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Vladimir Putin: Mr Federal Chancellor,

Allow me to welcome you to the Urals. I should tell you right away that this region is traditionally considered one of the strong and dynamically developing territories of our country.

This assessment of the region is quite fair and justified. Not just because the Sverdlovsk Region occupies third place in Russia in volume of industrial production. It is important that this region today skilfully uses all its advantages and the opportunities that an open economy provides.

I expect that because of this, the meeting of business circles of Russia and Germany here, in Yekaterinburg, will be useful, interesting and fruitful.

The inter-governmental consultations are held here regularly – every year – and your business forum will take place at the same time, only at different venues. But it is very important for politicians and the business community to share a common mood. A mood of mutual understanding, of constructive cooperation and achievement of specific results.

I think it will not be superfluous to repeat that relations between Russia and Germany have a strategic nature. Strategic in the sense that these relations are directed towards achieving long-term goals, including in the area of economic cooperation. It is this promising approach that should determine both the sense and dynamics of business relations.

I note that economic cooperation between Russia and Germany is traditionally one of the most advanced areas of our partnership.

Germany remains the main foreign trade partner of Russia outside the CIS. Mutual trade turnover for January-June this year came to 12 billion euros, and 24.3 billion euros last year. German investment in Russia makes up over 17% of total investment. And here, Germany is an undoubted leader.

It was pleasing for me to see how the Federal Chancellor reacted to the small exhibition that the Governor showed us at the entrance to this hall. The vast majority of major projects in the Sverdlovsk Region are carried out with the help of capital from German partners and German industry. Recently, a meeting of the Consultative Council on Foreign Investment under the Russian Government confirmed serious progress in the attractiveness of our country for investment. And as you know, yesterday Russia’s investment project rating rose two points.

It is clear that after the expansion of the European Union and the completion of the process for Russia’s entry into the WTO, where we count on Germany’s support, our countries will play a greater and greater role in the formation of a common European economic space. And this means we will have a real influence on transformation processes of the global distribution of work.

And these are truly strategic challenges, which Russian and German business will have to react to together. Therefore, the more precisely and confidently mechanisms of agreeing and coordinating positions work, the more successful the response to these challenges will be.

Today over 2,000 firms with German involvement are working in Russia. The number of branches of German corporations and banks working on the Russian market is also steadily increasing.

This cooperation not only brings profits, it also strengthens mutual trust. And the entrepreneurs of our countries gain invaluable experience in conducting joint business, experience that is founded on the principles of business etiquette and a careful attitude to one’s own reputation.

Expanding their business, Russian entrepreneurs show an increasing interest in Germany’s economy. They show they are ready today to invest their capital in creating new chains of industrial cooperation. And we expect that this activity will find understanding and support from the leadership of Germany.

In connection with this, the Federal Chancellor and I give great importance to the strategic group on trade, economic and financial issues. It should be emphasised: in three years of work, the general conditions of economic cooperation have been improved significantly. At the same time, a number of chronic problems have been solved. Now the group’s portfolio has many large-scale projects that have European significance. A number of agreements on them will be signed here, and in the near future they will also be signed outside the territory of Yekaterinburg, and they are in an advanced state.

A clear sign of this is the construction of the North European gas pipeline. I know that work on signing this document is nearing completion, and it will be signed in the next two to three days. We highly rate the readiness of our German partners to take part in new plans on extracting, transporting and storing Russian energy resources.

Both sides also well understand all the prospects of cooperation in the sphere of high technology. The scientific potential of Russia, including in the Urals and Siberia, is well known. It is both unique and universal.

Nevertheless, several truly large-scale projects are so far in the developmental stage. They require effective schemes of financing and administration, and an organisation of work is required which in practice opens up new, wide possibilities for us. This includes selling high technology products on the markets of third countries, for examples, in the aerospace industry.

I expect that we will be able to discuss all these topics next year at the bilateral forum on cooperation in the sphere of high technology and innovations. And your ideas and recommendations would be very useful here.

