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Vladimir Putin: Ladies and gentlemen,

I sincerely appreciate the invitation to visit your University, the oldest in Texas and one that is at the cutting edge of science and education. I am glad to see all those gathered here. My special thanks of course go to the authorities of Texas and Houston, President George Bush Sr as well as Mr James Baker for organising this meeting.

When we met I was surprised to discover that Mr Baker remembers our first meeting. It took place in 1992 in St Petersburg. I was a fairly modest city official at the time, and Mr Baker was a very big boss. Nevertheless, he remembers that meeting, which is very pleasant for me, and another thing is that back then the US Administration led by Mr George Bush Sr paid attention to Russia and even worked in the regions. It worked in a direct hands-on manner with personal involvement and as we see all this has paid off. And for this I would like to thank the former and the current leaders of America.

And of course, I would like to extend greetings from Texas to all the citizens of the United States of America.

For Russian citizens Texas is not just a ”Lone Star state,” a romantic state that enthralls all those who know and love America (and there are many such people in Russia). It is not only a symbol of independence, nobility and the American quest for justice. For Russia, the south of the United States is an economically developed and wealthy region. A region with which our cooperation does not have to start “with a clean slate” because we already have much in common. This includes the oil and gas industry and the joint work in space research which is fast gathering momentum. Russian speech has long been heard at the Johnson Space Centre. We even have a shared holiday. It is April 12, the day when our compatriot Yuri Gagarin made the first spaceflight in the world. As far as I know the Texas Legislative Assembly has declared it to be a holiday. This is a special symbol to us and, I assure you, it gives us a special feeling for Texas.

I think even these facts provide an affirmative answer to the question that has long been relevant, but is now doubly relevant: do Russia and America need each other?

It has now been brought home to us what being together means. We have started to invest this concept with new substance, to look for ways for a more productive and upgraded cooperation. So our relations should not be seen only through the prism of the events on September 11. Of course these events gave us a chance to make our bilateral ties long-term and genuinely friendly. Today political leaders have a special responsibility. They must not only provide an adequate response to the terrorist challenge, but reappraise the history and the logic of mutual relations between our countries and see how to build on them, what to rely on and what to try to achieve. In short, it is our duty to hear the “pulse of history.”

And there, I am sure, the problem of confidence comes to the fore. People in our countries have not yet entirely got rid of the Cold War stereotypes, at least one has to admit that not all of them have. And besides, the experience of the past decade has not been wholly positive. So, people on both sides of the Atlantic expect one thing from our talks with the incumbent US President: they want us to find a common language on the problems which millions of people in Russia and the US and in the whole world look to us to solve. They expect political leaders in America and Russia to leave behind double standards, unnecessary suspicions and hidden agendas so that they initiate an open, direct and fruitful dialogue. The Cold War should not grab us by the sleeves any longer.

Today much has been done for the relations between Russia and America to be built with due account taken of each other’s interests. We are learning to realistically assess the potential of our countries without exaggerating or underestimating it.

The possibilities for our constructive interaction are indeed vast. Luckily, they are not confined to the relations between governments. Contacts between non-governmental organisations, cultural exchanges and friendly ties between thousands of people – all this is our common capital. We should enhance and broaden it in all the spheres of informal cooperation.

The scientific community has a particularly great potential in this area. Only two countries in the world have from the start pursued a strategy of developing science across the whole spectrum. They are the US and Russia. The desire to generate knowledge, including fundamental knowledge, is a feature of both the American and Russian cultures. But the Russian reserves of fundamental and technological knowledge have not been fully realised. So, joint Russian-American research and development, in our opinion, have a big future. Especially since we already have an example of such successful cooperation — NASA. The interpenetration of our education systems is very important. They are organised in different ways, but each has proved to be viable and each is effective, has its own traditions and its own “taste” for education. Therefore contacts in this sphere will benefit children and parents and our countries as a whole.

Speaking to this audience, I would like to stress that creative contacts at the “grassroots” level, to use an American phrase, are sometimes much more fruitful than meetings of bureaucrats even at a very high level.

