PRESIDENT OF RUSSIA VLADIMIR PUTIN: Good afternoon dear ladies and gentlemen!

Thank you for the warm welcome. For my part, I would like to thank you all for the attention you have devoted to today's meeting. As far as I know, a record number of journalists have been accredited to cover today's event. I hope that it will prove useful for us all. In any case, I shall try to be as forthcoming as possible and answer all the questions that interest you.

It would seem natural to begin our meeting today with the Russian Federation's  economic results, with our perception of our social and economic policies in 2005 and what we have achieved in 2005.

I should tell you at once that, as a whole, we are satisfied with the results of our work in 2005. I shall begin with general economic indicators which, in general, are well-known. Perhaps I am repeating myself, but nevertheless I would still like to list them. GDP (gross domestic product) growth was 6,4 percent. It is possible that this figure shall be slightly adjusted, but it shall not change significantly. We shall have the final figure sometime in March, but today we already more or less know the figure. This is quite good, especially since we had originally planned for growth of 5,9 percent.

The Russian stock market grew significantly in 2005.

Of course, all markets we refer to as developing markets grew. In Europe this includes Poland and Hungary, in Latin America it includes Argentina and Brazil, and in Asia it includes South Korea, one of the leaders in market capitalization. But even when we compare ourselves with the leaders, or a leader like South Korea where growth was around 54 percent, then we have 88 percent, an absolute record both for the world and for our country.

Naturally the growth of the Central Bank's gold and currency reserves was significant, simply a record. Let me remind you that in 2000 we started with 12 billion, today this already amounts to 185 billion and by the end of last year it was some 182 billion. The Government's Stabilization Fund also grew. And this has consequences for society at large: the average salary in the country grew by 9,8 percent, on average the population's income grew by 8,7 percent, and pensions grew by 13 percent, a significant increase. The incomes of our veterans have also significantly increased, both those of the participants in the Great Patriotic War and other similar groups.

All these economic indicators that I just named are given in real terms, that is to say that they take inflation into account. In addition, I would like to qualify this by saying that, of course, we are not completely satisfied with 2005. We were not able to keep to the levels of inflation that we had planned. As you know, we planned for 8,5 percent inflation and we shall have approximately 10,8-10,9 percent. It is slightly less than in 2004 but nevertheless represents significant growth. We did not manage to restrain the increase of the rouble's nominal and real exchange rates and this has had a negative effect on certain developing sectors of our economy. But I repeat that as a whole we are satisfied with our work in 2005. In the field of politics, concerning political development, I would  point out the creation of the Public Chamber, an essential instrument for civil society.  I would point out the law which gives the parties that win regional elections the right to participate directly in choosing the heads of the regions. And of course I would mention forming the bodies of state power in the Chechen Republic. With the election of parliament this process has been brought to a close and the Chechen Republic has fully returned within the constitutional sphere of the Russian Federation. Of course, there remains many economic and social tasks and tasks concerning creating local authorities. But the problem of forming state authorities has been resolved.

Of course this is not all that we have managed or failed to do, but these accomplishments are fundamental and I would like to draw your attention to them.

I think that we should now to turn to the main part of our meeting and I shall try to answer your questions. Please go ahead.

ALEKSEI GROMOV: Colleagues, please go ahead.

I think that you began the press conference last year and the year before that? Please introduce yourself.

ANDREI TUMANOV (Vashi 6 Sotok newspaper [gardening publication]): Yes, not only the last one but the one before that.

Vladimir Vladimirovich, at the last press conference we touched on the difficulties of privatising gardens and vegetable plots. We talked about this and then the Government studied the question and even Fradkov called it 'the garden nightmare.' It has been announced that a 'garden amnesty' is being prepared. What do you think, will the Government's promise to bring an 'garden amnesty' result in a situation whereby an average person could privatize her plot of land in a normal way, without unnecessary delay, and even receive income to support her as a pensioner?

VLADIMIR PUTIN: It is pleasant that after such global questions we go right to very concrete ones. In addition, concerning the positive things our Government and the leadership of our country has done, I would like to mention that the number of our citizens living under the poverty line has significantly decreased, as has the level of unemployment.

And what you just said is linked to my two previous remarks because, of course, gardening constitutes a significant income for a large number of Russian citizens and after our previous meeting I formulated an order for the Government of the Russian Federation on this theme. The Government then prepared a draft bill on liberalizing purchasing one's own property and land plots.

I hope that in the very near future, at the spring session, this law will be adopted [by the State Duma].

OKSANA BOIKO (TV channel Russia Today): Vladimir Vladimirovich, please tell us what has Russia's leadership chosen as its priority directions for the upcoming G8 summit? What are the topics? What answer would you give sceptics who say that Russia does not belong in the G8.

