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President Vladimir Putin: Mrs Federal Chancellor,

Ladies and Gentlemen,

This round of Russian-German intergovernmental consultations has just ended. It has been the most representative round so far in the eight-year history of our meetings in this format.

Here in Tomsk we held what amounted to an away session of our two countries’ governments. The heads of 13 Russian ministries and agencies took part in the consultations, as did 10 members of Germany’s new government.

Our decision to hold these intergovernmental consultations in Siberia does not just broaden the geography of our meetings but also signifies the practical development of the regional component of the partnership between Russia and Germany. I would like to take this opportunity to thank the Tomsk Region authorities and all the people of Tomsk for their warm welcome and hospitality.

First of all, I would like to say how highly I assess these two days of talks with the Federal Chancellor. I think it is of principle importance that we have reaffirmed our mutual commitment to deepening the strategic partnership between our countries. We are talking here not just of continuing and building on what has already been achieved over the last decades in our bilateral relations, but of taking active steps to move ahead and enrich the multilayered fabric of Russian-German cooperation.

During our intergovernmental consultations we discussed in detail the implementation of agreements reached during previous consultations and also examined our plans for the future. We noted that our bilateral trade rose by almost 38 percent in 2005 and reached a new record level. Russian statistics put the figure achieved at $33 billion, while German estimates are even higher and put it at 39 billion euros.

The inflow of German investment to Russia made itself felt in 2005 and showed an overall increase of 73 percent, which is a very good growth rate.

The major investment projects approved during these consultations aim at building on this trend. These projects concern above all sectors such as energy, transport, communications, aviation and space. The High Level Working Group on Strategic Economic and Financial Cooperation Issues is currently working on the details.

We place a lot of importance on making the Russian market more attractive for investment and on promoting Russian goods on European markets. The important banking sector agreements we have reached today will certainly be of help in this, in particular, the cooperation agreement between Vnesheconombank and Deutsche Bank on support for joint projects within the framework of a public-private partnership. The agreements concluded with the Russian Development Bank will also make a positive contribution. We approved the initiative to establish a Russian-German Foreign Trade Chamber in Moscow and have agreed to complete all the necessary procedures for setting up this institution by the end of the year.

The energy sector remains a priority area for our bilateral cooperation. Our countries have an interest in ensuring general European and global energy security as a foundation for the national and global economies. I would like to highlight the agreement signed between Gazprom and BASF on exchange of assets as part of the project to develop the Yuzhnorussky gas field. This is an ambitious project, a serious project, and one that will be carried out over many years. Annual gas production at the field could come to up to 25 billion cubic metres, and production will continue for 30 years.

I am very pleased to see that the quality of our cooperation is changing for the better and that our relations are not simply that of a partnership, but are now genuinely strategic in nature. I note also that this autumn we plan to hold an energy forum bringing together leading Russian and German companies. This forum’s objective is to help take the energy dialogue further and search for new and more effective forms and mechanisms of energy cooperation.

Among the projects we discussed that encompass Europe in general and Eurasia in scope, cooperation in the transport sector has a particularly important place, especially the plans of Russian Railways and Deutsche Bahn to speed up the transit of goods between Europe and the Far East. Active talks are underway with Siemens on building high-speed trains in Russia and creating the corresponding infrastructure and service base.

I also note the agreements on joint work between Russian and German partners in construction and in the housing and utilities sector. In particular, the German experience will be useful to Russia in carrying out its priority national project, Affordable and Comfortable Housing.

We have agreed to work more actively on developing programmes to make use of the possibilities of Russia’s Emergency Situations Ministry and Germany’s Interior Ministry and Defence Ministry in dealing with emergency situations in Europe and in other parts of the world.

We see good prospects for our cooperation in the aviation sector in general. The successful launch of the Salis project to lease An-124–100 planes for strategic air transport by European Union countries and NATO is a significant event in my view.

