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Excerpts from transcript of meeting with Government members

President of Russia Vladimir Putin: Good afternoon, colleagues,

We will start with an issue that will likely be the subject of much discussion today, namely, my request to the Federation Council on using Russia’s Armed Forces beyond our country’s borders. The Federation Council has examined this request and approved it.

Syria is the issue here. The only real way to fight international terrorism (and international terrorist groups are creating chaos in Syria and the territory of neighbouring countries right now) is to take the initiative and fight and destroy the terrorists in the territory they have already captured rather than waiting for them to arrive on our soil.

We all know that thousands of people from European countries, Russia, and the post-Soviet region have joined the ranks of the so-called Islamic State, a terrorist organisation that – I want to stress again – has nothing to do with genuine Islam. There is no need to be an expert to realise that if they succeed in Syria, they will inevitably return to their own countries, and this includes Russia.

We all know too that the Islamic State long since declared our country its enemy. Today, a number of countries, including the United States, Australia and France, are using their air forces to carry out air strikes against the Islamic State’s positions in Syria.

We have always consistently supported the fight against international terrorism. At the same time, we believe that it must proceed strictly in accordance with international law, in other words, on the basis of UN Security Council resolutions or at the request of the country in need of military assistance. Our partners’ operations in Syria have neither of these things as their basis, but we nonetheless think it possible and necessary to unite the efforts of all concerned countries in the fight against international terrorism and base this common effort on the UN Charter.

At this stage, I propose that all countries concerned, in particular the countries in the region, start taking part in the work of the international information and eventually coordination centre in Bagdad.

The only real way to fight international terrorism is to take the initiative and fight and destroy the terrorists in the territory they have already captured rather than waiting for them to arrive on our soil.

We have informed all of our partners about Russia’s plans and actions in Syria. Let me repeat: Russia’s involvement in the anti-terrorist operations in Syria is in accordance with international law and based on the official request from the President of the Syrian Arab Republic.

I want to stress the point though that the conflict in Syria has deep roots and is the result of many factors. This includes interstate and domestic political factors, and religious and interethnic differences, which have been exacerbated by unceremonious foreign intervention in the region’s affairs.

Given these circumstances, we naturally have no intention of getting deeply entangled in this conflict. We will act strictly in accordance with our set mission. First, we will support the Syrian army only in its lawful fight against terrorist groups. Second, our support will be limited to airstrikes and will not involve ground operations. Third, our support will have a limited timeframe and will continue only while the Syrian army conducts its anti-terrorist offensive.

Our view is that a final and long-term solution to the situation in Syria is possible only on the basis of political reform and dialogue between all healthy forces in the country. I know that President al-Assad knows this and is ready for this process. We are counting on his active and flexible position and his readiness to make compromises for the sake of his country and people.

Russia’s involvement in the anti-terrorist operations in Syria is in accordance with international law and based on the official request from the President of the Syrian Arab Republic.

To finish with the military theme, let me congratulate our naval personnel, who today, for the first time in the history of the Russian and Soviet submarine fleet, travelled a long way beneath the Arctic ice from Severodvinsk to Kamchatka. The atomic submarine Alexander Nevsky has now begun its battle duty. This is a big event in the navy’s life. I want to congratulate everyone – the sailors and the shipbuilders – on this successful work.

Colleagues, while security issues and military development are very important matters for our country’s overall development, one of the key areas for ensuring Russia’s growth is the economy, especially the social sector, industry, and agriculture.

Along with many of the Government members here today, I held a meeting recently in Rostov Region to review the results of the latest harvest campaign and discuss matters related to agriculture sector development. Yesterday, I discussed the microelectronics sector’s development with my colleagues. This sector is also very important for the national economy. Today, we will look at issues of a broader nature, namely, how to address the signs of recession we see in some areas.

Let’s begin by hearing from Mr Ulyukayev [Minister of Economic Development] on the work to develop socioeconomic priority development areas in single-industry towns. I know that the ministry has done the necessary work in this area and has already selected several projects.

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Vladimir Putin: Has the final agreement been reached with our Ukrainian colleagues on gas? And incidentally, what is happening there with air services? Please share your comments.

Energy Minister Alexander Novak: Mr President,

In accordance with your instructions to continue consultations between ourselves, the European Union and Ukraine on the reliability of gas transit to Ukraine, as well as the Prime Minister’s instructions, I held consultations with our partners on September 25. We were able to agree on the content of the protocol on cooperation in terms of gas supplies from the Russian Federation to Ukraine during the period from October 1, 2015 through March 31, 2015 – the so-called “winter package.”

The main stipulations of this agreement are mutual obligations of all sides. First and foremost, obligations by the Ukrainian side to guarantee the continuation of reliable transit of Russian gas through Ukrainian territory to EU countries in the volume that Gazprom provides for transit under existing contracts.

In turn, the Russian side, the Government of the Russian Federation, will consider providing discounts on a quarterly basis based on demand, and will consider gas pricing for Ukraine on a competitive basis, at price levels offered to countries adjacent to Ukraine, such as Poland. I have briefed our partners that on September 24, the Prime Minister signed a corresponding resolution for the fourth quarter of this year.

For the first time, this protocol reflects the obligation of the European Union, the European Commission which represents the European Union, to organise financing for Ukraine’s gas purchases through international financial institutions, including the allocation of the first $500 million tranche for Ukraine to purchase gas from Russia in October to fill its underground gas storage facilities and ensure safe passage during the winter period.

Vladimir Putin: How much money are the Europeans giving them?

