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Question: When did you decide that Mikhail Fradkov would be appointed Prime Minister, and why? Several people were probably considered. What qualities made him stand out among other candidates? And what did not satisfy you in Mikhail Kasyanov’s Government?

Vladimir Putin: First of all, I would like to say that I was not dissatisfied with the work of Kasyanov’s Government. I am simply convinced that from time to time, the personnel of such key structures in the state needs to be changed. According to the Constitution, the President can be elected twice for four years. During these possible eight years, things should not be rushed, but it is useful to change the personnel of the supreme bodies of power. People get used to their high positions, and they become surrounded by hangers-on, minions, cling to old ideas, and begin to value their place too highly, instead of working hard and thinking about the development of the area they work in and the country as a whole. This is an unavoidable component of any bureaucratic structure. So I repeat, there should not be any fuss and constant personnel reshuffles. People need to be treated with care, but systematic changes are necessary. This is the first point.

Secondly, over the last year it became clear that the dynamics in Kasyanov’s Government were being lost. I discussed this openly with him; we had a very good working relationship, and still do. He agreed that over the last six months, as he said himself: “I think you’re right – the dynamics have been lost.” But I think that this had been going on for a year, not half a year. Everyone had already started thinking about the elections. And, this is a significant factor – they could not decide on administrative changes, or more important things in the sphere of the economy and social development. This is the second reason, perhaps the most important one.

As for Mikhail Fradkov, we had known each other for quite a while, although not closely. I met him around 1995, when I worked in St Petersburg, and where as you know I was in charge of the city’s foreign economic ties. Mikhail Fradkov was at the time first deputy Minister of Foreign Economic Ties of the Russian Federation. We did not have any business relations, and we met in the usual way – he came to St Petersburg to see his younger son who was studying at the Suvorov Military School.

I must say that at the time this made a very strong impression on me, because back then, while some of our leaders were building Russia, many of the so-called elites were pilfering everything they could and hid it away. And when in these conditions a person doesn’t find a cushy position for his son, but sends him to another city, and what’s more to the Suvorov Military School – I must admit that this made a favourable impression on me. I repeat, no personal or official relations developed between us. Only later, when I was working in Moscow, our paths occasionally crossed. But, when I was working in the Presidential Control Directorate, I had the chance to receive information about the work of various ministries and departments, including the departments where Mikhail Fradkov worked.

His character, the style and the results of work, his focus on results, his personal qualities as an honest person were in no doubt even back then, when there wasn’t even any question of any special appointment or promotion for him. This attitude gradually formed from completely objective information that came from different sources. As you know, he later worked for Ingosstrakh, and returned to the Government – he essentially worked in the same department, which simply changed its name. It was initially the Ministry of Foreign Economic Ties, then the Ministry of Foreign Economic Ties and Trade, and after that, I think, just the Ministry of Trade, I don’t even remember now. At any rate, it was the same department. And, I repeat, he worked very well there. Later, working in different positions, I got more familiar with his work. Then Fradkov worked in the tax police. This work was essentially under my control. So there was a history to my relations with him. And the information was quite objective.

I can tell you when the idea arose to appoint him. When the decision was made to transfer the functions of the tax police to the Interior Ministry, I talked with him for quite a long time about this. Like any head of department, he of course told me how the service works, how important it is and how much the country needs it, etc. I listened to all this very attentively, and then I said: “Now forget that you head this department and tell me, if you act in the interests of the state, and try to distance yourself from everything, what do you think, is it possible to transfer these functions to the Interior Ministry? Will the state lose something or gain something? Just be honest.” He thought for a little while and said: “If I am to be honest, there won’t be any losses. It’s hard for me to say this, there are people I answer for. I only hope that whatever decision is made, people won’t suffer. The best people will be kept, their functions will be kept.” He made a series of proposals on how this should be done. But this was also an additional touch to his portrait. This was the first step.

The second step was our following meeting. I asked where he would like to work if the decision was passed to reorganise the functions of the tax police. There are different options: in Moscow, in Russia, or abroad. I told him that I didn’t know where he would work in Moscow: in the Government, in some other structures, I couldn’t tell him. But I told him that I did know where he could work abroad – there was a very interesting position. I told him immediately – the post of the representative in the European Union. His answer was, I think, quite correct. He said, “I don’t know what you can find for me here, but I don’t want to leave the country.” He had to leave, because during our third talk I told him that I understood everything, but that he was needed there. “This is a very important area, and it is hard for us to find a person who would make a fundamental change to this work. The European Union is about to expand, and we have many unresolved problems. I will work in contact with you. You will work in Brussels and in Moscow. And I would ask you to accept this offer.” He said, “All right, I agree.” So during all these discussions, essentially, a final decision was made. Of course, he did not know about this. He found out about it several days before it happened. I summoned Fradkov to Moscow under the pretext of discussing our cooperation with the European Union and the upcoming meetings with the EU leadership. It came as a complete surprise to him. But he agreed.

