September 14, 2007,

Sochi

Meeting with Members of the Valdai International Discussion Club

PRESIDENT VLADIMIR PUTIN: Good morning, ladies and gentlemen!

This is our fourth meeting, and I think it has turned out to be very good practical experience for you in getting to know Russia, although you know it well already. All the same, organizing events of this kind cannot help but be useful.

In recent years, I have once again become convinced that the media in Europe and North America are very disciplined. I donít see the published results of our encounters but Iím sure that your knowledge of Russia helps you personally understand our country better. And since you are Russian specialists in any case, I think these encounters must be useful. We shall be glad if you can transmit your knowledge and understanding of Russia to your spectators and readers, in order to rid them of stereotypical notions that are still very strong among your fellow citizens, among people in the west. We, here in Russia, feel it. Of course escaping these false impressions from the past takes a lot of time. But this exchange, which is now in its fourth year, can only benefit us all.

This year you dealt with the problem of religious relations in Russia. This is one of Russiaís most important problems. It has always been a problem, and hasnít disappeared in the course of decades and even centuries. Russia is an interdenominational country. And its economic, social and political well-being depend to a large extent on how we organise relations between different religious groups.

Moreover, Russia has been an interdenominational country from the dawn of its existence. And, if you think about it, here the Orthodox church, Russian Islam, and even Judaism have many things in common. For centuries, they have co-existed in harmony and developed by cooperating with each other. Not only can interdenominational cooperation, the best solution for these problems, benefit us, but it can serve to make the country stronger and more stable. And if things go wrong, all this can take on inimical and perverse forms and have unpleasant consequences. For centuries, Russia has managed to cope with these challenges. Today, we have created a reasonably comfortable working relationship among faiths. I have reason to believe that this will continue in the future.

Naturally you have been interested in issues related to the upcoming political events in our country: the elections to the State Duma and the election of the President of Russia in March 2008. I know that you met to discuss all of these issues in Russiaís regions and in Moscow. Today we are fortunate to be able to discuss these things together. It will give me great pleasure to listen to not only your questions but also your views, opinions and assessments of the current state of Russia. I shall, in turn, permit myself to express my own view of events.

BRIDGET KENDAL (BBC TV correspondent): Vladimir Vladimirovich, I am very pleased to see you here in Sochi!

On behalf of all my colleagues I want to thank you for taking the time to meet with us today, because we are all interested in Russia, and it is very important for us to know your views on various issues.

Let me begin with a question that has been much discussed, by journalists and by all those who follow Russian affairs here and abroad, your appointment of a new prime minister. I would like to ask, why precisely now? Wouldnít it have been more democratic to wait until the Russian citizens of a democratic society had expressed their opinions? To wait until then, rather than appointing someone so early? And why Viktor Zubkov? What were your reasons for choosing him? And could he become a candidate for the presidency, as you did eight years ago? Perhaps the post of Prime Minister makes him well placed to take part in the race, or perhaps, you know that the Prime Minister of Russia is a sign of continuity in the run-up to the election?

VLADIMIR PUTIN: Regarding the appointment of a new prime minister at this time, it has nothing to do with democracy or with anti-democracy. It has nothing to do with the will of the citizens, if that is what is meant by democracy. Democracy is inseparable from the law and respect for the law on the part of all citizens and officials. What I have done to change the government is in complete accord with current legislation. So there has been no contravention of the law.

This decision is in large measure technical. If you remember, prior to the presidential election in 2004 it was exactly the same. I will tell you why: one possible scenario involved no change in the government before the presidential election and his inauguration in May 2008. And I would have liked events to transpire according to precisely this scenario. But, unfortunately, members of the government, like the rest of us, are people. I noticed that they were easing off at work and beginning to think about the shape of their own destiny after the elections. I would have liked the government in Moscow, the regional authorities and federal authorities in the regions of the Russian Federation, to work like a Swiss watch right up to the election and immediately after the election, between March and May 2008. We needed a workable, smooth, well-functioning mechanism, without any disruptions or delays, without any pause or relaxation.

Therefore, I thought it appropriate to do this now, in order to highlight key points for the administration and staff. I did it to show it to the people who are likely to remain in the Government, in the ministries and departments, and to be working after the parliamentary and presidential elections. Provided, of course, that they are aware of their responsibilities, and that they are willing to commit themselves totally to the tasks at hand. And vice versa: for those who are keen to do something else, keen to go to other departments or to take up another line of work outside ministries and departments, it is better to do this now, to make the necessary changes and to create a competent team.

I did not push the Prime Minister into this.  He arrived at the decision himself, because he is a responsible person. He sized up the mood perfectly and, as a matter of fact, he came to me with this proposal. I agreed with him, because I had observed the same thing. You know what weíve done. I accepted his resignation and today appointed Viktor Zubkov. In the State Duma 382 deputies voted for him. That is a lot. Only a splinter group from the CPRF [Communist Party of the Russian Federation] didnít vote for him.

As for the second part of the question: why Viktor Zubkov? This is a man with great professional and life experience. Essentially, heís a true professional, an effective administrator with a nice personality and, on the other hand, a lot of on-the-job experience. You already know his curriculum vitae. He spent more than a decade in agriculture, working his way up from the grass roots. Back in Soviet times, he managed to give a boost to one of the worst collective farms, a state farm that eventually packed it in. He made it the best in the Soviet Union, not for the whole period, but during certain years. He did almost no ideological work  but was always interested in production. He was not just the head of the regional department of the Communist Party in Leningrad but of the sectoral committee for agriculture. This was a production job because the party was in large measure simply a part of the state apparatus. Then he was first deputy chairman of the regional council Ė that was also administrative work. And then he worked in the Mayorís office in St. Petersburg. Then he was Deputy Minister of Taxes and Duties. And here we have a brand new incarnation: he begins to deal with financial affairs, albeit at the level of the entire federation. He became First Deputy Minister of Finance. There is no need to explain to this audience the qualifications of people who have worked in the Ministry of Finance in any country. And his working on Alexei Kudrinís team says a lot; judging by the economic activity, it has been a highly professional team for the past seven years. Viktor Zubkov is a member of this team. And then he was chosen for his personal qualities -- he is an exceptionally decent man Ė to create a new structure, Rosfinmonitoring or, in other words, financial intelligence. And here too he has shown himself in the best possible light. In his department he has at his fingertips a massive amount of financial intelligence. This is, after all, an analytical service that collects information about financial institutions and government organisations, a massive amount of information. Not once, I would like to emphasise, did Viktor Zubkov abuse this trust. Business circles in Russia repeatedly talked about the risks when we decided to create this organisation. People were afraid that, in contemporary Russia, the concentration of confidential information in one agency would adversely affect business. This did not happen. During all his years of work with the office, the agency led by Viktor Zubkov was never implicated in a single case of corruption. At the same time, the service has worked effectively. The information it has collected has led to criminal proceedings against thousands of people, 521 of whom have been found guilty by the courts. That number over that period of time is comparable to the number of persons involved with the justice system  and convicted by courts in the major European countries. In the United States during the same time period twice as many people were convicted, in European countries, an average of 500-plus people.

All of this taken together constituted the basis for the decision. I believe that in this quite critical pre-election period for Russia, we need precisely this sort of person: a superb professional, a decent person, cool-headed and, I would add, wise.

Now, as to whether Viktor Zubkov will be a candidate in the 2008 presidential election. Maybe he will, like any other Russian citizen. Of course he is not an ordinary Russian citizen.  From now on he is not simply the head of Rosfinmonitoring, but the Prime Minister of the Russian Federation. He answered this question when speaking to journalists yesterday or the day before. He explicitly said the following Ė and I think he was right: before taking up a higher position, I have always convinced myself and the people with whom I have been working that I have achieved positive results in the position where I am currently working. And if the results of my work as Prime Minister of Russia satisfy me and satisfy the citizens of this country, I will not rule out the possibility of running for the position of President of Russia in March 2008. He did not say: "I will run." He did not rule out the possibility. I think that was a balanced, dispassionate response.

Indeed, now it is hard to say, he still has to work during a rather difficult pre-election period and get through the period of the elections to the State Duma. Weíll see then. If you recall, a year, a year and a half ago, we were told that the field was empty, that there was no one to choose, that no one knew who would be president. Now they have named at least five people who really have a chance to be elected President of Russia in March 2008. If another viable candidate comes along, that means that the people of Russia can choose from a larger group of candidates. Besides, the outcome of the elections to the State Duma in December of this year will indirectly influence the results of the presidential election one way or another. And these elections will be preceded by a sharp political debate and a partisan struggle. How will it end? Letís wait and see. Then weíll see what happens in March

ARIEL COHEN (Senior Fellow, Heritage Foundation): In recent weeks, the international financial markets have gone through a period of instability. Russian markets are becoming increasingly integrated into international economic processes and what happens in the world increasingly affects them. Foreign investors, portfolio investors came to the Russian market. How do you think what is happening now, how might it affect the Russian financial markets and could it have a bad effect?

V. PUTIN: As you have said -- and I fully agree with you Ė of course the Russian economy is increasingly becoming part of the world economy. And all the positive and negative aspects of this process are now affecting the Russian economy. They are an intrinsic part of the process, and we already have a sense of not only the positive impact of developments in world markets, but also the negative. And when the mortgage market in the United States became unstable, it certainly affected us. We register such impact in the markets the very next day, and those events continue to affect us.