VLADIMIR PUTIN: We chose the topics based on the themes that are being put forward for discussion at the G8 summit this summer in St Petersburg. The problems and challenges that are literally facing humanity. This the first thing.

The second. When choosing certain themes, we deliberately tried to choose those in which Russia could actively and effectively take part in finding a solution to the problem.

For this reason it was natural to make our choice during consultations with our partners, and we regularly work with our partners from the G8, both during the Sherpa meetings and at the highest political level. I am very thankful to our partners for the help and support they gave us both before choosing the themes and during the preparation which is now underway. So for this reason it was natural for us.  We first chose energy security in the world, second the fight against infectious diseases, and third problems concerning education. In addition, all of these themes are constantly being discussed in the G8 in one or another form, style or amount. We are suggesting them as core topics. All of our partners have agreed to this.

Regarding those adversaries you mentioned who say that Russia does not belong in the G8, I know that our country has such adversaries. They are stuck in the previous century, all these Sovietologists. Despite the fact that the Soviet Union has ceased to exist, they are still there because they do not have another occupation. What can we say to them? I know the mood of the G8 leaders. No one is against Russia being included and actively participating in this club because nobody wants the G8 to become a meeting between fat cats, especially since differences and inequalities in the world are increasing. The difference between the quality of life for the so-called golden billion and the poorest countries of the world is growing. On one hand, Russia acts as an excellent example due to its economic and financial growth. Let me remind you that we have a surplus budget and a trade surplus. The relationship between our external debt and GDP is 30 percent, in 2000 it was 80 percent, and today this is one of the best such indicators in the world. Everything bears witness to the fact that Russia is pursuing a correct measured economic policy. But at the same time, unfortunately, we cannot brag so long as our population is not rich. A great deal of our population is poor. This is our misfortune and our main task: diminishing the number of poor people in our country. And in this sense, as a country with a developing economy and social sector that is better than any other, then maybe in the G8 we can understand the problems of developing countries. For this reason Russia's participation in the G8 is absolutely natural.

In addition, the G8 is a club which addresses global problems and, first and foremost, security problems. Can someone in this hall imagine resolving, shall we say, problems concerning global nuclear security without the participation of the largest nuclear power in the world, the Russian Federation? Of course not. So everyone who talks about this, whether Russia belongs there or not, can just talk. It is their job. The dog barks, the caravan rolls on.

OLGA SOLOMONOVA (Trud newspaper): I have a question concerning Russian-Ukrainian relations in the gas sector.

It seems that everything had been resolved at the beginning of this year, that you agreed on everything. You met personally with Yushchenko. Everything seemed normal.

Now, as is well-known, Ukraine is once again starting to take gas outright and Gazprom is constantly increasing deliveries to Europe.

What is your impression of this situation?

VLADIMIR PUTIN: First of all I consider very positive the fact that we were able to agree with Ukrainian leadership on a common approach towards supplying Ukraine with Russian energy. It is positive both for our bilateral relations and for the energy situation in Europe and in the world.

And I consider that Ukrainian leadership took a courageous and correct step when it accepted these agreements. These agreements were a compromise and each party is satisfied with them. Along with this, you are correct. We agreed on everything, signed everything regarding prices, fixing prices, the volumes of deliveries. And despite all of these agreements and without any conflicts, we were faced with the situation in which a large amount of Russian gas is being siphoned off from the pipelines through which it is exported to Europe. During a cold period in Ukraine this amounted to 34-35 million cubic metres of gas per day. Gazprom wanted to remake these losses for western European consumers and unilaterally increased daily deliveries by 35 million. What happened next? Our Ukrainian partners continued to take 35 million daily in addition to the supplementary amount that Gazprom was delivering, that is 70 million cubic metres a day.

And now I would like to ask a question to those sceptics who didn't believe it was necessary to construct the Northern European Gas Pipeline under the Baltic Sea. Is this pipeline necessary to ensure a stable gas supply to western Europe or not? Whoever talks about this theme in the future must reflect on whose interests they have at heart, the interests of their own population or other interests that are difficult to justify. 

We expect that we shall be able to find an equilibrium in our relations with our Ukrainian partners. I am happy about the fact that, in contrast to previous years, our Ukrainian partners said straight out that they were taking this gas, there was no tentative to cover up, nor to distort the fact. It is important to us that we are paid for this gas according to the prices we agreed on. This can be done either at the end of February or in another way, seeing as the quantity of gas delivered to Ukraine, the quantity of Russian gas, is limited to 17 billion cubic metres a year. This means that at one point the total volume shall be determined and then we must agree on the new volume. But it is important that this is not hidden but discussed openly. I hope that these discussions will lead to a positive result.