Question: How do you assess the initial results of the new Government’s work?

Vladimir Putin: Positively. It is too early to talk about any results yet. But I value the style that is forming in the leadership of the Government. And I value the fact that reorganisation of the Government does not interfere with the final development of important economic and socio-political decisions, and bringing them into effect. Mikhail Fradkov has been able to continue work on reorganisation, and on principles that were established in the framework of this reorganisation. As you can guess, there are many who want to move these principles out of the way, and live in the way that they consider best. Mikhail Fradkov is, on the one hand, able to maintain this rate and principles of reorganisation, and, on the other hand, not to slow down in developing and passing important economic and social changes, to advance them, implement them, and prepare proposals to be sent to parliament.

Question: Two days ago you signed the Decree on reorganising your Executive Office. When did you make the decision on reorganisation, which goals did you set yourself, and what Executive Office would you like to work with as a result of these changes?

Vladimir Putin: When did the Presidential Executive Office come into being? In June 1991. It was a time of revolution. And the Executive Office came into being as a “revolutionary headquarters”. First of all, I hope there will not be any more revolutions here. And this means that we do not need a revolutionary headquarters, we need an effective administrative tool. But it should be a tool that matches its purpose, and does not infringe on the jurisdiction of other supreme bodies such as the Government, for example. So the Executive Office should be compact, substantial and more manageable. Not from a political point of view, of course, but from the administrative point of view. So it has become simpler: the structure will be two-tiered rather than three-tiered. We have had main departments, then departments within the framework of main departments and so on. Now there will be no main departments, only directorates and departments.

Secondly, we have consolidated several departments, for example there was a department of economic policies and experts’ department. We merged them, and this will be a very serious Presidential Experts’ Directorate, whose task will not be to give orders to the Government and not to interfere in the jurisdiction of the Government but to expertly assess the economic situation in the country, and to work out proposals on the development of various spheres and give relevant recommendations to the President which he can also use when working with the Government. But, I repeat, this directorate will not infringe on the Government’s jurisdiction.

Also, we had a territorial department, as you know, and a domestic policy department, which essentially did the same work. We have united them. It will be one Domestic Policy Directorate. The same goes for the press-service and information department, the protocol and organisation department, and so on.

Question: An interesting event took place yesterday – the Caucasus Forum. I would like to ask if you are satisfied with the work of this Forum. Will there be a second one? Usually, events like these end with the passing of a declaration, but there was no declaration yesterday. Why is this?

Vladimir Putin: This is indeed the first experience of this kind. This initiative, as I said yesterday, came from the leaders of the Caucasus regions. The first impetus came from Alexander Dzasokhov. He insisted that this event be held in Vladikavkaz. I will be honest – because many people wanted to hold the Forum in their own regions, I decided to hold the Forum here, on neutral territory, so as not to cause jealousy in the regions. Additionally, it is more convenient for me to work here, as the entire system works smoothly – a system for communication with the General Staff, the Ministry of Defence and so on.

I am happy with how this event was held, and with its results. We did not plan to pass any declarations. The main thing is not to pass a document, but for the ideas discussed during the Forum not only to be understood, but also to be put into practice.

Why did I start with the South? I think that you and your readers and viewers understand this. Unfortunately, many problems that Russia faces today arise in the South. In fact, this is probably always the way it has been in the history of our country. I won’t list all these problems now – everyone knows them well. The future of our entire country depends on whether we can find a common language and arrive at common decisions. But to act effectively here, to find effective decisions, harsh administration alone, especially methods of force involving the law-enforcement bodies, not to mention the army, is insufficient.

Unfortunately, 5–7 years ago we reached a dead end when we were forced to use the Armed Forces and the law-enforcement bodies in quite a harsh manner. Despite all the problems, which have not been solved yet, we have now moved away from this dead end. A new stage is beginning now. Now we need to, and can, move to another, more stable stage of work, relying on society, and on religious and other organisations. This is the first experience of this kind, but it is necessary to widen the base of support for our efforts. People liked it, and I would like not just you, who came from Moscow together with me, but also regional media took up these ideas, took inspiration from them and instilled them further in the minds of the peoples who live here. The people who came here and participated in the Forum are influential in their quarters. They are religious and public figures, heads of Cossack groups, and education and cultural workers.

I am satisfied, because I think that the people spoke from their hearts about what they want in the Caucasus. It is clear that conciliation is still a long way off, and there are many sore points, I don’t even want to mention them now. Our forum was very useful, because it would be a mistake to rest on laurels believing that everything has been done.

