Zee Beam News

12.09.2006 The Financial Times by Stefan Wagstyl - Vladimir Putin met foreign academics and journalists at his countryside residence at Novo Ogarevo on Sept. 9 to discuss Russia’s domestic and foreign policy, energy and economy issues. The transcript of that conversation first appeared on The Financial Times website, and was published on the official website of the Russian president.
Vladimir Putin started with some opening remarks about energy. "Oil and gas energy has always been very sensitive elements of world politics and today this is true as never before. (There are) problems in the Middle East and Iran and this aggravates energy problems around the world. The world is interested in the stability of Russian supplies and in Russia remaining a stable partner for her counterparts. Still we have much in common and a lot of common interests and I propose what should unite us should be to work for cohesion and making the world more reliable and more predictable..."

FT: The oil age may end much sooner than oil runs out because of technological change. How will Russia adjust and develop other sectors?
"We are working in this area. The academy of sciences and business are working on renewable energy sources and hydro-electric energy... We are working on the basis that Russia not only today but in the medium term will play a significant role in world energy.
France has 80 per cent of its energy from nuclear sources. It is 16 per cent with us. We have started and are putting together a programme to build up nuclear energy until we will reach 20 to 25 per cent of nuclear energy in the total energy supplies of our economy.
Solar energy will be more effective in other (warmer) countries. Hydro-energy will be developed. Actually our hydro energy potential is great.
Our assessments (of our potential) are a little less than for China but we will be in second place and we intend to develop the hydro sector.
But we will use the present situation in the market (for oil and gas) it is favourable to develop our renewable energy sources."

Is Russia an energy superpower?
"I would prefer to abandon the terminology of the past. Superpower is something which we used during the cold war time. Why use it now?... We have tremendous potential in the energy sector and not everybody appreciates the potential of this energy. What is at issue now is how to make use of this tremendous potential.
It would be highly appropriate for Russia not just to produce and sell but to use this favorable factor in the economy — not only to solve some problems but to develop high technologies. We should not just consume hydro-carbon-fuel but use it to develop nuclear energy, hydro power and renewable energy sources. This is what we are going to do.
I have never stated Russia is an energy superpower but we have more reserves than almost anybody else. We have always behaved and we will continue to behave in a responsible way. We intend to participate in the elaboration of common rules in the energy sector and to abide by rules which are developed together. But these should be fair rules that include the production of energy, the transport of energy and the consumption of energy.
"(The G8) agreed that security should not be just for consumers but also for producers." Putin complained about long term take or pay gas contract where he said consumers had broken agreements. "Our security is hurt by this."
[Putin referred to the European energy charter which Russia is under pressure from the EU to implement and open its gas pipelines to private companies. He said Russia had analyzed the proposal and had found "extreme profits will go to intermediaries between producers and consumers". "It will not bring down prices. Prices will continue at current levels or grow. This (ie cooperation in energy) should be equal cooperation. If they want something from us, if we allow them in what will be the benefit for us. They said they will remove some (barriers) but there is no gas production in Europe and no gas pipelines in Europe. So let’s have something equivalent in western Europe and discuss how we will be let in."
Putin complained that although Cocom lists have been cancelled the US state department still maintained high-technology export controls.)
Putin also complained the European Energy Charter did not create an open market in nuclear fuel. "In the nuclear fuel market we should be put on to an equal basis." France was free to supply nuclear fuel, he said. "We hear no hue and cry over this but...this (Russia’s position on the charter) is presented as Russia’s refusal to ratify. ..First do what you agreed to do."
"What we want is to achieve equal relations. We don’t want superpower status. We believe this status is deliberately fostered within the EU in order to remind (people) that Russia (used to be) the evil Soviet Union."]