MANIUEKO MORENO (El Correo, Spain): Dear Mr President, please tell us about the idea that Russia must join the World Trade Organization this year. But I think that up until now no agreement has been reached with either the USA or Columbia. Please tell us what are the prospects for resolving this problem, what you think of this problem in general, and whether or not Russia needs to accede to the WTO? Thank you very much.

VLADIMIR PUTIN: As a whole we intend to join the World Trade Organization. As I have already said, we are going to do this only under conditions that are favourable to us and based on agreements within the usual process by which countries accede to this international economic trade organization. If they are going to make additional claims in addition to those usually made to a country that is joining, then of course we shall object.

Today the main problem is resolving the issues with the United States. I think that if we agree with the USA then Columbia shall agree as well. In practice, all other countries and I would like to emphasize that all, all of our partners supported Russia's accession to the WTO. For now only the United States is preventing us from joining.

Today we are discussing the question of whether or not branches of commercial banks will be allowed to operate in Russia. We have already expressed ourselves on this topic. We consider that it is unacceptable for us because it would not allow us to control financial flows in the Russian Federation and, as a matter of fact, the financial community in the United States agrees with us. Everything is clear at the professional level, but at the political level we must take some concrete steps to meet each other half way. I hope that we shall undertake these steps. In any case, I know the mood of the President of the United States and he supports Russia's accession to the WTO.

QUESTION (city of Magadan): Dear Vladimir Vladimirovich!

At the end of November at a meeting in Magadan you expressed your position on the basic directions in which gold mining should develop in Russia. This improved the mood of all workers in the mining industry in the Far East and not only in the Far East. However, we now fear that the propositions that were made there shall not be implemented, and first and foremost your orders to the Government. It is possible that more time is needed or that there are other reasons for the delay. My question is connected with this.

Vladimir Vladimirovich, has your position concerning the Far East, one of the country's strategic regions whose natural resources can enrich Russia, changed?

VLADIMIR PUTIN: Certainly, my position has not changed. Moreover, as you know, in practice we have two federal target programmes designed to develop territories. Two territories, that is the Far East and the Northern Caucasus, the south of Russia, have been chosen as two priority territories. For this reason significant financial resources have been allocated towards these goals and in 2006 the volume of these resources will significantly increase compared to what it was in 2005. First and foremost we are talking about developing infrastructure to create the necessary conditions for economic growth in these regions and creating additional jobs.

With respect to the gold mining sector I hope that all the orders made at the meeting in Magadan shall be implemented. As you remember, certain colleagues that work in this sector made proposals that I consider unacceptable, namely exporting, shall we say, gold ore for it to be processed abroad. If this were the case we would see neither the taxes nor the gold. Such things cannot be implemented. All the rest can and must be implemented according to the agreements and orders that were made at the meeting in Magadan.

STEVEN GUTTERMAN (correspondent for the Associated Press, USA): During your presidency you said that Russia is a European country that shares European culture and values. But sometimes Russia supports certain opinions or a certain regime in the former Soviet Union which obviously does not share these values. For example, events in Andizhan and Russian support for Uzbekistan's actions during these events. Do you not think that these approaches are incompatible?

Thank you.

VLADIMIR PUTIN: I do not think that these approaches are incompatible, especially since we know better than you do what happened in Andizhan. And we know who trained the people who ignited the situation in Uzbekistan and in that city in particular, where they were trained, and how many of them were trained. This does not exclude the fact that there are a great many problems in Uzbekistan, but it does exclude the fact that we take an approach in which we oscillate, or in which we could allow ourselves to shake up the situation in that country.

You probably know what the Fergana valley is and you know how difficult the situation is there, the population's situation and their level of economic well-being. We do not need a second Afghanistan in Central Asian and we shall proceed very carefully. We do not need revolutions there, we need an evolution which will lead to establishing those values you spoke about, but that will not encourage explosions like the ones we faced in Andizhan.

MOHAMMED AMRO (Al-Jazeera): Mr President!

After Hamas' victory in the Middle East there have been certain statements from the west threatening to stop or diminish the help they give the Palestinian population.

Will your position on this issue change? And do you agree with the opinion that what is happening now in the Middle East is the failure of American diplomacy?

Thank you.

VLADIMIR PUTIN: It is a big setback, an important setback for American efforts in the Middle East. A very serious setback.

I think that if we want to resolve these difficult global problems than we must only do so together and not invite the participants in the process to pull the chestnuts out of the fire, but rather sit down together and to listen to each other right from the beginning and to take corresponding decisions.

