29 january 2009

Prime Minister Vladimir Putin met with members of the International Media Council on the sidelines of the World Economic Forum in Davos

Vladimir Putin: Good afternoon,

I spoke at length yesterday, for almost half an hour, and presented Russia's views on world developments, primarily, in the economy. Before that, I met with your colleagues from Bloomberg and the ARD television network, among others. I regularly meet with Russian and foreign journalists.

In general, my views on domestic political and economic developments in Russia and the rest of the world are well known. Therefore, I don't think I should waste any time on long introductory remarks. I believe it would be best if you ask your questions, and I will try to satisfy your curiosity.

The only thing I'd like to say is that for the first time a peaceful change of top leadership took place in Russia in line with the Fundamental Law, the Constitution. We held presidential elections on time and in accordance with the Constitution. We also held parliamentary elections. These were major events in the life of the country.

I'm glad to note that we have largely preserved continuity in both politics and the economy, which enabled us to set up a government team in Russia. We have managed to preserve stability despite economic turmoil, and maintain our development priorities, which I consider a very important achievement. I hope this will allow us to overcome the current global financial and economic crisis with smaller losses.

This is all that I wanted to say in the beginning. At this time, let's switch to a free and simple discussion, and I will cover the problems that you consider most urgent.

Question: (As translated): Before we launch a democratic discussion, the host may ask one question. Mr Prime Minister, you voiced a very interesting idea yesterday. I would like to quote you. You said it would be incorrect to think that the state is omnipotent. However, as President and Prime Minister, you tried hard to popularize this concept. The Government now has greater interests in the areas of ship-building, aircraft manufacture and nanotechnologies. Have you changed your mind or are you placing curbs on the state's economic intervention?

Vladimir Putin: I will explain. It is my opinion that our discussion has got off to a very good start. Given Russian economic realities, some spheres of activity and production cannot develop effectively without the required state support. Frankly speaking, not only in Russia but also in developed economies of the world certain spheres cannot develop at all, not to mention a cost-effective development, without direct and decisive state influence.

You have just mentioned such an industry, namely, aircraft manufacture. Are we not witnessing the same direct all-out state intervention in this sphere in Europe? What about the European Aeronautic Defence and Space Company (EADS)? Moreover, I believe that Russia displays an even more market-like approach to other similar issues. Our state involvement is far more market-oriented. Unlike in EADS, the Russian state does not take part in settling purely commercial issues.

What was a typical economic feature of Russia in the mid-1990s? A state which had created many sectors in the Soviet economy then left them to their own devices. Such sectors then degraded. However, the development of certain sectors, including the nuclear power industry or space exploration, is simply unthinkable without direct state involvement or responsibility. This is exactly what we are doing. Although there is nothing unusual in it, such activity was perceived as an unusual aspect of the modern global economy.

True, the state has increased its stake in energy giant Gazprom, a strategic company, from 38% to 51%, which makes it a controlling stake. What's so surprising and unusual about this, compared to the European energy sector? How many years did it take France to denationalise its power-generating industry? We are now witnessing relations between major European companies, with the state directly participating in such disputes.

Consequently, I don't think that we in Russia were doing anything unusual. Our partners did not like only one unusual thing, namely, our efforts to restore the potential of specific Russian economic sectors and the creation of more adequate competition incentives. Our partners or potential rivals may not like this. However, those receiving such goods and services all over the world, including Europe, cannot help but like it. It is no secret that competition is the driving force of progress and the main price-and-tariff reduction tool, as far as consumers are concerned. That's why nothing unusual happened in this sphere. This is the first aspect.

And now the second aspect. As you know, small, medium and large businesses face certain problems which began with the financial sector. Consequently, we were forced to help our companies. For instance, we had to deprive them of problems, namely, margin calls and to prevent the loss of their cheap collateral pawned with Western loan agencies.

We are negotiating with the business community virtually every day.

I do not see representatives of our business community here. Even if they were here, I would say what I now want to say. And I am sure of what I am now saying. I get the impression that many of them want to stand as close to the state as possible, to try and hide behind its broad back to solve their problems. On the whole, I understand them. This is what I had in mind yesterday when I noted that the spirit of free enterprise was being eroded, and that businessmen must understand that much depends today on their decisions and responsible behaviour.

The same is true of yesterday when the global, Russian and European economies were on the rise. Naturally, the state must lend them a helping hand and support them. To be frank, we are doing precisely this. However, it would be incorrect and even inappropriate to shift all responsibility for industrial and corporate development onto the state because the state would make the economy ineffective if it starts nationalising everything.

This is what I had in mind. I would be very glad if I have managed to satisfy your curiosity concerning my attitude toward state involvement in the economy.

Question: At one time, Mr Prime Minister, Russia had very good relations with the United States, and the West in general. You had very close relations with President George W. Bush. But they have deteriorated in the last two or three years.

You spoke about this at the Munich conference two years ago. Other representatives of Russian government have also complained about the conduct of the United States and other Western countries. What do you expect from President Barack Obama and his administration? What should they do to restore good relations between Russia and the West? What action would signal to you that the attitudes in the United States and the West in general have changed?

Vladimir Putin: First of all, I'd like to say that we are not complaining about anything. What is there to complain about? We are simply stating our opinion. We believe that too much emphasis on resolving problems by force and the neglect of international law are counterproductive and destroy international relations. Near as we can tell from the signals coming from Washington, the current administration shares this approach to a certain extent. We know Obama's position on Iraq, and his intention to withdraw troops from there. We have heard that there is no special need to admit Georgia or Ukraine into NATO. There are different ways of ensuring their security although, frankly speaking, nobody threatens them. We have heard that there is a need to talk about the deployment of a missile defence system in Europe.

We do not want key issues of international life resolved unilaterally by one center. We stand for the restoration of the mechanism of collective decision making under the current system of international law. Probably, we should improve it taking into account the interests of all participants engaged in international discourse. These are the main points in broad outline. Everything else is details that can be dealt with later. Given goodwill, any question can be resolved in a search for compromise.