How do you see relations with Asia developing over the next 10 years or so?
"Economic activity is moving from the Atlantic ocean to the Pacific ocean.....Russia has a certain natural advantage because it also borders the pacific ocean....we are talking with our neighbors and partners.
We would like to settle all our outstanding disputed issues with Japan, including the territorial issue on acceptable conditions for Russia and Japan.....the search for the solution will not be easy or fast but it will be possible.
As for China, we have reached a level of relations we never had before.....I believe in our entire history relations are at their best...(The conditions exist) for maintaining the best possible relations for a long time." Putin talked of common economic and political interests including in manufacturing, military equipment, technology and energy.
".....As for energy, today only 3 per cent of our exports are accounted for by Asian countries. But in 10-15 years from now that region will account for 30 per cent of our exports in the oil and gas portfolio. We intend the construction of two gas pipelines from west and east Siberia and we intend to go forward with these projects.....experts are working on possible routes for west and east Siberian pipelines. I believe we have very good prospects and it is quite doable.
(As for oil), we have started the construction of a pipeline with an (annual) capacity of 50-80 million tons. About 250 kilometers has been already built in a year. I am sure we will (soon) bypass Lake Baikal..."
Putin said the pipeline would be built to Skovorodino about 100-150km from the Chinese border. Russia would discuss with Japan how to transport oil from Skovorodino to the pacific coast — initially by rail and later, in the second stage of the project, by pipeline. "We are working on how to do it because we want the second stage to be as economically viable as the first stage. We need to do more (oil) exploration work in east Siberia.

How do you intend and to manage and use the large budget surpluses you are accumulating?
"The present and future of our economic policy and our personal priorities boil down to the fact that the (increases in) expenditure levels should not exceed the percentage growth in the economy and should be closely linked to the efficiency of our country. We are very aware of the fact that there should be a healthy developing economy in this country."
Putin said "additional funds" drawn from reserves accumulated in the stabilization fund and in the government budget were available but he expressed concern about the possible impact on inflation which had to be reduced to "acceptable" rates. He forecast inflation would be 9 per cent this year and hoped that in the next few years it would drop to 4-5-6 per cent. Spending on health care, welfare and education would increase — not in the manner of a petrodollar economy but in line with economic growth.
Putin said the government had grouped spending into special projects, including health care, education, welfare and infrastructure. Agriculture was also on the list because agriculture meant not only food production but the livelihoods of about 40m people.
However, Russia in contrast to some European states, Russia would not subsidize exports or close its markets to for agricultural products. "We will do what is in the interests of our own consumers. We will use customs regulations but we are not intending to close down our markets and shut down our economy because it would be immoral and detrimental to the consumers our country."
Putin said he also wanted to diversify the Russian economy by promoting high technology and other sectors through the creation of high technology zones and through tax policy. "We have been gradually shifting the burden of taxation to the energy sector so we can release high technology from very excessive taxation."

The Shanghai Cooperation Organization (SCO)...
Putin said he was surprised by the scale of the SCO’s development. Russia had not planned for it to have a wide role but to limit itself to less significant issues such as border controls between China and the states of the former Soviet Union. "A historic event" was the signing of a border treaty with China two years ago — achieved after 40 years of negotiations. The SCO developed a central role in the settlement of border issues.
"The organization (then) started to develop and spread out. I am aware of the fact that in the depths of the special services perhaps people will think that Russia and China have some clandestine motives. Are they cooking something up there?" But Putin denied this, saying that countries created the organization to cooperate with each other. "After the bipolar world collapsed there was a demand for other centers of power. We understand this great principle but we are not planning anything like that. The SCO has a good future. We are not going to turn this organization into military-political bloc...."

What is Russia’s position in the crisis over Iran?
"Russia is opposed to the proliferation of mass destruction weapons including nuclear weapons and in this context we call upon our Iranian friends to abandon the uranium enrichment program. The Iran problem is only part of the problem of threshold countries — countries which would like to develop nuclear energy for civilian programs.
Russia has several concerns.
First, the enrichment of uranium for the level needed for the nuclear energy sector...is very difficult to control. If a country does any enrichment it is very difficult to verify whether the threshold has been crossed between energy and weapons programs and spent fuel is a problem because it can be used to produce weapons grade uranium. Therefore we propose the creation of international centers for spent fuel so counties can develop nuclear energy without their own fuel cycles.
(As for Iran), yes, indeed, they do have the right to state of the art technology. Why not in nuclear energy?" Putin argues that Iran was a special case among countries developing nuclear power such as Brazil and South Africa. "We should recognize that neither Brazil nor South Africa have established in their constitution that some other state should be destroyed....This is not to the benefit of world security...Iran is in a very dangerous area, the Middle East area. That’s why we ask the Iranians to consider some alternatives.
As regards (United Nations) sanctions, I think we should together with our partners in the Group of Six think together and conduct additional consultations with the Iranian state and only afterwards think about proceeding to a sanctions regime."

