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Mr Putin told Mr Watts about the processes going on in the Russian economy, conditions for doing business in the country, and a programme of reforms. He said Russia had achieved significant economic improvement owing to the actions taken by the Government. In connection with this, references to a favourable foreign economic situation are not tenable.

The President said the programme of reforms of the Russian economy, which was adopted three years ago, would continue. He admitted the inflation rate in Russia was significantly higher than in industrialised countries, but it is reducing with every passing year. The President said Russia pays its foreign debts in full and regularly. All that testifies to the positive changes in the Russian economy and its stability.

Mr Putin suggested Royal Dutch/Shell discuss the construction of a pipeline running to Europe via the northern route. He said that apart from the Sakhalin 2 project, the company could engage in other major projects. He said he discussed the Sakhalin 2 project with Japanese Prime Minister Junichiro Koizumi during his telephone conversation prior to their meeting. Japan expressed its satisfaction with the implementation of the project and considered possibilities for participating in other projects, the Russian President said.

In his turn, Mr Watts considered this as voting for large-scale investment in Russia. He said Sakhalin 2 would lay the basis for many other projects.

Royal Dutch/Shell Group is one of the major foreign investors in the Russian oil and gas sector. The investments into the sector exceeded $2 billion in 2002.