Humanitarian partnership plays an important part in consolidating the friendly ties between our peoples. We think it is essential to develop dialogue between civil society in both countries and to develop education and youth exchanges. The establishment in Moscow and Hamburg of a new youth cooperation body – the national youth exchange coordination offices – pursues precisely this objective.

The Petersburg Dialogue forum is also working energetically and productively in this area. The forum will hold its next session this autumn in Dresden.

During our consultations we exchanged views on a wide range of European and international issues, including settling the Iranian nuclear programme issue and the situation in the Middle East and Kosovo.

I note the productive work done by the bilateral High-Level Working Group on Security Issues. This working group has become an important mechanism for coordinating our foreign policy issue positions on the international arena, above all in the areas of strategic stability, the fight against terrorism, drugs trafficking and organised crime and the non-proliferation of weapons of mass destruction.

We are focused on continued close cooperation to ensure the handover of the G8 presidency from Russia to Germany in 2007. We have also agreed to develop our cooperation in forming a new quality of relations between Russia and the European Union, above all in creating the four common spaces on the basis of the relevant roadmaps.

In conclusion, I would like to say once more that Russia is ready to continue building an authentic long-term partnership with Germany. What is important for us is to see that Mrs Angela Merkel, the members of the German government, the German public and German business share this aim.

Thank you for your attention.

Federal Chancellor of Germany Angela Merkel: Thank you very much. First of all, I would like to thank our hosts, the Russian President, the members of the government, and above all, the Tomsk City Administration. Tomsk is not the biggest city in Russia and it had to prepare to hold this event here.

We have all very much enjoyed ourselves here. I am pleased that this morning we had the chance to look around a bit. I was very impressed by how intensive the relations were between Germany and Siberia in past centuries. The rector of Tomsk University showed us around the library and noted that the university’s professors used to travel every year to Humboldt University, and this was perfectly normal.

I can say today that we are on the right road to intensifying our relations and turning our dialogue into a strategic dialogue. We discussed a large number of issues at bilateral level. We spoke about the signature of agreements, which is a positive event and shows how intensive our contacts are now and what potential they have.

I spent four hours discussing all the different domestic and foreign policy issues, as well as bilateral matters, with the President. I think we can say that this was an open and intensive discussion and our views coincided on many points. But even at those moments when opinions diverged, we were also able to discuss this intensively and in a spirit of partnership.

We spoke about cooperation in the energy sector and this was also part of the public discussion. I was very pleased that, as the President also said, it has been forty years now that Germany and Russia have been working together in the energy sector. Both the politicians and the economists said often that this should continue and that our contacts should become even more intensive. I think that this is in our common interest.

Today a broad discussion is underway in Germany and in Europe about the need for natural resources to ensure energy supplies for our global world. It is good therefore that Germany and Russia have signed a number of agreements between companies in this sector, for example, the agreement between Gazprom and BASF.

I think it is very important that we make small and medium-sized businesses more involved in our economic relations. This sector provides 75 percent of the jobs in Germany. In this respect, the establishment of the Russian-German Foreign Trade Chamber in Moscow is a very important step that will help German small and medium-sized businesses get access to the Russian market.

We also discussed other projects in detail, cooperation on the financial markets, increased scientific exchanges and youth exchanges, for example. The President and I are taking upon ourselves patronage of youth exchanges in order to intensify contacts between young people in both countries. Yesterday we met with scholarship recipients and had a chance to see that these kinds of exchanges create intensive contacts that can last for many years.

In the area of cultural cooperation, I am pleased that the problem of returning cultural heritage that was displaced during World War II is going to be resolved.

Regarding foreign policy, we discussed, of course, the situation in the Middle East and the situation with the Iranian nuclear programme. We share the view that we must do everything we can to ensure that the international community acts in unity. We also agreed to continue our close contacts in the future.

Overall, I can only say a sincere thank you to you all. These consultations mark another step towards a deeper strategic partnership. We held excellent talks in a very friendly atmosphere. I think we have achieved a level of cooperation we can be proud of and can develop further. Thank you.

