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President Vladimir Putin: Dear Mr Prime Minister, dear ladies and gentlemen!

I am very glad to have the opportunity to speak here, to the representatives of business communities. I would like to express my gratitude to the organisers of this forum: the Bavarian authorities, the Prime Minister, the leadership of the Munich and Upper Bavaria Chamber of Commerce and Industry and the Eastern Committee of the German Economy.

Our meeting is taking place in an extended format and small and medium-sized businesses are here along with the big names of German industry. I consider this to be important and useful as it is really the middle class that establishes the fundamental bases for a steady economy and acts as the leading force for prosperity in many different countries of the world. This is well known.

We already met with many of those who are present here today in Tomsk and I have known many of the people here for many many years. These are my friends and I am very glad that our cooperation will continue in this business format.

Already today the implementation of large projects is bearing fruits. I would like to especially emphasise investment projects; one might say that they act as indicators. These projects include constructing a car assembly plant in Kaluga with Volkswagen’s participation. We spoke about this endeavour for a very long time and I am very glad that the company management has made this decision.

I want to point out that in Russia we have established the most favourable conditions for investments and for allowing capital to work effectively. Already 15 international automobile companies have taken the decision to begin working in Russia. Many of them have actually begun construction. And I am very pleased that German companies are not lagging behind.

Cooperation between Russian Railways, Siemens and Deutsche Bank about delivering high-speed trains to Russia and establishing the infrastructure to maintain them is pleasant to see.

The Russian-German business dialogue is proceeding without pauses, almost without interruption. A large number of agreements relating to finance and economics have been signed during this present visit.

Germany is one of the major investor countries in Russia, and a country that has worked in our market for a long time and very successfully. The volume of investments made in Russia bears witness to this. They amount to almost 12,5 billion dollars, including direct investments which amount to about three billion dollars. If we compare this with a similar period last year, than in just the first six months of 2006 German capital investments increased almost two-fold and by an amount of 1,3 billion dollars.

Incidentally, during my visit we touched on the subject of the possibility of Russian investments several times. We do not understand the nervosity that we see in the media with regards to the possibility of Russia investing in Germany. My German colleagues have told me that these investments presently amount to 400 million and in only six months German investments increased by 1,3 billion dollars. Why the hysteria?

I remember in the beginning of the 1990s when I worked in St Petersburg and the first direct contacts between our business and foreign business, including German business, had just begun. I remember that we said: ‘Do not be afraid, being afraid of foreign investments is a symptom of some kind of childish illness’. The Japanese bought half of New York and well? Nothing. Of course they didn’t bring New York back to Tokyo with them.

And it is the same in this case. I am simply convinced that if our cooperation is going to develop, then mutual investments will only benefit us. Moreover, the companies that are now having trouble in Europe can perhaps fully manage without major restructuring and massive layoffs if they invest in Russia. Today our companies have shown themselves to be very good examples of desirable cooperation in the international arena. Their capitalisation is growing very strongly and quickly.

One must mention that today there are 3,500 purely German or German and Russian companies working in Russia. And here in Munich I cannot help but point out – and in this respect I fully agree with my colleague – that around a third of all German investments in Russia are from Bavaria. And this applies to one half of all major capital investments. We welcome this activity of our Bavarian partners and we shall help you in every possible way.

We know that the delivery of energy resources is very important for our German partners, especially since Russian oil and gas supplies more than 30 percent of Germany’s needs. And here I would say that the prospects for our cooperation are impressive. And one need not be afraid of any kind of dependence on Russia. Russia never, never, let down its partners and especially not Germany. Even in the most difficult periods of our economic development and statehood at the beginning of the 1990s, we regularly – hour by hour, minute by minute – provided all the necessary deliveries and never once interrupted them. We require only one thing: that Russia be treated as a partner with equal rights. And that Russia not be put in an unfavourable economic situation. But this never happened in our relations with German companies and with our German partners and, I hope, never will.

Moreover, the permanent discussion about excessive dependence on Russia certainly induces us to find other commodity markets. And of course in this case we shall find these markets. And if we go there, then Europe will not receive the natural irreplaceable resources that she could have received. But I must point out that recently this rhetoric, that has a purely political character, has been diminishing. We are very happy about this. More and more rational approaches are prevailing. These are people who think and who are professionals. They are not thinking about their political careers and self-interest but rather about the benefits and destinies of the economy of their country and the well-being of their people. Therefore, in connection with this and as you know, we made the decision to reorient a portion of the Shtokman gas field, Russia’s major northern deposit, to Europe. This is a unique deposit with reserves that amount to about four trillion cubic metres of natural gas. And certainly a part of these resources can be reoriented and will be reoriented to Europe. Ms Merkel asked me about this during one of her first visits to Moscow. We thought about this, looked at whether it could work and now, finally, Gazprom announced this decision the day before yesterday. This means that throughout 50, 60, 70 years Germany will receive additional resources – today it receives about 40 billion – to about 50 to 55 billion cubic metres of gas. And Germany will become not only the major consumer of Russian gas but a transit country and act as the major centre for redistributing energy to all of our consumers in Europe.