Our position concerning Hamas differs from the American and western European positions. The foreign ministry of the Russian Federation never declared that Hamas is a terrorist organization. But this does not mean that we approve and support everything that Hamas does and all the declarations that they have made recently. We think that it is one thing when this political force was the opposition and trying to get into power and we know that throughout the whole world very often the opposition makes very radical statements. It is another thing when it receives the people's vote of confidence and must make sure that the people who believed in this movement feel the positive results of their authorities' work. And for this it is necessary to leave behind the extremist positions, to recognize Israel's right to exist and to have relations with the international community.

We call on Hamas to do these things. In any case we would consider refusing to help the Palestinian people a mistake.

NADEZHDA SUDAKOVA (Nizhny Novgorod, Kremlin news agency): Vladimir Vladimirovich, in September 2004 you announced a new system for forming the executive authority. A lot has changed in this year and a half, including in the Nizhny Novgorod Region. One can now draw conclusions on this period and see the positive and negative aspects.

Please tell us if you are happy with how this system is now functioning and its results.

VLADIMIR PUTIN: I am happy with how this system is functioning. From the beginning I said that it is a far cry from naming the heads of the regions in Moscow. It is quite a difficult political process to determine authorities by having the federal level participate on behalf of the President of the Russian Federation and the deputies of legislative assemblies participate on behalf of citizens living in a given territory. You know that when resolving this issue we collided with just what we had fought for, one could say that we shot ourselves in the foot. Namely the fact that in certain regions the candidates we proposed were obviously not wanted and that the federal level had to take into account the mood of the deputies in that region. And I am very happy that it happens exactly this way. It means that we are reaching a situation in which a governor who is named as a result of this process will be more sensitive to the region's problems but will also be intricately linked with the whole nation's interests. And I hope that unlike the past, there shall be no governors that have three previous convictions among our deputies.

P. TYCHINKIN (NTK, Krasnodarsky Region): Vladimir Vladimirovich please tell us what you think of the fact that Sochi, a city in the Krasnaia Poliana valley, wants to hold the Winter Olympics in 2014 and what do you think its chances are? And a follow-up question: how do you see the region's role in the present stage and, in your opinion, what has the region achieved? Thank you very much.

VLADIMIR PUTIN: The  Krasnodarsky Region is developing very successfully and comes out favourably when compared with other Russian regions. This is because of the highly skilled employees, very good traditions in the region, a population that is very politically active, good infrastructure and a good climate. We must say straight out that the leadership is quite thorough, that the governor has a implemented measured careful and correct economic and social policies. As a whole this is quite good. I think that it possible to do even better but as a whole I am satisfied.

Regarding Sochi, we shall support the city's application to host the Winter Olympic Games. We shall do this independently of the result because the country needs modern developed infrastructure and a holiday place that is convenient for the citizens of our country. Sochi is an ideal place where the climate is gentle, the sea is nearby and in several places in the mountains there is snow all year round. I went skiing there two years ago, it is somewhat difficult for technical reasons-we had to land with a helicopter-but there is snow even in the summer. For this reason we shall develop Sochi in any case and allocating the financial means is, of course, more convenient if we have an important goal in front us such as hosting the Winter Olympic Games.

FEDOR BYSTROV (Volga Press): Vladimir Vladimirovich, in December of last year the Federal Agency for Industry prepared some proposals, somehow I would not like to talk about supporting the domestic automotive industry, but about reorganizing the industry. In particular, they are proposing to create a national automobile corporation by merging KAMAZ, AVTOVAZ and GAZ. What do you think of the prospects for such a merger and of the domestic automotive industry in general?

And I have a second question if you do not consider it out of place: would it be possible to use your private car for a test drive? I think that many Russians would be interested to know what is in the President's car.

Well, using this opportunity, I would like to invite you to drive in a Togliatti.

VLADIMIR PUTIN: Thank you, thank you for the invitation.

Which car would you like to receive? (excitement in the room)

FEDOR. BYSTROV: A Volga.

VLADIMIR PUTIN: A Volga?

FEDOR BYSTROV: Yes, I would like to do an article on a Volga.

VLADIMIR PUTIN: Okay, fine, we agreed.

`Concerning the proposal for the automotive industry, as you know, quite important decisions have be made, and these decisions have been criticized especially  with respect to taxes, customs duties and the delivery of outdated equipment into the territory of the Russian Federation. This is a very sensitive topic.

Along with this I would like to draw your attention to the fact that the Government of the Russian Federation has determined its final conditions for automobile assembly in the territory of the Russian Federation and they are already receiving positive feedback.

We have already concluded agreements with the six largest international automotive companies to produce automobile technology on the territory of the Russian Federation. We are conducting negotiations with an additional 14 of the world's major automobile companies. I am convinced that we shall achieve positive results during the negotiation process. This is the first thing.

