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Heydar Aliyev: Mr Putin,

Today sees the start of the official visit by the President of the Russian Federation to Azerbaijan. I extend a cordial welcome to you and I would like to express the profound gratitude and the wish of many people in Azerbaijan to see you here on an official visit.

Without exaggeration, I can say that the visit has a historic significance because no Russian head of state had visit to Azerbaijan since it acquired independence and Russia established its sovereignty after the disintegration of the Soviet Union. There were, of course, some reasons for it. Nevertheless, it is an important factor for us and we have wanted this visit to take place. And this visit is being paid by Vladimir Putin, with whom we have come to know each other, grown closer and found a lot in common on all issues during our meetings and our work in the Council of CIS States.

Vladimir Putin: I would like to thank you and our Azerbaijani friends for the invitation and a very warm welcome. From the very first minutes, we became aware of this positive mood and the readiness not only to conduct negotiations, but to achieve real results. We have been having fairly regular and frequent meetings recently, and have had a chance to exchange opinions, but that was outside the framework of official talks and visits. You have just said that this is the first visit by a Russian leader to Azerbaijan in the past ten years. For my part I would like, on behalf of the Russian leadership, to invite you to pay a return official visit to the Russian Federation.

Heydar Aliyev: Thank you.

Vladimir Putin: We attach great significance to developing our relations with Azerbaijan and I think we have every opportunity for that. And I agree with the President of Azerbaijan: we can indeed turn a new page in the relations between Russia and Azerbaijan in all areas of our activities.

We have started discussing the problems and prospects for the settlement of the Karabakh issue, which is one of the key elements in the situation in the region.

We have paid a good share of attention to economic issues. Trade between us has increased by 25% last year. It is a welcome trend, but the level of economic interaction still does not match the potential or the interests of the two countries. And this gives us something to think about.

The political dialogue has recently been fairly intensive and, in my opinion, quite substantive.

I would like in particular to note the effective cooperation between the law enforcement bodies of Russia and Azerbaijan in the fight against terror and organised crime. I take this opportunity to thank you, Mr Aliyev, and the leadership of Azerbaijan for handing over to Russia the people complicit in the blowing up of houses in Dagestan. Terrorists, whatever cover they use for their activities, deserve to be punished and in the event there was no justification for using religious slogans as a cover because the victims of their terrorist attacks were Dagestani Muslims. But let me assure you that there will be no attempt to make short shrift of them. Democratic Russia carries out all the court proceeding in a democratic way. All people are entitled to legal defense and defense lawyers in an open trial. All the arguments for and against will be thoroughly looked at before decisions are taken.

We know that since the criminals were extradited to Russia you personally have been receiving death threats. You were not afraid, you have displayed courage and strength of character. And while I express my gratitude to the leadership of Azerbaijan I am aware that the responsibility for the decision rests with you personally and I would like to thank you personally.

Now permit me to say a few words about trade and economic cooperation. We pin great hopes on the activities of the intergovernmental trade and economic cooperation commission. During our recent telephone conversation I suggested that the Commission include representatives of the business communities in Russia and Azerbaijan. We are ready with our proposals. I understand that your reaction to this suggestion is generally positive, so we expect your proposals in this sphere. I think the addition of business representatives would lend greater dynamism to the Commission. And you have already said during our meeting that the work of the Commission needs to be changed in precisely that direction.

Russia favours the closest cooperation with Azerbaijan in the fuel and energy sector. That applies to the extraction and refining and the transportation of oil. We for our part offer all the necessary conditions and opportunities, including material and technical ones, and we expect that our work in this sphere will have a long-term perspective. We hope that our Azerbaijani colleagues have a similar approach, and that applies above all to the volume of oil transit to Novorossiisk.

There are other promising economic cooperation projects. In particular, Russian companies could take part in modernising and reconstructing industrial facilities in the field of metallurgy, energy and agriculture in Azerbaijan. We could unfold cooperation in the energy industry and have the power grids of Azerbaijan and Russia work in parallel. You know, in the Soviet times we had good links and by and large there are good prospects for restoring the former level and for developing the relations between Azerbaijan and Russia in the energy industry.

Russia has traditionally been a consumer of Azerbaijani farm produce. At the same time, Azerbaijan imports some important food products from Russia. I think that the export of early fruits and vegetables to Russia and return supplies of foodstuffs to Azerbaijan could be an important area of mutually beneficial cooperation.

The participation of Russian companies in the reconstruction of the Baku metro, with partial replacement of the rolling stock and equipment, is a viable proposition from the economic point of view. I think the financial issues can be sorted out to mutual satisfaction. Naturally, it is always the top problem in that kind of projects.

Our companies have been showing an interest in cooperation in ship-building, in restoring poultry breeding in Azerbaijan, in the development of the pharmaceutical and the light industries, establishing joint ventures for the processing of agricultural products and the manufacture of electrical instruments.

