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President Vladimir Putin: Colleagues, Ladies and Gentlemen,

First of all, I would like to thank the President of Croatia, Mr Mesic, for the invitation to take part in this important multilateral summit.

This is the first energy cooperation summit, the first at such a high level, in this region, in any case, and we hope that this meeting will not just lead to broader dialogue, but, most importantly, will outline practical prospects and priorities for future work together.

The subjects discussed at this summit are immensely important for today’s world. Energy supply issues have become a primordial part of international economic policy today. The strategic objective our cooperation in this area pursues is to ensure access to reliable energy supplies for all countries of the region. Our policies take into account the Balkan countries’ increasing involvement in the European integration process, and we are ready to develop our relations in cooperation with the European Union.

It is my conviction that we should draw on all the best in our experience of working with current European consumers of Russian energy supplies. I note that for four decades now, despite the serious and truly global changes in the world, Russia has never broken a single one of its contractual commitments.

Regarding the countries of southern and southeast Europe, Russia supplied 73 billion cubic metres of gas to this region in 2006 alone. This comes to almost half the total volume we supply to the EU countries. We also supplied 59 million tons of oil. These figures are eloquent proof of the solid base upon which we can continue to build our cooperation in the energy sector.

I am sure you will agree that Russia’s relations with its partners in the Balkans have traditionally been based on mutual sympathy, common spiritual traditions, the closeness of our languages and cultures and a common history. Our economic ties are defined by the aim of turning the Balkans into a region of stability and security.

As one of the world’s leading oil and gas producers, Russia is ready to do everything possible to resolve the region’s energy problems. This, of course, must be based on a balance of interests and on equal responsibility of suppliers, transit countries and energy consumers.

As you know, this formula for ensuring energy security was first approved at the G8 summit in St Petersburg. We are strictly committed to applying this formula in implementing our future energy policy. Another of the main principles underpinning energy cooperation is that of transparent and fair business relations. I stress that long-term relations is also one of the fundamental principles of energy cooperation. We view this as an additional incentive for developing ties in other areas too, above all in investment. Based on these clear and straightforward positions we are ready to develop our cooperation with the Balkan countries in the energy sector.

The oil and gas sector is one of the main areas of cooperation. Russian companies are already involved in a number of major projects in the region, in particular projects to increase transport capacity from the Black Sea to the Mediterranean. Russia, Greece and Bulgaria signed an intergovernmental agreement on building and operating the Burgas-Alexandropoulis oil pipeline in March 2007 in Athens. This pipeline will be able to transport 35 million tons, and this capacity can be expanded to 50 million tons. I want to emphasise that this project will use the very latest technology and will conform fully to all the demands set by environmental protection organisations.

Gazprom, of course, is the company that has taken the lead in cooperation with the Balkan countries. Gazprom not only supplies gas to the region but is also involved in work to improve the energy infrastructure. In Greece, for example, six gas pipelines with outlets and the Florina electricity generating station have been brought on line.

The memorandum of understanding between Gazprom and the Serbian Government on building a gas pipeline across Serbian territory, signed last December, is an important step in strengthening the system for reliable energy supplies to the Balkans. Similar work is currently in a preliminary phase with other partners in the region, including Hungary. We are looking at options for future cooperation and for the most suitable and effective transport routes.

Russia is interested in continuing talks on gas sales and in making use of the region’s transport possibilities. Russia is also interested in building underground gas reservoirs in a number of Balkan countries, which will not only improve the region’s energy supply situation but will also make it more attractive and important in terms of resolving Europe’s energy issues as a whole. Also of interest is the project to develop the gas network in Macedonia and expand the gas pipeline network into Albania, southern Serbia and Kosovo.

As you know, Gazprom and Italian company ENI signed a memorandum yesterday on the possibility of laying a new gas pipeline system across the Black Sea. We have held preliminary talks and consultations with our Bulgarian colleagues. I hope that we will continue this discussion today at the meeting with Mr Prvanov.

This is a promising project that would unquestionably help improve the energy supply situation in Europe overall, and we are very pleased that this project has the backing not only of the Italian and Russian governments but also of the European Commission.

Other Russian companies, LUKOIL, for example, are working actively in Bulgaria, Macedonia, Romania and Serbia. LUKOIL alone has already invested $1.5 billion in the region and it intends to continue developing this mutually beneficial partnership.

We also have a good outlook for cooperation in the nuclear energy sector. Last year, Russia’s Atomstroiexport won a tender to build a nuclear power plant in Bulgaria. We hope that the contract will be signed this year.

This Russian project is also interesting in terms of developing technology cooperation between Russia and Europe. Our German partners, Areva and Siemens, will supply a large amount of equipment directly involved in ensuring safety and enhancing the plant’s technical and economic performance.

The electricity sector is another area in which we can develop our cooperation. Russia has traditionally been a reliable partner for southeast Europe in this sector. One of the most important projects in this area is the synchronisation of the energy systems in western, central and southern Europe with the energy systems of the CIS and the Baltic countries. This project’s implementation will enable us to create an electricity chain forming a ring around the entire Black Sea region and uniting all the European countries located in the region. Furthermore, this will help to put in place the main parameters for a common energy market.

I stress that our energy companies are ready to discuss in substance the question of taking part in privatising and modernising generation capacity in the countries of the region. There is particular interest in building heating and electricity stations in Macedonia and modernising electricity stations in Bosnia and Herzegovina.

Russia’s Siloviye Mashiny is one company that has deservedly established a reputation for itself as a reliable partner in the region and has long been cooperating with countries in the region, supplying turbines and generators for energy facilities.

It is pleasing to see that today our partnership has become a two-way street. Croatian company Konchar, for example, has been working successfully on the Russian market for a long time now, supplying equipment for electricity production, transmission and distribution.

I think that we could achieve significant results by combining our efforts in work to reconstruct energy facilities built in earlier years with Soviet assistance. Of course, we intend to take part in tenders under equal conditions with other competitors.

Russia is also ready to discuss the question of helping to create regional energy transit hubs. You can rest assured that Russian companies will maintain the most stringent environmental standards in any work undertaken as part of joint energy projects in the Balkans.

I would like to draw your attention to the fact that our companies are working in the energy sector, in particular in production, in another part of the world, the Caspian, not so far from here, and are competing against the world’s leading energy companies. And our environmental standards are higher than those our partners from other countries follow in their oil and gas production operations.

It is our conviction that the way to strengthen our cooperation in the energy sector is to strengthen our trust in each other. This requires transparency, the supremacy of the law, complete absence of discrimination, open markets, and of course, readiness to stand up for our national interests.

Colleagues,

Russia’s economy is developing so fast now that we are able to address far-reaching social and infrastructure issues.

The international economic forum that took place recently in St Petersburg, and which was attended by delegates from more than 60 countries, analysed in detail the current situation and development outlook for the Russian economy and assessed its prospects very positively.

The Russian economy is growing at a rate of 6.9 percent a year on average, and it increased by 7.7 percent over the first four months of this year. The energy sector accounts for only 1.6 percent of this growth. The service sector, construction, machine-building and the chemicals industry account for the rest.

These facts convincingly demonstrate our consistent and steady progress, and I think that this is just the beginning. Our country has a highly optimistic development outlook and I am convinced that constructive cooperation with your region and with Europe as a whole will only multiply our future achievements.

In short, we are interested in mutually beneficial, open and good-neighbourly cooperation. We hope that we will be able to, whether in multilateral format as at this summit, or in bilateral format, hold productive discussions on all the items on the agenda and on the real mechanisms for carrying out our cooperation in the energy sector in general.

Thank you for your attention.