Official website of the President of Russia

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Question: The Russian economy has developed at a good rate in 2006 and GDP grew by approximately seven percent. What are your predictions for the year’s end and in what way will the high prices for oil exports influence economic growth?

Answer: I must point out that the increase in world energy prices has a double-sided influence on the Russian economy. On the one hand, it undoubtedly provides additional economic opportunities but, on the other, the excess inflow of currency puts pressure on the ruble. The resulting increase in the exchange rate results in more imports and a decrease in the competitiveness of Russian goods other than hydrocarbons.

The Economic Development Ministry forecasts 6,8 percent GDP growth for 2006. And it is certainly true that incomes gained from exporting raw hydrocarbon resources helped this growth.

However, a significant share of the increase in GDP is the result of growth in other branches, namely in construction, metallurgy, trade and financial services. In the first nine months of this year foreign investments increased by 31,7 percent and foreign direct investments by 55,5 percent. Experts consider that foreign investments will continue to grow several times more quickly than GDP.

The state’s financial situation continues to improve. As of 24 November 2006 Russia’s gold and exchange reserves amount to more than 243 billion USD. As of 1 December the Stabilisation Fund contained 2,2 trillion rubles. As a whole, basic aspects of the Russian economy have become even more attractive in comparison with those of other developing markets. All of this bears witness to the positive structural changes in the economy, changes we constantly strived for. I would like to emphasise that this task will remain topical in the future as well.

Question: At the informal summit Russia-EU summit in Lahti the European Union received less from Russia than it had expected to receive. With which provisions of the Energy Charter does Russia agree or disagree?

Answer: If one were to judge by the information in certain media then one would think that the dialogue between Russia and the EU is merely limited to discussing problematic issues in connection with ratifying the Agreement on the Energy Charter, the import of Polish meat, and different kinds of quotas and tariffs. In reality, this is far from the case. In addition, to approach the issue from the position of ‘who received what’ is a fundamentally mistaken way to characterise our relations.

The EU and Russia already are each other’s most important political and economic partners. Our volume of trade is growing and the cooperation between our industries is accelerating. Our cultural and educational contacts are expanding. In May 2005 at the Sochi summit Russia and the EU signed agreements on simplifying the visa regime and on readmission. And we hope that they will soon enter into force. I would like to emphasise once again that as we develop our relations with the European Union we try to work in a long-term perspective, and to uncover new possibilities for cooperation in the interests of all Europeans as well as in the interests of progress and security on the continent.

Now, to discuss the ratification of the Agreement on the Energy Charter (AEC) in more detail. Russia signed the AEC and the related documents in 1994. At that time we expressed our concern on a number of points and these are expressed in the declaration of the chairman of the Conference on the European Energy Charter.

In particular, we discussed the problem of trade in nuclear materials between Russia and the EU, something that was removed from the sphere of competence of the AEC. It was proposed that this issue be resolved within the framework of the Russia-EU Partnership and Cooperation. We even decided on a date to conclude an agreement on the free trade of nuclear materials, namely 1 December 1997. However, as of yet negotiations on this issue have been fruitless. And Russia is affected by the fact that Europeans keep imposing quantitative limits on the goods of the nuclear cycle. Moreover, the situation has been significantly aggravated by EU expansion and also with the creation of the Energy Community of South Eastern Europe, where member countries have agreed to apply EU legislation on their territory.

The AEC has also conserved the haziness surrounding the protection of investments. This shortcoming was supposed to be removed after signing the Additional Investment Agreement to the AEC but in 1998, the EU blocked this.

The situation concerning the Energy Charter Transit Protocol also directly influences our position in relation to the AEC. Here, there are a number of unresolved questions that have a crucial value for us. They include Brussels’ attempts to remove EU member countries from the Protocol’s sphere of competence (they argue that the EU is an integration association in which the concept of transit is ostensibly inapplicable), and to impose on Russia an unprofitable regime of transit tariffs and of regulating transit disputes. There is also the problem of depriving Russian companies that have functioning delivery contracts the priority right to renew their transportation contracts.

Because Russia expected that the said issues would be resolved, Russia started to ratify the AEC in August 1996. However, this process is still not complete since none of the aforementioned obstacles have been removed. Therefore because of this and according to p. 45 of the Agreement, then its provisions apply to Russia on a temporary basis and provided that they do not contradict Russian legislation.

Question: Russia declared that it would supply Europe with energy from a distribution centre in Germany. Why do Europeans demand that Russia provide them with “market access, stability and predictability“? What are they afraid of?

