Transcript of the press conference:

Angela Merkel (as translated): Ladies and gentlemen. Today we are joined by Mr Prime Minister, Mr Putin, Prime Minister of Russia. It is quite a while since he was here last, but we did meet on May 9, during my visit to Moscow. We talked during the first round of negotiations. Today, we are going to continue the conversation over dinner, and we will discuss economic issues, matters related to economic cooperation and the role that the German economy is to play in Russia. Despite the crisis, the German economy remains an important partner for Russia. Our two economic ministries also signed a declaration. We are cooperating very actively in the field of technology. That was apparent at the intergovernmental consultations this year in Yekaterinburg.

This ranges from transport infrastructure to supplying hospitals with medical equipment. We could be of great help in those areas. We also have very good potential for cooperation in the field of energy efficiency. Of course, we are absolutely convinced – and this is something usually said by the Russian side – that Russia's modernisation is important, since Russia remains an important supplier of raw materials for us.

As for the Nord Stream project, it is one of the largest gas supply investments, but it is important that Russia expands the basis of its economic potential. And Germany could become an important partner in this.

I am very glad that Russia's negotiations with the WTO continue to be very focused – Russia would be an important WTO member. The Prime Minister of Russia, Vladimir Putin, yesterday made a suggestion regarding the establishment of a free trade zone between the EU and Russia as a goal we could work towards. I said yesterday, and let me repeat today, that this is extremely important – Russia and Europe are strategic partners, and the potential for partnership and cooperation between Russia and Europe is still far from exhausted.

However, there are a significant number of obstacles to be overcome. One important step is the issue of Russia's WTO accession. And there are a number of additional issues that need to be discussed, such as import duties and other aspects of this. Work on a partnership agreement between the EU and Russia is also ongoing: it is being pursued actively. We have made meaningful advances in the construction of the Nord Stream pipeline. This is underway in my constituency on Ruegen island, so I hear all about it first-hand. Today, this evening, we will discuss a series of other issues related to our cooperation.

But the most important message that I wanted to convey is that economic relations between Germany and the EU as a whole on the one side, and Russia on the other, have great development potential. And so I welcome the fact that Russia is taking active steps in science and technological research, in particular in the Skolkovo project. And Germany has a very real interest in seeing Russia succeed in this undertaking.

Vladimir Putin: Madam Federal Chancellor, ladies and gentlemen.

This visit to Berlin has a packed agenda. It includes intergovernmental activities, a conversation with the Federal Chancellor and important interaction between business communities, which, incidentally, was, in my opinion, held in a very pragmatic and focused way.

The forum bringing together managers from leading German companies resulted in a very fruitful dialogue. We talked with German business leaders about common problems in this post-crisis world, the fusing of potentials and competitive advantages in the interests of enhanced economic development and, of course, about specific projects that are sure to bring even greater mutual rewards.

At a certain point Russia and Germany charted this course of strengthening cooperation, of building a strategic partnership, and this approach is yielding real, tangible results. Bilateral trade revenue now stands at about 18 billion euros for each side. Well, take 18 billion euros, maybe by yearend it will be 20 billion euros, that's the volume of goods that German industry produces and sells on our market. Is this a lot or a little? And this, as you know, means providing jobs and prosperity for millions of people in Germany. So is this a lot or a little? By way of comparison, let me just say that I asked the Russian Economy Ministry for the figures, and Russia accounts for 2.5% of Germany's total exports in sales volume, whereas for Japan this figure is only 1.3%. I think that, in volume, the sales made by German industry on the Russian market are comparable with those of the leading eurozone economies. This means something, and is worth a great deal.

Integrated cooperation is developing successfully in industry, infrastructure, the high-tech sector and energy.

The Federal Chancellor and I have agreed to continue to provide joint business initiatives with the necessary political and organisational support. In essence, we are striving to move away from traditional, mainly commercial forms of interaction towards full-scale technological and industrial cooperation, to create strategic alliances between Russian and German companies in several key industries.

