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President Vladimir Putin: Ladies and gentlemen, allow us to briefly inform you on the results of our work today. As you know, today’s meeting with Leonid Danilovich Kuchma was far from being the first of this year. As a rule, we have taken the opportunity at each of our meetings to discuss the broadest range of issues. Of course, we have always given particular attention to issues regarding our bilateral cooperation and all-round strengthening of relations between Russia and Ukraine.

I want to stress that we have built up complete trust and mutual understanding with the Ukrainian leadership – with Ukrainian President Leonid Danilovich Kuchma and with Ukrainian Prime Minister Viktor Fyodorovich Yanukovich – the kind of trust that exists between longstanding old friends. This relationship of trust helps us successfully resolve sometimes complicated issues that arise in our two countries’ relations. At today’s meeting, we analysed in detail our cooperation prospects in the energy sector and we examined the progress of major projects in this area.

You just witnessed the signing of two important documents – the Agreement on Measures to Ensure Strategic Cooperation in the Gas Sector and the Agreement on Oil Transit through Ukrainian Territory.

These agreements are the result of joint coordinated work and I would like to point out that they were drawn up quickly and competently.

Russia and Ukraine then, have not only confirmed the strategic nature of their bilateral relations but have also taken a major step towards forming the Single Economic Space between the four participating CIS states, something that in turn will positively effect the development of the entire European economic space. I am quite sure of this.

I would like to take the opportunity at this press conference to particularly note that the Russian Federation has passed a law – I mentioned this at the start of today’s work – that sets a zero-tax rate for the export of oil and gas to Ukraine, including gas condensate. This decision on Russia’s part is completely market-based in nature and is in keeping with the practise of international economic relations. I am certain that this step will help strengthen integration processes throughout the CIS area in general.

Cooperation in the aviation and space sectors were also on the agenda at our meeting and we likewise discussed a number of current international issues. We are particularly concerned by the potentially explosive development of events in South Ossetia and also by the tense situation in Abkhazia.

We are unanimous in thinking that what is most important at this time is that the sides involved settle these conflicts through peaceful means. Using threats is a method that leads to a dead end. This is why it is important to continue negotiations aimed at creating an atmosphere of trust and at preserving peace and stability. Russia will do all it can to assist this process.

The situation in Trans-Dniester was yet another issue we examined. We both affirmed that the current complicated situation there is in large part the result of letting slip opportunities last year when there was a real chance to make a decisive breakthrough in settling the situation there. We both agreed that today it is necessary to refrain from any hasty action. We must avoid at all costs an escalation of the tension there. We think that all disputed issues, including economic and humanitarian issues, should be settled only at the negotiating table.

It is well known that Russia and Ukraine are the intermediaries and guarantors of a settlement in Trans-Dniester. We will continue to make every effort to help return the situation in the region to normal as soon as possible. I must say here that Russia and Ukraine have an absolutely identical approach in this respect and that we have completely coordinated our policies and line of behaviour.

In conclusion, I would like to come back to our bilateral cooperation and say that it is becoming more dynamic and bringing more results with every passing year. Just as importantly, it is in the interests of both our countries. To give an example, trade turnover between Russia and Ukraine is growing steadily and already comes to more than $7 billion for the first half of this year. This will undoubtedly help resolve many important social and economic problems both in Russia and in Ukraine.

To put it briefly, our ties of friendship are strengthening and developing all the time and are bringing real benefits for our citizens. We have planned further steps to continue developing our relations. I have no doubt that if we continue to work in this spirit we will definitely reap the results.

Question: The signing of the law abolishing VAT on oil and gas exports was, in a sense, a real sensation for relations between the two countries. Could you be more detailed about how you see this law playing a role in developing the integration processes in the post-Soviet area?

Vladimir Putin: This is indeed on of the key issues in our cooperation over recent years. This is an issue not just of recent months, but of the last few years, a question that has been much discussed. This was not an easy decision for Russia to make and we took a long time coming round to it.

