course, these are tough measures, but at the same time, the agreement no longer has effect, but the money we paid is real, and our Ukrainian partners must understand that nobody hands over money just like that, for nothing.

At the same time, I remind you that Ukraine’s debt, public and corporate, to Russia is quite large as it is. This includes the $3-billion loan that we gave them recently in accordance with our agreement to buy Eurobonds, and the nearly $2 billion that Ukraine owes in accumulated debt to Gazprom. All in all then, Ukraine’s total debt comes to a very large sum.

Vladimir Putin: 11 billion plus 5 billion?

Dmitry Medvedev: Yes, it comes to all of $16 billion. I don’t think we can afford to lose that kind of money given that our budget faces difficulties of its own. I propose that we examine these issues in accordance with the set procedures.

Vladimir Putin: Mr Medvedev, remind me of the situation please. The way things turned out, we gave Ukraine a discount on energy resources immediately after signing the agreement, that is, starting in 2010, but we acted in advance so to speak, because the use of the naval base was still covered by the old agreement until 2017. In other words, we gave Ukraine this money in advance. 

Dmitry Medvedev: Yes, that is the situation, Mr President. This was essentially an advance payment taking into account our particular agreements at that moment. In principle, we could have chosen not to pay this money, but we did so, given that this was part of the new agreement’s terms, and it was also a way of helping Ukraine. But now that the circumstances have changed, this advance payment should be returned.

Vladimir Putin: Yes, there are grounds for this. Let’s not take any hasty steps though. Let’s discuss the whole matter and analyse it. I ask the Foreign Ministry to join in this work too and then present proposals together with the Government.

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