We noted the concerted efforts being made by one high-level interdepartmental group. We have a great asset in our coordinated joint declaration on key areas of economic cooperation between Russia and Germany.

We paid particular attention, of course, to the development of small- and medium-sized businesses. Today, during our brief conversation, Madam Federal Chancellor drew attention to those problems associated with the growth of small- and medium-sized businesses in Russia. I totally agree with her – a great deal remains for us to do.

Today, we also discussed the key areas of activity scientific and technical cooperation, including the outlook for 2011, the Year of Russian-German research, science and education. Madam Federal Chancellor herself is very active on this. We are well aware of her education and profession. As for our projects in Hamburg and other cities, Russia is represented and is, in fact, comprehensively represented. I believe we will continue this work in the future.

I will raise one more matter. The visa issue came up once again during a meeting with representatives of the German business community, in connection with the serious difficulties that border formalities pose for developing business contacts.

The Russian approach to this problem is understood: we endorse the maximum simplification of visa procedures in our relations and we have repeatedly declared ourselves ready to move to a visa-free regime. Of course, we can only move in that direction on a reciprocal basis.

Let me remind you that it was with the Federal Republic that we signed our first bilateral agreement on simplifying the visa regime, which was then followed by similar arrangements with other EU countries and the EU as a whole.

We also addressed the issue, and I hope we will have the opportunity to talk about this some more today, of the recognition of higher education qualifications. This is an interesting and important aspect of the development of the labour market. Of course, we also talked about energy issues. We naturally discussed the problems – this was something discussed today in the forum with business people – related to the third energy package. A great deal remains to be clarified. It is unclear how decisions will be implemented. We would like to act at least in accordance the well-known adage "do no harm" – we must not damage what has already been built and what is working well.

In general, our meeting today, at least that part of it that we have seen so far, was very useful and, as always, frank. I would like to thank the Federal Chancellor for this atmosphere. Thank you very much.

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Question: Good evening. The newspaper Kommersant. My question is primarily for Mrs Merkel. Do you still think that the establishment of the Customs Union comprising Russia, Kazakhstan and Belarus jeopardises the prospects for establishing a free economic zone between the EU and Russia? Thank you.

Angela Merkel (as translated): I have pointed out that Russia has made great advances in terms of WTO accession. Belarus and Kazakhstan are not yet at that point. If a free trade area or customs union were to exist, it would mean that all three countries should join the WTO. We have already discussed this today, and the prime minister has already told me that as members of the Customs Union, Kazakhstan, Belarus and Russia will actively take the same steps that Russia is taking as it pursues WTO accession. Here we are, of course, talking about the future, but we must emphasise that we are neighbouring regions and as in other areas, we will deepen and strengthen our partnership. In the same context, we need to discuss specific topics relating to both the Customs Union and the issue of WTO accession.

Vladimir Putin: I have something to add here, and this is something about which I informed the Federal Chancellor today: we are building a Customs Union with Kazakhstan and Belarus, we have already established it and we are now talking about creating a Common Economic Space. But I would now like to repeat something I said in the closed section of our talks with German business representatives – the rules by which we establish a common economic space in this trilateral format are virtually indistinguishable from those rules that are enacted and used in the World Trade Organisation.

This applies to markets, access to services, the movement of goods, labour and capital. In this sense, indeed for our European partners, including those from Germany, it will be much easier to work in this space thanks to clear, comprehensible, procedures and rules in place. And this does not complicate our work together, on the contrary, it facilitates it, making it truly comprehensive. We can say that we took up the baton of work in this area from the Europeans, and I think that we will bring it to fruition in the near future. This will only benefit our cooperation with Europe.

Angela Merkel: Yesterday I mentioned one clause. This related to import duties. This is certainly something that cannot exist in the free trade zone. Take the automotive industry for example... Russia says that it wants to build up its automotive industry. In this regard, it is important, of course, to conserve some economic potential, and in the development phase, a free trade zone may not always be helpful. Of course, in the long-term, it is always more favourable to have a situation in which there are no customs duties. But at a particular point it is important to have customs duties in order to prepare for the future and this is a future we must keep in view.