What can we expect from this, and how apprehensive are we? Not particularly, and I will tell you why. Because if we recall the sad events of 1998 and look at what was happening with the Russian economy, what sort of condition it was in, and if we look at the Russian economy today, we realize that it is a completely different economy. Then Russia's economy was weak and highly vulnerable. We had a huge national debt. We were literally addicted to borrowing from the World Bank. We were even more dependent on oil and gas than we are today. We had minimal gold and currency reserves. Even if we had wanted to at that time we could not have pursued the liberal economic policies that we can afford today. And we were very far from being able to say that our national currency was freely convertible, and even further away from actually making it so.

What do we see today? Today, the ratio of Russiaís external debt to our gold reserves is the best in Europe. And the very existence of these reserves, of course, helps guarantee our stability. Since then we have consistently reduced inflation. As you know, it is still fairly high. But if you look at what it was in 1999 and 2000 Ė I donít remember the exact figures Ė it was over 40%. Now, I think itís eight and a bit. That is still high, of course, but itís not 40%. This has enabled us to significantly expand the Russian economy. The country's GDP is growing at an annual rate of 8%. Currently it is already 7.7%. This is also an element of stability. We have moved to full convertibility of the ruble. Successful countries in the economic sense such as, say, China Ė and we congratulate our Chinese friends for that success Ė have enjoyed really astounding success, but they have not yet moved to the free convertibility of their currency. And we have. We have removed all restrictions on the movement of capital. And, furthermore, the Central Bank still had some doubts, they kept some specific instruments for backup, and so on, but after consultation they concluded that these restrictions could be removed ahead of schedule. We did it last year.

As experience has shown, in general all this has had a positive impact on the Russian economy. We just had a huge inflow of capital. Last year it was 41 billion dollars; in the first half of this year, there was 70 billion dollars of net inflow. After the events in the North American market, we saw a small outflow of speculative capital, in the region of nine billion dollars. This is a normal adjustment, thereís nothing unusual about it. Then this outflow stopped, and now capital is flowing in again. In my opinion, all this, in addition to a number of other legislative decisions, has created a very stable environment for the development of the Russian economy. Oil prices are rising. In addition, if we look at the 7.7% growth in GDP, we see that the proportion of processing industries has increased significantly when compared with previous years. And this also shows that we have been able to solve one of the main problems of the Russian economy by making it more diversified. This is also a sign of stability. All this together gives us every reason to believe that, despite the well-known interdependence of events in world markets, we will  succeed in maintaining stability and development.

P. DUTKEVICH: Vladimir Vladimirovich, today Russia has developed the idea of sovereign democracy. This is an interesting concept that is still being explored and has, I think, considerable significance for relations between Russia and other countries.

I would like to ask you what kind of democracy the next President will pursue? 

VLADIMIR PUTIN: I think that sovereign democracy is a debatable term. It creates some kind of confusion. Sovereignty is something that refers to the quality of our relations with the outside world, while democracy refers to our inner state, the inner substance of our society. But in the modern world, and in science, whether in the exact sciences or the humanities, many concepts are on the borderline, as it were, between different fields and areas. Those who say that this term is possible and think we can make use of it also have their logic. For this reason, as you might have noticed, I try not to intervene in this discussion. I donít think this debate does any harm. On the contrary, it is good when people reflect on these things, when they think about how, for example, to ensure our ability to carry out our national projects by building an effective society that is sensitive to what is happening in the world around and provides a comfortable environment for its own citizens. I think that this kind of conceptual search is useful, and so I do not get involved and do not take any clear position, because what I like is the discussion itself.

Frankly speaking, there are not so many countries in the world today that have the good fortune to say they are sovereign. You can count them on your fingers: China, India, Russia and a few other countries. All other countries are to a large extent dependent either on each other or on bloc leaders. This is not a very pleasing situation, but it is my deep conviction that this is the reality today.

I know that, unfortunately, in some Eastern European countries, not just the candidate for the post of defence minister but even candidates for less important posts are discussed with the U.S. ambassador. Is this a good thing? I do not think it is very good for all the countries concerned because sooner or later it will provoke the same rejection that Soviet domination once provoked in these countries. Do you understand? It might seem welcome today, but tomorrow it could lead to problems. Even old Europe is obliged to take NATOís political interests into account in its policies. You know how the decision-making process works. There is probably no need to explain.

Sovereignty is therefore something very precious today, something exclusive, you could even say. Russia cannot exist without defending its sovereignty. Russia will either be independent and sovereign or will most likely not exist at all.

But at the same time, we continue to pursue the goal of creating a more comfortable society for our citizens, a society with prospects for development, a society driven not by unclear and amorphous state interests but by the initiatives of our citizens themselves, a society in which the interests of the individual, the interests of each person, are the cornerstone of state policy.

We will continue to pursue our goal of ensuring that our citizens not only have the opportunity to express their opinions but also that through this expression they can influence state policy. This calls for specific tools, of course, not the citizensí assemblies of medieval Novgorod, for we cannot gather everyone together on Red Square and yell our views, but we will work on creating just such a society where citizens can make themselves heard.  

Of course, we do see attempts to use the lexicon of democracy to influence our domestic and foreign policy. I think that this does damage and that it is not the right course of action. It only undermines trust in the very institutions and principles of democracy. 

But there is nothing we can do about such attempts. We will continue to engage in discussion with our partners and I hope that they will realise that if they want something from Russia they need to get to the heart of the matter, discuss the substance and not try to put pressure on us. Such attempts will get them nowhere. If it is the Kosovo issue we need to resolve then let us talk about Kosovo, and if it is the Iranian nuclear issue we need to address then let us discuss the nuclear issue and not democracy in Russia. Nothing good will come out of these attempts. And if there really is concern about events taking place in Russia then let us discuss these things frankly and directly instead of bringing up other unrelated issues. I think that discussion in itself is useful and interesting.

You asked how democracy is likely to develop under the next President. The country has a number of objectives, one of which is to develop a multiparty system. This is something we need. I think a lot about how life in Russia should develop after 2008 and in the longer term and I see no instrument capable of stabilising the country other than democracy and a multiparty system. We cannot build Russiaís future by tying its many millions of citizens to just one person or group of people. We will not be able to build anything lasting unless we put in place a real and effectively functioning multiparty system and develop a civil society that will protect society and the state from mistakes and wrong actions on the part of those in power. There is no other road we can take and there is no question of inventing some kind of home-grown local-style democracy. But this road is not simple. It takes time and the right groundwork and conditions. We need to ensure that our economic transformations bring about growth of the middle class, which is to a large extent the standard bearer of this ideology. This is something that takes time and cannot be achieved overnight. We need to ensure that people have genuine assets and the possibility of obtaining them through honest means.  

Yesterday and the day before, I visited different regions of our country and spoke with different people. One of the issues I was looking at concerns the Affordable Housing Programme. I met with people who are building houses for themselves - public sector workers and small-scale entrepreneurs. These are decent houses by not just Russian but also American or European standards. They are not palaces of course, such as can be seen on the Rublyovka Highway in Moscow. These are already different people. They have property now, they have borrowed money and they have to pay it back. They are thinking about how to budget their money in order to repay their loans and deal with other tasks too. They are thinking about how to earn more money, how to do it legally, through lawful and honest means. These are not swindlers, not oligarchs, but ordinary people, and it is precisely they who are the middle class.   

Talking with these men and women, I understood that these people will be the bearers of this ideology. They already have an interest in ensuring that the state develops the needed institutions. They have an interest in a stable society based not on the power of a strong hand but on common sense and the law.

T. de MONBRIAL: Mr President,

You are the first leader in Russian history to be very strong and yet be willing to share power and refuse to change the Constitution. This shows you are a democrat. But no matter who becomes the next President, he is going to have to coexist with you to some extent, for you said yourself that you are not about to go into retirement.

My question is: you spoke about a multiparty system (it does not exist yet and will take time to form). Do you think that after stepping down from your current office you will be able to help develop democracy in Russia without weakening the position of your successor? In other words, will the next President not be weak by definition? 

VLADIMIR PUTIN: I have no interest in seeing a weak President of Russia. I do not want this. I want the President to be not just a self-sufficient figure but someone who can effectively carry out his functions and fulfil his obligations to the people. Of course I have the desire to work and I hope that my health will permit me, and this will be a factor the future President will no doubt have to take into account. We will, of course, need to agree about how things will function. But whatever the case, I will do everything possible to ensure his independence and effectiveness. After all, I have spent all these years working to make Russia stronger, and Russia cannot be strong if the Presidentís power is weak. I have no intention of undoing with my own hands everything that has been achieved over these last years.

H. CARRERE DíENCAUSSE: Vladimir Vladimirovich, I would like to come back to the issue of future Russian democracy. We are very pleased to have arrived in Moscow at a time of so many events - the election campaign and the change of government Ė and all of our meetings with politicians and political scientists have been linked to this. We have heard the views of many of them. For a start, they are somewhat surprised by the change of government and say that the parliament has no involvement at all. This is amusing to the French because in France it is always the president who appoints the prime minister. Our last prime minister was not a member of parliament and the parliament did not even know anything about him. In our system such things are perfectly usual.

It was suggested to us that we should show interest not just in the presidential election but also in the parliamentary election because it is the parliamentary election that will show us how and what United Russia is going to decide and who it will help.