Answer: The question of what our European partners are afraid of and why they demand something from Russia would be better directed at them. Throughout many years Russia has acted as a reliable supplier of energy resources to Europe and Russia expects further, mutually advantageous cooperation. In connection with this, we give great value to the North European Pipeline project. Building this installation will not only diversify the routes for transporting Russian gas to European countries but it will also help strengthen the infrastructure of energy cooperation between the EU and Russia as a whole.

And as to “access to markets”, the third largest Russian oil company TNK BP is half owned by Europeans, something that is already visible from its name. And I will note that Europeans are successful and work for good profits in Russia. European companies are also participating in projects based on production sharing agreements, namely Sakhalin-2, Khariaga, the Caspian Pipeline Consortium and in many other projects. And we welcome the arrival of such serious partners with solid technological and investment opportunities on our market.

Here, it is essential to remember one thing. I am referring to the fact that Russian natural resources are extracted from Russian territory and exported from Russia. You will agree that we have the right to demand that our partners participating in these projects show respect for our nature and to request environmental propriety. We also proceed from the fact that the country owner should receive a worthy income from the use of its resources. I say this because at times some opponents in these discussions forget that we are not taking about anything abstract or universal but rather our own, Russian property.

Question: Russia refused to let EU capital participate in developing the Shtokman deposit and in the project Sakhalin-2. Would Russia be ready to allow international capital to participate in developing these projects provided that Russian investments in Europe receive equal rights?

Answer: The question is not quite formulated correctly. The Sakhalin-2 project is being developed without the participation of Russian companies, that is exclusively by international capital. With respect to the Shtokman deposit, as far as I know, during negotiations between Gazprom and potential partners Gazprom suggested that in exchange for participating in the development of this deposit—the largest in Europe—Gazprom would receive access to the end-point consumers of natural gas in the USA and in Europe. However, this was not very successful. But as I understand it this issue has not been fully resolved. And it could be considered again in the event that foreign partners were to put forward interesting offers.

Question: Initially the gas reserves from the Shtokman deposit were to be exported to the USA. Now these reserves will be delivered to Europe. Does Russia plan to sell gas to the USA?

Answer: The answer to this question is connected with previous one. In connection with unsatisfactory results of negotiations with foreign partners Gazprom made the decision to start by implementing the pipeline variant of gas deliveries through the North European Gas Pipeline to Europe. And to only produce liquefied natural gas intended for other markets, including the American one, when the development of the Shtokman deposit is at an advanced stage.

Question: Iran and North Korea’s nuclear programmes resulted in something like a small Cold War. In North Korea’s case, what was Russia’s position concerning the resolution 1718?

Answer: As is well known, Russia supported the UN Security Council resolution 1718. It is true that a strong and well-calibrated reaction aimed at preventing any further escalation of tensions was required. We also considered it necessary to send North Koreans a clear signal that their actions are undermining the international regime of nuclear non-proliferation.

Simultaneously, we insisted on the necessity of limiting our actions to peaceful ones. Therefore, at Russia’s initiative the text of the resolution included a provision that states that should any further actions be required with respect to North Korea then additional Security Council decisions are required.

We consider that the main goal of UN Security Council resolution 1718 is not to punish North Korea but to ensure a political solution to the problem of this country’s nuclear programme. In connection with this, we welcome Pyongyang’s decision to return to the table with six negotiators and we expect that this process will eventually result in finding a civilised solution to this problem.

Question: What essential difference does Russia see between the nuclear programmes of Iran and North Korea?

Answer: The difference is obvious. North Korea left the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), declared that its nuclear programme has a military purpose, sent the IAEA inspectors from its country and, finally, made a nuclear test.

Unlike North Korea, Iran participates in the NPT. Iran continues to observe the Agreement with the Agency for the application of guarantees that would allow Iran to control its own nuclear activities. As of yet the Agency has found no signs that Iran is changing from using nuclear energy for peaceful purposes to using it for military purposes.

However, it would be wrong to say that the IAEA has no serious questions about certain aspects of Iran’s past nuclear activities. In addition, the IAEA can still not confirm that Iran has no undeclared—that is, military—nuclear projects. All of this causes concern with respect to the orientation of this country’s nuclear programme.

Our efforts to settle the situation concerning the Iranian nuclear programme are aimed at getting Iran to clear up the IAEA’s outstanding questions in the course of a transparent and enterprising cooperation and dialogue with the Agency. And in this way to restore trust in the peaceful orientation of its nuclear programme.

Question: The European Union has shown its readiness to act as an intermediary in the conflict between Russia and Georgia. What is your government’s opinion of this offer?