Russian business is ready to contribute to the restoration and modernisation of the aluminium industry in Azerbaijan. I know that some decisions in this sphere have been taken, but we still have hopes that dialogue will continue. There are positive trends in military cooperation, which is a field we previously had no cooperation in. We take a positive view of the visit here by Marshal Igor Sergeyev, the Russian Defense Minister, and the document signed during the visit.

On the whole, we welcome the way border cooperation issues are being handled between Russia and Azerbaijan. We hope that Azerbaijan will soon ratify the agreement on border cooperation. And, as we have just agreed with you, it is important to continue talks on the dismantling of the state border.

Cooperation between the regions of the Russian Federation and Azerbaijan is an important part of our relations. I think that in this sphere, the lower we set the bar of cooperation the more concrete and effective such cooperation will be and the more it will meet the needs of the local people. We believe work on an agreement to develop cooperation in the border areas of Russia and Azerbaijan and on rational use and protection of water resources should be speeded up. There is something to think about there: we can have multilateral agreements and, given the good will (and I understand all the parties have it), a positive result can be achieved.

We attach great significance to cooperation in the cultural sphere. And there again I would like to thank you personally, Mr Aliyev, for the attention you have paid to the development of cultural ties between Russia and Azerbaijan, for supporting and promoting the Russian language. As far as I know, practically all the schools that existed in the Soviet times are still functioning in Baku and the base for the development of the Russian language has been preserved. This is added proof that our cooperation is indeed forward-looking.

Heydar Aliyev: Not only schools, but also departments at higher education institutions.

Vladimir Putin: In other words, the use of the language is not shrinking. It shows that we have a good base for the development of relations. We hope that culture and the arts will continue to cement our relations in the future.

Russia and Azerbaijan are neighbours in the Caucasus, so turning the Caucasus into a region of peace and prosperity is a special concern for us. We have a positive opinion of our work with Azerbaijan in launching the “Caucasus four” mechanism. The four leaders of Caucasus states have had several meetings together. I think this practice is worth maintaining. In any case in my opinion the recent consultations on the situation emerging in the region have been positive. We look forward to further constructive contacts and a frank discussion, within the “four,” of the situation in the Caucasus as a whole, and we are convinced that this forum can and must be the centre for coordinating approaches to security and cooperation in the region.

We are fully aware of what a sensitive issue the Nagorno-Karabakh conflict is for Azerbaijan. We have been closely following the development of the situation there. We are gravely concerned about the lack of real progress in its settlement. One cannot remain indifferent to the fate of the numerous refugees who have been denied normal living conditions for almost ten years. And I would like to assure you that Russia, both independently and as co-chair of the Minsk OSCE Group, will persist in efforts toward an early resolution of the Karabakh conflict. Besides, the continued “no war, no peace” situation hinders the development of our relations with Azerbaijan and Armenia and other Transcaucasian countries. We are convinced that it is up to the heads of the parties involved, and no one else, to solve this problem with the support of the international community. It is only after preliminary agreements have been reached that the mediators can join in and provide the necessary assistance. But I repeat, we are ready to join this work actively even now. Our aim is to achieve peace without winners or losers. I think that this is the most acceptable formula that we should work towards.

We paid considerable attention to bringing closer the positions of Russia and Azerbaijan on the problems of the legal status of the Caspian Sea, as Mr Aliyev has said. This problem has indeed been long a subject of discussion and it makes little sense to wait until it is resolved multilaterally. Multilateral efforts should of course continue, consultations and meetings should continue, but if today we have a chance to reach some bilateral agreements and if these agreements are acceptable to both sides they should be concluded. And we appreciate the leadership of Azerbaijan for the constructive approach as manifested above all in upholding the national interests, but we believe that the agreements we have reached are acceptable and meet the interests of Russia.

I understand that you do not object to supporting the initiative of the head of Turkmenistan and, as he proposed in our telephone conversation, to hold a meeting of the Caspian states in Turkmenistan in late February or early March.

Heydar Aliyev: Yes.

Vladimir Putin: Consultations should be held with our colleagues to determine the date acceptable to everyone. That is all I wanted to say. If anyone on our side or on your side wants to speak, we can give them the floor.

Heydar Aliyev: First of all, I would like to thank you, Mr Putin. I think the relations that have been shaping up recently between the Russian Federation and Azerbaijan, our personal contacts and numerous working contacts between the heads of various ministries and agencies in the two countries create the prerequisites for implementing your proposals. I think such meetings will intensify Russian-Azerbaijani relations.

I appreciate your sensitive and considerate reaction to the recent earthquake in Azerbaijan and the humanitarian relief rendered by Russia. It is not only important for the people who have suffered from the earthquake, but it also characterises the friendly relations between our countries and peoples.