I would like to know your view on the most suitable form of democracy, because there are various forms of democracy. Democracy can take the form of a parliamentary republic. The late Anatoly Sobchak dreamed of seeing Russia become a parliamentary republic someday. You can have a presidential republic, as in France, and this is also democracy. With your experience of eight years running this country as president, what form of democracy do you think is most suitable here and how can it be achieved rapidly? 

VLADIMIR PUTIN: In the medium term future, Russia will need strong presidential power. I cannot imagine another system. I already mentioned that we need to strengthen and develop the multiparty system. What kind of parliamentary republic could we have unless we first have normal political parties? It would be chaos. Even countries with a well developed multiparty system sometimes run into problems. Take a European country such as Germany, for example. It was enough for one group to break with the Social Democrats and create their own party and problems soon arose that affected the whole system. Schroeder is a decent person and was willing to cede his place, but if he hadnít been, what would have happened then? Perhaps the country would be in crisis to this day. Look at what is happening in Belgium where they have not been able to form a government for months now. But Russia is an immense country with a vast territory, the biggest country in the world. 

You have just been looking at relations between the different religions. Look at how many different ethnic groups live in Russia, how many people with such varying ways of life! I seem to recall that we spoke last time about what is happening in the Caucasus. Take the Republic of Dagestan, for example. It is home to dozens of different ethnic groups. They all speak different languages and do not understand each other because their native languages have nothing in common with each other. Russian is thus the natural means of communication between all these different groups. There are four main ethnic groups there and it has long been the case that if the president is from one of these groups, the prime minister has to be from another and the speaker of the parliament from another again. To upset this balance would risk setting off an explosion. Russia is a complex country and this is why, especially when we do not yet have a stable and developed multiparty system, the only suitable form of democratic power is strong and democratic presidential power.  

You mentioned Anatoly Sobchak, and I do indeed particularly treasure the time when I worked together with him. This was a very important experience. Back then, at the beginning of the 1990s, power in the city was essentially in the hands of the city assembly. We decided to introduce the principles of parliamentary democracy at city level, after all, we were talking about a city of five million people Ė the population of a European country like Finland. As I said, almost all power was in the hands of the Legislative Assembly and it was decided that the Legislative Assembly would appoint ministers to the city government. The whole thing turned into an endless nightmare. It would take half a year or more to get ministers appointed and the cityís economy was beginning to suffer. Then the deputies themselves began to fear that everything would soon fall apart and people would start taking to the streets, and they decided at that point to elect a mayor Ė and in terms of his functions, the mayor is, at city level, like the president at national level Ė and give him the main powers.  Without a real multiparty system, each deputy is in reality backed by this or that business organisation or this or that political lobby group. Without internal discipline and an ideology binding people together, this all leads to chaos. This is why I think that it would be very dangerous to introduce this form of democracy to Russia in the immediate future, over the next decade. This is not to say that it is not as good a form of democracy. You just said yourself that France, for example, has strong presidential power, and the country works. And France is not the only case. The U.S. Presidentís powers are not so weak, are they? In France, as far as I know, there are not even limits on the number of terms in office as president. We do have such limits. I do not see any problems for the principles of democracy in this respect and I think that presidential power is essential in Russia for the time being.

O. MOSCATELLI: Hello,

I wanted to ask you about the moratorium on the death penalty. You know that in ten days time, I think, the text of a resolution on the death penalty is to be presented, and Europe very much hopes that Russia will sign it.

I would like to know if this is possible, and what do you think of this initiative in general?

VLADIMIR PUTIN: I have already spoken on a number of occasions about my views on the death penalty.

If you want to help the Russian Federation Communist Party in its parliamentary election campaign you are on the right road by asking me such questions, because my view on this issue is not popular among the vast majority of Russians. The vast majority of our citizens want to bring back the death penalty, and our political opponents will speculate on this, of course. And you are helping them by asking me such questions.

First, I think that the death penalty is senseless and counterproductive. History over the centuries, right down to modern civilisation, has proven the senselessness of the death penalty. I will quote an example I have already given in the past. Pickpockets in ancient Rome were sentenced to public execution, and it was precisely during these public executions that the greatest number of pockets were picked because huge crowds gathered to watch the spectacle and the pickpockets had a field day. Tougher penalties, right up to the death penalty, are not in themselves a remedy and are not the most effective instrument in the fight against crime. Lawyers will understand me for they know that the most effective weapon in the fight against crime is the certainty of being punished (this is common knowledge), and not the severity of the punishment. 

Second, it is my conviction that by passing the death sentence on its citizens, even if they are criminals, the state instils cruelty in its citizens and breeds ever new examples of citizens showing cruelty towards each other and towards the state itself. This is also harmful and counterproductive. In order to fight crime effectively we need an effective economic policy, an effective social policy, and competent, modern and civilised prisons and law enforcement agencies. It is harder to achieve all of this than to bring back the death penalty, but we should not take the populist road, and to be honest, there is no need today. Russia feels confident today and has entered a period of economic growth and political stability. 

M. BIGNON: Mr President, could you comment on United Russiaís role in forming Russiaís future, that is, on the issue of who will succeed you as President? Most Western analysts see you and your team as leaders who have mastered the art of financial stability. The country is now entering the stage of industrial development. You have created important instruments for this development: investment funds, venture funds and so on. Where do you plan to get the money for industrial development? How do you plan to use the Stabilisation Fund over the coming years? What share of this fund will be used for financing the countryís development and what share will be invested abroad? Do you plan to invest in foreign shares or in foreign state securities?

VLADIMIR PUTIN: You might have noticed that over these last years we have stuck quite strictly to a very liberal policy aimed at keeping the money supply in check and fighting inflation. The experts probably think that an even more austere financial and economic policy would have been preferable. I think that this is precisely the art of politics Ė to define the limits of what is possible and what is necessary. For quite a long time we limited the use of oil and gas revenues to finance internal development and, under pressure, including from the left-wing opposition, tried to hold back state spending as much as possible. I cannot say that we were entirely successful, but we followed this policy in balanced and consistent fashion and it has achieved its objectives.  

Now that the Russian economy is growing and has reached a growth rate of around 7 percent a year, the experts have concluded that it is now possible to invest some of this money in development, above all in infrastructure development, without much risk for our macroeconomic indicators.

You mentioned that we have created institutions to help develop industry. I think, however, that we should develop the real sector of the economy above all not so much through development institutions as through ensuring the necessary macroeconomic conditions. If we bring down inflation loans will become cheaper, and this is an extremely important factor in economic growth, and not only when it comes to state investment. This would invigorate the entire economy, starting with small businesses and going all the way to the big investment projects the country is carrying out. 

We will therefore continue to pursue a healthy and balanced macroeconomic policy, and I hope that the Zubkov government will continue to work in this direction.

In this context we are also looking at the way many of our partners in the East and West are behaving. We are paying particular attention to what our Chinese partners are doing. They are using very particular methods of reining in inflation, of course, methods that can only be used within a rather strict political system, and are ordering banks from above to limit the amount of money they lend. I will not pass judgement on whether this is good or not, whether this is a market approach or not, but the results are positive and are fully in keeping with the market economy. We see what our colleagues in Europe and North America are doing and we will try to ensure that the main condition for development in our country is not development institutions, no funds and banks, but macroeconomic stability.  

But as I said, our experts Ė not me personally but our experts: financial specialists and economists, young and progressive people Ė have calculated that part of the revenues we have accumulated can be used to fund development institutions without any real risk for our macroeconomic indicators. This is not simply state investment which, as world experience has proven, is not always so efficient; these are state resources that aim to give private investors greater confidence and courage. I hope that this will not be a case simply of state investment but of investment as part of a public-private partnership, and that all of this investment will be packaged in market clothes and will work in a market environment. From an infrastructure point of view, unfortunately, Russia is in a neglected state. Our roads, airports, ports, energy supply systems and so on are all having a considerable slowdown effect on economic growth, unfortunately. The people working in this area all know, and I know too and see it in my work every day that if only we had a railway in such and such a place people would immediately start producing oil, ore, gold and platinum there. But so long as thereís no railway, thereís no production. You see an area with great tourism potential and know that if only there was a road to this place its development would take off that much faster. I know of several projects that have not been completed Ė hotels, swimming pools and so on not built Ė because although the locations are excellent there is no way of getting there. The state thus needs to take on this function. Our countryís business community is not yet able to do everything on its own Ė develop the infrastructure and build all the facilities. I think that public-private partnerships could be just the recipe for achieving our goals. We will channel part of the funds into precisely these objectives. As for the actual share of funds, this will depend on the macroeconomic situation in the country. We will limit the amount of funds if we see that our action is having a detrimental effect on our macroeconomic policy. 

Part of this money, part of the oil and gas resources, will be used to boost the personal old-age pension accounts system. We have decided that for each rouble an individual voluntarily puts towards his future pension, the state will add a rouble in order to encourage people to save for their retirement and to eventually transform the personal retirement savings programme into the main basis of the countryís pension system. We see this as one of the main directions for ensuring higher future pensions in Russia.

Where and how will we invest the money from the Stabilisation Fund? So far we have invested quite cautiously, mostly in securities. We are not planning at this stage to move into more risky investment such as investing in the shares of even stable companies.