Question : The nuclear energy issue is very important in the context of the upcoming G8 summit. Mrs Merkel, as I understand it, Germany is cutting back its number of nuclear power plants. What will you do to replace this nuclear energy? And a question for the Russian President: we have just commemorated the twentieth anniversary of the accident at the Chernobyl nuclear power plant. How do you view the development of nuclear energy?

Finally, a more personal question: I know that you spent three hours at a restaurant yesterday. Could you say something about this?

Vladimir Putin: You were following us, no doubt.

Angela Merkel: It was not so long really, but we did have a good talk with each other.

Regarding the question of cutting back nuclear energy, there is a plan that calls for all the existing nuclear power plants in Germany to be closed down by 2020. Of course, this is the subject of continued political debate. As for what plans we have for replacing this energy, I can tell you that a very intensive dialogue is underway with the country’s business community. We have already launched this dialogue and we need to work out together how to work most effectively in the energy sector, how to make best use of our resources. We also need to ask ourselves how we intend to comply with our international commitments regarding carbon dioxide emissions. I am referring to the Kyoto Protocol here. This is the subject of intensive discussion in Germany. In any case, there is increasing awareness of the issues and I think that this is very good. This is about making people realise that energy and electricity do not just come out of a socket in the wall, and making people think about how energy is produced and how electricity is generated. You should continue following this discussion because there will be a lot of interesting aspects raised.

Vladimir Putin: I will begin with the most pleasurable part of your question, the restaurant. We did indeed spend quite a long time there and, as far as I could tell, the Federal Chancellor did enjoy the Siberian cuisine. She’s hinting that she even tried bear’s meat.

But this gave us the chance to discuss practically all the international issues on the agenda. We gave a lot of time and attention to the most acute issues of the moment: the Iranian nuclear programme, the Middle East, other regions of the world that are of interest in terms of ensuring global security and our own security. That is what we were busy doing for three hours yesterday evening.

Regarding nuclear energy, I spoke with President of Ukraine Viktor Yushchenko yesterday and we discussed precisely this issue and remembered this tragic anniversary, the anniversary of the Chernobyl accident. Incidentally, I want to note that despite the international community’s numerous promises to help Ukraine, practically nothing is being done in this area. Knowing as we do the scale of the tragedy and the scale of the problems that Ukraine is still encountering today, we agreed on what we can do together, on a bilateral basis, to help Ukraine in this area. But despite this tragedy, Russia realises that nuclear energy will continue to play an important part in the world’s energy sector in the future. The question is not whether to have nuclear energy or not, but how to make it safe. Modern technology, modern developments, make this possible. You know about the plans that different countries have in this area. The clear leader in nuclear energy in Europe is France, and in the world overall it is the United States. Both these countries have very ambitious plans for building new units. Of course, these projects are very capital-intensive to start with, but later they produce cheap energy and if properly operated, nuclear power plants are the cheapest and most environmentally friendly energy source, paradoxical though this may sound. I note that the G8 summit in St Petersburg plans to discuss energy in general and will also discuss nuclear energy with regards to supplies and to energy security overall. I think that everyone realises that ensuring the safety of nuclear energy is in the interests of all countries, whether or not they have nuclear energy programmes of their own. No one is indifferent to what their neighbours are doing in this sector because the Chernobyl tragedy shows that nuclear energy is global in nature no matter where it is being developed, and when it comes to the issue of nuclear safety, we all need to take part and we all need to think about this issue together.

Question: I have a question about Iran. The IAEA is due to present its report at the end of the week and it looks as though Mr El Baradei’s report will not be particularly positive. How will the situation develop from here? I know that you and the Chancellor want to pursue a diplomatic situation, but perhaps the time has come to consider the option of sanctions?

And a second question regarding energy security: before your meeting with the Chancellor yesterday, you said that Europe is using any pretext to put restrictions on Russia developing its nuclear energy sector, but today we have seen that a major agreement has just been signed in this area. What did you mean when you said that Russia is not being allowed to expand its influence in the energy sector?

