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ON THE SITUATION IN THE MIDDLE EAST

Foreign Minister Sergei Lavrov: We are continuing our efforts to set this situation on a political and diplomatic course. Our special envoy, Deputy Foreign Minister Saltanov, has been in the region practically since the conflict began. Other countries’ special envoys are also at work there. There is an understanding of the need to hold an international meeting of the group on Lebanon, which includes Russia, the United States, the leading European countries, the leading Arab countries, the UN Secretary General, the European Union’s high representative for foreign policy, Javier Solana, and the head of the World Bank. We proposed holding this meeting last weekend but our partners preferred to see it take place on July 26. It will take place in Rome this Wednesday. The meeting will discuss a ceasefire, the release of hostages and prisoners of war, and, most importantly, how to ensure security along the lines formulated in the statement issued by the G8 in St Petersburg. One of the most crucial issues will be the proposal to deploy a peacekeeping force. There is a still a lot that is unclear about how this force will be formed, who will send contingents and what their mandate will be. We base ourselves on the position you affirmed in St Petersburg, namely that we need to obtain the agreement of the parties involved and that any such operation should have a mandate from the UN Security Council.

President Vladimir Putin: How many refugees were there during the Kosovo crisis?

Sergei Lavrov: More than a million.

Vladimir Putin: That was in 1998?

Sergei Lavrov: In the mid-90s and at the end of the 90s. This total included not only refugees from Kosovo but also Serbian refugees from Eastern Slavonia in Croatia and from the Republika Srpska in Bosnia. There are still around 500,000 refugees today and this constitutes the biggest group of refugees in Europe.

Vladimir Putin: How many refugees are there now in Lebanon?

Sergei Lavrov: It’s hard to get an exact figure. Inside Lebanon there are around half a million displaced people, people who have fled or are cut off from their homes, and there are also still several tens of thousands of foreigners in the country.

Vladimir Putin: I ask you to examine what we can do to help these people by way of organising humanitarian aid. How is this work going?

Sergei Lavrov: In accordance with your principled agreement we have already drafted the relevant proposals and put additional specific ideas to the government. The first Emergency Situations Ministry plane carrying humanitarian aid will leave today for Cyprus from where we will be able to transport it safely by sea to Lebanon, through agreement with Israel and the other countries concerned.

Vladimir Putin: Who will deliver it from Cyprus?

Sergei Lavrov: The UN will provide the vessels. They are chartering vessels now. A UN special coordinator for humanitarian issues is currently in Lebanon and has already assessed the situation. Today an appeal will be published listing the types of humanitarian aid needed, and in addition to our first delivery, we will also formulate proposals based on the concrete demands of the Lebanese government.

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ON ECONOMIC RESULTS FOR THE FIRST HALF OF 2006

Economic Development and Trade Minister German Gref: We have tallied up the macroeconomic results for the month of June and for the first half of the year. In June we had GDP growth of 6 percent compared to the same period last year, and we had GDP growth of 6.3 percent for the first half of the year.

Industrial output growth was slower in June than in May and came to 2.9 percent compared to June 2005. Industrial output growth came to 4.4 percent for the first half of the year.

Personal incomes showed a rapid increase, rising by 15.2 percent in June, which is a record for the past two years, and by 11.1 percent for the first half of the year. Wages rose at a slightly higher rate and were up 12.1 percent over the first half of the year.

Trade was up 13.7 percent in June and rose by a total of 11.3 percent over the first half of the year. This is a very good result and we have had very rapid growth in retail trade earnings for the last two months in a row now.

Investment rose by 10 percent in June and by 9.4 percent for the first half of the year. This is also a very good result that is driving industrial output and GDP growth.

The construction sector has shown good results with construction up 14.5 percent in June. This upsurge in activity is linked to the summer period and the seasonal factor is certainly important in this respect. Construction rose by 8.3 percent over the first half of the year.

Regarding inflation we have the figures for the period up to June 17. Inflation rose by 0.4 of a percentage point from June 1–17. In July last year monthly inflation was at 0.5 of a percentage point. We think that we will have inflation of around 0.5–0.6 in July but the end of the month could see a slight decrease in inflation because of the seasonal reduction in prices for fruit and vegetables that will slow the inflation rate a little and contribute to a considerably lower figure for August. Accumulated inflation comes to 6.6 percent for the first six months and 17 days of the year.

Going by the current growth rates we are seeing in the economy we expect to have GDP growth of around 6.4–6.5 percent at the end of the year.

Vladimir Putin: What is the situation with the rouble’s strengthening real exchange rate?

German Gref: The rouble’s exchange rate strengthened by 6.6 percent over the first half of the year. We set an annual corridor of around 7–8 percent but we think now that this corridor will be around in 7–9 percent in annual terms.

Vladimir Putin: You realise, don’t you, why I’m asking?

People’s real incomes are rising, and so are wages. If the rouble’s real exchange rate continues to strengthen, it will lead to increased imports, thereby putting pressure on our local producers. I am just asking you then to give this situation your attention. I know that you know yourself, along with the Finance Ministry and the Central Bank, how important it is to constantly keep this under watch.

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