President Vladimir Putin on his visit to Italy

Submitted on Thu, 10/16/2014 - 22:00

President of the Russian Federation Vladimir Putin answered  journalists’ questions following his visit to Italy


I am ready to answer questions pertaining to the work that was done here over the past day and a half.

I want to start by saying that overall, in my view, this was a fruitful visit. I was able to talk with many of my colleagues, and not just within the framework of the ASEM Summit, where your humble servant talked about how we view the development of relations in the world and between different continents in fighting today’s issues pertaining to terrorism, infectious diseases and other current problems, but also during bilateral meetings with representatives from our partner nations in Asia and Europe. Overall, these talks were substantive and comprehensive, and I am certain they will help develop relations between Russia and its partners in Asia and Europe.

If you have questions, I will try to answer them.

QUESTION: Mr President, today you had several meetings on the sidelines of the summit. How do you assess the results of those meetings? We know you discussed Ukraine; what can we expect next?

Also, a question concerning the Ukrainian gas issue. Mr Poroshenko stated that you were able to reach certain agreements, and then added that you were not able to do so in all areas. Could you tell us about these talks in more detail?

VLADIMIR PUTIN: First, it is true that we spent a great deal of time discussing the Ukrainian problem, or rather, Ukrainian problems, as there are many of them. We talked about issues of security, a full ceasefire and disengaging the conflicting parties. We almost went as far as comparing our positions on maps. Although here, of course, we need first and foremost to rely on the opinion of experts and participants in the negotiations, and Russia, as you know, is not a participant; we can only help the conflicting parties resolve the problems that emerged earlier.

I would like to draw attention to the following. First, I agree with my colleagues that the Minsk agreements should serve as the benchmark in the settlement of the Ukrainian crisis. I want to note that these agreements, unfortunately, are not being fully fulfilled by either side. In other words, neither representatives of the Novorossiya self-defence forces nor Ukrainian representatives are currently complying with the agreements fully for a range of reasons. These include both objective and subjective reasons. However, I believe that all sides will strive to fully carry out these agreements.

Second, the line of demarcation should be finalised and implemented. That is precisely what will provide the opportunity to fully end shelling and the killing of peaceful, innocent people. This needs to be done as quickly as possible.

I have said that there are objective and subjective issues. For example, the self-defence forces were supposed to leave certain towns, but it turns out that some of the fighters in fact come from those towns. They say, “We cannot leave because our families – our wives and children – live there.” This seems like a subjective matter, but it is very serious. So it cannot be ignored. The Ukrainian side is aware of these problems. We will try to help, mediate and seek acceptable solutions.

The same is true of other places where members of the Ukrainian armed forces are still present, and in accordance with the Minsk agreements, they should have left, but they are not leaving yet. That is the first part.

The second part of the problem has to do with the law that was recently signed by the President of Ukraine. I know the reaction and opinions expressed by Novorossiya representatives. I suppose this is not an ideal document, but ultimately, it is a step in the right direction, and we count on it to also be used for a final solution to security problems.

There are some issues with monitoring the demarcation line. And here, we have made rather good progress, in my view, because we agreed that we will use unmanned aerial vehicles, modern equipment that allows us to determine the location of strikes, if they occur.

As far as the drones are concerned, Italy, France, and Germany have expressed willingness to work together on this, and Russia is participating as well. Experts will need to gather soon in Vienna within the OSCE framework and work out the technical issues. This is roughly the set of problems that we discussed with regard to security.

As for the gas-related problems you mentioned, yes, we gave a lot of attention to these issues, and made progress here as well. That progress pertains to our agreement with our Ukrainian partners on the conditions for renewing gas supplies to Ukraine (at least for the winter period) and on all the parameters for this agreement.

It is an issue of the National Joint Stock Company Nadra Ukrayny’s cash shortage. These are objective circumstances. Russia cannot take on any additional risks. The problem is that, as you know, we issued Ukraine a loan at the end of last year worth 3 billion dollars. According to our assessments, Ukraine owes 4.5 billion dollars for gas that has already been supplied but not paid for. Gazprom transitioned to a prepayment model and, in accordance with the contract, can no longer change the conditions of the supplies.

We understand our Ukrainian partners’ financial situation; we see that they truly do have problems and that they have a cash shortage. We also, once again, met them halfway to a certain degree regarding the conditions and volume of payments for the gas supplied earlier, in other words, on their debts, and expect that here, our European partners, the European Commission, will also help and, in my view, should even give Ukraine a boost and help resolve this cash shortage problem. There are certain instruments: either a bridge loan, or carrying over another IMF tranche, or a first class guarantee from the European Bank.

