Prime Minister Vladimir Putin and Ukrainian Prime Minister Yulia Tymoshenko addressed a joint news conference summarising a meeting of the Committee on Economic Cooperation of the Russian-Ukrainian Interstate Commission.
Vladimir Putin's address:
Ms Tymoshenko, ladies and gentlemen,
We have just finished the fourth meeting of the Committee on Economic Cooperation of the Russian-Ukrainian Interstate Commission. I thank Ms Tymoshenko and all who took part in the negotiations for today's constructive discussion and substantial work.
Russian-Ukrainian political partnership and political relations as a whole are going through hard times. This is no secret. It is essential in this situation to rule out pauses and misunderstandings in the dialogue between our countries' Governments.
We are well aware of our responsibility for preserving the achievements of Russian-Ukrainian partnership. That is why we make it a point to be circumspect and behave appropriately as we seek mutually acceptable approaches to the problems we share. Today's talks prove this.
We have made a detailed analysis of the present state and prospects for bilateral trade and economic cooperation, mainly in such pivotal fields as energy, transport, agriculture and finances.
We have also discussed how to coordinate our efforts against the global economic crisis.
In this connection, I would like to give prominence to the theme of promoting bilateral trade. As we know, the volume of mutual trade dropped considerably in the first months of this year-largely due to the objective reason of the global economic crisis. At the same time, it makes us seriously consider the removal of obstacles to the development of trade and other economic contacts.
That is why it is so important that we signed today an intergovernmental agreement on the mutual establishment of offices of the Russian trade representation in Ukraine and relevant offices of the trade and economic mission within the Ukrainian Embassy in the Russian Federation. The agreement envisages spectacular expansion of economic cooperation so as to implement the potential of Russian and Ukrainian regions as fully as possible.
The agreement envisages the establishment of such offices in seven Russian cities-Novosibirsk, Kazan, Samara, Yekaterinburg, Rostov-on-Don, Ufa and St Petersburg-and in seven Ukrainian cities-Simferopol, Odessa, Lviv, Donetsk, Uzhgorod, Kharkiv and Dnepropetrovsk.
A protocol has also been signed on commodity supplies along the production cooperation lines this year. It will spectacularly promote contacts between Russian and Ukrainian industrial companies.
Naturally, energy partnership-in particular, in the gas sphere-was prominent on the agenda.
First, we have confirmed once again that we will base our relations solely on market principles with strict compliance with agreements, contracts and other available understandings.
Second, we have made practical analysis of transport development teamwork, including the Ukrainian gas transportation system. The parties realise that effective modernisation of the system called to guarantee unbroken supplies of Russian gas to Europe is out of the question unless Russia participates in it.
Another essential theme of our discussion concerns the implementation of joint aircraft-building programmes. Evidently, only pooled efforts guarantee effectiveness and competitiveness, considering acute competition in that sector of the world market.
We have also discussed bilateral partnership in space exploration. Priorities include the establishment of united GLONASS-based navigation temporal environment of Russia and Ukraine.
Transport partnership has also come under discussion, with special attention to drafting an intergovernmental agreement on the establishment of a consortium for cooperation in the Azov-Kerch water area.
We should not overlook cultural contacts, either. Several landmark dates are celebrated this year-suffice to name the 200th birth anniversary of Nikolai Gogol, the 300th anniversary of the Battle of Poltava, and the 64th anniversary of Victory in World War Two.
It is our sacred duty to preserve the history we share. I am convinced of this. We should spare no effort to promote public initiatives toward our nations' mutual rapprochement and the development of cultural and other human contacts.
In conclusion I want to say that all discussions at the negotiating table were businesslike and outspoken, and the decisions we have made inspire us to further active partnership.
I thank our Ukrainian partners for this highly informative meeting. I am grateful to Ms Tymoshenko for the atmosphere of today's discussion as I am giving her the rostrum.
Yulia Tymoshenko's address:
Mr Putin, ladies and gentlemen,
We have gathered here again today, a year after the latest meeting of the Committee on Economic Cooperation, to summarise what our ministries and agencies have done since. It matters tremendously that our joint Economic Committee meets regularly; more specifically, it means that Ukrainian-Russian relations are becoming predictable and stable in all spheres. It would be good to retain this regular schedule in the future.
