Opening address by Prime Minister Vladimir Putin: 

Good afternoon, ladies and gentlemen.

The Committee on Economic Cooperation between Russia and Ukraine has ended its fifth meeting.

I would like to say that dialogue between the Russian and Ukrainian Governments is developing dynamically and positively. The economies of our countries are closely connected, as we all know, and regular meetings on all aspects of our business cooperation clearly meet the common interests of Russia and Ukraine.

The talks today were attended by the heads of several ministries and departments, who discussed interaction in different spheres, including nuclear and other power generation, trade, aircraft manufacturing, space exploration, agriculture and transport.

We also discussed the global financial crisis and ways to restore trade to the previous level and ensure its sustainable growth.

Bilateral trade has plummeted this year, as I have said, first of all because of the crisis. It is in this context that we discussed ways to lift obstacles hindering the development of Russian-Ukrainian economic and investment cooperation, and spotlighted the importance of ensuring fair competition.

We have also agreed to instruct relevant departments to hold consultations. I would like to tell Ms Tymoshenko that I have issued corresponding instructions to Russia's Economic Development Minister.

As expected, we discussed cooperation in the gas sphere. Our countries have an effective interaction mechanism and practical agreements and contracts in this sphere. Strict compliance with them will ensure stable and uninterrupted work of the gas transportation systems of both Russia and Ukraine.

We wholeheartedly hope that all signed agreements will be honoured. For our part, we can guarantee compliance with them. We want to celebrate the New Year's Eve without shocks.

I would like to tell you that the Ukrainian Prime Minister has raised several questions connected with the crisis. We agreed to meet the Ukrainian sides halfway and to adjust some of our previous agreements. I believe that their formalisation will preclude any problems in either country.

We also discussed such a crucial sphere as nuclear power generation, where we have accumulated a wealth of effective and mutually beneficial cooperation. The goal now is not to lose a grain of it because of passing market considerations because risks will be too big in this case.

We were happy to register progress in aircraft manufacturing, in particular research and development and joint manufacturing of aircraft equipment. We also discussed cooperation in space exploration. However, we must apply additional joint efforts to ensure the maximally positive use of the intellectual and production capacities created in this spheres and to expand cooperation.

Of course, the talks were not limited to trade and economic problems. We also spoke about other spheres of Russian-Ukrainian cooperation, first of all its cultural aspects.

We focused on cultural and scientific cooperation. I would like to remind you that we will mark 150 years since the birth of writer Anton Chekhov in January 2010. We will certainly discuss this event. Ms Tymoshenko has invited me to a business dinner and I think we will have enough time to speak about possible joint events within the framework of these anniversary celebrations because the writer had lived and worked for a long time in Yalta, Ukraine.

In May 2010, the people of Russia and Ukraine will mark the 65th anniversary of victory in World War II. It is our duty to celebrate it jointly, showing respect for our veterans and out common history. Victory in World War II was a signal event and one of the things that will keep us united forever.

On the whole, our talks today passed in an open and constructive atmosphere. The decisions we have taken are spearheaded into the future.

We worked constructively today to find compromises, and we have found them. We hope that they will promote the development of bilateral mutually beneficial partnership and cooperation between Russia and Ukraine.

In conclusion, I would like to express my sincere gratitude to Ms Tymoshenko and all our Ukrainian partners for their hospitality and for creating good conditions for businesslike talks.

Thank you.

Question: I have a gas-related question. You said you have reached an agreement today to adjust some of the existing agreements to avoid future problems. Could you elaborate on this, please?

You seem to be satisfied with the contract signed early this year. Therefore, it would be interesting to know your opinion on the open letter Viktor Yushchenko sent to the Russian President today, in which he says those contracts were unfair, especially with respect to underpriced transit services. This is a question for both PMs.

Mr Putin, if Ukraine eventually raises gas transit fees, will Russia take any action in response? And finally, about the loan, is Russia considering issuing a loan to Ukraine for its pipelines upgrade? Thank you.

Vladimir Putin: About what we agreed on and what the problem is in our view: our Ukrainian colleagues have repeatedly voiced concerns over the penalties for failure to purchase the agreed amounts of gas under take-or-pay contracts.

This is an accepted international practice. Gazprom has such contracts with all European partners, not just Ukraine. I would like to stress this - it is not an exclusive approach to Ukraine. It is a general rule.

Second, we all understand that natural gas consumption has shrunk as both Ukrainian and Russian economies contracted due to the global recession. Therefore, considering the special relations between Russia and Ukraine, between Gazprom and Naftogaz, we decided not to impose these penalties. Let me repeat this publicly - no sanctions will be applied.

Third. What do we have to do to avoid a similar situation next year? We decided today that, despite the earlier agreements on purchase volumes, Gazprom and Naftogaz will adjust the amount for next year. No extra gas in the contract, no sanctions. This is a very simple decision, which suits everyone and does not violate existing contracts.