In this respect I found the adoption of the law on foreign investment in the United States very strange. I spoke with President Bush about this at the APEC summit. Not only was a law on foreign investment passed but a council on foreign investment was also set up, and this council includes the directors of the CIA and the FBI among its members. I said to him [President Bush] ďYou know, I worked in the KGB in my time and I know well that after working in the intelligence services for a few years some people start looking for spies everywhere, even under the bedĒ. Itís a kind of professional distortion, a shift in consciousness that takes place. The intelligence services already have every opportunity to transmit all the information they see necessary to the leadership, including to the president, and I do not think there is any need to include them in purely economic structures because their only objective is to Ďtake hold and not let anyone iní. They are not the best advisors on economic issues. In any case, what is there to stop them from informing the head of state about this or that problem, including problems of an investment nature? Why the need to include them directly in a body that takes economic decisions? I would not do this and I see no point in it. I think this is not a very positive signal.

Now they are planning on setting up something similar in Western Europe. What can we do in this situation? We will also have to create some kind of new structure. Instead of supporting the ideals of the free market and an open liberal economy we are all moving towards isolationism. Why? If there are fears that Russia will invest its state funds, I can assure you that this is not the case. I am coming to my answer to your question. We do not plan to invest money from our Investment Fund in any foreign enterprises. As for our portfolio investments, our investments in securities, treasury bonds and so on, they only benefit the Western economy and play a stabilising role. We think that this is also Russiaís contribution to ensuring global economic stability. There are absolutely no grounds to the fears that Russia will use centralised funds such as the Stabilisation Fund to try to get entry to the holy of holies of the American or European economies.

D. STEEL: I would like to ask you about Iraq. President Bush has just announced the withdrawal of several thousand servicemen from Iraq by the end of the year. But the Americans will nonetheless continue to maintain quite a large force there. The Democrats in the Senate are talking about a withdrawal from Iraq. Even one of the leading Democrat candidates, Hillary Clinton, has said that American troops will have to remain in Iraq for an as yet undetermined time. There is also the opinion of the Iraqi public, which, according to a recent public opinion survey carried out by ABC, BBC and NHK, is largely in favour of an immediate American withdrawal from Iraq. The Iraqis think this will make the country more stable.

What is your view of the situation? Do you think that a rapid and complete withdrawal of American troops from Iraq will make the region more stable or less stable? Thank you.

VLADIMIR PUTIN: My view is that the U.S. military operation in Iraq did not make its goal to occupy the country. You know that we were always opposed to this operation and believed it to be a mistaken decision. But at the same time, we never believed that the United States pursued the goal of occupying Iraq and gaining some kind of pleasure from this fact. Clearly there are other objectives. To be honest, I do not fully understand them, as official declarations do not make them fully clear. Bringing democracy to the country, letís say, but what kind of democratisation is taking place there? No matter what anyone says, is it really possible to hold real elections in a situation when military operations are taking place?

I remember in the case of Chechnya everyone here probably repeated that same argument that there can be no real elections when military operations are still taking place. But in Afghanistan, it turns out, it is possible. They are still counting the votes there, I think. And in Iraq it is possible. These objectives cannot be achieved with the help of military means. There are obviously some other objectives that remain unknown to me. But whatever the case, America will have to withdraw at some point. The question is when? You asked me whether it should happen soon or whether it would be better to wait. This is not a question for me but a question for the Americans themselves. 

I think that the question is not one of a timetable, not one of how soon a withdrawal will take place, but of putting in place the conditions that will make a withdrawal possible. I agree with President Bush that it will be possible and necessary to withdraw when the Iraqi authorities themselves are able to ensure the countryís security.

Where I disagree with him is that I think it is all the same better to draw up some kind of timetable for withdrawal because until it is clear that American troops will withdraw at such and such a time the Iraqi leadership will not have the inner incentive to take all the necessary steps to organise its own armed forces and security services. What motivation do they have for doing so when American guns are keeping everything propped up? Things are fine for them as they are. But if they know that the Americans will leave by a particular date, they will try harder. I think that this would be a strong incentive for effective action within Iraq itself. The worst case scenario would be for Iraq to split into three parts Ė Kurdish, Sunni and Shiite Ė because this would mean not the end of the Iraqi problem but the start of new problems: Iraqi, Kurdish, Turkish and Iranian problems and problems related to the Arab world when it comes to the Sunnis. It is important therefore to work towards consolidating Iraq and help it become more effective. I would name a date for withdrawal. 

A. RAR: Vladimir Vladimirovich, I will ask my question slowly so as to give you some time to eat too.

VLADIMIR PUTIN: I did not even count on getting to eat, so you neednít worry about me.

A. RAR: First of all, thank you for being so patient and giving us so much of your time for what is now the fourth time. This is a great pleasure for us all. But the Germans are not so popular here these days, isnít that so?

The results of public opinion surveys always put us in second place after Belarus, but now the Chinese have overtaken us. According to a survey conducted by the Levada Centre, China is now in second place and we are in fourth or fifth place. The Estonians are in last place. I think this situation has arisen because Europe (I am expressing my personal views here) has not really accepted you. We remember your speech in the Reichstag. We remember how the Cold War in Berlin ended and we remember the initiatives you proposed and also the last meeting in Lahti, where you justified events in Russia Ė events that are not to the liking, naturally, of everyone in Europe. 

My question is: should Russia in its future relations with Europe build its policy around working with the European Union as a whole, or around establishing economic contacts with individual countries, including with Germany, I hope? Or do you have plans for greater and more substantial integration in Asia? Thank you.

VLADIMIR PUTIN: Russia is a unique country in that part of its territory is in Asia and a large part is in Europe. Christian values form the foundation of Russian culture and in this sense Russia is a European country. But Russia is also home to 15 million Muslims, a large part of our territory is in Asia, and we also have interests in Asia. We share thousands of kilometres of common border with the Peopleís Republic of China. As you know, the Asian markets are developing very fast and efficiently. There is an ever greater concentration of technology there and they are not just producing cheap consumer goods. Of course we will develop our relations with Asia; this is only natural. But we will not neglect our relations with Europe. The European Union is our biggest trade and economic partner. More than half of Russiaís trade is with the European Union. We very much want to work with an independent European Union that will defend its own interests above all through dialogue with us. I recommend thinking about sovereign democracy. It is a concept that could be of interest for the European Union and for individual European countries. 

As for whether we have been accepted or not, this comes back to what I started with, the fact that there are stereotypes from the past that act as a brake. There is a sort of trans-Atlantic solidarity that comes across as somewhat foolish in my view when it starts to dominate in areas concerning purely pragmatic things and projects in which Europe itself has an interest. I did not know about the results of the surveys you mentioned, but I think I do know why this shift in public opinion is taking place in Russia. I think this is because most people in Russia often see now that the position taken by European countries or by the European Union is not sincere. Just take the Northwest Gas Pipeline project, for example. Anyone in Europe should see that this is a market decision, that it benefits all of our consumers, does not harm anyoneís interests and does not take anything away from anyone. Are we taking anything away from anyone? No. Are we hurting anyoneís interests through this decision? No. Are we cutting energy supplies to anyone? No.

We are always being told that supplies need to be diversified and transport routes developed. We are investing billions of dollars in just such diversification and development, and yet we face obstacles on all sides. What is this? This is some kind of political speculation. Of course, after seeing all of this, we began to build a pipeline to the Pacific coast, a huge oil pipeline. Thousands of kilometres have already been laid. Now we are building a gas pipeline. There will be two pipelines.

Everyone keeps talking about Polandís interests, but in what way are we harming Polandís interests? We have built a major gas pipeline system across Poland and pay money for transit. This has given Poland increased importance as a participant in overall European energy policy. But why should all pipeline systems have to cross Poland? We have all said, after all, that we need to diversify risks. Why this situation then? No one can explain this.

As for our relations with our neighbours when it comes to energy prices, I have already said, and no one disputes this, that for 15 years we have been subsidising the former Soviet republics. In the case of Ukraine, for example, this represented from $3 billion to $5 billion every year. Who else is prepared to do this?

If the West wants to support Ďorangeí movements, then let them pay for them. Or do you want to support them but have us pay the bill? Do you think we are idiots or something? This is such an obviously insincere position that any ordinary citizen can see it.

Letís take the question of democracy. I was meeting with my colleagues, with whom I have genuinely good personal relations. At the press conference they said that they support freedom of speech, freedom to hold demonstrations and so on. But two days before, a huge demonstration in Hamburg was broken up, a demonstration that was held in response to preventive action taken by the police. No one had even taken to the streets yet but the police were already going round peopleís houses and arresting possible participants, and this provoked quite a stormy response.  

Is this a sincere position? If you think that we should let anyone and everyone break windows in the streets and hold demonstrations in breach of the legislation, you should allow the same in your own countries. But you do not allow this in your own countries. Look at how firmly the police acts in Paris, Berlin and other European capitals! We see all of this. So, you are allowed to enforce order and ensure that everyone obeys the law but we are not? Our citizens see this. This is evident to all. You could be more subtle about the way you go about things. This is why this shift in public opinion has taken place.

But I do not think that this is some kind of tragedy and cannot be reversed. On the contrary, I think that we in Russia, in Europe and in the United States need to be patient and start looking for positive things in our relations with each other rather than concentrating only on problems. We need to do everything we can to help build up our trust in each other. There is no need for lectures. All we need is to take a positive view of each other and support each other. I think that if we become more interdependent our trust in each other will grow, and as we come to trust each other more, so our relations with each other will grow stronger.