Ukraine’s position has always been clear, consistent and, I would say, quite firm over these years. But I think it has also been clear to our society what has guided us. Various experts estimate that this decision will cost our budget $800 million next year. Even for Russia this is a serious amount. In taking this decision we are forced to take the next step as well, and this we are already doing. We need to work out how to compensate for the budget revenues that we will lose. Something has to offset this lost revenue. We will be obliged to raise tariffs for gas and electricity – we have practically already done this. This puts a burden on all Russian consumers but it is a step that we have taken deliberately. We are not doing this just in the interests of theoretical integration. We are doing what we are doing and we are doing it now because our partners’ economic development results, the results achieved by the Yanukovich government, show a sustainable, positive development trend underway in the Ukrainian economy. This means that so long as these trends continue, decisions such as this that broaden our cooperation in general will, I am sure, lead to not just increased trade opportunities and trade volumes on both sides, but will have a positive impact on overall economic development in Russia and Ukraine, which ultimately will benefit both countries. I repeat that this is a deliberate and carefully calculated decision. We are sure it is the right decision. Naturally, it will also give a boost to developing the integration processes initially among the four Single Economic Space participants – Ukraine, Russia, Kazakhstan and Belarus – and we hope that it will also help develop similar integration with the other CIS countries.

I think that we will make up for the losses. If we had to take this decision the time for Russia to do it was now when our economy and our budget revenues are doing quite well. This is the plan by which we intend to build the Single Economic Space, that is, a free trade zone without any deductions, something that our Ukrainian colleagues had always insisted on. This is a step towards each other and it is an important step.

Question: Vladimir Vladimirovich, we want to thank you and your colleagues for creating this wonderful press centre where we can now work. How do you see Russian-Ukrainian relations in general today compared to how they were a year ago, and how do you think they will look in a year’s time?

Vladimir Putin: Perhaps we should give our guest the floor.

President Leonid Kuchma: If I had been asked this question a year ago, I would have replied that relations have considerably strengthened. Today I do not even have the words to describe them. I think it is visible. We have a relation of such confidence now that we can discuss absolutely all issues. The main thing is that, not only can we talk about issues, we can find solutions to our problems. I am grateful to Vladimir Vladimirovich, therefore, that this is the way in which we are settling all the problems today between Ukraine and Russia. I am afraid I cannot comment on what the situation will be like in a year’s time, but I am sure that the foundation we have laid today, the strategy we have set out, cannot be changed because this would be bad above all for Ukraine. And we would only end up putting our necks out of joint if we turn abruptly this way and that. But I do believe that we must look calmly in both directions.

Vladimir Putin: Leonid Danilovich, regarding the prospects for our relations, perhaps we should pass the question on to your colleague and see how he sees the prospects for Russian-Ukrainian relations?

Prime Minister Viktor Yanukovich: Recently, I was at the Panteleimon Monastery on Mount Athos. Our priests were there, including our Metropolitan Vladimir the most blessed. Our monks, there was Superior Ieremia there, he is 89, asked him what relations are like today between Russia and Ukraine. He looked at them and said, “Don’t you see, our prime minister has come to the monastery to pray that we will do more good for our peoples, the peoples of Ukraine and Russia”.

I can describe our relations, as I see them, in a more figurative way. The relations between the Ukrainian and Russian peoples should always be smooth, tranquil and deep, like a strong and deep river flowing. And there’s no changing nature.

Vladimir Putin: As in any family, we also have our share of problems, contradictions and quarrels. But today I can say without any exaggeration that there is the highest degree of trust in relations between Russia and Ukraine. I don’t like using cliches, but I would like to draw on the rhetoric of the past and say that our relations today are fraternal in nature, and I hope that they will remain so in the future.

Question: There has been a flare-up of conflicts within the CIS. How is this influencing the processes underway in the CIS? And a question for President Putin, there are rumours that you are planning to go to Tbilisi, to Georgia. How possible is this and will it help solve the problems?

Vladimir Putin: I will allow myself to start. I did discuss this possibility with my Georgian colleagues, but given the flare-up that you have just mentioned I think this visit would not be appropriate in the current situation.

Now, regarding the conflicts themselves. At regular intervals we hear that the conflict is taking on a bilateral Russian-Georgian character. Nothing of the sort is the case and it cannot be the case. I want to make this clear right from the start. I also want to remind you how these conflicts arose in the first place. They arose following the collapse of the Soviet Union at the beginning of the 1990s, when Georgia, which had gained its independence, announced that it was abolishing the autonomous status of South Ossetia and Abkhazia. This was the foolish decision that ignited these interethnic conflicts. What we are seeing today is a relapse of what happened at the beginning of the 1990s.

Russia, like the other CIS countries, is ready to make what contribution it can to settling these conflicts and restoring Georgia’s territorial integrity. But we are not going to take on functions that it is not our role to have and we are not going to take sides. We want to see these conflicts settled in such a way that all the people living on this territory will accept the decision and come to an agreement amongst themselves. We are only willing to play the part of intermediary and guarantor of the agreements reached, the agreements that can be reached if good will is shown. м