Go ahead.

QUESTION: A clarification concerning the ceasefire. Many volunteers from Russia arrived in the conflict zone. Most of them joined the Novorossiya fighters. Some even managed to get into the National Guard. In order to deescalate the conflict, what will happen with these people when they go back, if there is peace? In essence, they are breaking the law. They are almost like mercenaries. Is some kind of amnesty or guarantee possible?

VLADIMIR PUTIN: I think that if such problems occur, then they will need to be resolved in accordance with existing legislation. But I want to point out that it’s not just Russian citizens fighting in Ukraine. European media also report that there are people from Europe fighting in the conflict zone, and indeed, on both sides. I think that my colleagues and I will come to an agreement on how to proceed in the future. What’s most important is to end the bloodshed now.

QUESTION: Mr President, I would like to understand how the sanctions currently reflect on the Russian economy. The Euro is rising against the dollar, and both the dollar and euro are rising against the ruble; gas prices are dropping. What are the future prospects? Will certain social programmes be cut? What is the general margin of safety?

VLADIMIR PUTIN: The Russian budget is based on a calculation of $96 per barrel. Currently, the price is lower than $96, but I do not see any tragedy in this. First, this is now, and I think the price will even out and adjust. Moreover, I don’t think any of the serious market participants are interested in maintaining it at a low level – $80 or less, or just a little higher.

If we take Shell, the oil extracted in the United States, their break-even rate is $80. If global prices stay at a level of $80, then production will collapse. The main oil-producing nations also have a budget calculated based on a rate of $80-something, nobody there is interested in oil prices falling under $90 either. There are adjustments related to objective circumstances, first and foremost, the drop in the growth of the global economy, consumption is simply declining, and reserves in the United States have increased.

But we will see; forecasting is actually very difficult. In any case, I want to stress that Russia, the Russian Government, will undoubtedly fulfil all its social obligations. We have enough of a safety margin. Maybe we will need to adjust something in the budget. Maybe. Maybe we will even reduce some of our spending. But this will certainly not involve cuts in social spending. The Government of the Russian Federation will fulfil all its social obligations, and it is capable of doing this without any particular losses.

But naturally, we will not allow macroeconomic indicators in Russia’s economy to worsen. We will not follow the path of a drastic increase in the budget deficit.

QUESTION: I would still like to find out how you assess the drop in the ruble. You spoke about it quite calmly just now. You talked about oil and the drop in the global economy. Why do you feel this is happening? To what should we give credit, so to speak? Is it the sanctions? Is it oil? If it is oil, there is a theory out there that oil prices are manipulated by Saudi Arabia and the United States. This theory is very popular in Russia. I would like to hear your opinion on this matter.

VLADIMIR PUTIN: Regarding the Russian national currency exchange rate. Of course, one way or another, it is connected to the state of the economy, and the Russian economy, one way or another, is tied to the foreign markets, the international and global situation, particularly with regard to trade, oil and energy resource prices. Prices have declined, and thus, it is reflected on the economy and on budget revenues, and therefore, the national currency.

At the same time, I want to stress that Russia is one of the nations with the largest gold reserves. The Bank of Russia will pursue a balanced financial policy. This means that it will ultimately use elements of a floating exchange rate, and will not spend all its reserves mindlessly. But the reserve is sufficient to adjust the level of the national currency. I do not foresee any dramatic changes here. I am confident that when oil prices realign, the national currency exchange rate, the ruble exchange rate, will also shift.

QUESTION: Have the US sanctions had an impact?

VLADIMIR PUTIN: No, the sanctions… Of course, they’ve had an impact on the overall backdrop of the global economy, which is not so strong in any case; however, they are not a decisive factor. The decisive factor is the overall state of the global economy, which has not been able yet to get back to stable and efficient growth after the crisis of 2008-2009. All these years experts have been saying that the world economy is still in a state of stagnation and recession. Therefore, there has been nothing new in the past years. It did not become much better, although it did not become much worse either.

If you recall the expert assessments made three to four years ago, they used to say that there will be growth, but it will be very insignificant, gradual and even similar to stagnation in a way. That is exactly what is happening. Those who said so were right. However, I am more of an optimist than a pessimist and I believe that it will all gradually smooth out.

As for conspiracy theories, conspiracies are always possible. However, in this case they hit the conspirators the hardest, if they do exist. I have already mentioned that the budgets in the main oil producing countries are also based on oil prices, around $85-90 a barrel, I believe. That is one thing.

The other is the production of shale oil. The profit rate here is very high, and the price drop on the world markets will deal a very heavy blow to this type of activity in the United States as well. I do not think the American oil industry is interested in seeing this happen. We will see how things develop in the future. I believe there will be a positive adjustment.