And we look to business to play an active role in shaping our new relations. We see a growing interest in the Russian market among American business circles in recent years. The change is amply justified. Today our country has everything for effective investment in the most diverse fields. I have every reason to say this with confidence.

First, Russia is maintaining a high rate of economic growth. Our GDP increased by 8.3% last year, this year the growth target was originally 4%, but in reality it will be about 6% – 5.7–5.8%. Industrial output has also registered steady growth. We think that it will come out at 8% at the end of the year. The favourable foreign trade conditions is only one reason. Internal incentives have appeared in Russia. One indicator is the work of our banking sector, which has increased credit to industry by more than 40%.

Secondly, the legal conditions for business have noticeably improved. The number of licensed activities has dropped from 2,000 (the legacy of the planned economy) to 104. That is still a few too many, but we intend to take another step to cut down on bureaucracy and liberalise the Russian economy. Businesses will soon be registered on a “one-stop” basis, within a single system and according to uniform rules. A law to this effect will come into force in July of next year.

The new Land Code, whose absence has been a brake on the economy for many years, will undoubtedly have a positive impact on the investment and business climate.

Legislation has been passed to counter money-laundering. We have challenged the “black market” which has been eroding the country’s economy. We have supported legal business, and it has received extra protection.

Thirdly, the corporate governance of Russian companies is gradually improving. A corporate governance code based on world business standards has been prepared.

Fourth, also very important, and perhaps the most important thing is the easing of the tax burden, something that has been discussed in Russia for years (for a whole ten years) and on which very little had been done until recently. As of January 2002 profit tax will be cut from 35% to 24%. All the tax breaks are abolished, that is, Russian business is becoming more transparent. And I have no doubt that we will stick to this approach in forming the rules of the game.

In the field of extraction of natural resources we have introduced one tax instead of three. Many in this room probably know that we now boast the lowest rate of income tax levied on private persons. It is the lowest in Europe, it is a flat-rate tax which does not depend on the size of income, and it is just 13%. And I must say that such a liberal approach had the immediate effect of sharply increasing the collection of taxes into the federal budget.

Accession to the WTO is one of our priorities. We are deliberately synchronising this process with internal reforms. Having said that, we understand that this step would bring not only benefits but also additional obligations. We realise we have to do it within a short space of time and we are deliberately speeding up the negotiating process. Already we are preparing a package of laws that will fill the “blank spots” in terms of international standards and WTO rules.

And I would like to stress that we will seek standard terms of admission to the WTO. It is quite a complicated process, but of late, it has been making good headway, not without support from our American partners.

That the main direction of our efforts is the correct one is witnessed, among other things, by the positive start to the Russian-American business dialogue. Already “interest groups” are being formed here. Boeing has come up with an initiative for the aerospace sector. A round table of Russian and American hi-tech companies is in the process of approval. On the Russian side it is headed by Academician Velikhov, a scientist of world stature. And there are other instances of which you in Texas know, I am sure.

This year, ladies and gentlemen, the flow of foreign investments into Russia increased by 40%. It is still not much in absolute terms, but it is a significant growth in percentage terms. Unfortunately the US is behind Cyprus, Holland and Germany in terms of direct foreign investments. But while the flow of capital from the first two countries is simply repatriation of our own Russian capital, the strengthening of Germany’s positions indicates that Europe is interested in investing in Russian industry. We hope that America will be able to take up that challenge.

Russia already has many stable areas of the economy which today contribute towards overall security. I am referring above all to our energy resources. Russia remains a reliable and predictable partner, a supplier of oil and other energy sources.

There are already early “success stories,” as you say in America, in our bilateral cooperation. The construction of the pipeline by the Caspian Pipeline Consortium is drawing to a close. It is the biggest investment project in Russia with the participation of American capital. Several days ago the company Exxon Mobil announced the opening of the main investment phase in the Sakhalin-1 project, which envisages investments of between $12 and $15 billion, while the total expenditure on the project may amount to $30 billion.

In the automotive industry, joint production of a new off-road vehicle is being launched together with General Motors, and the Ford company is active in Russia. Pratt and Whitney is moving part of its production to a factory in Russia. And the same is true of some units produced by Boeing.