I have been such an advocate of customs duties – as a rule, I have only spoken of them in purely negative terms.

Question: Madam Federal Chancellor, if we are talking about the future, this afternoon we discussed Russia's rapprochement with the euro-zone. Do you consider this is a positive goal? And a question for Mr Putin. Tell me, is Russia counting on joining the WTO in 2011?

Angela Merkel: Yes, I read that there was talk of bringing Russia into the euro-zone, and as far as I know, Russia does not want to tie its currency rigidly to the currency of the European Union. However, cooperation on monetary policy usually goes hand in hand with economic cooperation. Russia has enjoyed a certain room to manoeuvre during this economic crisis. And this is also important for the future, but I must say that fiscal policy and economic cooperation are extremely strongly linked.

What else can one say? This to some extent resembles our discussions with the Russian President regarding the Russia-NATO council. We are moving away from the concept of the Cold War. Russia is now our partner. There are problems and difficulties we still need to overcome, but essentially we should look at all this from the perspective of our globalised world, in which we have common interests and where our interests can be linked. This convergence of interests is now actively underway at all levels.

Vladimir Putin: Regarding the monetary union, we are well aware that any currency union derives from the merger of different economies, from their level of economic development. This in itself is obvious, and here I am in complete agreement with the Federal Chancellor. This needs to mature, but in general, looking to the future I do not rule it out as a form our cooperation could, potentially, take. That's the first point.

Second, concerning our possible accession to the WTO in 2011 – I believe that it is possible, and we would like to see it happen. Overall, there are no longer any issues on which agreement has not been reached.

Angela Merkel: We want to bring the Doha round to completion within the framework of the G20, and this could transpire once Russia has joined the WTO.

Question: Good evening, Mikhail Shcherbakov, ITAR-TASS. Mr Putin, today you mentioned the third energy package, something you have repeatedly criticized. What solutions to the problem do you see? And will it not threaten the implementation of projects such as South Stream and Nord Stream? I would like to ask Mrs Merkel her opinion on this document, given that both Russian and German companies are already suffering as a result of the regulations it proposes.

And my second question is about integration. The visa issue was discussed today. On the Russian side, it is clear that this is something we are ready for. Is Germany, in particular, also ready? And what specific steps is the German side willing to take? Thank you.

Vladimir Putin: We understand that our European colleagues, in this case those in Brussels, plan to de-monopolise the market, and in general this is correct. But at the same time we should keep in mind that there are considerable differences between, for example, the energy business and the transport industry. We can see that the solutions proposed may be harmful and endanger energy companies that are described as being vertically integrated, especially those from Russia and Germany. And this gives them a legitimate concern. I share their concerns. That is the first point.

Second. So far nobody has been able to explain to us how these new rules and regulations would work. To date, no one has said anything about this. Gas is pumped into the Nord Stream pipeline. How will it continue to be transported through pipelines, built at our expense and that of our German partners? This is our property. Can't we transport our gas to end consumers? And who will transport it? And whose gas will it be? And how will it end up in this pipeline, if it comes from Siberia? Who is going to drill a hole and hook it up to this pipeline? But we must proceed from realities, from the reality we face. And we very much hope that our European partners, including those in Brussels, will view this with understanding and that we will find a solution. Solutions can always be found provided there is good will. I have observed this good will among many of our European partners, and notably among our German partners.

Angela Merkel: So, regarding this subject. The EU, and the European Commission in particular, displays an unwavering trend, wherever there is this infrastructure, whether for electricity, a railroad or gas pipelines, for transportation networks everywhere to exist separately from the product. Germany has never supported this concept – the distinction in property right terms between the product and the transport or supply network. And, turning to electricity, we also have some solutions to offer that envisage a commercial separation between the supply network and the product, but in which overall ownership remains in the same hands. In particular, in electricity, this is arranged so as to ensure the high voltage network remains in the same hands. Regarding the energy package, this is a forward-looking project, to 2013. We have until then to find ways for it to work in practice. We are willing to show maximum flexibility as well as to require maximum flexibility, and this is another issue we will raise with Brussels. Since there are fewer suppliers on the gas market than, for example, there are on the electricity market, where there are multiple suppliers, in Germany, for example, they need access to the network. But I do not know of another supplier for the Nord Stream pipeline that could deliver gas through this channel. So I think we have time to find our way.