Look at what is happening in Russia now with regard to German war burial sites. It never used to be the case that Russian war veterans and young people looked not only for the remains of Soviet soldiers killed on Russian territory during World War II but also for German soldiers, and buried them anew together. This is a very significant signal that shows that former distortions in values and what were perhaps natural resentments are being rethought. People are now taking a more pragmatic approach to each other, a more positive approach, I hope. Now we are seeing the emergence of what will form the foundation for our long-term cooperation.

Y. CHARNOGURSKY: Mr President, I want to leave aside topical issues and turn to a question which keeps coming back up from time to time, that of Russia and its mission. Much has been written in Russian political thought about the importance of some kind of mission for Russian politics. In the twentieth century this mission was socialist revolution, and in the nineteenth century it was support for the Slavs in the Balkans, support for the Christians in the Ottoman Empire.

Now, at the start of the twenty-first century, do you think there is an idea that could win strong support from Russia and that would go beyond the boundaries of the Russian Federation?

VLADIMIR PUTIN: You mentioned the idea of pan-Slavism and the later idea of socialist revolution. Regarding the first idea, I would like to come back to the following. The basic principles of the Russian Empire were the ideals of monarchy, the link with the people, and Orthodoxy. These were the three cornerstones of the Russian Empire. I draw your attention to the fact that Russiaís foreign policy at that time aimed at strengthening the countryís domestic foundations. The support for Orthodox peoples in Europe was, in my view, linked above all to attempts to strengthen one of the cornerstones of Russia itself, namely Orthodoxy.

I also want to remind you that, as many of you perhaps know already, Russia was a fairly tolerant country in its old system of values. It had many faiths and many ethnic groups, but Russian passports did not specify a personís ethnic identity, only their religious identity. If a personís passport declared them Orthodox by religion, it did not matter in the slightest to the authorities what ethnic group the person belonged to Ė Jew, Tartar, Russian, Bashkir. In that system of values, foreign policy was directed at strengthening the countryís inner foundations. But times changed and Vladimir Ilyich Lenin-Ulyanov said at one point: Russia matters nothing to me; what matters is to achieve world socialist revolution. That is already another story, however. Russia was drawn into this new system of values against its will. The countryís people did not at all expect what they got. They were deceived and they expected something completely different. They hoped for peace for all peoples and land for the peasants. Remember the communistsí slogans. But they did not get any land and nor did they get peace. Civil war broke out. Land was confiscated and the workers did not take possession of the factories as promised. Instead, an authoritarian management system was put in place and this was followed by attempts in Russia and in some European countries to spread this system even further.

Todayís Russia has no intention of following the example of Tsarist times, and even less intention of following the Soviet example. I do not think that we should take some kind of missionary role upon ourselves. I think that this would be detrimental for Russia. Even in 1915, 1916, and on the eve of World War I, when Russia was one of the biggest powers in the world, progressive and intelligent people were warning that it should be careful and not start throwing its weight around as a great power because this would only ultimately harm its interests. They said that this would only irritate other countries and provoke additional attacks and that instead of cooperation it would lead to rivalry. I fully agree with this, all the more so as it applies to todayís Russia. I therefore have no wish to see our people, and even less our leadership, seized by missionary ideas. We need to be a country that in every way has a healthy self-respect and can stand up for its interests, but a country that is at the same time able to reach agreements and be a convenient partner for all members of the international community. 

S. SHENG: There is a saying in Russia: Ďlet well aloneí. It seems to me that what is important is not so much who succeeds you as president but whether or not they will continue your political course.

How will you ensure that your political course continues, in particular as regards your policy towards relations with China?

Thank you. 

VLADIMIR PUTIN: Our national interests will ensure the continuation of our political course in domestic, economic and social policy and on the international stage.

I have every reason to believe that our relations with China, the level of relations we have attained over these last years, has the support of the vast majority of our citizens, and whoever comes to power in Russia, no matter what the future presidentís name, and no matter even what the composition of the future State Duma, everyone with an influence on Russiaís policies will have to take public opinion into account.

CLIFFORD GADDY: I would like to go back to the economy.

Since you asked us not just to ask questions, but to assess what you have done in various fields, and I am an economist, I would like to say first how impressed I am. I think that any economist in the world would be satisfied with the work you have done. The most important thing for economic development is macroeconomic stability. And I would permit myself the observation that, no matter what those outside Russia think, no one can dispute your accomplishments in achieving macroeconomic stability. These achievements are indisputable. And I would even say that your economic record is the best in the world.

You took over when the country was effectively bankrupt, particularly as far as relations with the International Monetary Fund were concerned. You had practically no gold reserves, and there was no Stabilisation Fund. We know that now Russia has more than 400 billion USD in foreign exchange and gold reserves worth more than 100 billion USD in the Stabilisation Fund. In addition, there is more money now in Russia than in the entire International Monetary Fund. So I think everyone agrees that this is a great achievement.

But in a sense, you have come to the end of the stabilisation phase and you now face a choice. My colleague Mr Kupchan listed some of the options when he said that you must choose between domestic investment, foreign investment and investment in securities. I think you gave a very clear answer to this, a very good answer. But I would say Ė and please correct me if Iím wrong Ė that the range of genuine strategic options is even greater, because the money we are talking about comes from oil and gas. And oil and gas are in the ground. So part of your problem, I guess, is that the total value of oil and gas produced in Russia annually, most recently at very favourable prices, say 60 dollars a barrel, is half a trillion dollars a year, 500 billion dollars a year. Well, maybe 170 billion dollars will go into reserves and the Stabilisation Fund, and the rest constitutes the real consumption of oil and gas. And managing the cash flow derived from these sales is a problem. Even Mr Ivanov said that having so much money is a headache, that prices are very high, and that we must think about making them more stable. I donít know, maybe he was joking or simply mistaken, but he gave that impression, that itís bad for Russia to have so much money. One option would be not to expand oil and gas extraction in the long term. I simply want to ask if you think that there is perhaps a problem with the strategic plan itself. Have you Ė you and your team Ė thought about Russiaís future as a producer of oil and gas? I know that some people are wondering whether we need to produce as much as we are now. Why not leave all those reserves in the ground? The price of oil and gas is going to go up, and so we will be richer if we sell it then. Why sell it now rather than wait? So I would like to ask: how do you see this issue as part of a strategic plan, taking into account the price of oil and gas and projected returns? Thank you.

VLADIMIR PUTIN: You certainly have a point. Of course we too are thinking about this.  Let me begin by telling you straight out what we are going to do. We will expand extraction and augment the extraction of oil and gas. That is first and foremost. We will do so because consumption in the world market is increasing. It is growing, and these goods are in demand on the world market. I donít think that we should wait forever for prices to rise. We know that there have been periods in economic history when, say, coal was the main source of energy, and then its value declined sharply. With all the current interest in the development of renewable resources, hydrogen, biofuels, and so on, why should we speculate by waiting for prices to rise?  We have always acted with the utmost responsibility in this area and we will continue to do so.  Of course, we will try to balance this with our capabilities and our interests, and we hope that the demands of the world market and our interests will be in accord as far as possible. We have never indulged in any speculation in this regard, we have never used blackmail on the world market. We are not a member of OPEC [Organisation of the Petroleum Exporting Countries], although of course we keep track of what they do. We cannot influence the market the way OPEC countries can because, despite all the idle talk about Russiaís energy monopolies, as an economist you of course know that Russia has no monopoly at this level, unlike some countries, particularly the OPEC countries.

Russia has two companies that deal with oil, Rosneft and Gazpromneft. All the rest are private and fully owned by their shareholders. There is a great deal of foreign participation in this business: American companies, Chinese, Indian, European Ė a lot. Year after year BP [British Petroleum] is constantly increasing its reserves, mainly because of its stake in Russia. A quarter of BPís profits now comes from the Russian market, because of their production here in Russia. Our economy in the energy sector is quite liberal and open.

The same applies to gas. True, we have a monopoly on the pipelines that transport it. This monopoly will continue mainly because of the disparity between domestic and foreign prices. But the government of the Russian Federation has decided, as you are no doubt aware, to issue the following decree: we are moving to establish prices that ensure an equitable return on investment, first and foremost for gas in Russia and in the European market. This means that the price of gas for domestic consumers will go up.

We believe that these steps will inevitably have some positive effects. The first is the diversification of primary sources of energy -- coal, oil, fuel oil, gas, hydropower, nuclear power -- to make investing in them more attractive and thus to spur their development. Secondly, and very important in our view, to incite those involved in economic activity to introduce energy-saving technologies.

I repeat, we will not specifically restrict anything, but we will stimulate the development of other sectors, particularly manufacturing, by using other ways and means permitted by the market. We have done this on a regular basis in recent years, namely by redistributing the tax burden and creating institutes for development: the Development Bank based on Vneshekonombank, the Investment Fund, the Housing and Communal Services Fund. In fact, it is also investing in a rather sensitive area of the economy, in construction.

We will not manage the economy with administrative measures designed to increase or decrease production, but rather by using economic instruments aimed at the entire economy, not just one sector.

Letís go over to the other side and give this lady the floor. Please, go ahead.