It is with this thought in mind that we arranged at once for Ukraine to be the venue of the next Committee meeting. I think September would be the best time for it, considering the overall political situation. As we were summarising our work today, we saw major progress and practical achievements in all the 11 priority fields of our teamwork. I think the entire world looked on during the settlement of the problem of natural gas supplies to Ukraine and Europe. Now, we are approaching the signing of a long-term treaty on gas supplies and transits. This treaty, with a ten-year term, will rule out any subjectivism in price-setting. This is of great importance as it also rules out any misunderstandings, which is what proper market partnership is about.
We should continue in this direction now. Today, we have spoken about how to achieve success in this field. To be sure, it implies the modernisation and reconstruction of the gas pipeline network, in which we regard Russia and Gazprom as our partners. As I see it, such modernisation and reconstruction would be impossible without teamwork and knowledge of the amount of gas Russia will export on a mutually beneficial arrangement. It is also essential to realise that Ukraine can be a reliable partner in this respect.
Today we also discussed the prospects for Russian gas to be pumped to Ukrainian storage facilities. We will draft a relevant intergovernmental agreement together and, I am sure, will be able to achieve such decisions on its basis quite soon. I hope this will be the case.
Joint efforts for the Ukrainian nuclear industry are among the pivotal fields of our partnership. I am glad that we have signed a medium-term agreement on nuclear fuel supplies to Ukraine in 2009-2010. This agreement demonstrates that our teamwork is logical. As agreed, we will draft a long-term contract for ten years before July 15. It will envisage all-around cooperation in nuclear power generation. This is essential, because Ukraine hopes to build a nuclear fuel plant in cooperation with Russia. We hope to soon become members of an international uranium enrichment centre, and we know that Russia supports us in this important field. We are very close partners in energy.
I also want to say that an ad hoc team has been established and an intergovernmental agreement will soon be ready on finishing the construction of two units at the Vinnitsa nuclear power plant. This will be another instance of our teamwork.
I am convinced that there are no problems in the energy sector today that cannot be resolved.
As for industrial policy, I want to say only one thing-that the document on partnership and cooperation signed today is essential. It is so important because it envisages privileged terms of cooperative inventory material supplies from Russia to Ukraine and vice versa during the crisis. Such privileges enhance the stability of out engineering companies engaged in aviation and space exploration, and we therefore attach great importance to the document signed today.
I think I should say more about the new fields we want to improve. Today's joint Committee meeting discussed one such field, the joint introduction of nanotechnologies. We heard that the Russian Government is making sufficient allocations to ensure their progress. Nanotechnologies also have Government support and sufficient funding in Ukraine. We have agreed to draft a programme of R&D in nanotechnologies, which will become one of the top priorities of our partnership.
As I see it, all issues discussed today have either been successfully settled for now or have the chance to be settled quite soon, and they open broad avenues for our partnership.
As Prime Minister, I want to stress once again on behalf of the Ukrainian Government and all of Ukraine that we look forward to constructive, predictable and sustainable Ukrainian-Russian cooperation. It is all the more important during the crisis, and consultations such as this promote it in practice.
I thank Mr Putin for his support in tackling all issues, and I thank the entire Russian and Ukrainian team. It has done a fine job, and I expect further success.
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Question: I have a question for both Prime Ministers about the modernisation of Ukraine's gas transportation system. Can you clarify how and on what conditions Russia will participate in the modernisation of Ukraine's gas transportation system, given that Kiev has on more than one occasion declared that it was not considering the option of Russia's participation in the management of Ukraine's gas transportation system?Vladimir Putin: Sorry, who said that they were not considering it?
Response: Kiev. The Ukrainians, the authorities in Kiev. And the second question. What is the form of the agreement that makes provision for Ukraine buying less gas than is specified in the contract? And what guarantees are there that such agreements will be followed? Thank you.
Yulia Tymoshenko: First of all, about the modernisation of the gas transportation system. Almost four years ago a law was passed in Ukraine setting out the ownership of the gas transportation system. It can be owned only by the state.
This law directly forbids the participation of the gas transportation system in joint ventures and other associations. No division or reformation of the enterprise is allowed. That law really did strengthen the state's ownership of the gas transportation system.
At the same time we absolutely understand that without the harmonious partnership that has developed with Russia, between Gazprom and the Ukrainian NAK-Naftogaz, in this area, it would be very difficult to ensure the throughflow of sufficient volumes of gas to the European Union from Russia via Ukraine, and it would be very difficult to guarantee all the joint projects on the construction of new sections of the gas pipeline, such as the Bogorodchany-Uzhgorod, for example. That's why we invited the Russian Federation, as one of our main partners, to participate in the modernisation and reconstruction of the gas transportation system.