Angela Merkel: Regarding Iran, it is certainly true that after Mr El Baradei presents his report at the end of the week, as you said, we will need to think about what to do next, and we will need to be clear on the steps we can take together in the future. There could be discussions in this respect concerning the IAEA and the UN Security Council. The political directors will be meeting at the end of May, as will the five permanent members of the Security Council and the ministers representing the European Troika. I do not want to look ahead now, but I want to say that as far as Germany’s position is concerned, we want the international community to continue working in unity, as has been the case so far, and to show Iran that we really do seek a diplomatic solution, but that Iran must abide by the commitments it has made. The issue is not to prohibit Iran from developing a civil nuclear energy programme, but is about the need to comply with agreements and obligations. The report will probably make this very clear once again. I cannot say anything for certain now, but we need a coordinated response that reflects the unity of the international community on this issue.

Vladimir Putin: You mentioned a diplomatic solution to the problem, but a diplomatic solution can involve a number of different possible responses. We will discuss this with our partners, with our European partners, with the United States and with the entire international community. It is our view that the IAEA should continue to play a key role and that it should not shift the responsibility for resolving problems of this kind to the United Nations Security Council, but this issue is already being discussed in the Security Council. As I said, we will continue to work together with all our partners. It is too early today to say exactly what decisions we will reach together. I think the main thing is for us to ensure that whatever decisions are reached, they must be coordinated and approved. The principle issue for us, and our position is very clear in this regard, is that we oppose the proliferation of weapons of mass destruction, including in Iran. But we believe that Iran should have the opportunity to develop modern technology and nuclear energy for civil use. Ensuring that Iran has this opportunity while at the same time removing the international community’s concerns regarding its nuclear programme – this what we will decide through the negotiations with our partners and with Iran itself.

The second part of your question addressed our concerns about energy cooperation with Europe. As the Federal Chancellor just pointed out, energy cooperation between Russia and Europe dates back not just a couple of years but has been going on for decades now. My colleague and I discussed this in considerable detail yesterday. Even during the Cold War and the confrontation between two different systems that had the world balanced on the brink of nuclear war, Russia, the Soviet Union at that time, unfailingly fulfilled all its obligations under the terms of its commercial contracts with its European partners, to the exact day and hour. So, today we have to ask ourselves what fears we are talking about? Why is this fear of excessive dependence on Russia being whipped up when the world has changed so radically? We are always hearing about excessive dependence on Russia and about how steps should be taken to limit Russia’s access to the European energy market.

But why don’t you try to see things from our point of view. What do you expect us to do when we are always hearing the same thing day in, day out. We start to look for other markets. This does not mean that we plan to cut back our cooperation with Europe, because Europe is a natural partner for us, the most convenient partner for us, and so far it has always been a reliable partner. But when we keep hearing the same thing, we begin to see it as a threat that our access to markets could be restricted and so we begin to look for other options elsewhere. I don’t think anyone has any interest in seeing this happen.

Just to take the latest example, Gazprom did not even have plans yet to buy the Centrica company in Britain, but a leak in the press suggested that Gazprom was considering this acquisition. And what was the reaction? British politicians and business representatives immediately began saying that a separate law should be passed to limit the expansion of Russian energy companies into the European market. But what kind of reaction is this? What happened to globalisation and free market relations? What is going on here? In other words, if others come to us, that is investment and globalisation, but if we come to others, that is the expansion of Russian companies.

We need to reach some kind of agreement on general rules of behaviour. I was very pleased to hear that the British Prime Minister, I think, said that this kind of behaviour is unacceptable and that he will support any investors, including Russian investors, if they decide to participate in this or that company. I think that if we follow a partnership approach such as this we will be able to resolve even the most complex problems. We will be able to find solutions to even the most difficult issues.