Answer: First of all I wish to note that no conflict between Russia and Georgia exists. This issue consists in the fact that, for reasons that we do not understand, Georgian leadership is doing everything possible to damage relations between our countries. And over the last few years Georgia has consistently carried out an anti-Russian policy. This includes uncivilised rhetorical discourse, calculated accusations, provocations concerning Russian peacemakers in Abkhazia and South Ossetia, spy scares and so forth.

The situation is developing against the background of a sharp, inadequate militarisation in Georgia that poses a threat to stability and security in the Caucasus. In practice, preparations are being made to resolve the Georgian-Abkhazian and Georgian-Ossetian conflicts by force. Instead of peace talks we hear barefaced threats addressed to Sukhumi and Tskhinvali.

We do not need intermediaries as we normalise our bilateral relations with our neighbours. Russia and Georgia have a centuries-old experience of building friendly relations. And we tell our partners, including representatives from EU states, about this. Still, if during a discussion with the present Georgian authorities, the Europeans were to state that it is expedient to end the counterproductive attempts to strain relations with Russia and establish a tense atmosphere that would justify the use of force against Abkhazia and South Ossetia, then such a contribution could only be welcomed.

Question: The Russian government has declared that it is obligated to investigate the murder of journalist Anna Politkovskaya. Is there progress in this investigation?

Answer: First of all I wish to emphasise that there can be no special declarations or special obligations in this respect. A crime has been committed and in Russia, just as in any state governed by law, it will certainly be investigated according to existing legislation. Therefore stating the question in such a way implies that it is outside of the sphere of law. It seems that those who raise this issue live in an atmosphere whereby if the state’s law enforcement agencies were not urged to do so, then they would not carry out their natural duties.

A tragedy occurred. A woman, the mother of two children, was killed. But some political provocateurs blasphemously try to speculate about this. Moreover, I sometimes have a hard time relinquishing the idea that the vocal, unfounded declarations that the Russian authorities, special services, participated in this murder are attempts to direct the investigation on the wrong course. I am convinced that this will not happen. And the best professional forces of the Russian law enforcement agencies are involved in investigating this crime and there are already certain results. I would like to note that, as far as I know, the relatives of the late Anna Stepanovna Politkovskaya are satisfied by the way investigatory work is proceeding.

Question: The level of trade between Russia and Mexico remains low. What are your suggestions for increasing it?

Answer: It is true that our economic relations still represent a minor field in which we cooperate. The present volume of our trade amounts to around 300 million USD, a figure that obviously does not coincide with our countries’ potential.

Russian firms’ work on the Mexican market is complicated by the fact that your business circles are traditionally strongly oriented towards American companies because of preferences within the North American Free Trade Zone (as is well known, the USA accounts for more than 85 percent of Mexico’s trade). In addition, I must remind you that, as of yet, Mexico does not consider that Russia has a market economy and applies anti-dumping measures concerning some important components of Russian exports, including on metal products and pipes.

Nevertheless, in the last few years our countries’ business circles have become more interested in establishing direct ties and activating a business dialogue. New partnership mechanisms that unite the state, private and academic circles are being established. One example is the Russian-Mexican Intergovernmental Commission on trade, economic, scientific and technical cooperation as well as on the shipping industry, and other examples are the Business and Academic Forum and the Business Council.

It is important to saturate our cooperation with concrete business projects. From the Russian side, major companies and banks such as Gazprom, Energomashexport, Techsnabexport, Rosoboronexport and Vnesheconombank are interested in expanding ties with Mexico. And I shall note that they have successful experience in implementing major projects with multi-million dollar budgets in various countries throughout the world. There are good prospects for cooperation available in the energy sector, mechanical engineering and aviation. This year the Mexican city of Veracruz established a centre for servicing and repairing Russian helicopters. Just this one project is capable of substantially increasing the volume of bilateral trade.

Russia recently benefited from Mexico’s support as it tried to become a WTO member. I hope that our participation in this organisation will help eliminate remaining disagreements and stimulate trade and economic cooperation.

Question: Is there a possibility that you will meet with the newly elected President of Mexico Felipe Calderon in the near future?

Answer: During the six years in which the National Action Party has been in power, the party headed by the new President of Mexico, the traditionally friendly relations between Russia and Mexico have substantially developed. I would especially like to note summit meetings in 2004 and 2005 during which we reached important political agreements.

We expect that the new Mexican leadership is open to deepening dialogue and to developing mutually advantageous cooperation with Russia. I shall certainly be glad to meet with the new President of Mexico, Felipe Calderon.