The second concerns the merger between KAMAZ, AVTOVAZ and GAZ. Of course this is possible. But the owners of these companies must decide this themselves together with the state. If all participants of this process agree that such a an association could help the development of the Russian automotive industry then, of course, we shall support such a decision. But we shall not impose any decisions.

SVETLANA TSYGANOVA (Impulse newspaper, city of Zelenogorsk, Karsnoyarsky Region): In the enterprises and cities associated with the Federal Atomic Energy Agency, and I represent one of these cities, there is a great deal of interest in the global initiative that you talked about last week. You said that during the G8 summit of the Russian presidency you shall propose creating international centres that perform certain functions in the nuclear fuel cycle, in particular, enriching uranium for the countries who are not members of the nuclear club.

Please tell us why Russia needs this?  What does it mean in practice? And what tasks for the Federal Atomic Energy Agency does this imply?

VLADIMIR PUTIN: We all know perfectly well how tense the world energy situation is becoming. Many countries of the world including the Russian Federation, the United States, and Europe are actively studying the possibility of alternative sources of energy: hydrogen, thermal energy, wind energy, biological resources and so on. Now people are saying that it is possible to use certain materials from the moon. Right under our feet we have opportunities in nuclear energy that are not being taken advantage of. And of course many members of the international community are interested in developing nuclear energy for peaceful means. Along with this many issues and problems linked with the proliferation of nuclear weapons arise during the implementation of these plans. Because there are a minimum of two problems which  cause concern: they are enriching uranium and working with radioactive fuel. Because both can be used to create fuel for nuclear weapons and nuclear weapons themselves. How can we find a solution which will allow us to support those who wish to develop their nuclear energy and at the same time ensure global nuclear security? One of these propositions was made in St Petersburg during the meeting of the Eurasian Economic Community. We suggest creating a network of centres that deal with that part of the nuclear fuel cycle concerning enriching uranium. These centres would be equally accessible to all those who want to participate in developing atomic energy together, there would be no discrimination. This also includes our Iranian partners. You know that the Russian Federation already made this proposal to Iran quite a long time ago. At a meeting in St Petersburg my colleagues, the heads of Uzbekistan and Kazakhstan, did not rule out participating in this project.

In this way it could be designed from a long-term perspective with the participation of countries that have important reserves of raw uranium. But there need not only be one such centre. The Russian Federation is a natural partner for resolving such tasks, because of the highly developed level of nuclear power in the country, the presence of schools, experts, human resources, and the development of nuclear energy infrastructure.  Such centres could be created in other states of the nuclear club and, I repeat, along with ensuring the provision of non-discriminatory access to all those who want to use them.

As to the Russian Federation, I draw your attention to the fact that approximately 16 to 17 percent of the energy we generate is derived from nuclear power. In some countries, including the European Union, in France for example, nuclear energy accounts for almost 80 percent. If in 20 or 30 years we attain 25 percent then this is already quite good. Nuclear energy for peaceful means is now concentrated in the European part of Russia, particularly in the Urals, and we have many northern territories which need additional energy resources. Of course, we must do this in conformity with modern security requirements. There are the so-called fast reactors which in practice are very safe. I have already spoken about this more than once and experts know what to do in this sector. We very much expect effective cooperation from the part of the nuclear club and all those who want to take part in this joint effort.

ANTON VERNITSKII (Pervyi Kanal): Vladimir Vladimirovich, a question about the priority national projects. What are all the regions saying now that the new year has begun and how much movement has there been in these directions? And a follow-up question: how can you be so confident that the enormous amount of financial resources allocated for these projects will not be wasted?

VLADIMIR PUTIN: Obviously I must begin with the last question. Of course, the danger that financial resources can be used ineffectively or simply stolen exists everywhere. I expect that the system we created in order to implement these projects shall work, and that it will not only be effective but organized in an absolutely transparent way and that no criminal activity will be uncovered here. I am counting on this and on the Government who, as you all know, is taking care of most aspects of the practical implementation of these national projects. I am counting on the public. I think that it would be good for the Public Chamber and the deputies on location where these projects shall be implemented to take everything regarding the movement of financial resources and the implementation of these projects under their daily control.  

A national project is not a panacea for resolving all the problems that face the country, of course not. But it is simply a signal, an impulse in a given direction that we expect shall help develop the priority economic and social spheres – health care, education, housing, agriculture. As you can see, it concerns these spheres, the so-called real sector of the economy and the spheres of culture and education. But spheres such as education and health services are very closely linked to the development of the economy because without the so-called human factor, without investing in the person, we shall not resolve any task that stands before us.

I am not going to talk about all this now, as we have already done so many times, but the first information, the initial information on how projects are proceeding in the regions is generally positive. In February we shall start making payments to the lowest echelons of health care. I know of a criticism along these lines: 'and what about other medical workers that cannot be considered part of primary care?' I repeat that the Government has decided to do this as a first step, because the situation is especially critical in these lower echelons. Some 50 percent are not fully staffed.