About Ukraine's plans to raise transit fees, and how Gazprom will react if it does: Ukraine will raise the fees as stipulated in the contract signed early this year. We agreed from the start and informed the public in both countries that for 2009 Ukraine left last year's transit fees unchanged, while Russia offered a 20% discount relative to the European price. Next year, there will be no discount, and no cheap transit. Transit fees will in fact rise by a bigger margin than the Russian supplies price. Russia will pay 60% more for shipping its gas to Europe across Ukraine. We know that; we have agreed to it consciously. This isn't strange or illogical: I repeat that all the changes are in accordance with the contracts. Gazprom agreed to it knowingly, and there is no confrontation here.

There is something else I would like to say. Indeed, it is the first time over the years that Ukraine is abiding by all of its obligations, fully and consistently. This is a very important factor of energy stability in Europe. I must give credit to the Ukrainian Government for sticking to its contractual obligations.

Incidentally, the pricing formula as well as transit fee formula are the same that are applied in Europe. They are not anything different or special or discriminatory for Ukraine. In this sense, Ukraine has simply fully integrated in the system of relations Gazprom has been building with other European partners for the past two decade.

I am confident that we must value and carefully preserve what we have achieved by now, so as not to slide back into crisis and chaos. We are absolutely determined to honor our commitments.

Yulia Tymoshenko: I can only add a few words to this. First, I'd like to reaffirm that Naftogaz and Gazprom have signed a standard contract. Ukraine has the same contract with Russia as any other European country. It is pointless to call it good or bad because it is simply standard.

Ukraine is an independent country. Genuine sovereignty can only be based on pragmatic, market relations with other countries, including our neighbours. Ukraine has signed a European market contract for the first time in 18 years and this achievement unequivocally strengthens its sovereignty. These are relations between equitable partners.

At the same time, I'm pleased to note that our positive relationship has helped Ukraine receive a bit easier terms during this crisis year. Russia has given Ukraine 20% off the market price of natural gas, and, as a consequence, will not fine it. We have agreed to support each other in 2009, which is a difficult year.

In this context some developments around the contract in Ukraine are not quite understandable. Indeed, many politicians in Ukraine, including high-ranking officials, do not like these contracts. I regret to say that in previous years the gas market rested on megacorruption. Bypassing budgets and public companies, billions of dollars found their way into the pockets of the mediators which our two governments removed early this year.

Many politicians in Ukraine do not like this. They have stopped making huge amounts of illegal money. But the partnership between Russia and Ukraine implies a lack of any corruption in our relationship. Many want to return to what they thrived on, and for this reason they criticize, put down and discredit these contracts, calling into doubt the governments' efforts.

I would like to emphasize once again that Gazprom offered Ukraine one of its lowest prices this year. Moreover, starting January 1 of next year, Ukraine will receive market price for the transit of Russian gas to Europe via its territory for the first time. Naftogas will gain billions of dollars in profit. I should think all Ukrainian politicians should appreciate such contracts as well as a national independence, sovereignty and power.

Vladimir Putin: In fact, I find it strange that this question is even being raised. Several years ago, when I was president, I extensively discussed this subject with Yushchenko. I remember him saying: yes, it will be difficult but Ukraine must switch to market pricing as this is one of the manifestations of independence. This is true. It is a manifestation of sovereignty and independence. But now when this has been done, it seems unjustified for some reason. This sudden about-face looks strange, to say the least.

Question: Mr Putin, Ukraine will soon hold presidential elections. Quite possibly, there will be some changes in the national administration system. Ukraine could also have a new Prime Minister by the time the next meeting is held in six months.

What do you think about the recent work of your Government and that of Prime Minister Tymoshenko? How could this influence the level of Russian-Ukrainian relations?

And a small question concerning fines. Considering the latest statement issued by Gazprom, there is a small discrepancy today. Will the fines be applied later or not? Does your current statement imply that the issue of collecting fines for failure to purchase the agreed amounts of gas in 2009 has been settled completely?

Vladimir Putin: Look, contracts are governed by the international civil law. Gazprom has been ordered not to collect any fines from the Ukrainian partners. I have confirmed this once again to-day. . This is the first point. They must sort things out under the contract. I repeat, there will be no fines. This is my answer to the last part of your question.

Speaking of assessments, I am not supposed to make any. It is up to the people of Ukraine to make such assessments. We have always had a constructive relationship with the Government of Ms Tymoshenko. I believe Russian-Ukrainian relations have become more stable and stronger during our cooperation.

Question: Mr Putin, are you aware that Georgian President Mikhel Saakashvili has visited Kiev today?

Vladimir Putin: Do you really think I follow all his movements?