The delegations of North Ossetia-Alania and Ingushetia flew together in one plane. And, as Dzasokhov told me – perhaps this does not sound serious, but it is in fact important – he told me that he had given the instruction to lay the table at the airport. These are minor details, small steps, but they may have a continuation, and they are worth a great deal. We are now in a situation when with small, but balanced and well-thought out steps we can at last overcome the problems which we still encounter, which stop us from developing. But we overcome them not by force or law enforcement measures, but by political means.

I think, as this is a very problematic region with a potentially large number of possible conflicts, that this forum was needed here. I am sure that this could also be practiced in other federal districts – to meet not only with leaders, Presidents and governors, but to hold forums like this with the involvement of society. Every federal district has its difficulties, its problems, and by involving society, we can try to look for, and probably find, not only the actual means of solving them, but also the tools to achieve these goals.

Question: How do you assess Yury Luzhkov’s mission in Adzharia? How likely do you think it is that it will be possible to avoid a military solution to the conflict? What should Russia do?

Vladimir Putin: I have already given my assessment of this visit. It was positive. I do not only think, I am certain that his presence played a positive role, and perhaps in quite a critical situation helped to avoid an armed conflict or casualties.

Not only I, but the leaders of Georgia, the President of Georgia, gave a positive assessment of Yury Luzhkov’s efforts. The Adzharian side also understands this, although it was not easy to establish contact between the Adzharian and Georgian leadership. I can assure you that he played a very important role in ensuring that this contact took place. Without question, he can only be thanked for this.

As for the future of Georgian-Adzharian relations – firstly, it is an internal matter for Georgia. We do not intend to interfere in any way. Secondly, if you noticed, our military base in Adzharia was not drawn into this conflict in any way. The President of Georgia made particular mention of this in our telephone conversation. We will continue to act in this way – we will not be drawn into these conflict situations. Of course, we would very much like to see these disputed issues resolved by peaceful means only. Our Foreign Ministry remembered the Kars treaty which was signed by Russia. In this sense, we are right to consider ourselves the guarantors of this treaty, which states that Adzharia is an integral part of Georgia. We act according to this principle of the territorial integrity of Georgia. At the same time, the treaty also states that Adzharia will be provided with a broad autonomy, freedom of using the Batumi port and other clauses, which no one has countermanded. This is our position. We will assist in ensuring that the territorial integrity of Georgia is preserved, and, I repeat, that all disputed issues are solved peacefully.

We are in contact with the leadership of Adzharia, and I am personally in contact with President Mikhail Saakashvili. We have established friendly, partner relations, and we maintain constant telephone contact. We do not pretend to have any exclusiveness, but we are prepared to play a positive role, if this is required.

Question: Could we please return to Mikhail Saakashvili? You said that you had good relations with him?

Vladimir Putin: Yes, good, equal working relations.

Question: But will the visa regime be abolished?

Vladimir Putin: The visa regime is not connected with my personal relations with the leadership of Georgia, whether good or bad. It is connected with the war on terrorism. It is connected with the fact that we were not able to establish cooperation with the previous leadership of Georgia in territories adjacent to our border with the Chechen Republic. Mikhail Saakashvili himself proposed to give a new quality to our joint efforts in the anti-terrorist area. And his proposal is very bold, and a long-term one. If it is put into effect, it really will elevate relations between Georgia and Russia to a new level. I say this without any exaggeration. Russian and Georgian specialists are now working together on implementing these proposals. I fully support them. They involve joint patrolling of the border, joint special operations, and several other forms of cooperation, which go even deeper. We only have one goal – to get rid of support bases of bandit formations which still exist on the territory of Georgia, bandit formations which from time to time cross over into the territory of Russia.

I repeat, Mikhail Saakashvili did not just give his support, he proposed several initiatives to improve and intensify this work. If this really does take place in practice, then there will no longer be any grounds to preserve the visa regime.

Question: Do you think there are any prospects for non-military solutions to the Georgian-Abkhazian problem?

Vladimir Putin: I think that if there are any means of solving the Abkhazian problem, they are non-military. There are no military means. They will only lead to a further worsening of the situation and a widening of the divide between Abkhazia and the rest of Georgia. But I believe that there are peaceful means. Both sides must acknowledge each other’s lawful interests and find a compromise. I believe that it is possible.

Question: From the perspective of your four years as President, do you think that Mikhail Saakashvili has started off too drastically? A war on corruption is underway, and there are the problems of Adzharia, Abkhazia and Ossetia. Should a President start his term in office like this?