As to what form will this participation take. Of course, all the technical components needed to modernise and rebuild the system are produced both in Russia and in Ukraine. And in this case Russia can participate, contributing to the reconstruction and modernisation as the supplier of the necessary components, pipelines, as well as through its technological and intellectual participation, and with its measurement equipment. This can all be built together with Russia in the first place.
Apart from that, other investors may be brought in. If a particular piece of equipment is produced in neither Ukraine nor Russia then, of course, other countries can be attracted with their investment financing on the basis of a return of their investment resources.
Vladimir Putin: It's been said here that Kiev has repeatedly opposed Russian participation in this modernisation. But we have no intention of managing it. That's point number one.
Secondly, what is Kiev? It's a geographical, political and historical notion. It's a city that every Ukrainian, and I assure you, practically every Russian holds dear. It's a city that shares our common destiny, the cradle of our civilisation.
Regarding political leadership, the reality of the current economic situation must prompt clear political and economic decisions. And the reality is this: We are the main and only supplier of gas through the Ukrainian pipeline system. When we see that the possibility of modernisation involving increasing capacity by 60 billion cubic metres is being considered, and no one is talking to us about it, then, the logical question arises, where the gas going to come from? This is the natural question that comes to mind. We suggest that we need to at least hold precursory discussions on this.
At preliminary consultations, and at today's council meeting we discussed this issue in detail, and we have decided that the participation of the Russian side is, nevertheless possible in some form or another. And that fully corresponds to Ukrainian national interests.
I remind you that several years ago it was suggested that an international consortium involving the Russian and Ukrainian sides and their European partners, be created. It was proposed that this international consortium would rent Ukraine's gas transport system, which would itself remain state property. The international consortium would have taken upon itself all the risks linked with modernisation, attracting financing, increasing capacity and so on.
To this day I do not understand what concerns this could raise. I think it is fully in line with the interests of all the participants of the process. But the final word, of course, is Ukraine's, as it is Ukrainian property.
I suggest that this question still could and ought to be put on the agenda for our bilateral and multilateral relations, and by multilateral I mean European consumers, who have an interest in this.
What do we see in the document that was signed in Brussels? It says that it is possible to create a new legal entity that would deal with gas transportation. But we have longstanding contracts with Ukraine's NAK for transit. What would happen to those contracts? Of course, that worries us, how could it not? Naturally, we are holding consultations on this issue, and a regular exchange of views is taking place.
We don't mean to impose, but without taking account of Russian side's interests we do not see how this can be done, and here I also refer to the modernisation, which is linked with the increased volume of transit gas.
This is of course a difficult issue. It requires a repeated discussion. We are prepared to do that, to ensure that there is a harmonious, non-confrontational atmosphere, that we find a solution professionally, responsibly and with regard to both Ukraine and Russia's interests.
Question: I have a question to both Prime Ministers: How accurately are the contracts that were concluded in January being fulfilled? Are the majority of their parameters being followed? Is payment being made on time? And one more question to Ms Tymoshenko: You have talked about your plans for supplying gas to underground gas storage (UGS) sites. This is quite expensive. Have you held discussions about how this gas will be paid for and when it will start to flow into the UGS's? If I may, a third question: You spoke about the construction of a power-generating unit at the Khmelnitsky Nuclear Power Plant. That will also clearly require credit resources, and at the same time there is a discussion about the allocation of a $5-billion loan. Have I understood correctly that this loan will go specifically to Khmelnitsky NPP, or is it intended for something else? Thank you. And, Mr Putin, if you have something to add here, I'd be very grateful.
Yulia Tymoshenko: In the first place, regarding how the gas supply contracts are being fulfilled. Of course, each month we have to adjust, together with Gazprom, the volume Ukraine uses. It goes without saying that today, due to the economic crisis, which has affected both countries, we cannot sustain the demand for those volumes that were specified in the contracts. According to the agreement with Gazprom, we pay for the amount of gas that we actually consumed.
We are consuming less not because we are acting in an undisciplined manner, but simply because of the economic crisis, and the decreased demand. It is very important that both Gazprom and the Russian Government come to meet us on this. We are amending the contract to take into account the economic crisis, adjusting the volume that Ukraine needs.