How will Russia respond to its population decline and the issues raised by immigration?
Putin said, firstly, that Russia was taking steps to try to increase the birth rate by improving medical centers for women, increasing social benefits for mothers and children and for those who adopt children. Russia had to create conditions for women to return to work more easily after child birth and to invest in housing.
Next, the government was committed to reducing the death rate by cutting the deaths of those people, men especially, who died prematurely through alcoholism or accidents at work.
Thirdly, immigration was nothing new for Russia. The problems caused were less acute than in the west because Russia was a multi-ethnic and multi-religious country. Immigrants from the states of the former Soviet Union (who dominate Russia’s inflows) were not foreign to Russia and spoke Russian, said Mr Putin.
"Many immigrants come to western countries and there are arguments. In our case people have not yet arrived and they are already assimilated... Of course we should take care of the interests of the indigenous people and we do."

Does Russia prefer a strong or a weak European Union? What is its stance on Kosovo and on regions with frozen conflicts?
"we are interested in Europe being a strong state...It’s not easy for us to maintain dialogue with the EU if there are no clear cut structures or if Europe is in a transition or transformation phase when every few months a president or chairman is changed...We are not going to manipulate or engage in some manipulations inside the EU. And what’s more if the European states speak with a single voice in my opinion it will create favourable conditions for the development of international relations..."
(As for frozen conflicts,) we are ready to work with all our international partners and the EU as a whole in dealing with problems whenever and wherever they exist. This includes Abkhazia, South Ossetia, Nagorno Karabakh and Transdnistra.....
... As far as Kosovo is concerned we have (UN) Resolution 1244 and we cannot manipulate or ignore the Security Council decisions. Also our actions in this respect should be coordinated certainly and care should be taken of all interests in the process. One can`t apply one rule to Kosovo and other rules to other situations. In what way is the Kosovo situation different from the Abkhazia situation or the South Ossetia situation. In nothing. They are no different. If we start to manipulate the situation we will find problems. People will feel disappointed and disillusioned."
In Kosovo, we have to think about what’s going to happen in future if Kosovo`s independence is recognized.....We heard it said things would be alright in Iraq but in Iraqi Kurdistan only the Kurdish flag is raised."

Is it right for senior Kremlin officials to assume jobs at the head of large state corporations such as Igor Sechin at Rosneft?
"We are talking about a general practice and not about the presidential administration. It applies to the government as well. It’s not that people are working in the Kremlin and in private companies. They don’t work in the companies, they only represent the interests of the state in a company where there is a state-owned share." Putin said this had no bearing on how these officials dealt with other companies. In future independent lawyers could represent the interests of the state. "But at this stage it isn’t realistic because these lawyers would immediately start taking care of their own interests..."

What of Russia and Germany and the issues raised by other EU states about the planned Baltic gas pipeline?
Putin said there was political and economic competition among EU states. "Several of our partners believe that developing (bilateral) ties including energy ties are not in their interests and they`re trying to interfere with that just like they interfered in the pipeline between Russia and Germany. Nothing has changed in that (behavior)...This is the only explanation of the very confused problem of the Northern Gas Pipeline. It does not damage anybody’s interests. It does not harm anyone. It does not take anything away from anyone. The $60bn worth of gas which are been contracted will go through the new route. We are not taking any (gas) pressure from pipelines going through Poland and Ukraine. They are still there. (Their) experts understand it very well. They simply pretend they don’t know it.
What I am very much surprised is that there are some political fears in Germany. That they don’t understand (these issues)...This is a very practical connection between the Russian and European gas systems, made without damaging any interests. The struggle against this project can only be political.
"It seems serious people do understand this and the (German) government takes a very pragmatic stand in the interests of their country...."
Putin expressed satisfaction with plans for Russian pipeline investments in Hungary Bulgaria and Greece and said he was not concerned about western plans for the Nabucco pipeline which could link central Europe, Turkey and the Caspian.
"I said we intend to increase oil and gas exports to Asian countries (to 30 per cent of the total). We will certainly do it but there’s a lot of political involved."
Putin referred to Ukraine saying that Russia had to consider the $5bn a year it has lost annually over 15 years in supplying cheap gas to Kiev. But — "Thank God" - there was finally an agreement earlier this year to raise prices.
"Our European and American partners decided to support the Orange Revolution...It’s is kind of shocking, problematic...If you started it, then go ahead and pay (ie subsidies to Kiev). You want the long term political benefits but you want us to pay. (If) you don’t want to pay, take a realistic look at the situation."
Putin argued that Europe would suffer economically if its metal industries paid $250 per thousand cubic meters for gas while Ukrainian competitors paid $50. "It’s a political decision by our western European and American partners. It`s a mistake and a bad approach.
"But despite all the problems we have achieved (in Ukraine) benefits for all European partners." Putin said the negotiations over the gas contract with Ukraine had been difficult but Russia had succeeded in reaching separate agreements for transit to gas to Europe and the supply to Ukraine. "The five-year transit contract which governs the energy supply to Europe, this is a huge step towards energy security in Europe. Great credit should be paid to President Yushchenko. He is a serious and responsible politician who does not go for expediency and who is a serious player in this market and makes Ukraine a respected country...."