PETER SCHOLL-LATOUR: Mr President, Russia has a great deal of experience in Afghanistan, where the situation, in my opinion, is now very difficult. Is it a threat to Russia? Are you concerned by recent military activities in Afghanistan?

VLADIMIR PUTIN: Yes, I am concerned. Attempts to stabilise the country are proceeding very slowly, and the drug menace is not decreasing but increasing. The threat of instability on the border between Pakistan and Afghanistan is still very high. And this, of course, cannot fail to concern us. We do not have a visa regime with the former republics of the Soviet Union. We have free movement of citizens with almost all countries in the area, including Tajikistan and Uzbekistan. We remember perfectly well the period when the Northern Alliance was practically nestled up against the Tajikistan border. If the Northern Alliance had ceased to exist, the support the Western allies were counting on when they launched their military operations would not have been there. And that would have happened, if we hadnít backed the Northern Alliance. But we would be very reluctant to return to a situation in which we had to use such means to exert our influence on events in Afghanistan.  We want to strengthen the government of Mr Karzai, and we want to bring peace to the long-suffering country of Afghanistan. In this sense we will encourage in every way the success of our Western partners there. Unfortunately, that success is still a long way off.

KAREN DAVISHA: We have spent a lot of time discussing the election with various people. We had a wonderful meeting with Mr Churov, the head of the Central Election Commission. He knows the electoral system inside and out. We also realise how much time you have spent on developing a new [election] law and a new party system. At the same time, when we talked this week with leaders of opposition parties, they spoke of some specific abuses in the regional elections, and they are concerned about these. This restricts their ability to participate on equal terms in the December elections. In particular, I am referring to not counting the votes for the URF [Union of Right Forces] Ė they were kept off the ballot, as was Yabloko in St Petersburg. Furthermore, the Communists do not have sufficient access to the media in the south, and so on. I would like to ask: how concerned are you about, let us say, the unbridled enthusiasm of the regional elites in their attempts to secure such a big success for United Russia, bigger than it deserves?

VLADIMIR PUTIN: The voters determine the level of success that this or that political force deserves.

As for the ruling groups in any country, they always behave the same way.  The representatives of opposition movements and parties everywhere always do the same thing.  Go to any of your countries and talk to the opposition parties, or bring them here and Iíll listen to them. They will say exactly the same things that the representatives of our opposition parties said to you. There is nothing new here, nothing of any interest.

As for the URF, everyone knows perfectly well that one of the official and unofficial leaders of the URF is Anatoly Chubais. He is at the same time the leader of one of our largest energy companies. And it is in my power to keep him there, or remove him. As you know, this organisation plays a defining role; it has not only a financial but a quasi-administrative impact on people because it is represented in every village, every city and every town. It is able to provide not only moral and administrative but also financial support. I hope that they do so under the current legislation. I would like to believe that they are. But, in fact, this is covert support on the part of the state for the "right forces", as it is called, the Union of Right Forces.

As for Yabloko and its chances, they depend first and foremost on the preferences of people and their current views on how the country is developing, on the trust of the population. Apparently, the people do not trust the ideas put forward by these parties.

I do not want to go into detail here. I would very much like to see all points of view represented in the next parliament. It would be more lively, perhaps; it would create the conditions for making more informed decisions. But in the final analysis, no matter what anyone says, this primarily depends on the voters.

As for the communists: they have always complained that they lacked something. They had every opportunity, let us say, in Soviet times, to benefit from a complete monopoly on the media. But it didnít help them.

The Liberal Democrats, led by Vladimir Volfovich Zhirinovsky, complained to me, for example, that we give a public forum to the CPRF [Communist Party of the Russian Federation] but that the media ignores them. As far as I know, Yavlinsky even refused to meet with you. The leaders of the URF seem unable to agree on anything.

There is no need for our colleagues to shift their internal problems onto us. They need to focus on the country we live in and on how to make the slogans they propose more interesting for the majority of the countryís citizens. Only then will they see the effects of their political efforts supported by the voters.

As for legislation, I honestly do not think that ours is anything special. In fact, it is a template of a very large number of laws that exist in European electoral systems. This legislation was based not only on domestic conditions but enacted after extensive consultations at the professional level with our European colleagues, the European Parliament and the Council of Europe. In the course of these consultations, our legislators took note of many of the comments that were made. I believe that our legislation is very well-grounded and suited to the principles of the democratic election process.

NIKOLAI ZLOBIN: Thank you, Vladimir Vladimirovich. I hope you have been able to relax a little after such a difficult trip. Thank you for spending so much time with us.

I will start my question with a brief preamble. The west has indeed seen that Russia has become much stronger economically and now enjoys political stability. I think that it also understands that Russia is pursuing a more independent foreign policy. This is really obvious. And there is some bewilderment and perplexity: what to do with this new Russia, and what policies to adopt in relation to it? I think that the West has lagged behind in this regard, and the policies that we often adopt concerning Russia are the result of improvisation, with no genuine strategic forethought.

Nevertheless, there are issues that we are really trying to sort out. We are divided on many issues, both the political community and the community of experts are divided. One of the major issues is 2008. I would like to go back to that.

I will admit to you, Vladimir Vladimirovich, that even our group is divided. There are people who think that President Putin will leave, and this is indeed a unique chance for democracy in Russia, because the person leaving stands extraordinarily high and is still rising in the polls, because he is someone with great authority, and because there is no one else of this calibre in Russia today. And this exit will therefore be a huge step forward for Russian democracy.

There is a group of people who think that President Putin will not leave, that at the last minute the Kremlinís political strategists will invent something Ö

VLADIMIR PUTIN: Theyíre both right.

NIKOLAI ZLOBIN: I havenít finished Ö

VLADIMIR PUTIN: But Iíve already answered.

NIKOLAI ZLOBIN: Yes, Putin will not leave because he cannot leave, so dependent is everything on one person, so linked to your decisions, your commitments, to trust in you or your conviction that Ö Well, such a situation is called ďif leaving you canít stayĒ. But where to put the emphasis nobody really knows.

But there is a third group of people who say that in the end the Kremlin and President Putin will find some compromise between the two extremes. And this compromise will go as follows: you do leave formally, but in effect you stay. They say that there will be a new branch of power in Russia called "Vladimir Vladimirovich Putin."  Or they say that President Putin will return in 2012 or even before 2012. And many even in our group see the appointment of a new prime minister as a preparation for this kind of scenario, because you have appointed a person who is, to say the least, no longer young. He is neither well known in Russia nor hugely popular Ė let us be frank.

Is this a preparation for the third scenario? All the more so because in your comments the day before yesterday you said that we all have to think about how to change the system, the structure of government and the state administration before the elections and after the elections. Here we are all trying to figure this out. Can you enlighten us on this subject?

VLADIMIR PUTIN: I can. When I spoke of stabilising or changing the government, I was referring to the structure of government. Nothing else. We have created a system of governance at the level of government, for which we also borrowed the template from several countries, in which ministerial offices were the systemís centre, along with other structures that did substantive work or had various monitoring functions. In the course of the last three years and a bit it has become clear that for us this is really not an effective model. As soon as those who had advocated liberalism in government became ministers, they began to pull the heads of agencies and of other departments into their sphere of influence and began telling them what to do. Do you understand? And this continued for three and a half years. These were our most liberal ministers. I said to one: ďListen, what are you doing? You used to be such and such ÖĒ Ė ďTrue, but that didnít workĒ. That didnít work but it doesnít mean play the fool, that means build something that does work. This is what I had in mind. Thatís the first thing.

Secondly:  I said that those who said Iím leaving and the ones who said I would stay are both right. Because I took a firm decision a long time ago, at the outset, that any person in power must not change the structure of authority to suit himself.

I am very concerned that today in Russia so much depends on only one person.  And I want to change this. But when I said that both groups were right, I meant that I am not planning to disappear altogether. I am not planning to emigrate, to take up permanent residence in another country. I love my country, Iím Russian.

I think I have described the small village about a hundred kilometers from Moscow where my ancestors have lived since the ancient times of 1600. During all those centuries, from generation to generation, they went to the same church. The church documents in the archives show this. It shook me up, I hadnít known it before.

And, you know, I feel my bond with the country. I really care about the problems of the ordinary citizen, and I say that quite sincerely. Iím always thinking about how whatever action we might take will affect the actual lives of ordinary people. I will never forget that I lived in a communal apartment in Leningrad.

Given that, I am not planning to go anywhere, Iím going to stay here. At this point I havenít exactly decided how Iíll spend my time. But whatever I end up doing, I realize that it will have an impact.  Thatís a fact. I am not going to speculate about this impact or exaggerate its significance, but there it is. It will also depend on what I take up, either purely political work or something elseÖ

There is a well-established expression that for ages has passed from one generation to the next: the victory doesnít go to the one who has the power but to the one who has the truth. What does it mean? It is a reference to the fact that in our society the strength of moral influence on society is always greater than the influence associated with the official rank or position of this or that person. This incidentally is in large measure one reason of the success of the dissident movement in Russia. These people were honest towards their country and its citizens, and the citizenry felt it. Itís not probable, rather itís absolutely clear: my activities will have an influence. But I say again I am not planning to use it to destabilise or weaken the authorities. My goal is to ensure that power in Russia remains stable. And I have every reason to believe that it will.

BOBO LO: Thank you, Mr. President, for the opportunity to ask a question.

