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President Vladimir Putin: Mr Prime Minister, Ladies and Gentlemen,

It gives me sincere pleasure to welcome the prime minister of Italy, Romano Prodi, to Sochi. This is our third meeting in Russia in the last seven months. We have agreed that our next meeting, in six weeks time, will take place in Italy.

In this respect, we spent a considerable amount of time looking at the preparations for our fourth intergovernmental consultations, which will take place this March in Italy. I am sure that they will give a big boost to the whole range of relations between our two countries, and there are sufficient grounds for these expectations.

Last year was marked by a significant increase in our bilateral trade, which rose by 28 percent and came to around $30 billion. New joint projects are emerging and our investment cooperation has grown a lot stronger and has now become a two-way street.

The high technology sector is one of the priorities for our work together. It is important in this respect to build on the work already begun in the space and aviation sectors, in the defence industry and in telecommunications.

We also have good prospects in the fuel and energy sector. I am sure that our recent agreements on Russian energy exports to Italy will provide additional security guarantees for both suppliers and consumers. Furthermore, these agreements are fully in keeping with the principles set out in the Energy Charter.

We place great importance on carrying out the tasks set in December 2006, in Moscow, at the ninth session of the Joint Council on Economic, Industrial and Financial Cooperation.

We noted that humanitarian cooperation between our two countries has increasingly gained in substance. The Russian-Italian Dialogue Forum is working actively through civil society organisations in our respective countries.

We have confirmed an agreement that the first foreign performers to appear on the stage of Russia’s Bolshoi Theatre when it opens after reconstruction in October 2008 will be singers and musicians from the chorus and orchestra of Milan’s La Scala.

Cooperation between Russia and the European Union has always been an important part of our dialogue with Italy.

We had a substantial and interested exchange of views on current international issues, including the Middle East, Iraq, Afghanistan and Iran. We will discuss these issues in more detail during the second part of our meeting.

Our countries share the view that the United Nations is the key instrument for maintaining global security. I am sure that Italy’s election as a non-permanent member of the UN Security Council will further facilitate the close coordination of our foreign policy efforts.

I would like to thank the Prime Minister for today’s constructive and substantial discussion.

Italian Prime Minister Romano Prodi (Translated from Italian through Russian): Thank you, Mr President. It has been a pleasure to be invited here and to have this discussion which we will continue after the press conference. Our countries will hold bilateral talks in March in Rome and Bari. We could say, therefore, that we have an ongoing dialogue that benefits both countries.

We have no problems in our bilateral relations. Looking at the figures, $30 billion is an impressive result and it puts us in second place with a development index that is very high indeed.

I would like to note that Italian investment in Russia and Russian investment in Italy is not going just to the traditional sectors but is diversifying now into new sectors. Consumer goods, construction, real estate – these and a whole range of other sectors are bringing our countries ever closer together, including through major projects that we are implementing together.

I can mention two such major agreements, signed by ENI and Gazprom in the energy sector. In particular, an agreement is to be signed that will make it possible for our country’s company to take part in work at the initial phase.

Everything that was agreed at our previous meetings is now being implemented in practice. The same goes for another major sector, where Italy’s ENEL is set to become involved in the production and distribution of electricity on the Russian market. Another important area of our cooperation concerns a large Italian company, Finmeccanica, and is connected to high technology, including in the defence industry.

But there are also many other possibilities before us and the road is open for other joint projects too. I said during my meeting with President Vladimir Putin that Italy supports developing our relations and investing in a wide range of sectors. Although we will only begin discussing international affairs in detail during the next two hours of our meeting, we did not hide the fact, during our initial discussions, that we are concerned by international issues. We need to pursue an actively multilateral approach in resolving these issues. As the President said, and I fully agree with him, there are many conflicts in the world today. The time has surely come now to try to start ending these conflicts, and we must be active in doing everything possible to ensure that this does happen. If we look around the world we can see just how many fronts we have: Palestine, Lebanon, Afghanistan, Iraq, Somalia.

The time has come to resolve these conflicts, because if we do not do this, the situation could simply get out of control. We will examine these issues in the next part of our discussion because I think that it is our duty not only to look at these problems in depth but also to look for ways to resolve them together. Thank you.

Question: My question is for both leaders. What direction do you think the dialogue between Russia and Italy and Russia and Europe overall will take in the future? And could you explain why relations between Russia and Italy are faster-growing and more multifaceted than relations between Russia and some other European countries?