REMARK: And what if it falls to $41…

VLADIMIR PUTIN: At this point, these are only speculations. There were times when oil prices fell even lower, the fall was greater, but we will not proceed from this premise.

In that case, we will use our reserves, the Bank of Russia has over $400 billion, and the Government of Russia has two reserve funds of almost $100 billion each. Therefore, overall, we feel quite confident; the world economy will continue to grow anyway, which means that the demand for energy resources will grow one way or another.

Finally, the most important aspect. Those sanctions we are talking about on the one hand do have a negative impact on us, of course: the markets may be closed to our financial institutions, and so forth. While on the other hand, this makes us work harder. If we need some high technology very badly and we cannot buy it, we will have to make it ourselves, and Russia can do it.

Russia can do just about anything, though this does require investment, the development of corresponding fields of research, of applied sciences and production. I assure you that I can see this happening. This is the other, positive side of the coin called sanctions.

QUESTION: Mr President, now that a very fragile peace has been established in Ukraine, can we say that Russia has failed to provide the necessary assistance to Donetsk and Lugansk? Many people were killed there and the infrastructure was destroyed. Will Russia help in any way to restore this infrastructure? Or this is a job for the Ukrainian authorities?

On the other hand, if, as you have said, they fail to find additional funds for gas, and the winter may be cold, if some cities in Ukraine go without heat, would Russia be ready in this situation to ship gas to Ukraine on credit?

VLADIMIR PUTIN: Russia will not ship anything on credit anymore. I will tell you why. First, this situation requires certain discipline on the part of the customer.

Second, as I said, we already lent them $3 billion at the end of last year. Our partners owe us $1.4 billion for the last two months of last year – November and December. This $1.4 billion is indisputable. Nobody is disputing last year’s supplies, but nobody wants to pay either.

$500 million remain to be paid for the first quarter of this year. Then, even as we were selling them gas at a knock-down price, you might say – $268.5 for 1,000 cubic metres, they still failed to pay us $500 million. They never paid anything for April, May or June – nothing! They simply stopped paying. All this adds up, according to our estimates, to $5.5 billion, if we take the price Ukraine was to pay for April, May and June at $485. However, we are willing to give them a $100 discount on that rate. In that case, the overall debt will come to $4.5 billion. We are being quite accommodating.

In addition, Gazprombank has given Ukraine a loan, or rather it has given Nadra Ukrayny a $1.8 billion loan. It has every right to require repayment, because one of the conditions was regular payment by Nadra Ukrayny, but they are not paying.

The same Gazprombank gave a $1.4 billion loan to a private business for the chemical industry. $4 or $5 billion worth of gas have been shipped and locked away by the Ukrainian Government in gas storage facilities. They are not letting the chemical industry use this gas, they keep it in storage. As a result, the chemical industry comes to a standstill. This, of course, is Ukraine’s internal affair. While our problem is easy to add up: $4.5 billion plus $1.8 billion, plus another $1.4 billion – that comes to around $10 billion. We simply cannot let this debt grow anymore.

I believe that in this situation our European partners should, as I have already said, lend Ukraine a helping hand. We are obviously helping, but we are taking a risk, we have taken on the risk. The Europeans should also take on some of the risk. The amount in question is minute compared to what we have lent Ukraine. It could be a bridge loan, or some first rate European bank could provide security – the amount would be several times less than what Russia has already provided, as I have said.

QUESTION: Russia is now strengthening relations with APEC states, with China, Japan and South Korea. How do you assess your current relations with Japan? Japan has joined the current sanctions against Russia.

VLADIMIR PUTIN: We are expanding our contacts with countries in Asia and the Pacific. This is not a political decision. This is because we have long been working in this direction, bearing in mind the economic growth rates in the Asia-Pacific region. It would have been foolhardy not to take advantage of the economic growth in China, or the technological advancement of Japan, or of our long-term good relations with the Republic of Korea, bearing in mind that our relations with North Korea are equally friendly and we could and should act as a mediator in resolving conflicts between the two states on the Korean peninsula. This is in our interests because we are Korea’s neighbour. Therefore, this is a path we have chosen a long time ago, and as I have said, it is not for political reasons that we are moving along this path.

Over to Japan. In the past few years, our relations with Japan have been developing steadily, both economic and political cooperation, including the search for a settlement in connection with the peace accord. It is unfortunate and did not happen on our initiative that Japan has practically stopped all political contacts. This has not been our choice, and we are ready to continue our relations with our friends in Japan, but the ball is in their court, as they say.

This is all. Thank you very much.