Speech by Foreign Minister Lavrov during a meeting with representatives of the Association of European Businesses in Russia

Submitted on Tue, 10/09/2012 - 22:00

Moscow, 8 October 2012

Dear Mr. Hartmann,

Ladies and gentlemen,

I am glad to have another opportunity to present in front of the members of the Association of European Businesses in Russia. It has become a tradition, and today we are meeting for the fourth time. We presume that such contacts will help us in building trust and understanding between the EU and Russia.

The issue of trust is now the key issue in the international relations; both in politics and in the economy. Of course, the Russian economy needs to continue gaining the confidence of investors, which means opening new horizons for development, laying the foundation for long-term and large-scale cooperation. "We are completely open to it", - said Russian President Vladimir Putin, speaking on October 2 this year in Moscow at the Investment Forum "Russia Calling".

In today's deeply interdependent world, a serious discussion of any topic is impossible without considering the overall dynamics of global development, with no understanding of the historical period we are now experiencing, which can be described in two words - time for the change. Tectonic shifts are taking place in the international landscape; the new international system is being formed. This process has not been easy; the instability in world affairs is increasing, which is most clearly seen in the Middle East and in North Africa. In general, the danger of strengthening of the conflict potential in the international relations is increasing.

All of this does not help overcoming the crisis in the world economy, which structural problems remain unsolved. Among them are the high level of governmental and private debt, the increase of unemployment rate, fluctuations in prices of energy and food. The pace of economic growth in the EU has slowed down; the recession in some countries has deepened, and the International Monetary Fund has recently cut its forecast for the world economy by five points.

We wish our European partners success in overcoming the crisis. We are confident that in the end the situation could be changed for the better. But it is clear that the simple solutions, which provide a rapid effect for those solutions, are not found on this way; significant and sustained efforts, which involve finding of the new innovative approaches, changing in the model of economic development, will be required. I would like to refer in this connection to Mr. Barroso: European Commission President in his annual presentation on 12 September, 2012 to the Members of the European Parliament said that in times of crisis, Europe needs to find a new direction, new ideas, new thinking.

It appears that an important issue for all of us is what role in these efforts the relations between Russia and EU can have. It is obvious, that he search for the sources of economic growth based on the high-tech innovation is a common and urgent task for Russia and the EU countries. It is important to understand the amount of a major contribution to its solution can make the development and strengthening of the partnership between Russia and the European Union.

Deepening of the relations with EU is a priority topic for us. EU is our largest trade partner, accounting for more than half of Russia's foreign trade. Last year we were at the pre-crisis level in terms of trade - it is nearly $ 400 billion. Around 80% of accumulated foreign investments in the Russian economy came from EU countries. About 40% of our country's foreign exchange reserves are denominated in euros.

Russia’s entry in the WTO has created conditions for the transition of trade and economic cooperation between Russia and EU on a new level; it allowed better conditions of mutual access of Russian and European business in each other’s markets. We treat this as an additional source of economic growth. We are confident, that it is necessary to look at this situation from European Union’s angle.

During the process of entrance to the WTO, an extensive work is done on law reformation and implementation of measures aimed at improving the investment climate and the competitive environment. Particularly we are speaking about the simplification of administrative procedures and customs administration, tax relief regime, fighting corruption, improving the situation in the field of protection of intellectual property rights, improving the quality and transparency of public services. Russian Direct Investment Fund is actively working. It is impossible to name everything; moreover, I am sure that you can feel the positive effect of the measures taken by our own experience.

Of course, much remains to be done. We intend to encourage structural changes, to create conditions for the emergence of new sectors of the economy, look for modern sources of growth, transition to a new technological structure. Our goal is to make the Russian economy more efficient, boost its attractiveness for foreign business, especially in Europe.

We already have the base for these tasks. Russia is one of the world leaders in key indicators of macroeconomic stability. National debt is only about 10 percent of GDP, and the debt to foreign investors is only 2.5 percent. By the volume of gold-value reserves, which is $522 billion, Russia takes the third place in the world. Last year recorded the lowest inflation rate in recent history - 6.1 percent. We expect that by 2014, it should not exceed 5 percent. The influx of investment in the Russian economy in 2009-2011 was around 3 percent of GDP, higher than the world average. All these are the signs of stability, which are crucial in our current environment.