What are you three biggest achievements and what advice to you give to your successor?
Putin said his achievements were to enhance the standing of the Russian state, boost the economy and repay foreign debt, and restore the international status of Russia. For the future more had to be done to improve the lot of the poor, to fight corruption, to deal with the population decline, encourage local self-government and diversify the economy.
Putin returned to the question of Kosovo. "I don’t know whether we will make the timing the resolution (which the US has suggested could happen this year) or what it will look like. But we will seek to use the rules of international relations so that they can be applied to all regions of the world. We will be guided by the interests of the participants in international relations in Europe including Serbia. And if the solution would not acceptable to us we will not hold back from using our right of veto."

What do you understand by the term sovereign democracy and what do you think of the debate in Russia about this concept?
Putin said that sovereignty had to do with a country’s capacity to conduct its affairs without interference from abroad, while democracy had to do with a country’s domestic political context.
So these were two different things. But, at the same time, the world was becoming more globalised. Countries which had made economic progress and which could manipulate global mass media could project their influence through the media across national borders. "Of course there are still different nations but the global world in which we live creates a platform for such discussions. I don`t think it`s harmful if people argue about this."

Is religion important in stabilizing Russia?
"Russia has always been a very religious country." Putin recalled how his own family came from a village 130 kilometers from Moscow, where his family could use church records to trace its history back to the seventeenth century. "I had never thought how stable society was. For 300 years the family lived in the same village and went to the same church."
The Communist revolution changed every thing and created a spiritual vacuum. "Major harm has been done by the state to religions — to Jews, to the Orthodox and to Muslims — and this harm has not yet been compensated. "I think the state should support the church but at the same time we are a secular state...."

Why is it that Russian policy is positive towards the US but there is a lot of anti-American sentiment in the media, including in the state-controlled media?
Putin said the programs reflected Russian life and Russian society while foreign policy pursued pragmatically. "There is a certain dichotomy between the sentiments of the public and their perceptions — and our real policy."
Putin complained that sometimes it was difficult to work with the US on issues. "We are not going to work against American interests but we are to uphold our interests taking account the interests of our partners. This works well only if our interests are taken into account (by others).
"We have very good relations with president Bush. We want to enhance our relations with the US." Putin complained that while other countries were able to set up lobby groups in Washington, the state department was not allowing Russia to do so, and would not explain why not. "This is a critical issue. It is the presumption of guilt which was applied to the Soviet Union and now it’s mechanically transferred to Russia..."

Are you strengthening further central control over the region and do you still rule out standing for a third term in 2008?
"Public opinion is that an overwhelming majority would like stability without any change (in the leadership). But I don’t think stability can be assured by one man alone but by the overall state of society and this depends on the constitution to a large degree.. I say everybody should be equal before the law. I have no right to have any exceptions made for myself. This would be destabilizing."
As far as centralization of power is concerned, Putin said he thought he had done the right thing in assuming the power to nominate regional governors and take the power to do so away from the local populations. This was necessary in a country without effective parties, where local clans bound together by economic interests could take power. In any case, regional parliaments retained the right to reject the Kremlin’s nominations.
Meanwhile, the Kremlin was encouraging the development of municipal government which had "never before happened in the past." This is a very significant step which has not been finalized yet. The notorious vertical power is not just a construction but it’s a redistribution of authority and power. It’s a search for the best possible organization of the state so that each level of the state is most effective. Not everything has been optimal but we are searching for effective solutions.