Question: He has held talks with President Viktor Yushchenko, has presented an award to him and has also remembered the victims of the 1932-1933 Holodomor famine in Ukraine. What do you think about this coincidence?

My second question is about the economy. Could you say a few more words on the situation in the aircraft industry and our cooperation in this sphere, with reference to the statements made by Mr Yushchenko about some problems here?

Vladimir Putin: You see, I have very little to say on your first question. I know what we have been doing today. As you know, our delegation comprises my First Deputy and two more Deputy Prime Ministers in charge of energy, industry and transport. As I have already said, we have discussed cooperation in the sphere of space exploration, engineering, energy and aircraft construction today. This I can say for sure. Moreover, we have reached an agreement on some issues of vital importance for Russia and Ukraine.

I don't know what our colleagues have been doing. Still I think the two presidents can always discuss something and go somewhere. The soldiers have recalled bygone days and battles lost by them. My counterpart has also invited me to have dinner together. We will eat together. I said we will discuss Chekhov, for instance.

What else can one suggest? Both presidents should better dine without ties because ties are pretty expensive today. Well, you know what I mean.

Yulia Tymoshenko: Mr Putin, I can surely dine without a necktie.

Vladimir Putin: Mr Yushchenko's guest could eat another tie.

Speaking of aircraft construction, this complicated issue is not so funny but is very important for Russia and the Ukrainian aircraft industry. Ms Tymoshenko has proposed exchanging minority stakes of the newly established corporation and our United Aircraft Corporation (UAC).

We think this is possible. At any rate, we would, undoubtedly, profit if we pool our efforts in this vital high-tech sphere. But we must agree on the principles of this cooperation.

I would like to draw your attention to the fact that the UAC costs an estimated $3 billion. Moreover, a Russian bank had bought a 5% stake in the European Aeronautic Defence and Space Company (EADS). I want to stress that the stake will also be transferred to the UAC, considering its relations with EADS, by agreement with our European partners. Both companies are also creating excellent cooperation opportunities.

That's why we must assess mutual contributions, even if we speak about minority stakes. On the whole, I think we are moving in the right direction, and that such movement will create a good foundation for designing and manufacturing aircraft and, most importantly, selling them on our national markets and third-country markets. I believe this is possible. I have already issued the relevant instructions. My First Deputy, Igor Shuvalov, will tackle this issue. We will examine this proposal, which I think is good.

Question: This year both Russia and Ukraine were affected by the global financial crisis and the California flu pandemic. Could you please tell us how well the Russian and Ukrainian governments have been able to develop a sound strategy? What were some of the missteps and what were the positive aspects in this process?

Mr Putin, you said that you are comfortable in working with the Tymoshenko Government. Could you tell us what your most successful joint endeavour was? What do you consider to be a triumph for both governments?

Vladimir Putin: Stable relations and fulfilment of respective obligations. It seems to me that, this, you know, always was somehow... I don't want to use the wrong words...

Ukraine is a European country with a population of 45 million, and all the time recently someone is denying something, leaving something unsaid, something unpaid and claiming some kind of exclusivity as a country seeking some sort of consistent support from outside.

But if we are to talk about the growth in self-awareness, statehood and sovereignty - the former are simply incompatible things. In my view, the Tymoshenko Government has managed to bring the country into a state of self-reliance and genuinely strengthening sovereignty. I think that that's the way it is.

Because when a country depends all the time on some kind of external support and cannot exist without it, what kind of sovereignty is there to speak of? But this is strengthening sovereignty in a way that we welcome, because it is fulfilment of mutual obligations. This means stability in our relations.

You know, for a year we have had difficult talks, and Ms Tymoshenko constantly raised an array of issues with me. She is a difficult partner in conversation in the sense of coming to a final agreement. But we were always able to come to an agreement. And although it has been difficult, obligations are nevertheless being fulfilled. And that's the main thing.

Question: Ms Tymoshenko, and what do you consider to be the greatest achievement?

Yulia Tymoshenko: I think that there are two achievements. The first is that we have correctly aligned all of the tactics of our cooperation and we have good communication. We can react in an absolutely timely manner to any problems that arise. Consequently, these problems are duly resolved. This is good and efficient functioning of the two governments.

And the second achievement is that we have started to correctly align strategy. For decades ahead. By laying foundations in every significant industry for decades to come - aviation, energy, the gas sector, space exploration and many others. This is, it seems to me, what our nations want. Comfortable, dignified, pragmatic and equitable cooperation based entirely on market conditions. This is real freedom. And this is real partnership.

These two achievements, it seems to me, are very real for our two countries.

Following the Russian-Ukrainian talks, the Prime Ministers of both countries signed a protocol on the fifth session of the Economic Cooperation Committee of the Russian-Ukrainian Interstate Commission.