Businessmen are working independently, but we think that it is important for the Government of the Russian Federation to give them the necessary assistance. The new US Administration under President George Bush has similar intentions.

In this connection the issue of remaining trade and economic barriers is becoming crucial. These issues must be put out of the way. It is easier to move forward without the “ballast” we have inherited from the Cold War. I don’t want to enlarge on the subject, but you understand that I am referring to the Jackson-Vanik amendment, which is no longer in effect in practice. The US Administration pulls the plug on it every year, and it remains an odd symbol of confrontation.

We have already covered our part of the way towards overcoming old obstacles. And today we count not only on the constructive moves of the US Administration, but also on the support of US business circles in these matters.

I am aware that there are many representatives of the aerospace and oil business in this room. We have long been cooperating in space. The International Space Station is 85% a Russian-American project.

We are strengthening the legal basis of the production sharing agreement regime to make investments in the oil industry still more profitable.

The scale of the opportunities that open up in extracting Russian oil and gas could keep us busy together for decades ahead. And I am referring not only to investments by American companies in Russia, but also to Russian investments in joint projects. Instances of this already exist.

Ladies and gentlemen, Texan cowboys have the heels of their boots turned slightly inward in order to prevent mud sticking to them while working on a ranch. Cleanliness is an excellent symbol, including in international relations. Today people listen to what we say in meetings and official negotiations. But we will be judged not by our talk, but by what we do. Then it will become clear how clean our intentions are and how sincere our wishes. Nobody needs friendship and cooperation that exist only on paper.

Painstaking and hard work lies ahead for all of us. Here in Texas there are many true professionals who understand the value of the prospects of cooperation with Russia.

And in conclusion I would like to say this:

Your risks in the Russian market today are much less than they were several years ago. This is obvious. There is much that brings us together, and we are very much alike. And when Mr Baker made literary comparisons about George Bush Sr and George Bush Jr, he was speaking about acorns and oak trees. But we also have a similar saying of identical meaning: “The apple never falls far from the apple tree.” I am absolutely confident that the baton which has been taken up by the incumbent President from his father is in a safe pair of hands and we can do much together with him for the benefit of the peoples of Russia and the United States.

Thank you for your attention.

Question: How do you see the situation in Afghanistan and how do you see the future of that country?

Vladimir Putin: The situation in Afghanistan is one of the main problems which has been the focus of these and the previous meetings with the President of the United States, including the meeting in Shanghai. You have noticed that after the Shanghai meeting I stopped over in the Tajikistan capital Dushanbe on my way back to Moscow and I had a meeting there with the leadership of the Northern Alliance. I set forth what is in fact a view we share with the United States on the situation in Afghanistan at the moment, and I set forth our common position regarding the future of Afghanistan. The gist of it is that the organisation that turned out to have links with international terrorism, the Taliban movement, has no place in the future leadership of Afghanistan. At the same time the future leadership of Afghanistan must have the broad support of all the ethnic groups in that country and the support of the neighbouring states and the UN. In principle, that position was accepted by the leadership of the Northern Alliance and it said it was ready to work with the international community, including Russia and the US. The events we are witnessing are no surprise to us, in fact we see the goals that we set ourselves being achieved.

The first stage of our joint effort is liberating the north of Afghanistan, and then Kabul. These goals have been achieved. Of course, the problem of political settlement in Afghanistan is coming to the fore. Our strategic goal is to determine the country’s future, but at the same time I think President Bush has a point when he says that we must not slacken the direct efforts aimed at fighting those who are suspected of committing terrorist acts and are hiding in Afghanistan, and against those who are hiding them. Those who have pulled out of Kabul and are hiding in the mountains and other places are being pursued and I am sure justice will catch up with them. So at the moment, and I would like to stress this, the situation is under control. It shows that we are achieving the goals we set ourselves and we will go on working together and coordinating our efforts in this way.

Question: How do you see Russia’s relations with NATO? Will Russia ever become part of NATO?