You have just completed your first visit to Australia. During that visit you signed a framework agreement on uranium. When do you plan to move from the framework agreement to a specific agreement on imports of Australian uranium to Russia? And what quantities will be involved?

And another thing: this visit was also part of your pan-Asian tour. You took part in the APEC summit and concluded a major agreement on military technology with Indonesia. How do you see Russiaís role in APEC? In the wider sense, how do you see Russiaís role in the Asia-Pacific region?

VLADIMIR PUTIN: First, the question about the uranium agreement.

I hope I wonít offend you if I say that I donít know how much uranium Australia will supply. For us it is in no way either a political question or one of military strategy. It is strictly a commercial issue.

As for the military and strategic aspects of Russiaís nuclear programme, I would direct your attention to the following facts. I talked about this in Australia and I want to say it again. In order to create a modern military nuclear charge, you need about 20-25 kilogrammes of uranium. We sell 30 tonnes of enriched uranium to the United States every year. Do you understand? 20 kilogrammes is needed for a nuclear bomb, and we sell 30 tonnes every year. And in general we are ready to sell some 500 tonnes. I will not specify the quantity of enriched military uranium at our disposal. It is limitless. Therefore, we need uranium from Australia for peaceful purposes only, and this is a business decision. You can buy uranium in other places besides Australia. There are many suppliers, including right next to us in Kazakhstan from whom you can buy it ... One can even develop it in Russia. This information is secret, but we have actually confirmed large reserves of uranium. The only problem is infrastructure. Building railways and roads is expensive. But if we need these for military purposes, of course weíll build a road, weíll do everything. We will transport it in planes, in helicopters if necessary. But we donít need it for military reasons.

So this is Mr Kirienkoís question, a purely commercial one. I donít know how much he is going to buy or in what time frame. He is taking care of it and can work on it as much as he would like.

As for the Asia-Pacific region in general and our role in it, it seems multifaceted to me. First, we are working at the political level with many countries: with China and India, for example. These are our perennial and reliable partners in various areas.  Our relations with Japan are difficult, and we very much want to resolve all the problems of the past. I think that the Japanese leadership cannot have any doubts on that score. The question is how to find new ways to develop our relations, ways acceptable to the Japanese and Russian peoples that wonít humiliate anyone and will resolve all problems.

There are other countries Ė Indonesia, which I visited, Australia, and other smaller ones Ė each of which represents for us an object of interest and investment, as a partner in the area of high technology, and as potential investors in our economy. First and foremost, of course, in terms of development potential there are Eastern Siberia and the Far East. Unfortunately, the situation there is not very favourable. These regions are suffering from depopulation, but the opportunities are tremendous. There are huge quantities of natural resources. I think in Yakutia their value is five trillion dollars, and that is just what we know: oil, gas, gold and diamonds, practically Mendeleevís entire periodic table. But we would like to build infrastructure, create new jobs and develop a new economy based on innovative principles. I repeat, such possibilities exist there.

With regard to military cooperation, it is not a key area of our interaction with the countries of the region but, again, from an economic point of view, it is an important element. We sell weapons to China worth billions of dollars. Of course, this is not only good for the Chinese. It is good for our defense industry as well. The struggle for markets is a worldwide competition. You have seen how we have started making these transactions on credit. We provided Indonesia with a credit of one billion dollars just for the purchase of arms. In actual fact we werenít pushing anything. The Indonesians wanted to buy and they are creditworthy: they extract oil and gas. Their economy is good. On average its annual growth in the last I think five years is 6.5%. This has nothing to do with the policy of the Soviet Union, when for ideological reasons we exported weapons and offered non-recoverable loans to pay for them. These are market decisions. And we do not see how our shipments to, say, Indonesia pose a problem for the region or destabilise the situation.

Let us not forget that Indonesia is the largest Muslim country in the world. And the Indonesian authorities have done a lot to curb radicalism and fight terror. Let us recall the horrific terrorist attacks in Bali and elsewhere in Indonesia. I believe that our cooperation with the Indonesian leadership, with Indonesia as a whole, is a contribution to the common cause of fighting terrorism.

SHIGEKI HAKAMADA: I would like to ask the following. Recently, Russia has made a major change in its national policy. The day before yesterday, Mr Sergey Ivanov also underlined this when he said: we do not want to remain a country that exports raw materials. I think this represents a major change of course.

In connection with this issue, according to what principles are you changing your foreign policy or your relations with other countries, such as Japan, China or India? After the interview, I said to Mr Ivanov: Recently I feel that Russia has, one could say, ďdiscoveredĒ Japan. Ivanov fully agreed with this.

VLADIMIR PUTIN: These changes are to a significant extent only cosmetic. In fact, for a long time the Soviet Union sought to restore normal, full relations with Japan. Letís recall the notorious 1956 declaration. It wasnít us, it wasnít Russia that signed the 1956 resolution between Japan and the Soviet Union. It was the Soviet Union that signed it. It elaborated the principles on which to conclude a peace treaty. This is conclusive proof that this desire didnít spring up yesterday.

But more recently, of course, this desire for complete normalisation has intensified, because we want to have full relations with all our partners, including those in Asia. Japan has one of the largest economies of the world. You know better than I how it has progressed, especially in the high-tech field. It seems to me that recently we have made serious steps towards cooperation, not only on the islands, where access for Japanese citizens has been improved, but in the Far East as a whole where this normalisation is proceeding. In the global economy we are implementing more joint projects. If you take Toyota, Nissan and Mitsubishi, they are building large enterprises in Russia, making multimillion dollar investments. Of course, this creates interdependence. We can see that our Japanese partners have an interest in the stable development of the Russian economy and Russian political system. They have invested millions. And this we see as a sign of their confidence in Russia.

We value this highly, but we would like to see all the issues settled, as I have said many times. This is a difficult question. I donít want to discuss it now, since one can endlessly exchange arguments and never decide anything. But now we see on the part of our Japanese friends a genuine desire to come up with the necessary compromises. We shall also do this.

We know Japanís energy demands, and at our last meeting your Prime Minister said that Japanese companies are interested in joint ventures in Russia in the field of energy, including the extraction and transportation of hydrocarbons.

I am not ruling out the possibility of our working together in the nuclear industry. Overall, the outlook is very good, and, I repeat, I donít see anything particularly new here. There is a more intense, more incandescent desire for full cooperation, but in general the desire for the development of full relations with Japan can be considered a traditional part of Russian foreign policy. Iím sure that it will be sustained, I'm absolutely sure.

Now, excuse me, Mr Zlobin has sent a note to say that I didnít answer the second part of his question. And the second part reads: do I think it possible that I will return to power in 2012? First of all, I havenít gone anywhere yet. Are you trying to get rid of me? Iíve already said Iím leaving Ė what is it with you? Thatís the first thing.

Secondly, you know that 2012 plus 4 equals 2016. I donít know yet. Why plan so far ahead? My primary goal is to help create the right conditions for the development of the country, for the stability of the political system, for the creation of the economic conditions that will make this course irreversible. Obviously things can always change, in a few months everything can change. But if someone tried that, it is unlikely that they would have the support of the population.

I am not talking about macroeconomic stability and economic growth. These donít excite much interest among the people. But that incomes increase 10-12% annually is important for everyone.

Last year we received a great deal of criticism about providing medication for a certain category of citizens. What was the reason for the criticism? A lack of available medicines. But before this there were no such medicines, practically nil. You should know that we spent billions of rubles, billions of dollars supplying the beneficiaries of Social Security with these drugs. They had never been available before.

We have substantially reduced unemployment. You will recall that in the mid 1990's there was no real economic sector, that in the army no one had received a salary for months! Now there is none of that. There are some hitches in the commercial sector of the economy, but they are being worked out. Pensions are growing steadily. Though they are still hindered by inflation and not increasing quickly enough, incomes are actually growing.  And in the end that is what counts.

Previously mortgages were generally unavailable. Now it is still difficult, but a whole system of measures has been created that makes this sort of credit available to a large class of citizens. And I was recently convinced that this will spread to the regions.

You know that in recent years, for the past five years, the economy as a whole has been growing at 7%, the construction industry at 15%, and this year at 32%. Now that is worth talking about.

And the so-called national projects in education and health? You know, every school in Russia is equipped with computers and 100% (just a few remaining schools are not connected, but before the end of the year it will be 100%) are connected to the Internet.

The day before yesterday I went to a school. The teachers were working on their computer literacy. One of the women was fairly old and I asked her: isnít that hard for you? She said: you know, I am in retirement age, but I donít want to go. Itís interesting here. The children were sitting, studying the Chuvash language by means of a computer game. This is a totally different system of education. Every teacher is creating a website. There is a professional exchange of information between teachers, between schools and between the children. Over the past two years we have fully updated the fleet of ambulances in the country, and supplied every one with modern medical equipment. Wages in primary health care have increased many times over. I wonít go over all the other things now. Our actions have not touched every citizen, not everyone has been affected by them. But this trend is patently obvious to people. Whoever comes to power, whoever becomes president, will have to deal with this, with the mood of these people and with their expectations.

The demographic project. You know, we had a lot of disputes about whether to spend the money on this. The representatives of the economic and finance ministries in the government cabinet had many doubts about this, and I consider their views with great attention and respect. I was also unsure about whether to encourage women to have a second child, to pay out the so-called maternal capital of 250,000 rubles. It didnít seem like much money for a second child. But it is also a whole system of rewards: more money for pregnancy and childbirth, a medical plan, including vitamins for pregnant women. All this is free, and there is a system of certificates to promote the business of the medical facilities.