The membership of Russia in WTO would strengthen cooperation with the European Union in the format of the joint initiative "Partnership for Modernization". Under the sectoral dialogues our sides will gradually be bringing together technical regulations, eliminating trade barriers and expanding opportunities for cooperation in scientific, technological and innovation fields. We are glad to note that the majority of EU member states, which have signed separate bilateral agreements on modernization of partnership with Russia, have shown great interest in this work.

The reached level of interaction can, in practical terms, make you think about the implementation of major projects involving business and financial institutions such as Bank for Foreign Economic Activity, European Bank for Reconstruction and Development, and European Investment Bank. This will be discussed on a representative conference on the further development of the modernization of interaction, which will be held October 11-12 in Moscow with the participation of representatives of bilateral partnerships, the business community and experts in Russia and the EU. Today I read that the Federal Space Agency and the European Space Agency discuss the plans to sign the agreement in November this year on joint exploration of Mars, including the launch of appropriate space research station.

I am sure that in the future we can discuss the creation of industrial and technological alliances in areas such as energy, aircraft, shipbuilding, automotive, medical, pharmaceutical, etc. Substantive interaction, based on the synthesis of capabilities, will enhance the competitiveness of our economies, and their adaptation to the new the challenges of a globalizing world. We encourage you to connect to this process.

Of course, not all the issues of bilateral cooperation are seen in Moscow and Brussels equally. Particularly, I am speaking about the preparation of a new standard agreement. The negotiation process is not an easy one. The economic part of the agreement became a “stumbling block”. Our partners are eagerly trying to get as much concessions from Russia as possible, comparing to what was agreed upon Russia’s entry to WTO. This does not suit us. I believe that people, present in this room, better than anyone else realize that it takes time for Russian economy to “digest” new operating conditions in the WTO area.

We consider a new basic agreement as a short framework document, which covers all the key areas of cooperation between Russia and the EU. In our view, this agreement should be directed to the future perspective. Therefore we try to abstain from excessive details, so that the document could easily "adjust" to changing realities or the emergence of new areas of cooperation. If necessary, it will be possible to register the specifics in some sectoral agreements, which would complement the core document.

I think that over time, when the Russian business is fully adapted to the conditions of Russia's membership in the WTO, we could take the next step toward the further facilitation of the mutual access to markets. EU partners are already talking about a free trade zone. We should not rush with this. In any case, in the current work on a new core agreement on any conditions of "WTO-plus", it would be too early to negotiate.

A crucial element which is cementing the Russia-EU cooperation is the energy dialogue of EU-Russia. For several decades, our country is a reliable energy supplier to the EU market. During the "Cold War", and during the period of radical changes in Europe in the 90's of the last century, we always follow all the obligations to our partners. The obvious objective factors such as geographic proximity, availability of the necessary infrastructure are the cause of the complementarity of Russia and the EU and practicability in the establishing in the long term a single energy complex.

Gas supply is ongoing through the North European pipeline. Today its second string is opened. I invite all of you to read the statement of the President of Russia Vladimir Putin on this issue. Before the year the "South Stream" is to be built. The experts from Russia and the EU are working on a "road map" of cooperation between Russia and the EU in the energy field by 2050, as well as in the framework of the Consultative Council of the EU-Russia regarding gas.

At the same time, a number of steps the European Commission complicate the energy cooperation. I have in mind mainly the attempts of retroactive application of the "Third Energy Package" in the violation of contractual obligations of the EU and its Member States to Russia, based on agreements on investment protection. Many questions arise regarding the launching of the European Commission of an anti-trust investigation into the activities of JSC "Gazprom" in the EU member states and the desire of Brussels to realize the project of Trans-Caspian gas pipeline, excluding the international legal and environmental aspects of the situation.

We encourage our colleagues in Brussels to show wisdom and to count their steps several moves ahead in order not to harm the time-tested Russia-EU energy cooperation. In this context, we rely on the understanding and support of the European business.

There are other difficulties in our relationships. One of them is the consequence of the evolution of the EU legislation for the legal basis of relations with third countries. Along with the aforementioned "Third Energy Package" this was manifested in the unilateral steps of Brussels regarding the inclusion of the aviation in quotas trading system in the absence of a decision in the framework of ICAO.

We do not dispute the right of the EU to develop a system of its own instruments. However, these tools cannot have an extra-territorial nature; they must be strictly in accordance with international law and not to complicate the implementation of existing agreements with EU partners, including Russia.