I want to separately discuss the topic of cooperation between the regions. Over the last year alone, representatives of the largest federal states of Germany have worked in Russian regions – from Nordrhein-Westfalen, Bavaria and Hessen. Currently a delegation from Baden-Wurttemburg is in Yekaterinburg, and there is a delegation from Lower Saxony in Perm.

The Urals and North-West federal districts have already shown their economic and scientific potential in Germany, as have Moscow and St Petersburg. The Southern Federal District is preparing for a demonstration of its economic capabilities.

Direct cooperation between enterprises is becoming the norm. In the majority of cases, it no longer requires the involvement of administrative resources or state guarantees.

Today, it is also important to activate dialogue between entrepreneurial associations, including those organised according to regional principles. The object of their particular attention should be small and medium enterprises, and developing optimal mechanisms of their cooperation.

In recent years, a new generation of professional administrators has come into being. They are well versed in issues of Russian-German economic cooperation and able to contribute to its development. A major contribution to their training has been made by the organisers of the programme for training leading economic staff.

In just five years of instruction and training in Germany, over 2,000 people have participated in this programme. It is important that this results not only in an increase in qualifications, but also the establishment of contacts, giving birth to new business ideas and initiatives. And we, of course, are pleased that this programme has been extended until 2007.

It is these professional, and also simply personal contacts that strengthen the centuries-old ties between Russia and Germany. I expect that your meeting will also help not just economic but also spiritual ties of friendship between the people who live in our countries. Allow me to wish you success on this path and fruitful work here, at the forum.

I hope that the discussions and this visit to the Urals will increase the interest of German business in this very rich region.

Thank you for your attention.

Vladimir Putin (after the speech by Mr Mordashov):

I want to say literally just a few words about what Mr Mordashov has just outlined as one of the main topics. I would like to concentrate your attention on this – the problem of the Russian Federation joining the World Trade Organisation. I would like to direct the attention of all the colleagues present here, and above all our German friends, to the circumstances we are now dealing with in the discussion process for Russia joining the WTO. This above all concerns the talks with the European Union.

I think that representatives of German business, like no one else, are interested in Russia joining the WTO as quickly as possible, bearing in mind the volume of our trade ties, and the fact that Germany is an investor in the Russian economy. I would remind you that one of the main obstacles at the moment in completing the discussion process with the European Union is energy issues. But it is because Germany is our largest investor, that the German economy is interested in working within the Russian economy. This is the first circumstance. The second is, as Klaus Mangold said, that the main advantage at the moment is the economic stability in Russia. I assure you, if we drastically move to world prices on energy resources, macro-economic stability will be disrupted. The Russian economy is a derivation of the Soviet economy, which was built around energy losses, unfortunately for us. We cannot move to international prices on energy resources within the country in a single day. This is impossible. We would cause the entire Russian economy to collapse. This is impossible by definition. This means that European bureaucrats either do not understand this, or are trying to create conditions that are unacceptable for Russia to join the WTO.

We do not really understand why they are doing this. We realise that sooner or later, and the sooner the better, we must move to world prices within the country. We intend to do this in stages, first of all. And secondly, taking a flexible position, we are prepared to hold talks, but not within the framework of Russia joining the WTO, but rather within the energy dialogue with the EU. There are tools for this and an appropriate commission between Russia and the EU. There are also suitable specialists for this in the EU. We consider it incorrect and illogical to hold dialogue on energy within the framework of joining the WTO. The EU’s position towards Russia on this matter is in our opinion unjustified and dishonest. These problems have nothing to do with entering the WTO and are not related with joining the WTO. We look at this simply as an attempt to twist our arm. But I must say that Russia’s arms are becoming stronger and stronger. It is unlikely anyone will be able to twist them, not even such a strong partner as the European Union. I call on representatives of German business to pressure European bureaucrats to overcome the obstacles we are currently facing on Russia’s path to joining the WTO.

Thank you. Good-bye.