Ukraine is paying on schedule and in full for all the gas it uses. You phrased the question correctly when you said this has raised the issue of pumping Russian gas into gas storage facilities. And during today's meeting we sought to answer the question of how we can do this. Because when the gas flows into storage it isn't paid for by the consumers. Loans are vital to ensure these reserves.
We discussed several options, and agreed that the Ukrainian side will try to propose an intergovernmental agreement which could extend the payment term for the Russian natural gas pumped into storage facilities. That intergovernmental agreement will make provisions for a stage-by-stage, gradual payment for this gas.
For Ukraine this is one of the most practical and workable ways of paying. But in any case we need to find some clear-cut model of payment. There are no easy answers. We need to work together. Mr Putin displayed his goodwill today and promised to put this question for discussion in order to find a solution that would be acceptable for both sides.
Regarding the construction of two power units at the Khmelnitsky Nuclear Power Plant. The construction tender was won by a Russian company. I think the Russian side can provide the loan for what it builds, or what it supplies that also boosts its exports. What is to be built by the Ukrainian side by way of cooperation will be financed by the Ukrainian side. I absolutely agree with the fact that such international expertise in power plant construction needs to be introduced to Ukraine as well.
It cannot be fully funded by Russia. As was said today, Ukraine will provide 60% of funding. I am fully in agreement with this concept, and we support it.
Vladimir Putin: Regarding the first part of your question, about commitments that Ukraine and Russia took on when the contracts were concluded in January.
These commitments for gas purchases are not being completely fulfilled. Ms Tymoshenko has already mentioned this. In accordance with international practice the contract was agreed on principles of "take or pay". That's international practice. But we have agreed with our Ukrainian partners that smaller gas consumption volumes compared with those specified in our contractual obligations, were not down to any slackness on behalf of the companies involved, but are explained by the objective situation caused by the world economic crisis and the production decline in Ukraine itself.
A similar process is taking place in Russia. That is why we approach this with understanding, and by mutual agreement are not imposing any fines or sanctions. That agreement between Gazprom and NAK Ukraine exists. That's the first point.
The second point, regarding payment. Payment is made regularly, without interruptions. We know that the current economic and financial situation in Ukraine is not the best it could be and that only adds to our feeling of gratitude. We understand that this demands certain efforts from the Ukrainian Government. We hope that continues.
Now regarding the loans you asked about. If I understood your question correctly, you meant the loans for the construction of the two nuclear power units, and whether those are the same loans as have always been discussed?
No, it's not quite like that. We have three possible areas of cooperation here. First, as you have already mentioned, there is the construction of two power units at Khmelnitsky NPP. The approximate cost would be $4 billion. We understand that this is an important project for Ukraine, one that increases the energy security of the Ukrainian economy.
We are grateful that we have been given the opportunity to take part in the tender and for the fact that the tender committee decided in favour of a Russian producer. International practice, and Ms Tymoshenko mentioned this, is for loans to be issued (in practice tied loans) for the supply of equipment that is produced in the country granting the loan. In the current case this is the Russian Federation. This project could benefit Ukraine since it increases its energy security. It benefits Russia since our own businesses will be given work. I repeat, this project is worth $4 billion.
Regarding the gas flow into UGS, this is a very difficult issue, since the volumes are very large, 19-20 billion cubic metres of gas, which could flow there, at a value of $5 billion. This is the second issue. And it requires additional research, investigation, and consultation. As of today, there is no final decision. There is an understanding of the terms on which we could continue to hold negotiations. But this requires additional joint work.
And the third question is budget support. Those are the three possible areas.
Question: I have several clarifications to ask of Mr Putin. What you said regarding the modernisation of the gas transportation system, are we to understand that Russia thinks a reconsideration of the documents that were signed in Brussels is necessary?
Vladimir Putin: We do not think anything of the sort, we are simply saying that if our Ukrainian partners want to increase the capacity of their GTS (gas transport system) by more than 60 billion cubic metres, then they need to get that gas from somewhere. No one is going to bring the gas in buckets. That means they need to discuss this with the Russian Federation, with Gazprom, and work out together how this can be done.
Response: And with the EU, and with those parties that signed those documents?
Vladimir Putin: The discussions can include the EU, the other countries that have an interest in this project and can make a positive contribution to ensuring an overall result is achieved. We are now talking about pumping Russian gas into UGS. This throughflow is valued at $5 billion. Go to Brussels.
Response: And what?
Vladimir Putin: Take $5 billion and pay Gazprom, and that's it. And the problem is immediately solved. After all, the question is about us funding this issue.