Vladimir Putin: It is not just with Italy that we have fast-growing relations in a broad range of sectors, including in the energy sector.

Mrs Merkel was here the day before yesterday, and we were able to see that relations between Russia and Germany are showing excellent development in a great many areas, including in the energy sector.

There is the example of Finland, to take one country, which covers 90 percent of its natural gas needs through supplies from Russia. I will not go on naming positive examples of cooperation, for they are many.

We do indeed consider that we have very good relations with Italy. Why is this so? There’s no secret, it’s simply that the Italians are mature partners who know how to stand up firmly and consistently for their own national interests, do not expect any privileges and respect their partners. Italy is a comfortable and reliable partner for Russia. This applies not only to Russian energy exports to Italy. A number of Italian companies plan to invest billions of dollars in the Russian energy sector. It suffices to mention ENEL’s plans in Russia’s northwest region. It is not just these concrete positive examples that make our relations what they are, but the mutual trust and interest that are their distinguishing feature and that are what make it possible for us to develop our relations with such energy and effectiveness.

Romano Prodi: During my time as president of the European Commission, I said on many occasions that it is important to develop the energy dialogue between Russia and Europe. Some big and progressive steps have already been taken but we have not yet reached the point of fully and comprehensively settling all the issues regarding the shape that this strategic energy cooperation should take, cooperation that should extend to various areas, including scientific research and innovation in using new energy sources. This is indeed a very important subject because Russia is a vast country that has many different energy sources. But we need to look to the future and we do not yet know just how much longer we can keep using only the energy resources that we take from below ground. These are the kinds of issues I raised with regard to the energy dialogue. There is still a lot to do, but as I said, we have already accomplished a lot too. What I particularly want to note is that we are all now aware of the importance of this subject and the importance of this kind of dialogue. In Europe, there was not such great awareness of the importance of this issue four or five years ago.

As for the relations between Italy and Russia, I cannot make the same kind of comparative analysis that the Russian President has just done so well, and I can only say that relations are good, that they are developing, and that they will be even better in the future.

Question: I have two questions. First, Mr Prodi noted that there are many conflicts in the world and that the time has come to try to resolve them before they get out of control. My question therefore is what can be done to end the conflict in Afghanistan, which has been practically resolved for the last five years now, but not entirely. What can Russia advise as a country with experience in Afghanistan first as an empire and then as a country observing developments in Afghanistan at international level?

My second question is for President Putin. How do you explain the scepticism and sometime criticism that one hears, especially over the last three years, over specific actions taken by the Kremlin?

Romano Prodi: Together we see that new conflicts have been breaking out in the world over recent years but that none of them are being ended. We have named many conflicts, the conflict in Iraq, the conflict in Afghanistan, the conflict in the Horn of Africa, and perhaps the main conflict raging at the moment, the Israeli-Palestinian conflict. We have spoken a lot about Afghanistan. We are fully aware that this conflict has been going on for a long time and this is why we have spoken about using principally armed means to address it. Perhaps this is precisely a sign that the time has come to make use of various political instruments. If we do not do this, this conflict could simply become a kind of cancer on the international stage.

Vladimir Putin: I am not sure that I can give a full answer to your question.

A common saying has it that monopolies are always bad except in one case: when it’s your monopoly.

After the collapse of the bipolar world based on the struggle between two opposing systems, the illusion emerged in some quarters that the world was now unipolar and that all problems could be solved easily enough from one centre. But what the Italian Prime Minister has just said shows that this has turned out not to be the case. This kind of approach leads to an increase in the number of crises and a decrease in our ability to resolve them. Now we have a situation where Russia’s economic, military and political possibilities are clearly growing and a new competitor is emerging, a competitor that was supposedly already out of the running.

This is clear in the economy quite simply because competitive products are now appearing on world markets, but who wants to move over and let in a competitor, even if little movement has been seen so far at first glance. This, I think, is one of the main reasons, this unwillingness to take Russia’s legitimate interests into account, and this desire to keep it in the place that others have decided it should have.

Russia will define its own place in the world, will do it itself and will strive towards a balanced and multipolar world, a world that takes into account the interests of all members of the international community. As for healthy criticism, it has never done anyone any harm, and we are grateful for it.

Romano Prodi: Our discussion here enables me to make one little conclusion for my part. I have taken this new Russia into account, and I am trying to do everything necessary to give Russia that opportunity to play its part in the movement for peace throughout the world and in multilateral decision making.