Vladimir Putin: NATO was created in a certain historical period and for certain goals: it was created to confront the Soviet Union, and I spoke about it at the meeting with President Bush in Ljubljana. I think it was in 1956 or 1957 that the Soviet Government proposed to the leading NATO countries to admit the Soviet Union to NATO. At the time the Soviet Union was turned down. I have read the notes on that issue. And the reasons why the Soviet Union was refused admission to NATO were spelled out: it was the totalitarian character of the Soviet system, and the problems of Austria and Eastern Europe. As you see, when you look at it in the historical perspective, pooling our efforts with NATO is not a novel idea. As you see, today there is not a single obstacle to prevent NATO and the Russian Federation from combining their efforts.

NATO has become part of present-day reality. The organisation bears serious responsibility for maintaining stability in the world. We are already working with NATO at the Permanent Joint Council and we are prepared to expand cooperation.

Today threats that did not seem to be so substantial are coming to the fore. We know about this not only from the events of September 11, but in connection with the concern about the possible proliferation of weapons of mass destruction – not only nuclear weapons, but also biological and chemical weapons. And other threats are also emerging. One has to admit that NATO was not created for the express purpose of countering these threats. Today all the leaders of the main NATO countries recognise that if there is one ally that can make a real, tangible and substantial contribution to countering these threats, it is Russia. We are ready for broader cooperation with NATO, we are ready to go as far as the North Atlantic bloc is ready to go, with due account of course of the national interests of the Russian Federation.

We are discussing various options for broadening our cooperation, and some good ideas have been put forward. Anyway, those sitting in this room will agree with me that if we want a member of the international community to implement a decision consistently, persistently and effectively, that member should take part in working out the decision and feel responsible for implementing it. If we put in place a mechanism that includes Russia in the process of decision-making I think we will achieve a qualitative change in relations between Russia and the North Atlantic bloc. We are ready for that work and, I repeat, we are conducting very intensive and positive consultations, including with President Bush.

Question: What can we do to forge a qualitatively new strategic relationship between Russia and the US?

Vladimir Putin: I think that yesterday’s remarks by President Bush and my remarks at the Russian Embassy in Washington show that we have prepared serious and important changes that match present-day realities. We have stockpiled a lot of weapons. Some cuts have been made, but they are absolutely insufficient.

Let us think back to the tragedy of September 11, which is so terrible in this super-technological world. Strikes of this kind are painful, not to speak of the use of weapons of mass destruction. But we have thousands of nuclear warheads, we can destroy any big power several times over; today the US, like Russia, can prosecute a military conflict with the use of weapons of mass destruction simultaneously with all the nuclear powers. Even a madman would not contemplate such a development of the situation.

Of course, to reduce the danger of unsanctioned launches, and human-induced danger connected with nuclear materials we must seek to bring down the quantitative ceilings of strategic offensive weapons. President Bush announced yesterday the level to which the US is ready to reduce its arsenal, and I have to tell you that the Russian Federation has long declared that it determines these ceilings for itself. If we act jointly we will together make the world a much safer place than it is today.

Question: How do you see the future of land reform?

Vladimir Putin: You know, the land issue in Russia is not so much a legal and not only an economic issue: it is a very complex and emotional factor in the country’s life and has been for centuries. Lack of normal purchase and sale of land is a serious impediment to economic development.

We have passed a law on the free sale and purchase of land in cities and industrial centres. That involves a small percentage of all land. The decision on the sale of agricultural land has been set-aside for the moment. This is because during the past decade a highly complicated system of lease relations has emerged and in my opinion, some mistakes have been made which have led to the creation of a large group of people who have rights to certain plots of land but have no opportunity to own, use or dispose of them, that is, they have not become real owners. The three elements of property – ownership, possession and disposal – have not materialised. But the piece of paper certifying that a person is the owner is there. This has created a very complicated situation and one should proceed very carefully to make sure that the people who hold these documents do not feel cheated.

Experts are working out scenarios for a way out of this situation. But at the end of the day the market is the only correct answer. We will follow that path but – mindful of the historical conditions – we will tread warily.