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President Vladimir Putin: I am very happy to meet you. I have just had quite a substantial discussion with the President today. We examined practically all the different aspects of our bilateral cooperation, looking at political issues and, of course, also discussing economic questions, because this is at the foundation of all our work together.

I am very happy to have this opportunity to meet with you and talk with you because it is the government, after all, that bears main responsibility for economic matters. And there is a great deal to do in the economy. We have a large volume of work to pursue together. Our economic cooperation, as you no doubt know, has been developing quite well over recent years, I would even say it has been very good. The dynamic was a positive one and this is still the case today, though it is a little worrying that the growth rate has dropped slightly, although trade turnover continues to rise. In general, the results we have are not bad.

You have already worked in government before, you have the experience and are well acquainted with the issues facing our cooperation in all its various areas. I very much hope that the intergovernmental commission that has been set up will activate its work. The commission’s work has died down somewhat of late as a result of the political events in Ukraine. There is nothing unusual in this, of course. But now the time has come when I think we should be stepping up our contacts at expert level and between government leaders in order to begin working on the joint practical tasks we have before us.

There are many joint projects – you no doubt already know about them – and a lot of ongoing business. The relations between our countries depend in many ways on the results we achieve in this continuous work. We all know well that a positive mood in society both in Russia and in Ukraine also depends on this work.

Overall, I am pleased to meet you and I hope that even though we do not have a lot of time, we will be able to look at the key issues of our economic cooperation.

Ukrainian Prime Minister Yulia Timoshenko: Yes, I am also very pleased to meet you. I think that this meeting today is one of the most important meetings for Ukraine. What I noted in your brief words just now was something that is of key importance for us – that you are counting on the Ukrainian government. I want to say that you should know that you can count on the Ukrainian government. I know for a fact that each of our ministers prepared for your visit here today, for the arrival of your team. We know all the details, all the positive aspects and all the problems that we have had in the development of our relations, and I can say in all certainty that there is no issue that cannot be resolved.

We had these big tables with 62–63 problem issues, but I don’t see a single one that we can’t resolve. I know for a fact that if we have the will to settle these issues, there is nothing that is not within our power to resolve. This question came up again at the government meeting today. What I can say to you is that, if we transform somewhat the components of our cooperation, once all the political battles are over, then the Common Economic Space is a project we want to be part of. And we would like for the two governments to meet and examine in detail all the aspects of the Common Economic Space as we would like to see it and as we can see it today and give it concrete substance. Looking at our gas programmes, I know that our governments – our previous government and your current one — spent much time and energy on making our gas programmes a reality so that we could achieve a successful balance between our two countries and also involve other countries – Turkmenistan, Kazakhstan and Uzbekistan. I think we will be able to maintain and add to our achievements. We would like to see more joint economic projects. I was even a little pained to hear, for example, of how the An-70 programme was discussed for a long time and we put our efforts together but didn’t achieve any result. But this does not mean that we will discuss this programme now. I simply want to say that we would like to work on as many joint projects as possible: aircraft, outer space, gas, oil. Everything that can be done should be done.

Vladimir Putin: Leonid Kuchma was always on at me about the An-70, and now you’ve taken it up. (Laughter) But that is something to be decided by experts, specialists. Concerning the decisions at government level, we are ready to support high-technology projects. But there are also new projects emerging. You have no doubt heard about the medium-haul An-148 aircraft project, which the specialists say is very promising. The Russian and Ukrainian partners involved just in February signed an agreement on developing this project. This is a promising project – the market demand is estimated at around 480 aircraft of which around half would be for CIS countries. This really is good work.

As for the subject that you mentioned first, the Common Economic Space, I must say that, for a start, this was not our initiative. The idea to create the Common Economic Space was not a Russian initiative.

Yulia Timoshenko: But you are not backing down.

Vladimir Putin: We are not backing down. We in favour of it. It’s just that we were being patient about what was happening, including here in Ukraine with the serious internal political events that were taking place, and we understand that this is always an instrument or an issue in political battles. But those events are over now and, as you rightly said, we now need to study all the different issues in detail, including this one. Our position is based on the implementation of projects that are of vital interest to the Russian economy as well as to the economies of Ukraine, Belarus and Kazakhstan. We want to minimise our infrastructure costs and make our economy more competitive on the world market. That is our main objective and there is no political aspect involved.

I know that there are various points of view regarding the so-called supranational bodies. The project would involve only one supranational body and that is the tariffs committee. Again I say that this was not our initiative. Kazakhstan, Belarus and Ukraine are above all interested in ensuring that the tariffs for railway transport, electricity and other tariffs are not set in Russia but are determined by a body in which all these countries would participate. And this is the body that wants to take away part of our sovereignty. (Laughter). We will have to consider whether we need this or not.

Yulia Timoshenko: But you are ready to sacrifice a part for …

Vladimir Putin: For the sake of development of our whole huge economic territory we would be ready to do this. But we think that each country could do this exclusively going on its own national interests and how this or that country, this or that government, understands those interests. Let Ukraine take part in this project to the extent that it wants to. If it wants to take full part in the project, then let it do so, and if it does not want to participate fully, then we will not insist. The only thing we ask of you ( and this we will discuss during the second part of our talks when our colleagues from the press leave) is that you name as soon as possible someone who will be responsible for contacts with counterparts in Belarus, Russia and Kazakhstan, in order to continue the joint work. That is all we need. And as for the extent of your participation in this work, that is up to you to decide.

I think that the amount of our trade and economic cooperation with Belarus is a good example. The Belarusian economy is three times smaller than the Ukrainian economy, but trade turnover between Russia and Belarus is a billion higher than trade turnover with Ukraine, and that is even with the rapid increase in Russian-Ukrainian bilateral trade that we have witnessed over recent years. But our cooperation with you is still lagging behind our cooperation with Belarus. This simply goes to show that even a small step would be enough to achieve not just better results, but a level of cooperation that would have real benefits for millions of people in both Ukraine and Russia.

Yulia Timoshenko: Without a doubt. I just want to say once again that the government and the President, with whom we have literally just spent the last three days hard at work to prepare professionally for developing our cooperation prospects, want to see the Common Economic Space become reality. We want it to become reality in a way that is acceptable for all the countries taking part in it The main thing is to remove all the barriers to free trade. We should simply abolish all these barriers that stand in the way of our trade and not wait until 2010–2017. I do not even know which politicians will live to see 2017. (Laughter). But this is the main thing – to open up immediately all possibilities for genuine free trade. We are ready to do this. Ukraine is ready to take this step much sooner than was foreseen by all our prior agreements.

Vladimir Putin: This is a reason to discuss the Common Economic Space. I totally agree with you. By the way, it is completely false to say that the Common Economic Space means moving in one direction, while joint work with the European Union, say, is seen as moving in the other direction. It is nothing of the sort. As you know, on May 10, we plan to sign with our European colleagues an action plan for the creation of the four common spaces between Russia and the European Union. One of these main common spaces is a common economic space with the European Union. What does this entail? Essentially, it means harmonising Russian and European legislation. But if Ukraine makes a choice in favour of Europe and moves in this direction (we know that Ukraine will not join the European Union or even become a candidate for accession overnight), if we make common efforts to harmonise our legislation and European legislation, this will not slow down Ukraine’s progress towards Europe but, on the contrary, will start laying the foundation. If the foundation is already laid, then the movement ahead will be easier. And I think that as soon as our specialists will begin their work everything will become completely clear. We just need to begin this process as soon as possible.

Yulia Timoshenko: Yes, we are ready.