Alexander Novak: The first tranche is $500 million. At the same time, we agreed that over the course of the entire winter period, they will help and raise funds for Ukraine, including through various financial institutions and banks, since Naftogaz is truly in a difficult position, as is the Ukrainian economy, and they cannot cope on their own.

Vladimir Putin: That’s the issue. Because we can pump $500 million of gas into underground gas storage facilities, but they then need to pay for Russian gas supplies throughout the entire winter, and that’s close to $3 billion. Where will they get this money without help from European nations? So it is fundamentally important that this agreement includes European obligations to ensure financing.

Alexander Novak: Mr President, it was fundamentally important to formalise this in the protocol.

For our part, we signed this protocol, as did the European Commission. We feel that we have created all the necessary conditions to get through the cold season during the winter period reliably.

Vladimir Putin: Thank you.

And what is happening with air transport services?

Transport Minister Maxim Sokolov: Mr President, this week, Ukraine’s aviation authorities – the State Aviation Service – sent notifications to nine Russian airlines on banning their flights to Ukraine, in violation of our interstate agreement’s provision on air traffic. This agreement has been in effect for over 20 years, and since 2013 we have full liberalisation in all areas and frequency of flights.

This year, five Russian and three Ukrainian airlines have been providing air transport services. In the first eight months of this year, the overall flow was nearly 700,000 passengers, of which nearly half, or 300,000, flew Aeroflot.

Of course, such actions by the Ukrainian authorities are not only against international law, but also illogical in terms of transport functioning, since 70% of the passengers using Aeroflot were Ukrainians, and 40% of them were simply passing through Moscow on their way to other airports in Europe or other countries. Thus, this measure first and foremost hurts Ukrainian citizens, reducing their air mobility and essentially isolating them from Europe and the rest of the world.

In response we were forced to apply adequate ‘mirror’ measures. The Russian Federal Air Transport Agency has already sent notifications to five Ukrainian airlines – all the airlines that currently fly to or have permission to fly to Russia – on banning the use of our airspace from October 25 – in other words, from the date stated in the notification from Ukraine’s State Aviation Service. Naturally, in addition to the inconvenience to passengers – and I mean all of them – this will lead to significant losses not only for Ukrainian airlines, but first and foremost, Ukrainian airports. For our part, we have already begun to reroute these flows.

Vladimir Putin: We are trying to hold talks with the European Commission and Ukraine on our relations with regard to Ukraine’s signing of the Association Agreement with the European Union and trying to find a way out of these rather complicated situations related to inconsistencies in this agreement and our mutual, Russian-Ukrainian obligations within the framework of the CIS free trade zone. Mr Ulyukayev, how will this reflect on the current process?

Economic Development Minister Alexei Ulyukayev: I think the chances of a positive result in this process are now becoming very slim. Of course, this is not the first unfriendly action. We have registered over forty acts by the Ukrainian Rada and Cabinet of Ministers aimed against Russian economic entities, creating discriminatory working conditions, but this, of course, is an extreme – a complete ban.

In our document, which we offered for trilateral discussion, we introduced a section on mandatory elimination of unilateral measures by Ukraine aimed against Russian businesses as a highly important part of the entire agreement. Because it is impossible to agree on improving customs procedures, improving work in terms of technical regulation, etc., while discriminating against our businesses. Now, following these latest events, I think the chances are quite pitiful.

Vladimir Putin: Mr Medvedev, I want to ask you to keep all these processes under control, as they are very important to us.

Prime Minister Dmitry Medvedev: Yes, Mr President.

Naturally, we are in constant contact with our colleagues on this matter. I cannot but agree with the Economic Development Minister’s comment. All this is making the chances of agreeing on issues under discussion during our dialogue with the European Commission and Ukraine ephemeral. Because this is not just a refusal to seriously discuss the challenges we all face in light of Ukraine’s accession to the Association Agreement with the European Union, but also simply a set of unfriendly measures that are essentially directed against Ukrainian citizens.

Vladimir Putin: Ok.

Let’s say at least a couple of words about more pleasant topics. We are preparing for Formula 1 Russian Grand Prix in Sochi. Mr Kozak, how is that work going?

Deputy Prime Minister Dmitry Kozak: Yes, indeed Mr President, Russia will be holding this most prestigious race in the world for the second time now. As you recall, the Formula 1 races are a leading event in terms of television viewership, next to the Olympic Games and the World Cup.

Last year, over 500 million viewers in 120 nations around the world watched our Formula 1 Grand Prix. This stage, the second stage in the history of Russian auto racing, will be held on October 9–11 in Sochi at the racing circuit that, I want to point out, was recognised the best race track in the world at the Professional MotorSport World Expo in Cologne, and Formula 1 itself, the race, received two prizes as the best track in the world in the Formula 1 2014 calendar.

This year, the approved plan of preparations for the race has been fully carried out. Interest among Russian and foreign viewers is high, and tickets are selling at the same rate as last year. We are absolutely certain that it will be a complete success.

We are currently negotiating extending the duration of the contract, which ends in 2020, and we’re also making progress on negotiating rescheduling the races in Sochi from daytime to night-time.

We have noted a great deal of interest from Russian investors in getting involved in this race and financing the license fees we must pay every year to hold this race through non-budgetary funding.

Vladimir Putin: Night-time races?

Dmitry Kozak: Yes.

Vladimir Putin: But then it will be impossible to see anything.

Dmitry Kozak: On the contrary, they will be colourful. In Monaco and Singapore, the races are held at night, and are illuminated. We would start in 2017, because we will need to install additional lighting. TV viewership will also increase, because it will involve bright imagery; it is more beautiful at night than in the daylight.

Vladimir Putin: Very well. Thank you very much.