Transcript of the beginning of the meeting:

Vladimir Putin: Mr Watson, ladies and gentlemen,

It is my great pleasure to welcome you to Moscow. It's very good to see you here. Chevron has been working with Russian companies for a long time. To the best of my knowledge, you have invested about $1 billion in the Caspian Pipeline Consortium. On the whole, the work is going well there.

Chevron has partnered with eight Russian oil refineries, providing them with high-tech equipment.

It's gratifying that you're now taking your relationship to a new level by launching joint production of hydrocarbons.

I'd like to stress that you're taking certain risks, especially with regards to geological prospecting, which means that the government should make certain commitments to support projects of this kind.

I'd like to mention one more aspect of our cooperation. In 2006, Chevron, along with other major American companies, such as Boeing and our other partners, set up a special group to support Russia's ascension to the WTO and finally eliminate archaic barriers to our cooperation, such as the Jackson-Vanik amendment.

I am absolutely convinced that these archaic schemes and barriers, which were created during a previous era of international relations, are serious impediments to our business relations.

I hope that a new stage in our cooperation will be interesting and fruitful, and the agreements you're signing today with your partner Rosneft will provide a good basis for achieving our shared goals.

John S. Watson (as translated): Thank you, Mr Prime Minister, for such a pleasant introduction. Indeed, Chevron has long had operations in Russia.

You've rightly said that the work of the Caspian Pipeline Consortium is making steady headway - both in transporting oil to world markets and in terms of regional trade.

We are certainly interested in taking part in geological prospecting and extraction in Russia. We are very pleased to say that with the personal participation of Mr Sechin and the active involvement of Rosneft CEO Mr Bogdanchikov, we have reached a point where we can play an active role in this complicated and responsible project on the Black Sea continental shelf. This is a very promising region. Yes, of course there are hidden geological risks and much investment is needed. And we will need to work with the government to ensure that proper tax conditions are in place for the development of such projects.

Chevron has extensive experience in developing deep-water deposits, particularly hydrocarbon deposits. We believe that the positive experience we have acquired, as well as the positive experience of our partners at Rosneft will allow us to successfully develop this deposit.

As for trade, my predecessor was the co-chairman of the American initiative group, and I'm ready to continue to collaborate with both American and Russian companies to facilitate the resolution of all trade issues.

I have met with US administration officials and heard them say that progress in resolving trade issues will help strengthen relations between our countries. Let's hope for speedy progress in this area.

Vladimir Putin: Mr Chairman, from what I understand, you have a basic education in agriculture, which means you clearly understand the importance of environmental issues.

Our companies are operating successfully in the Caspian Sea. They have already started extracting oil from the bottom of the Caspian Sea while assigning environmental issues the highest priority. I assume that in your work with Rosneft you plan to observe the same level of compliance with environmental standards.

John S. Watson: It is quite clear that in light of the current disaster in the Gulf of Mexico, resolving the issue of production and environmental safety has become a key factor in the success of such projects, both deep-water projects and other projects.

Chevron has already successfully drilled more than 375 wells in very complex environmental conditions. Moreover, after the well known disaster in the Gulf of Mexico, a special working group of industry professionals has been established with a Chevron representative as co-chairperson. This group prepared recommendations that were accepted by the US Department of the Interior. A decision was made to toughen environmental standards and bring them to a higher, unified standard. We are confident that we will continue to drill deep-water wells successfully and safely.

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Rosneft CEO Sergei Bogdanchikov and his Chevron counterpart John S. Watson signed two documents in Prime Minister Vladimir Putin's presence:

- an agreement on the principles of cooperation between Rosneft and the Chevron Corporation;

- an agreement on interim financing between Rosneft and the Chevron Corporation.