Certainly some obstacles and problems are possible but the signal has been given in the regions and now the Government absolutely needs, and I want to emphasize this, must absolutely resolve these and other similar issues and increase the well-being of other medical workers and teachers.

We have already started paying school teachers for acting as form masters. In February the staff and workers in primary care must receive money. We have already planned in which regions we shall create high-tech medical centres to better care for the population. We have a huge country and it is too much to always travel to Moscow, St Petersburg and Nizhny Novgorod.

Within these projects necessary measures are being taken to develop agriculture. Of course the programme 'Housing for 2010' and the programme for accessible housing that are taking place within the framework of the national projects are closely linked. We know and understand this. One shall not interfere with the other but rather add something else that will help solve all the problems in the spheres I mentioned.

QUESTION (in english, back translation):

What do you personally believe that you have been able to obtain as a result of five years work? Are you personally satisfied with the results or would you like to have achieved more?

VLADIMIR PUTIN: No one can ever be content with the results he has achieved if he is in good health and has a good memory. One always wants more. Along with this I am very satisfied with what we have done. I remember the end of 1999 and the condition that the state and the economic and social spheres were in. There is a big difference, and this is a positive difference.

We have strengthened the Federation, we have brought the Chechen Republic back within Russia's constitutional sphere and done this through legal means, first and foremost democratic means – by voting for the constitution, voting for the President and, of course, voting for parliament. We have taken serious steps towards strengthening the economy. In practice we have already paid off all external debts. We are ready to further pay off the Russian state's debts in advanced payments. We have significantly – by several millions – lowered the number of our citizens living below the poverty line and we have significantly lowered the level of unemployment. We have seen an amazing increase in our gold and currency reserves. We were able to have a measured economic policy because of the inflow of oil revenues into the country, and accumulate part of these revenues in the Stabilization Fund. We have significantly increased the population's real incomes, and that is the most important thing.

Of course, a great many problems remain. And I also hope that in the future we shall work in the same way so as to resolve them effectively. But, of course, we must work to attain this. And I do not think that anyone of us is surprised at the intense work schedule for the President, the Government and the whole Russian leadership.

OLEG RAKITOV (Radio Rossiia, Ivanovo): Vladimir Vladimirovich may I ask you the following question: last year some governors were replaced at once and you were responsible for this – you nominate these candidates and put the candidatures before the Legislative Assembly. I would like to know which principles and criteria you use when choosing the future governors. Thank you.

VLADIMIR PUTIN: When answering one of the previous questions I already said that we do not, that I do not, nominate the governor, rather I propose a person to the Legislative Assembly and in practice the Legislative Assembly actually appoints the person that the President has suggested to the region.

Moreover, we have passed a law whereby the party that won the regional elections already has the right to propose a candidate.

First and foremost the criteria are personal and practical, and the most important thing is that the person is able to resolve the problems facing the head of the Russian region. It is experience, it is respectability, skill and, most importantly,  the practical results of a person's previous activities.

IGOR KOZHEVIN: (Rossiia TV channel, programme Vesti): Vladimir Vladimirovich last week there was a public discussion in the Government about the VAT and reducing it from 18 percent to 13, 15, or 16 percent. Different points of view were expressed. Today has any consolidated decision been taken on this issue and what is your point of view?

VLADIMIR PUTIN: This is a really topical question, one that is much debated. I do not think that we have already taken the final decision on this question. When answering your question I would like to start with the most important thing, and ask you to pay attention to it. Taxes shall decrease. The whole tax burden on the Russian economy today constitutes around 36,8 percent of GDP. If we subtract these revenues from the budget, revenues that come from the high oil prices and other energy resources, than this tax burden shall be significantly reduced despite the fact that it shall remain quite large for a developing economy such as Russia's.

Other countries in a similar situation have a smaller tax burden. It is true that when starting to implement social projects they need to increase taxes. But we must reduce them. The question is how to do so, which taxes to reduce and at what rates?

Any economic decision has certain consequences. If a given tax is sharply reduced than we both understand that the monetary mass in the economy decreases. One of today's main tasks is struggling with inflation and reducing it so that it is less than 10 percent. We must understand that if a certain tax, including VAT, decreases to a certain level than our monetary mass will be affected. The question is whether our economy is capable of developing this monetary mass, that is will this money stay in the pockets of businessmen or be reinserted into the economy? There is also the question of whether the economy is ready to accept this money or will it be sent offshore, taken away, and then there shall be no real positive consequence for the economy and we shall simply face additional problems of sterilization. We must weigh all of this and make a sensible coordinated decision regarding reducing the tax burden.