Vladimir Putin: The way a head of state behaves depends to a significant degree not only on his personal qualities, but also on the circumstances. And it is very difficult for me to say whether the actions of the Georgian President are adequate for the circumstances in which Georgia now finds itself. We know that corruption is very widespread there, and the social sphere is in ruins. I don’t know whether this is adequate for the current situation in Georgia or not. Perhaps it is impossible to do otherwise in order to achieve a result. I don’t think I have the right to assess the work of a head of another country.

Question: What about the initiative of Governor Tkachev? The fact that he dismissed the administration of the Krasnodar region is quite normal, but he has also announced a competition to fill these vacancies. Do you think this practice could also be used in other regions?

Vladimir Putin: Yes, I do. It all depends on how it is done. The idea in itself is of course interesting and promising. Sergei Kiriyenko does this in his district. And he has found many interesting young people, competent, energetic and eager to work in state service. He said that he was even surprised by this result. So if it is possible there, why can’t it be done here? Of course it can, but as I have already said, everything depends on how this is implemented in practice.

Question: To continue the international theme. Two European leaders are about to visit Russia – Jacques Chirac and Gerhard Schroeder. What will you discuss with them?

Vladimir Putin: Germany is our major trade and economic partner in Europe, and in fact our largest economic partner. The volume of Russia’s economic ties with Germany is greater than with the United States – over 20 billion Euros, so regular meetings with German leadership are absolutely justified and necessary for both Russia and the FRG. So the main topic at our meeting will of course be the economic aspect.

The same goes for France. We have very interesting joint areas of work – high technology, where Russia feels confident, and even to a certain degree a leader. This particularly concerns military aviation. As you know, for the first time we have created a joint military airplane with such a major western country as France. We are also developing relations in the space industry. We are grateful to the countries of the European Union, above all Germany, Italy and France for supporting Russia’s participation in launching space rockets from the Kourou space centre. We are also developing military relations with France. I just met with the commander of the Black Sea Fleet. He told me that joint training is planned with Italy, but there are also plans to train with the French Navy. So there is a long list of issues to be discussed with both the President of France and the Federal Chancellor of Germany. In addition, you know their decisions on the visa regime, which is extremely important for us. It would be very interesting to consolidate the positions taken by France and Germany on the expansion of the EU from the standpoint of building relations with Russia. And not just to consolidate them, but also to take them, as far as this is possible, to the platform of the European community.

And finally, it will be interesting to know how the process of adopting the European Constitution is going from the point of view of France and Germany. We know that this process is not easy. This document is going through a difficult birth, but Russia is still interested in Europe having a powerful core on the basis of which we could address issues pertaining to bilateral relations on a stable basis. Currently, the situation is such that we often have no one to talk to. Every six months the chairman changes, and as you know, a new broom sweeps in a new way. We think things through and make plans, but the specialists change, new priorities arise and the old ones disappear. It’s hard to work like that. Therefore, the more stable the situation in Europe, the more beneficial for Russia. Also, we should know what is going on in Europe, and understand these processes. In particular, we are interested because we ourselves are trying to build proper relations in the post-Soviet area. All the difficulties and achievements involving integration that are taking place in Europe are very important for us – we should take them into account and where possible make use of them here.

Question: Please tell us about your economic aims.

Vladimir Putin: If I tell you everything now there will be no intrigue.

Question: Tell us in general terms.

Vladimir Putin: I have already spoken about them in general terms, but now it’s time to act in practical terms. I think that many specific issues were discussed at the joint meeting of the Economic Ministry and Finance Ministry. Now we need to digest all of this, and explain it all time and time again, so that it is comprehensible.

I will return to the conversation with the Navy commander. I asked him whether people in the Navy understood the proposals to provide them with housing by using a mortgage system. He said that it was all very interesting, but that they didn’t yet understand the details. This means that people are required in this area who can explain everything to them precisely, so that it is understood that after three years a person in the military has the right to get his own flat. Previously, it took 20 years to receive the right to housing. Twenty years have gone by. Now they have the right, but still no flats. It’s like the joke when an old woman goes to a lawyer and asks: “Do I have the right?” “Yes, you do.” “No, wait, listen to what I’m saying, I have the right…” “Yes, you have the right.” “So can I?” “No, you can’t.” The same situation existed with flats for the military. But now, from 1 January 2005, it is not the right to housing that will accumulate, but money, and the money accumulated should be sufficient for people to receive a small, modest flat of their own after three years. And they will be able to do what they want with it. Money will not only continue to accumulate to pay for the flat, but people will also be able to rent it. How much is the monthly rent for a one-room flat in Moscow? Around 10,000 roubles a month, and in some places even more. So money will accumulate to pay for the flat that people have acquired. And after five years they will be able to change their residence, and the flat if they want, because the mortgage system is very mobile. The flat can be mortgaged and another flat can be received through this system in any region of the country. People need to grasp this, to understand it.