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Vladimir Putin: Esteemed Lord Mayor,

Your Royal Highnesses,

Ladies and Gentlemen,

Allow me first of all to express my gratitude for being invited to speak in this legendary and historic hall. Its walls hold the memories of famous historic figures and the leaders of many countries who have visited Great Britain.

Today, before the political, business, and cultural elite of the United Kingdom gathered here I would like to briefly discuss the processes underway in Russia, and share my views on the situation in the sphere of international politics.

You most likely know that the official history of the relations between Russia and Great Britain started long ago. I have already referred to 1553 today. As I have said, in that year the captain of an English trade ship, Richard Chancellor, came to Russia and was welcomed by Tsar Ivan IV. He received official documents from the English monarch and the Russian tsar gave him the right to free trade.

This was a far-sighted and wise decision to strengthen diplomacy with mutually beneficial trade relations, and to this day trade and financial relations are the most reliable means of strengthening friendship and understanding between nations.

Since that time, four and a half centuries have gone by. And, of course, much has changed since Russia made its first attempts in setting up relations with European countries. Today, our country has chosen the European vector for its development and sees it as one of the most important paths of mutual relations on the international scene: one of its fundamental priorities.

For over 10 years already, Russia has been confidently moving along the road of changes. I am very grateful to the Lord Mayor for taking note of several positive tendencies in the development of our country. We have definitely made a choice in favour of freedom, democracy, and market changes. It is this choice that opened the road to a new quality of mutual relations between our countries.

Today's Russia is a more attractive economic partner not only for Europe, but for the world as a whole. And I hope this is true for the business circles in Great Britain.

Macro-economic and political stability have already become an ordinary thing for us. Better conditions for doing business and, consequently, for investment are being created.

We still have many problems and a very large capital outflow. However, if three or four years ago this outflow was approximately $24.8 billion per year, last year it fell to $11 billion and the amount of investments was higher than the amount of outflowing capital. This happened for the first time over the past few years.

Five years of stable economic growth also means something to us. The Lord Mayor noted that last year's growth was 4.3%: this is correct. However, the average growth over the past three years has been 6%. And during the first five months of this year it was 7.1%. This obvious achievement is also the fact that there has been a stable budget surplus over the past four years in Russia. Moreover, we are paying off our external debts on time and decreasing our external debts. And today, in regard to the country's GDP, this is one of the best indices in Europe.

I must say that, together with the industrialised European countries, Japan, the United States and Canada, we are participating in lowering the debt burden in developing countries. And in this respect, Russia leads the world for writing off the debts of developing countries in relation to our own GDP. In absolute figures, if I am not mistaken, Russia is third in the world in terms of writing off debts after Japan and France.

As we give up excessive functions and authorities of the government, we hold back the growth of budget's interest-free expenses; although, we have simultaneously cut the rates of basic taxes, and not only income tax.

Next in line is the development of our internal stock market. We need to raise the quality and range of banking and other financial services. Starting in 2004, we will begin the transfer to the international standards in financial accountability for banks.

The Russian business community is actively and successfully entering the world economy. Close contacts are being established with foreign investors. Business operations are becoming transparent and predictable. As you know, Russia has just been accepted as a full member in the Financial Action Task Force, an organisation that fights money laundering. The level of corporate management is also growing.

It is good to know that these efforts are acknowledged beyond Russia's borders, including Great Britain. The number of Russian companies registered on the London Stock Exchange is growing.

The partnership in the energy sphere is especially promising. This subject will be discussed in detail tomorrow within the framework of the Russian-British Energy Conference. Many plans are being implemented and even more have been drafted for the future.

The strengthening of partner relations with the countries of the European Union is of priority importance for us. At the summit in St Petersburg we were able to make some progress along this path. We are paying particular attention to the development of the European common economic space concept and are planning to discuss it in practical terms already in November at the next Russia-EU summit in Rome.

In regard to Russia's planned entrance into the World Trade Organisation, and I am very grateful to our host, the Lord Mayor, for mentioning this today, this issue is also of principle importance. And I would like to use this opportunity to express my sincere gratitude for supporting our efforts in this.

We hope that Great Britain's position, which has traditionally been pragmatic and realistic, will help to successfully conclude the bilateral talks with the European Commission this year.

I would also like to note one more circumstance. I was speaking about economic reforms and macro-economic variables. They will not have any meaning if these positive changes of a macro-economic character are not felt by the citizens of Russia. Unfortunately, the lives of ordinary people are still difficult, but we are determined to pursue a balanced social policy and are constantly working towards increasing the population's standard of living, and are taking care of people who have reached the retirement age. A law, a whole package of laws on pension reforms has been passed, creating a new system of accumulative pensions. We are constantly trying to increase pensions and people's income. During just the first months of this year, real incomes of the population grew by 14%. We believe this must be the policy of the government which wants to see long-term results.

Esteemed Lord Mayor,

Your Royal Highnesses,

Ladies and Gentlemen,

The stability of the global economy largely depends on how successfully we combat new threats and challenges. The biggest of these are the proliferation of weapons of mass destruction, international terrorism and extremism.

Russia and Great Britain have first-hand experience of terrorism. We are using the whole range of the available resources to counter this evil. However, the fires of terrorism have not yet been extinguished. The global nature of the new threats and challenges demands a collective response from the entire international community.

Today, Russia is an active participant in the counter-terrorism coalition. As part of it, we interact with Great Britain and other countries. I would like to point to the very positive development of the relationship between our ministries, which are working together as never as before in recent history, improving the trust between the special services of our states.

In the fight against terrorism, we should not lose anything the humankind has accumulated in the millennia of its history. I mean, first of all, international law and also the whole international system and the central role of the UN. This system has served us well over the past decades. Civilisation has nothing to replace it with. And now, when the ideological schism in the world has been overcome, its potential could be used to the full.

Ladies and Gentlemen,

Four and a half centuries is a long time, even in historical terms. It is not surprising that in this time we have had periods of partnership and cooperation, as well as, unfortunately, episodes of distrust and ideological rivalry. But bilateral relations between Russia and the United Kingdom have been key priorities for both states. Today, they are by right becoming the most important foundation of European, and without exaggeration, global politics.

Allow me, Your Honour, to thank you and the Corporation of London for such a warm reception and this wonderful evening.

And now, I would like to propose a toast: to the Lord Mayor. To the Corporation of London.