One of the key aspects of our modernized collaboration is the facilitation of contacts between people, including the related work on the facilitation of the visa regime with a perspective to its complete abolition. Cancellation of visas will be a powerful incentive for the further rapprochement between Russia and the EU, and will open new horizons of cooperation to this, I am sure, business, and citizens of our countries strive for. In July this year, the heads of the union of the leading economic operators of nine EU Member States, acting on behalf of more than one million businesses, sent an appeal to the national governments and parliaments, as well as to the European Commission and the European Parliament with a call to remove visa barriers with EU neighbors, including Russia as soon as possible.

WE fully agree with this appeal. In the XXI century Europe, the visa problem, which is seriously hampering the international entrepreneur activity, economic growth and the creation on job places, should be written off completely in the archives of history. We strongly believe that we can achieve this goal in the next year or two. I am sure that Russia and the EU should set such big goals, and not be limited with unnecessarily modest steps; considering the fact that there are all prerequisites for the objective nature of the full and speedy implementation of our "road map" of Russia-EU visa-free dialogue – the joint steps to transition to a short-term visa-free travel for citizens of Russia and the EU.

If we talk about the possibilities of today, it is worth mentioning the work on the project regarding the upgraded Russia-EU agreement on visa facilitation, which provides the issuance of multiple-entry visas valid for five years for business people and for the representatives of business organizations. The sticking point remains the question regarding the inclusion in the document the point on the visa-free entry for the people who owns biometric passports, as was done in the agreement between the EU and Ukraine. We hope that the EU authorities will listen to our arguments, and we could sign a document that makes the life easier for both you and your colleagues in the European Union and Russia in the near future.

Overall, the analysis of the differences of opinion between the European Union and Russia on various aspects of bilateral relations leads to the conclusion that the differences not after all the others are related to the lack of a common vision of the strategic prospects for partnership. I think that the business community representatives could stimulate the discussion with governments about how we want to see the relations between Russia and the EU in 5, 10 or 20 years. Such a shared vision would create a favorable atmosphere for solving all-European problems, bearing in mind not only the development of partnership between Russia and the EU, but also moving to a system of equal and indivisible security on the European space.

The President of Russia Vladimir Putin proposed the initiative for creation of a single term economic and human space from the Atlantic to the Pacific in the near future. Russia and the European Union have a unique set of complementary advantages, such as scientific and technological achievements, natural and financial resources, land, education and the qualification of the population. Their union could be a powerful source of success in today's highly competitive world for the EU and for Russia.

With the prospects of cooperation between Russia and the EU, topic of Eurasian integration is connected. As you know, Russia, Kazakhstan, and Belarus formed the Customs Union and the Common Economic Space. On 1 February this year Eurasian Economic Commission started working - a single permanent regulatory body. Extensive powers in areas such as customs tariff and non-tariff regulation, customs administration, technical regulation, the establishment of trade regimes with third countries were transferred to it. The scope of the powers of the Commission will be expanded as we move towards the creation of the Eurasian Economic Union on 1 January 2015. We will move slowly to this goal, carefully analyzing the process of integration and consulting the best international practices, including, of course, the European Union the experience.

We are convinced that the development of the Eurasian integration brings the significant advantages for the foreign trading partners, particularly from the EU member states. After all, foreign companies now have an opportunity to work in the single market of the Customs Union, which unites 165 million consumers, on the unified transparent conditions, based on WTO rules. We are talking about the market, harmonized in terms of macroeconomic policy, competition rules, technical regulation, transport, and tariffs of natural monopolies, agricultural and industrial subsidies.

We can conclude that the integration processes in the European Union and on the Eurasian area are developing in a complementary and compatible formats, as it was emphasized in the agreed at EU-Russia summit in Moscow in 2005 "road map" for the formation of the four common spaces .

In December, Brussels will host the next EU-Russia summit. We hope that it will not only "compare notes" on a wide range of the bilateral and international issues, but it will also set a new milestones in cooperation in order to make our strategic partnership more dynamic and stable. We expect that the contribution of the business community, your ideas and suggestions in this regard will be in high demand, and will help to ensure the accomplishment of the heavy agenda of the Russia-EU relations.

Thank you for your attention, and I am ready to answer your questions.