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President Vladimir Putin: Ladies and Gentlemen,

Our first meeting this year with the President of Armenia has just ended. As always, we had a frank discussion of the whole range of our relations, but we paid greatest attention today to the economic aspects of our cooperation.

This year we will celebrate 15 years since the establishment of diplomatic relations between our countries and 10 years since the conclusion of the basic Friendship and Cooperation Agreement between Russia and Armenia. I am happy to say that as our two countries prepare to mark these anniversaries, not only have our relations maintained the potential of past years, but we have added considerably to our bilateral ties in all areas and have strengthened our partnership and the strategic nature of our cooperation.

Our discussions today focused above all on the development prospects for our trade and economic ties.

We are happy overall with the stable growth in our bilateral trade over these last years. It was up 40 percent in 2005, but over the first 11 months of 2006 it increased by a whole 70 percent. The final result for 2006 could come to a figure of around half a billion dollars.

The energy sector remained the driving force behind our cooperation. But other sectors, such as machine building, communications and chemicals, were also prominent.

The efforts of just three Russian companies – Gazprom, RUSAL and Vimpelcom – will almost double total investment in Armenia over the coming months. Rosatom and Russian Railways could also launch new projects.

On the subject of humanitarian cooperation, we assessed very highly the results of the Year of Armenia in Russia that has just come to an end. The more than 200 different events held throughout the country as part of this programme gave Russians the chance to learn about Armenia’s rich cultural heritage and modern achievements and have given new impetus to developing business and public initiatives.

Our discussions today also touched on a number of topical regional issues. Of course, our talks are set to continue today, and Robert Sedrakovich [Kocharian] and I will be having dinner together. We will discuss, of course, the development of the CIS, the Collective Security Treaty Organisation and the Eurasian Economic Community. We will also talk separately about the Trans-Caucasus region overall. I very much hope that during this year’s St Petersburg Economic Forum we will be able to hold multilateral talks with our CIS colleagues on economic cooperation issues above all, and I will inform the Armenian President in more detail on this matter.

I would like to conclude by thanking my colleague for a genuinely friendly and businesslike discussion. I am sure that today’s meeting in Sochi will mark a significant step in developing the strategic partnership between our two countries.

Thank you very much.

Armenian President Robert Kocharian: Thank you.

I have only just remembered that my first international meeting last year was also with you, Vladimir Vladimirovich, and also here in Sochi. Last year was a very productive year for the Armenian economy and for relations between our two countries in general. Despite the transport problems we have, bilateral trade is growing and the amount of Russian investment in the Armenian economy is increasing considerably. Before coming here, I reminded Vladimir Vladimirovich of his words about Russia being only a ‘shameful’ second in terms of investment in Armenia. But it seems to me that Russia will definitely have the honour of first place for total investment in our country’s economy by March. Practical work has now begun on carrying out major energy projects. Today we are discussing the possibility of Russian companies taking part in our mining and metallurgical sectors. These are very serious projects and our preliminary assessment is that 2007 will be just as productive as 2006, and that we will achieve a new quality of economic cooperation. We are talking, after all, about projects that are already underway, or about projects that are currently at the stage of active negotiation. I would just like to remind you, Vladimir Vladimirovich, of the economic situation and the situation with our bilateral relations in general 6–7 years ago. At that time, we had substantial military-technical cooperation, but in the economy the only real cooperation we had was through Armrosgazprom. Today the picture is completely different and Armenia is more than happy to see the way our bilateral relations are now developing. Regarding the problem of finding a settlement to the Nagorny Karabakh issue, this is something we only looked at in passing, but I will try to inform the Russian President on the current state of negotiations during the second part of our meeting. I am thankful to Vladimir Vladimirovich for the warm atmosphere in which our meeting took place and for the practical and pragmatic approach to our talks in general. Thank you.

Question: What is your assessment of the current situation in the Caucasus? What potential threats and dangers do you see for our countries and for the region as a whole? Is it possible that new threats of some kind could emerge now and in the future?

Robert Kocharian: Do you mean in the Caucasus or in the Trans-Caucasus? Part of the Caucasus is an internal Russian issue. I will look more closely at the problems in the South Caucasus.