Question: Germany and Russia are cooperating actively in Afghanistan, but there is still no end in sight for this campaign. Mr Putin, I would like to know what solutions you propose to combat the increasing drugs trafficking problem? I also have a question for the Chancellor: Germany plans to increase its contingent in Afghanistan from 1,600 to 3,000 people. Are you not afraid of the consequences? And a second question: I would like to clarify your position regarding the exchange of assets between gas companies and I would like to know your views on Gazprom’s attempts to acquire assets in Europe. Taking into consideration the situation with Centrica, can we talk of genuine economic integration in this context?

Vladimir Putin: Don’t go frightening our German partners with Afghanistan. Who will fight drugs trafficking, us? They have come to deal with these problems and we need to help them do this. We have taken an unprecedented step in recent history and have given Germany transit rights via our territory, something we have never done before. This is a sign of trust, this decision to allow the transit of military equipment and servicemen to Afghanistan practically without any restrictions. We see this as our contribution as a partner in the common effort to bring order to Afghanistan. The situation there is very complicated and I do not envy our partners.

We know all about Afghanistan. Russia now has to help its partners carry out this difficult and important mission that they have taken on, and we shall do this.

Angela Merkel: We think there is great interest in ensuring that Afghanistan develops in the right direction, becomes a stable country and that the suffering it has gone through finally comes to an end. This is a difficult process and it is one that will take a certain time. But along with the military presence in Afghanistan we are seeing progress of a different sort. The country now has a government and elections have taken place there. Knowing the history of this country we can say that such events in cases like this are very rare and that these are positive developments. We know that this mission is not easy but Germany has taken on this responsibility. We take decisions on sending the Bundeswehr to certain countries through discussions in our parliament, in the Bundestag, discussions in which the members of parliament take part. I think that Germany has made the right decision in making its contribution to bringing stability to Afghanistan.

Regarding the agreement signed between Gazprom and BASF, I am very pleased that we have managed to take this real step forward and that these two companies have reached agreements with each other. I also want to say that the issue of who can bid to cooperate with Germany is an economic development issue. This is our principle. We know, for example, that even in the central European Union countries, even when we are talking about countries that are both members of the EU, there is often debate concerning these kinds of economic deals, especially in the energy sector, because it is a sector that has traditionally been state-dominated and in many EU countries it is quite an emotional issue.

But the same rules apply here as apply to international trade in general and we cannot afford to take a protectionist line. This discussion is going on within the EU too. I spoke about this yesterday with the President and said that these issues are raised even between EU countries, and not just when Russia is involved.

Vladimir Putin: I already mentioned this issue. Regarding the deal between Gazprom and BASF, as I said, we welcome it. I think it is the best example to show that the Russian Federation and Russian companies seek far-reaching and intensive cooperation with partners in Europe, including with our German partners. This is the first such deal of its kind — a historical precedent — in that we are giving foreign partners access to gas production, giving them access to a major deposit that will be operated for decades to come.

But what is more important is that we see the same commitment to establishing a partnership relation from the German side. An independent evaluation of assets was conducted and an exchange of assets has been carried out. BASF has given Gazprom important opportunities to participate in gas distribution and transport assets in Germany. This has all been done on the basis of mutual interests. We will certainly respond just as positively to partners who wish to work with us in this way.

Question: My question is for the Federal Chancellor. The development of economic relations between Germany and Russia also means economic benefits for one country, in this case Germany. Economic indicators are on the rise in Germany and the ‘wise men group’ today issued its forecast for 2008 and predicted economic growth of 1.6 percent rather than 1.4 percent. Is this a sign of hope for economic growth?

Angela Merkel: When you look at how the Russian economy is growing, even Germany’s adjusted figures make us well aware that there are countries in the world growing a lot faster than we are. Good figures are figures that represent good news. The unemployment statistics have not been published yet, but we can guess that they will be better than they were before. I think this is a good sign and we can build on it, but we must not forget that we need change, reform and further development. All of this must take place as a stable and long-term process. We know too that forecasts can change and we are determined to continue our work and make the necessary changes, and in this we are moving in the right direction.