I have seen recently how this is done in the Chuvash Republic. Obstetrician clinics are fully-equipped with computer technology, any abnormality is put into the computer and recorded at the Perinatal Centre. From the very first days, the presence of any kind of abnormality means that the woman is put on a list. They have bought incubators and other necessary equipment. At the first sign of difficulty the woman is immediately transferred to the Perinatal Centre.

The future leadership of the country must contend with all this. And my belief that there will be continuity is based on this. Not 100% of continuity. Every person will set out his work in his own way, but he will be obliged to deal with the expectations of the population.

By the way, while we are talking about demographics, I repeat, there were many doubts about whether these measures would have a positive effect.  I had doubts because support for the reproductive process in Europe has received a far greater infusion of money. But those funds, which in Europe are paying women for having children, are actually less than the modest sums that we pay in Russia, because of our lower incomes. And it works. We are seeing a steady increase in fertility.

And what will happen in 2012? You know, it is hard to say. My task is to focus on keeping power stable, self-sufficient and efficient.

MARSHALL GOLDMAN: My annual awkward question: In your 1999 article ďNotes of the Mining InstituteĒ, you wrote that the state has the right to intervene when ownersí interests are in conflict. Can you explain this?

Gazprom and Rosneft have announced the possibility of merging. And the next day they denied it. Bogdanchikov even said that there had been no discussion of the subject. And you know that these major companies now have new bosses.

Are they now allowed to put their personal interests above those of the state? Can they give shares to their sons so that they increase in value?

There is evidence that productivity is falling in these companies, and that Gazprom is building at higher cost, and owns more pipelines in other parts of the world. Is this something your successor will have to correct?

VLADIMIR PUTIN: I do not know of any rumours about a merger of two of our public companies, and do not believe that we should create a monster that will dominate the Russian economy and, like a vacuum cleaner, suck up all the resources, including the financial ones.

If someone raises concerns about the growth of the market capitalization of Russian companies and their impact on the world economy, then it must be said that these fears are justified. This impact will continue to grow, but not through the merger of Russian companies, but naturally by virtue of their capitalization, by increasing their market value as a result of their activities, by expanding extraction and the development of foreign markets, and by optimizing costs and revenue. Yes, of course, occasionally questions arise about how effectively they work, how justified the tariffs and prices associated with the implementation of these projects are, but if a crime has been committed that is of course a matter for the law enforcement authorities. Letís say that Transneft builds a pipeline. Questions occurred to me too: wonít a pipeline to the Pacific Ocean be too expensive?  But then I forced them to go around Lake Baikal, it is 400 kilometres from the water supply zone. It is more complicated. This is difficult taiga and mountainous conditions. We do not even have the technology to put pipes through such areas. Of course, this is an expensive project. Or, another example, Gazprom is building a pipeline in the North, and not in the Balkans where there is a whole range of infrastructure, electricity and roads. In the North there are no roads, no electricity, and every nail must travel by helicopter. I cannot give you an expert valuation of those or other projects, but we will of course conduct such an assessment.

I didnít really understand, Mr Goldman, what you meant about certain bosses. What were you talking about? Or was the translation faulty?

MARSHALL GOLDMAN: I am referring to the fact that the children of some of your senior managers have been assigned to convenient positions, what would be called ďemperorsĒ in China. During the Soviet period this existed as well.

The question is: have the children of major leaders been appointed to good positions because of their personal qualities, or because they are the children of important people?

VLADIMIR PUTIN: Yes, I understand. In the old days we told this joke: When you ask a General: "Can the son of a General become a General?" he says: "Yes, he can." -- "And can a Generalís son become a Marshal? "--" No, he cannot." -- "Why not? "--" Because Marshals have their own children."

But such postings and practices exist not only in Russia but everywhere in the world. Of course, we will do everything possible to ensure that persons appointed to high positions, especially in companies, receive these positions based on their knowledge, and their personal and business qualities. But of course probably no one can prevent this by 100%.

ANDREW KUCHINS: Before my question I would like to make a toast to the excellent Olympic Committee that decided to hold the 2014 Winter Olympics here, in Sochi. This is a great achievement for your leadership, and bears witness to the excellent development that has taken place in Russia in recent years.

I congratulate you, the citizens of Sochi and the citizens of Russia! I hope that this will be a very successful 2014 Olympics.

VLADIMIR PUTIN: Thank you.

ANDREW KUCHINS: Now, I am ready to ask a question.

As I arrived at the Kazan railway station on Wednesday, the first thing I noticed was the new promotional posters: "Putinís Plan: Russiaís Victory." Here in Sochi, at the entrance to this place, I noticed the same thing: "Putinís Plan", "Tkachevís Plan". I wonder: what is "Putinís Plan"?

I wanted to ask you this question, but I am not going to ask it. I know that United Russia put up those posters and I want to ask you a couple of questions about United Russia.

Could you imagine yourself playing a more formal, official and leading role in United Russia either before or after the end of your term as president?

And a second question. In February 2006 Vladislav Yuryevich Surkov made an interesting speech in which he said that the goal of United Russia is not simply to win the next election, but also become the ruling party for the next few decades in Russia, such as the Liberal Democratic Party in Japan or the Socialist Party in Sweden in the 60s and 70s, for example. There would also be an analogy in Mexico. Do you share Mr Surkovís opinion that the development of Russiaís political system will benefit from the long-term presence of United Russia as the ruling party within a multi-party system? Of course, if you also tell us what the Putin Plan is, no one in this room will object.

VLADIMIR PUTIN: I do not think that I need to spend our time describing the so-called Putin Plan. I did not think up that slogan, United Russia did. Indeed, it refers to the fact that in all of the past seven addresses to the Federal Assembly (in any case, in the last five) there was a key part of the address devoted to the stateís medium-term development. This included economic, social, political and international activities. Each year there was a major part of the address. And if all these key ideas were put together to build a coherent system, it can become the country's development plan in the medium-term.

I talked about this in my 2007 Address. And I said that if we look at everything that has been laid out in the addresses of recent years, then we would see that this amounts to a plan for the development of the country. But in the pre-election campaign they have turned it into Putinís Plan and we here understand Ė you are all people professionally engaged in politics or policy analysis--that this is a campaign slogan. It enjoys the support of the population. Now, I just said to Nikolai Zlobin when I answered his question, that this plan contains a great many social issues. It also involves allowing Russia to be a country that pursues an independent foreign policy, something that is also supported by the overwhelming majority of the population. All this taken together has allowed the party to call this Putinís Plan, in light of the fact that the current President benefits from quite a high rating. Today this is the case, yesterday it might have been different and tomorrow it may change again. But in the opinion of people who invent these slogans during election campaigns it is obviously justified. I have no complaints in this respect. And I will tell you why.

I am deeply convinced that Russia needs a highly capable and responsible parliament. If this had not been the case over the previous five to seven years, we would never have been able to adopt those basic laws, which allowed us to significantly improve the situation in our economic, social and even international affairs. For example, we adopted the law concerning property. A very liberal law. This was the first time such a law had been adopted in the history of the Russian state. Throughout Russian history the principles of the private ownership of land had never been so clearly defined. This is a revolutionary law.

We have adopted a new Labour Code. I talked with Berlusconi, and he said: I have spent four years trying to pass a much less effective law but it will not go through. The Communists will not accept it. Yet we adopted it. A more stringent and market-oriented law, yet a socially responsible one.

I have not even mentioned other legislation. We have created a real basis and legal framework for the country's development. And of course we are very interested in ensuring that Parliament was effective. We certainly did this by benefiting from the support of the leading political force in Parliament, United Russia. Yes, you can still say that they do not have a clear understanding of ideology, that their vision is blurred. That is true.

But by working hard to be even better than we are and working on centre-right ideology, and strengthening the same tendencies within the party, we must accomplish contemporary pragmatic tasks. And we are of course interested in having the party preserve its status as Russiaís leading political force. In this respect I cannot say right now but I am thinking about how to keep supporting United Russia. It is natural that Parliament should work effectively. I have a number of variants and I will choose one of them. It might be more or less stringent but a certain amount of support will exist.

As to Surkovís declarations about whether United Russia should maintain its political status for decades to come, then I would draw your attention to the fact that I am not working for Surkov, rather, Surkov is working for me. And this is evidence that we have quite liberal relations within the political leadership, both within the Presidential Administration and within the Government.

It is hard to say whether this is good or bad for a given country. Stability is good but stagnation is bad. In any case, however things proceed in the future, I will continue to use my abilities as well as I can, depending on what I decide to do after March 2008. And I will try to strengthen a multi-party system.

You might have noticed that Mr Mironov created Fair Russia but that I supported him. And I would like to see a responsible social-democratic component in the Russian political scene. Not a relic of the past like the CPRF but a true responsible modern leftist party. A party on the left with a social-democratic component. I intend to work further to achieve this goal, independently of the fact that I will certainly support United Russia in the forthcoming elections.

And if United Russia can pursue a policy that is in the interests of millions of people, then it will have the support of the main portion of the population and then it can preserve its prominent position. And if it makes certain mistakes then I think that another domestic political force will appear, and that this will be a party with social-democratic views and may take on the responsibility for the countryís future itself.

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