Vladimir Putin: Well, I will take the liberty of adding a couple of words on this, so it is not only clear for experts, but any of your readers, listeners or viewers. To make it clear to everyone what is at stake here. This is a pipeline. We are told, "Just sell this part of the pipeline to a third party." Suppose we do indeed sell it. Then there would be three, four or five companies between the gas producer and the consumer. Each of them, to be blunt, wants to siphon off some money, meaning that the final product for the end user, say in Germany, would be more expensive than it is now. That's what the automatic application of these entirely noble principles of tackling monopolies in this area could lead to. I reiterate – I agree with the Federal Chancellor. Hopefully, this will not transpire. I hope we will find rational solutions to all these problems.

Angela Merkel: We will do everything to ensure that gas prices do not rise, and where possible, that it become cheaper.

Now, regarding visas. President Dmitry Medvedev and I discussed the visa issue during his last visit. The European Union is taking the lead in this line of negotiations. We will now prepare a road map or a plan of the steps we need to take in order to arrive at a visa-free regime.

In Germany there are still some issues, there are a number of concerns, so it does not look like we will have a visa-free regime tomorrow. But for the business community, for example, we can introduce some relief, because as it stands, getting the visa is difficult. Step-by-step, we are moving closer to a visa-free regime.

From Russia's perspective, I know, this is taking far too long. Russia is not quite in complete agreement with this approach, but we have now specified what steps we are prepared to take, we have been implementing these steps and will continue to do so going forward.

Vladimir Putin: I should mention that this does not only concern Russian citizens. Today, during discussions with German business representatives, the head of EADS, the largest and probably the only such company in Europe in aircraft production, suddenly said to me, "We really ought to simplify the visa regime somehow." So I asked, "Does it affect you?" He answered, "We assemble entire groups, engineering teams. We need to shuttle them from one country to another in a timely manner. There are a great deal of problems. It interferes with our work."

I think everything that hinders economic development must be eliminated.

Question (as translated): Last question from the German side. Mr Prime Minister – I am from Deutsche Welle – are you not disappointed that the Federal Chancellor did not fall into your arms and agree to forge full economic union tomorrow? And the second Question – regarding hosting the 2018 FIFA World Cup. Did you ask Germany to support your bid?

Vladimir Putin: We ask all our friends to support us in our World Cup bid. Germany is among the first of our friends. And there is a very respected member of FIFA, Mr Franz Beckenbauer. But we understand that FIFA members must make this decision on the basis of many factors that come into play regarding holding the World Cup in one country or another, and proceeding from the strategic aim of developing football worldwide. I believe that the fact that Eastern Europe has never held a world championship is an important motive for deciding in Russia's favour. As for open arms, then, as you saw, the Federal Chancellor and I hugged when we met and gave each other a peck on the cheek – we are old friends.

But seriously – establishing a free trade zone is difficult, very difficult, it requires careful consideration and reflection on the issue. There are no contradictions, I completely agree. And it is vital that the idea formulated should mature and be implemented in practice. I would call for us to open consultations on this issue, because there will be many questions that arise. And the sooner we can begin this discussion the better, the sooner we will finish it. And finally, the implementation of this idea, of course, stands benefit both Russia and the European economy, because it is sure to boost our competitiveness.

I know that you are all in a hurry to get to the press ball, so to ensure you can enjoy the most conducive conditions for your preparations for this important event, I think we should probably finish here?

Angela Merkel: Yes, I just want to add one thing. The next step in this intensification will be a EU-Russia partnership agreement, and once that is in place we can actively review all the steps in terms of WTO accession and execute them one by one. Thank you very much for your attention.