STEVEN ROSENBERG (BBC, Great Britain): Mr President, I would like to ask a question in English if possible. About a week ago some British diplomats were accused of spying in Moscow. Has the decision to expel the four diplomats been taken? And what will be the effects of this espionage scandal in Moscow? Will the control over non-governmental organizations be tightened?

VLADIMIR PUTIN: Concerning non-governmental organizations, I formulated my attitude towards the scandal you mentioned while in St Petersburg. Non-governmental organizations are a necessary part of society because they control the activity of the state and the agencies of power. They are an important part of the social organism. And the Russian government shall support these non-governmental organizations. We want them to be financed in a transparent way, we want these organizations to be independent, and not to be controlled by some puppet master from abroad because such incidences like the one we just saw only compromise the activities of non-governmental organizations.  But we cannot fail to address such incidences because non-governmental organizations cannot be used as a foreign policy instruments by one state on the territory of another.

As for the espionage scandals we regret that, having attained the level of interstate relations we now have, we see our British partners involved in such practices. We start from the idea that appropriate decisions shall be taken at the political level and that the problem we faced shall not reduce our cooperation with Great Britain. I am confident that we shall discuss this in private meetings with the Prime Minister. In any case the character and quality of our relations is so strong and well-grounded that the incident cannot undermine our cooperation with Great Britain.

I have already talked about the decision to expel the diplomats. Let them just stay here, in the residence. It is pleasant for us that these people are now under our control. And how will their colleagues react? I imagine you know that in the residences and among the diplomatic representatives of any country there are a number of clean diplomats and representatives from the special services. This is not everything that we have found out. Let them sit here.

TAMARA GOTSIRIDZE (Kavkasiia, Georgian TV channel): Vladimir Vladimirovich the new year started with a new low point in our relations. This is linked with the energy or gas wars, if I can call them by that name. And our relations already depend a little bit on the weather. In your opinion, how is the situation developing? And the question I have been asking for a number of years: when will there be a thaw in our relations?

Thank you.

VLADIMIR PUTIN: It seems to me that this is not linked to the weather but rather to the ability of different Georgian politicians to correctly evaluate the situation concerning mutual relations with Russia.

There was an unfortunate incident, and yes, deliveries were suspended. Our experts worked around the clock in the mountains in minus 30 degree weather to restore Georgia's power supply.

What have we heard and seen from the Georgian leadership? Some were simply spitting at us. And the citizens of Georgia must understand that such policies vis-a-vis Russia will not improve the situation of the ordinary Georgian. The responsibility for this lies with the Georgian authorities.

As for our intentions, we consider the Georgian people one of the very closest peoples to the Russian people, both with respect to history and culture. You know how many Georgians lived and live in Russia and what an enormous contribution the many citizens of the Russian Federation and the former Soviet Union have made towards developing and strengthening Russia. We very highly value this and never forget about it. We hope that it constitutes a good bridge for strengthening friendly relations in almost all directions. We are ready for this.

VLADIMIR KONDRATEV (NTV): Vladimir Vladimirovich you have already spoke about the new law that will allow the parties who win regional elections to make recommendations concerning the executive head of the region. I would like to know whether the law will be accepted at the federal level and will the party that has the most seats in the Duma also be able to propose candidates for the leader of the Government? In connection with this: will you not tell us the name of your possible successor? Perhaps you could say if you have already made your choice and decided who can be the successor? Thank you.

VLADIMIR PUTIN: You know that when I talked to Chechen friends during the preliminary discussions concerning possible candidates for the President of Chechnya, I asked them: what do you think, who could be the President of the Chechen Republic? And the answer they gave was: stop any person in the street and ask them the same question and the answer will almost always be the same – myself.

We have a great many people in Russia, a great many, who could head the country. Only the voters, the Russian people, the citizens of the Russian Federation can give the final answer to this question.

A party government? The lessons of history tell us that everything is possible but I am against introducing such a measure into Russian politics today. I am deeply convinced that in the former Soviet Union where the economy is developing, the state is being strengthened, the principles of federalism are finally taking root that we need a firm presidential authority.

We both know what happened in a developed stable democracy like that of the Federal Republic of Germany. It is a good example, you are a Germanist. Just recently it was possible to see a small new political party, the New Left, appear on the political horizon in Germany. The result of the elections was that, in practice, the country was in a political deadlock. If there had been no political culture, no good will on the part of the former German Chancellor Mr Schroeder, no skillfull steps taken by the present Chancellor Madam Merkel, then they would not have been able to come to an agreement and no one knows how the situation would have developed in Germany, how it would have affected the economic and social spheres and the well-being of German citizens. What does this say about us, countries of the former Soviet Union, that have not yet generated steady national parties? In these conditions who could talk about a party Government? It would be irresponsible.