Everything happening in this region has a direct impact on Armenia and any complications have a direct impact on our country’s security. This is why we are consistent in our support for peaceful settlement of the conflicts in the South Caucasus. We also want to ensure that the processes underway in the region do not lead to the emergence of new lines of division.

Each country in the South Caucasus, as it carries out its policies, its foreign policy and security policy, should also be aware of its responsibility for the situation in the region as a whole. We have problems with Azerbaijan over the Nagorny Karabakh issue, and we are holding negotiations. There is little cause for optimism at this point, but the main thing is that the ceasefire that has been in effect in the region since 1994, with Russia’s active help, is still holding today. I think this shows that both sides are committed to supporting the peace process taking place within the OSCE framework. We are also thankful to Russia for its active participation in the negotiating process in general.

There are various issues that have an impact on the region, including transport and energy issues. There are a number of different factors involved, but unfortunately they often have political overtones. I am not too optimistic at this point about the future security of the South Caucasus region, but I am sufficiently confident that we can keep the situation moving in the right direction and not create new lines of division. That is all I can say.

Vladimir Putin: The problems that we encounter in the South Caucasus today are not new. They have been present in this region for decades and even centuries now. During the Soviet years it was possible to smooth them over somewhat, keep them suppressed and give them an ideological spin, and overall the situation was more or less acceptable and stable. With the geopolitical changes that have taken place and the formation of a whole number of independent countries, all of these problems have become more acute, of course, and this is for a variety of reasons. Partly it is because they were not resolved earlier. Partly it is because newly independent states seek to assert themselves and strengthen themselves internally and externally. They see settling relations with their neighbours as a way of strengthening their statehood, but we do not have so much experience of intergovernmental relations and timely resolution of conflict situations. When I say ‘we’, I include Russia too. But as the economy grows, as people become more prosperous and we gain experience in intergovernmental relations, there is more and more cause for optimism. At the moment, however, the potential for conflict remains high. Unfortunately, we have still not managed to resolve the most acute problems, but we will continue to work on this, and Russia will do what it can to settle these issues and make every possible effort to find solutions to these problems.

Question: There has been a lot of talk about new joint economic projects of late. What is your assessment of the prospects for these new projects?

Vladimir Putin: Robert Sedrakovich already said that last year we noticed that Russia comes only second in terms of investment in the Armenian economy. This was unexpected indeed for me because given the special character of our political relationship, we could have hoped for a better result. But the situation certainly has changed over the last year. Total Russian investment in the Armenian economy currently comes to around $800 million. Three companies – Vimpelcom, RUSAL and Gazprom – plan to make considerable investment over the near future and this will at least double Russia’s total investment in Armenia, which will soon reach a figure of $1.5 billion. This work is already underway. As I already noted, other major Russian companies are also coming up with new projects. Rosatom, Russian Railways and telecommunications companies are all showing interest in developing their activities in Armenia. This is all cause for optimism and this optimism is justified. I am absolutely convinced that we have a lot of potential to draw on, and we will make use of our political relations and the very favourable climate of our relations, and transform it into results in the economy too.

Robert Kocharian: I would add the mining sector to the proposed new areas for development. Russian business is showing serious interest in mining gold, copper and molybdenum in Armenia. Armenia has great potential. Some agreements have already been signed and the rest are still at the negotiation stage. Another completely new area of cooperation stems from our talks with Rosatom on exploration and development of uranium deposits in Armenia. This is an interesting area for cooperation given that we have our own nuclear energy industry in Armenia, and we plan to keep it running. We are working together actively in this area and we will expand our cooperation. There is also a whole number of other areas that have development potential. One of them, as I said in my opening remarks, is the chemicals industry. We very much hope that the Armenian chemicals industry will reach new and serious agreements with Russian business in 2007. As for Vimpelcom, this company is in a very good position to become the leader on the telecommunications market in Armenia.

Vladimir Putin: $490 million is a respectable investment.

Robert Kocharian: So there is very serious potential. And quite simply, we have the confidence that economic cooperation will be the focus for our bilateral relations over the next 2–3 years, and this is why we paid such attention to economic matters during our talks today.