Yulia Tymoshenko: I'd just like to say a few words in answer to this question.
There has never been any question of us modernising or rebuilding the gas transportation system without Russia. That question never came up. We are talking about the fact that there is a declaration on possible financing for this process from European banks - the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank. That's what it's about.
I am certain that we will find all points of common interest on which we can base this joint work and together see the potential of using the gas transportation system to supply Russian gas to European consumers.
I would like to stress that the law that I mentioned earlier concerns the declaration, and other forms of alienation of ownership - concessions, renting the gas transportation system - this law that was passed in Ukraine directly forbids any such action, be it concessions, leasing, privatisation, or any other transformations.
But nonetheless I think that in this case we will find a way of building our work together on the basis of cooperation and on the basis of mutual efforts towards modernisation and reconstruction. I am certain that everyone understands that it is not possible to use Ukraine's gas transportation system without Russian gas.
Response: That was simply a small point of clarification, to which I expected a very short, laconic, answer. I still haven't asked my question.
Vladimir Putin: I think you should be satisfied. Or is that not enough for you?
Response: Absolutely. But my question was about something else. You said that there is an agreement between Naftogaz and Gazprom about the reduction in gas supplies...
Vladimir Putin: Not about the reduction, it is about not imposing any fines.
Response: Could you tell me please when this agreement will be sealed in a document form? When will the document be corrected and in such a form as to...
Vladimir Putin: It exists as a document. The contract allows the option of not imposing fines, and that is what Gazprom is doing.
Response: So today you can say that Russia will not impose fines, or take similar action, should there be a 20% fall in gas demand?
Vladimir Putin: The fines that could be imposed on the Ukrainian side take into account the $2 billion for gas not accepted in April. No sanctions are applied.
Response: Will they not be applied in the future?
Vladimir Putin: No.
Response: And could you clarify what other options for gas payment Ukraine has for the gas supplies to its storage facilities, in addition to the option that this will be payment for future transit?
Vladimir Putin: You are talking so well about this, just like a gas expert. And you have got to the core of the issue, which is linked also with the modernisation of the gas transportation system. Just now you suggested one option for payment. That is payment by Gazprom for future gas transit. Transit would be paid for several years in advance, and payment should be made to Gazprom for the gas injection. But if Gazprom pays for transit several years in advance, and then the Ukrainian gas transit system undergoes changes as specified in the above-mentioned protocol, and if instead of Ukraine's NAK there is another company that will deal with Russian gas transit, then who will be held responsible?
You're scratching your head now. Just as we have been doing since we first saw the document. Do you see? That's what the issue is about. And it is not linked with any evil intentions on the part of Gazprom or the Russian side. We have to understand what we are talking about, where we will get the resources from, be it gas, or material and financial resources, and how we will build a financial relationship with each other.
And so you have just told me - pay for future transit. Suppose, we have paid $5 billion. And what if Ukraine's NAK ceases to exist? And another company appears instead. Who do we get the money back from? And wouldn't this worry you? That is what Ms Tymoshenko and I have been discussing. Discussing rationally, professionally, without any noise or fuss. But no solution has been found yet. There are some indications that we will be able to find a mutually acceptable solution. But it is too early to speak about that.
Yulia Tymoshenko: And in order that we have guarantees for the long term, for the foreseeable future, we have suggested that the intergovernmental agreement be discussed as an option, in which the Government takes responsibility for the country. It is those responsibilities that are irrevocable in terms of international law. And I think that in the near future we will be able to present such a project for mutual consideration.
Question: I have a question to Ms Tymoshenko. Ms Tymoshenko, I am a correspondent with Channel One. Viewers quite often phone us from Ukraine and ask why the channel's broadcasting has been cut, even for cable viewers, not just regular broadcasts? And another question, how would you comment on the information that keeps appearing in the press about the fact that Ukraine continues to supply arms to Georgia, in spite of those events that took place in August?
Yulia Tymoshenko: I am certain that the last assertion has nothing in common with reality. I would like us all to cooperate in peace and harmony, and there should be no such things that could divide our countries. There are currently no such supplies. And I think that in the near future none will be needed.
Response: And Channel One's broadcasts?
Yulia Tymoshenko: I think that it is a disgrace. In the 21st century, access to information sources in the world is already so free that it is impossible to isolate anyone from anything. And I do not support any decisions or actions that could be taken to limit access to the information sources.
Vladimir Putin: Is that all? Thank you.
Yulia Tymoshenko: Thank you very much.