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President of Russia Dmitry Medvedev: Ladies and gentlemen,

Our talks with the Federal Chancellor have just finished and I would like to express my appreciation and thanks to Ms Angela Merkel for the warm welcome, and to salute all our German colleagues.

It is no accident that Germany is the first western country that I visited as head of state and only appropriate that Ms Merkel was the first foreign leader with whom I met just a few days after my election as President.

I see this as a sign of the auspicious prospects for development in Russian-German relations, prospects involving a spirit of partnership and respectful and mutually beneficial cooperation.

We discussed a variety of subjects, including international topics and of course our bilateral contacts.

We discussed in detail the possibilities of expanding Russian-German cooperation in European and international politics. We share a number of views in this area.

We are grateful to our German partners for their constructive approach in relation to the agreement between Russia and the EU and the prospects for the development of our relations.

That said, I must say that we are concerned about the trend towards a divergence in so far as European Atlantic policy is concerned, and of course the challenges that we have already discussed remain: these are pan-European security issues including plans to deploy a missile defence system, as well as issues associated with the Treaty on Conventional Armed Forces in Europe and NATO enlargement. All these topics we discussed in a totally open way; that is probably the most important thing, and it reflects the current level of cooperation between Russia and Germany. Such attitudes are a sign of the potential for Russian-European cooperation in the future.

We talked about various hot spots around the world and of the ways that we might resolve the current crises there.

Dear colleagues, it is clear that Germany is one of Russia’s leading trading partners and therefore a key theme was trade and economic issues, issues of bilateral business cooperation.

In recent years, trade has grown very significantly: it now exceeds 50 billion dollars and of course we do not want to stop there. I am sure that there are many ways in which trade and economic cooperation can be expanded. Just now Ms Federal Chancellor has given an example of how we could operate in various areas, and there will soon be a number of new agreements and new opportunities.

There is a need to develop mutual investments. The current number is significant, but I believe there are areas in which investment can be expanded, especially in high-tech areas, those areas which are now the engine that drives our economies.

A very important part of our collaboration, something very important for our cooperation, is the North Stream project. We really see it as a global project on a European scale, and this project is also designed to provide a reliable energy supply and energy security for every state on the European continent. We talked about this today and also about South Stream, another project that is also well underway. The main thing is that these two important business projects should develop simultaneously.

Then there is the question of raising the level of scientific, technological and industrial cooperation. Obviously we want to work on this as well.

We have yet another large project, namely cooperation at the level of small and medium business, because a nation’s life consists of more than large companies, energy companies and high-tech business: a significant part of every country’s life involves small and medium businesses. And this is also an important issue for our cooperation, and we can move forward in the development of health care, affordable housing, agriculture, transport infrastructure and public utilities — all the things that concern our citizens.

Cultural cooperation was also an important theme. In the coming years I am confident that these sorts of projects will be developed. Not long ago, it was decided that we should jointly sponsor an international music festival, Schleswig-Holstein 2008. This will be the first time that Russia participates in it as a major partner. I hope to discuss this issue with Mr Federal President in the near future. This is also a very promising and important area of cooperation.

We agreed to hold the 10th annual round of interstate consultations this autumn in St Petersburg. I believe this will be the most important event of the year for Russian-German cooperation. We discussed what we will concentrate on all the working areas that exist. We will create a new group that will focus on development cooperation. All these issues received our close attention.

Ladies and gentlemen, I would again like to thank Ms Federal Chancellor for her committed approach and very serious engagement with all the issues that we discussed.

And perhaps most importantly today's meeting confirmed the continuity of relations between our nations and the continuity of the high level of these relations, relations that are strategic in nature and oriented towards the future.

Thank you.

Question: The Russian President mentioned the North Stream project. In this regard, I have a question for both leaders. At one time this project was slated for 2010. But we know that there have been some delays in the authorisation procedures. Have these delays been resolved, and what do both sides propose to do concerning the previously stipulated time frame?

And a separate question for the Russian President: as you know, your predecessor, Vladimir Putin, was a Germanist. He had a special relationship with Germany and it always enjoyed a primary, privileged role in Russian foreign policy. You are not a Germanist and devoted yourself to China when you were in the government cabinet. For you, will China be taking Germany's place?

Dmitry Medvedev: Life is a complicated business. Moving ahead with projects that in my opinion are obviously mutually beneficial often gives rise to certain fears and certain prejudices. But there is nothing to be concerned about here. If a project is good — and I am absolutely confident that the North Stream project is both necessary and good for Europe – it will find its own way forward. And in this sense I am confident that the work being done on the German side and the Russian side will dispel any doubts that exist today among some European nations.

What should be inferred from what we are currently doing? It is clear that without additional sources of energy, without additional routes, development in Europe will not progress as fast as we would all like. The more clearly this situation is understood, the sooner we can take the necessary steps.

I think that we can do it, and these projects will in effect be implemented in the time frame that we agreed to at the outset. Simply because Europe needs them: North Stream and South Stream are economically beneficial, and they contribute to the energy security of the entire European continent.