As is well-known, when Russia held the G8 presidency Russia proposed to define energy security as a global priority. And we started on this work with our G8 colleagues’ full support. This strategic priority has already resulted in a concrete project. I am referring to the North European Gas Pipeline that is going to allow us to establish a fundamentally new route to transport Russian natural gas. This is a high-tech project and is also irreproachable from an environmental point of view. And it is open to all who are interested in the continent’s economic prosperity. I would especially like to emphasise one more time – and we have already talked about this a great deal – that it is not directed against any of our partners. All of our partners that we have worked with, work with now, and will continue to work with will not be less involved in cooperation, and will not receive less income from transporting our natural resources to our natural and largest consumers in Europe and, first and foremost, to German consumers.

Today our energy dialogue is getting deeper both on a bilateral level and within the Russia-EU format. But I shall say directly that such cooperation can only exist on an equal rights and mutually advantageous basis. And if people want us to create the conditions that will allow foreign firms access to the Russian market then it is also our right to expect a nondiscriminatory attitude from the governments of interested states when Russian companies plan to enter European markets. I already spoke about this before.

Dear ladies and gentlemen!

In many respects the prospects for our cooperation depend a great deal on the successful development of the Russian economy. And I can tranquilly refer to our achievements in this sphere as significant and large-scale.

For the sixth successive year our country has high GDP growth rates – on average about 7 percent per year. Today the volume of our gold and currency reserves amounts to almost 300 billion dollars – now they are about 270 billion dollars — and fluctuate according to the situation on the world currency markets. In addition to this, the government’s stabilization fund has accumulated 2,7 trillion rubles or about 70 billion dollars. These resources have allowed Russia to fully eliminate its debts to the members of the Paris Club, including to Germany. Today Russia has one of the best external debt to GDP ratios in Europe.

Lately the credit rating of the Russian Federation is also constantly increasing. And this is still one more confirmation of just how positively the international community sees the changes in the investment climate in Russia, and a confirmation of our country’s reputation as a reliable and predictable partner. I want to note that we aspire to improve all of our macroeconomic indicators. Not all has been done in this respect. Moreover, we are not happy with everything: we would like better results especially with respect to lowering inflation. But despite the relatively high level of inflation today, throughout all these years we have seen a trend towards reducing inflation. We strive to ensure and we will ensure that this economic indicator is competitive.

Of course it is also quite important that Russia maintains a stable political and social climate – this is quite important. We both understand perfectly the environment that foreign capital seeks out and in which conditions foreign capital can be best put to work. Each year the level of population income increases by about 10 percent in real terms, that is, minus inflation. And salaries are rising by approximately 9 percent and pensions by 8,5 percent. We would want even more. The issue at hand is how to maintain macroeconomic indicators, and we are going to continue to work further and purposefully in this direction.

Many of you know that we have embarked on special national projects in the social sphere and, first and foremost, in health care, education and in other sectors, including demography. We have similar problems to those in Europe, including in Germany. We are going to support families and women who make the decision to have two or more children. This is a big programme. I say this also because many of our German partners are taking part or want to take part in large-scale endeavours in these fields. I am referring to Germany’s high-quality work in all of these sectors.

This level of development in the Russian economy and social sphere allows us to maintain high levels of bilateral cooperation. In 2005 the volume of trade between Russia and Germany attained a record level – 32,9 billion dollars. And if we maintain this tendency than this year the volume of trade will exceed 40 billion dollars. This is an absolute record for all these years. And when we take into consideration the significant economic potential that Russia and Germany have, than this is far from the limit.

Today our assets include a number of general large-scale projects. Recently, together with our German colleagues, we are moving ahead in other spheres in addition to the traditional industrial sectors. Together we are exploring the prospects of the high-tech field, a field that sets the tone for the 21 st century’s economy.

We just met with representatives from the innovative sector, with heads of German science and major research centres. I think that it is in our mutual interests to speed up this process and to make it become more dynamic. Especially since joining our forces in the high-tech sector will give an important competitive advantage to both Russian and German producers in the world market.

In connection with this, the conversation I just mentioned with representatives of the academic and research communities was also fruitful. Cooperation in aeronautics opens interesting prospects for us and, first and foremost, with the European Aeronautic Defense and Space Company. I am convinced that deepening this cooperation is in Russia’s and our European partners’ interests.

In my speech I touched on the most important themes that are of major value for further business cooperation between Russia and Germany. But the purpose of such meetings is to hear each other’s point of view. To understand what is perhaps still hindering the development of mutually advantageous cooperation and just what, on the contrary, will expand its horizons.

I think that even if we hear the names of countries, of how they sound in German – Deutschland und Russland – then Russland, Deutschland even sound almost the same. We are natural partners and I am referring to the deep historical roots of our cooperation and all that we have developed over the past few years. And we are simply required to make new absolutely breakthrough steps forward in our cooperation. I am confident that we can do this.