And everything is possible in the future but, in my opinion, this should be a something that future generations decide.

ZELIMKHAN IAKHIKHANOV (Youth Change newspaper, Chechen Republic): Vladimir Vladimirovich please tell us if today we can talk about the end of the counterterrorist operation in the Chechen Republic? And if not when, in your opinion, will it come to an end? Thank you.

VLADIMIR PUTIN: I think that it is possible to talk about the end of the counterterrorist operation since Chechnya's law enforcement agencies will, in practice, take upon themselves the basic responsibility for law enforcement in the Republic.

All bodies of state power have been created in the Chechen Republic; I have already spoken about this and you are well aware of it. This means that the law enforcement agencies can and will get stronger – the office of the public prosecutor, courts, lawyers, notaries and, of course, the Interior Ministry of the Chechen Republic. In the aggregate, I hope, I am confident, that all of this together will result in further stabilization.

Today there are other regions in the northern Caucasus where the situation is even more worrying than it is in Chechnya. I must say that the law enforcement agencies in the Chechen Republic are supervising the situation more and more rigidly and are taking more responsibility upon themselves. More than anything, fortunately or unfortunately, they often work more effectively than the federal forces do and have a responsible approach towards resolving problems.

We understand, and I would like to draw this to your attention and that of your colleagues, that within the bodies of the Chechen Interior Ministry there are a great many people who just recently were using weapons to fight against the federal forces. It is a complex and painful process both for the Federation as a whole and for the Chechen Republic. But I think that, despite negative moments that occur in this process, it is overall a positive one. If people consciously understand that they can defend the interests of their people only together with Russia, and do this honestly, openly, and lose anything in this process, including their own life, then this deserves only support and respect. And we shall provide this.

I repeat that the law enforcement system in Chechnya knows the local customs and conditions, and can therefore react to what happens in a more sensitive way, and often prove more effective than federal forces. This represents a positive moment and I think that if things proceed further along these lines than we are right to speak of ending antiterrorist operations in the Chechen Republic.

There is one thing that I would like to talk about separately.        

Attracting people from different political backgrounds into Chechnya's law enforcement system is a positive thing. But we must take into account the fact that for more than ten years nobody has worked on developing these law enforcement agencies. There must be a legal culture, respect for laws and, more importantly, the desire to observe the laws among the employees who now work in the law enforcement agencies. We need to do serious work to improve the professional skills of those people who are now coming to work in the law enforcement agencies. We are all going to work on this together.

GEORGII GULIA (Interfax): Vladimir Vladimirovich I would like to return to economic issues and to probably the most important sector, Russia's oil and gas sector. What are its prospects for development and along which lines shall it develop? Towards deprivatization, nationalization and strengthening the monopolies that already exist or towards expanding the private sector in this branch as well? Thank you.

VLADIMIR PUTIN: I draw your attention to the fact that major multinational companies dominate the world energy market. If you look at any of them, any major American company, any European one, then these are large, powerful and, as a rule, multinational companies. We must develop in this same way. In some countries, not only in the OPEC countries, but in European countries such as Norway, the oil and gas sector is practically a complete state monopoly. Statoil and the second largest company are also state companies. We are not going to do things that way. Yes, today Gazprom is a state-controlled company but we talked about this and made announcements to this effect several years ago, saying that the state will once again control Gazprom, Russia's major energy company. We did this and did it openly but we also liberalized Gazprom's market shares and now investors have the possibility to enter the market as shareholders. In addition to this, we chose a strategic partner. You know how many German companies are present here – 10 percent. In essence, this is an international company. Rosneft is going to develop along these same lines. As you know, Rosneft's experts are now getting ready to issue shares on one of the world's stock exchanges. In other words, it shall also be an international company.

We have about ten quite large private oil companies such as LUKOIL, TNK BP, Surgutneftegaz and others – there are a great deal of them. Nobody is going to nationalize them, nobody is going to interfere with their activities. They are going to develop according to market conditions like private companies. I think that such a balance is better for the Russian economy today, and this includes active participation from our foreign partners and shareholders. Shall we look at TNK BP which, as you know, is 50 percent a Russian company and 50 percent owned by British Petroleum. I regularly meet with shareholders. Our British colleagues have told me that they are happy with working in the Russian market.

In my opinion, already one third of BP's total extraction takes place in Russian territory. One third or rather one quarter, I would not want to exaggerate. More precisely, one quarter. This is a huge volume. And the positive side to this is that BP's reserves in Russia are growing. And the Russian government goes on allowing this company to control more and more energy resources. And this is also a contribution towards stabilizing the international economy and international energy situation.

We shall continue further along this path.

(to be continued)

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