Regarding the second part of the question addressed to me, I am indeed not a Germanist, but neither am I a Sinologist. But the issue is not what countries the President has visited but what kind of attention does he give to this or that area of cooperation, this or that nation.

There is no need to get involved in numerology. My first visit was to Asia, where I met with our partners in Kazakhstan and China. Today marks my first visit to western Europe and in itself this visit says something about how we see our priorities. For us, Germany is a crucial strategic partner with whom we have a very high level of trade and economic cooperation and very good level of political contacts. I am sure that this will continue, regardless of who governs our nations.

Question: About the prospects of cooperation between Russia and the European Union.

Dmitry Medvedev: I think that for Russia the European track, the European direction of cooperation, is extremely important. And today Europe is the Russian Federation's biggest trading partner. We will continue to develop these contacts. As for actual contractual agreements, of course they must be sufficient, modern, and responsive to the realities of today. The fact that these legal issues were in something of deep freeze in recent times is perhaps not such a good thing. But we have moved on and in the near future, I hope that [at the Russia-EU summit] in Khanty-Mansiisk [on 26–27 June] we can arrive at a final partnership agreement. This is a good sign. I hope that we can move forward these contacts after establishing a new, full-fledged agreement.

As far as our demands are concerned, we have a set of relationships, a set of contacts with our European partners that are not limited to any demands. We are talking about mutually beneficial cooperation between equals, in an area that has received the closest possible attention from the leaders of the European states and that will benefit citizens who live in our countries. This is probably the most important thing.

These contacts can be worked out in different ways: there is a veritable palette of possibilities concerning trade relations, cultural ties and cultural cooperation. Therefore, the greater the number of such contacts, the better. In my opinion what is most important is joint investment in major projects, because nothing brings people closer together than joint business ventures. And the more reasons we have for creating joint enterprises, the closer our peoples will become and the easier it will be to create modern economic cooperation.

In this sense, I believe the investment component requires additional development. I am thinking of investment by our German partners in the Russian Federation, which is already quite large in scope, and investment by Russian business in the German economy and in the EU as a whole. This is a very important area of cooperation, and we must never lose sight of it.

I believe that now such cooperation will be strengthened, especially if we can work out a new agreement, which I hope will happen soon.

Question: As you know, in Europe and particularly in Germany, it has been suggested that the four major power companies be divided into generating, producing and distribution sections. From this standpoint, since a Russian energy company like Gazprom is one of the major investors in Europe — in particular in its distribution networks – how would this affect the level of Russian investment in distribution networks, which would effectively become public and thus be closed to Russian investment? ..

Dmitry Medvedev: In my opinion, any economic directives, including directives of the government, must meet at least one criterion. They must be reasonable, they should not be detrimental to the investment situation, and perhaps most importantly they should not result in reducing the standard of living, when the implementation of the directive affects the pocketbook of the ordinary citizen.

In this case, directives designed to increase competition are useful and promote major economic projects. If these directives do not meet these guidelines, then of course you can expect very different consequences from them.

QUESTION on the development of legal and judicial systems in Russia.

Dmitry Medvedev: Let me begin with the development of the legal system, the judicial system, which is a key priority for the development of our country, and I am determined to work in this direction. Our legal system is in a state of development: it has improved, and will continue to do so for a long time to come, until we are satisfied that it complies with our idea of the best legal and judicial system for a state such as Russia.

In this regard, I would like to say that all procedures, including executive and criminal procedures that exist in our country, must be based on Russian law, and issues of enforcement or issues of pardon should not be subject to interstate negotiations. It is a matter of national sovereignty

As for the procedures themselves, they do exist and should be observed in strict accordance with our rules. There is a procedure for pardoning someone, to which any citizen convicted of a crime (including Khodorkovsky) can resort, as well as other procedures that exist in regard to criminal law enforcement. But such issues cannot be resolved in discussions at the intergovernmental level or by decisions taken by politicians.

In our history there have been episodes when this kind of decisions were made by the Politburo of the Central Committee of the CPSU [Communist Party of the Soviet Union] and other structures of a supranational nature. How we live now differs from how we lived then in precisely this sense: such procedures must comply with the state regulations. The courts are responsible for these procedures, and in some cases the head of state. In these conditions it is possible to consider any appeals by any person.

Regarding the topic of human rights and improving our judicial and legal systems, of course this is a very important area as I have already indicated. We have devoted ourselves to this and will continue to do so. Not long ago I signed several decrees concerning the formation of various working groups that will concentrate on improving legislation in the judicial system and will work on improving legislation to counter corruption. This is important for changing life in Russia for the better and on these issues we will be making some very serious proposals. I hope that we can complete this work in the coming months.

But this does not mean that problems such as a modern judicial system, a modern party system or the development of the foundations of a parliamentary system can be resolved by presidential decrees. This is a lengthy process, which in any state takes years. In this sense we have already done serious work in recent years, during the period that Russia has existed as an independent state. We have been especially active in this work during the last eight years. We do not intend to rest on our laurels and, since these are state priorities, I will deal with them personally.