The Future of Putin: Europe and Russia Are Linked Together - January, 2009

The Future of Europe and Russia Are Linked Together - Putin


German ARD TV interviewing PM Putin:
http://www.youtube.com/watch?v=qVW4eTo6pK8

January, 2009

There are some that do not want to see Russia and Europe working together and have tried to bring up past phobias, says Russian Prime Minister Vladimir Putin who spoke with the German ARD channel and also discussed Ukraine's role in the current gas crisis.

Interviewer - Hubert Seipel, ARD political analyst

Q: Those who have energy, have the power. Russia has a lot of energy, how much power does it have?

A: Power belongs to those who have brains, first and foremost. You can have whatever, but not have the means to manage it. But you are right, in today's world energy means a lot. And it is in our interest to see Russian energy as an integral part of world energy, so that it would abide by common rules, receive appropriate income, make profit and make sure its partners' interests are observed.

Q: It turned out that you and Russia got hit heavily because of the decision to turn off the Ukrainian gas tap.

A: I want to state right away - we are not interested in stopping deliveries to our consumers. Just think about it - why would we do it? We have long-term contracts with our European consumers. These European consumers make timely payments. Why do we commit suicide and stop the deliveries from getting there? Ukraine basically staged a gas blockade for Europe. Why? In order to get lower than market prices on our gas. After the fall of the Soviet Union, new transit countries were formed. They try to use their transitory monopoly to get preferences, to get low gas prices, first of all. Lower than the market prices. As for Gazprom, it only acquires losses from the cut in deliveries to its partners. During the days when Gazprom stopped deliveries through Ukraine, it lost about 800 million dollars. Gazprom had to stop the operation of over 100 wells while avoiding the danger of negative technological effects. The company's image has been damaged also, as you have rightly noticed. But we are doing all this not just for the benefit of the Russian side, but mostly in the interests of European consumers. I want the European consumers, the citizens of the European Union, to be aware of this and to understand it well, because the European consumers are first and foremost interested in the reliability of the supplier. And reliability can only be ensured if all the participants in this process - gas producers, transit countries, and consumers - act within the framework of civilised market policies, rules and mechanisms. Besides, gas is one of the key foundation tools for forming prices on other products on the European and world markets. And if a western neighbor, Ukrainian partners, for example, get gas at lower prices, whereas EU countries pay high prices, then their products on world markets - chemical, metallurgical and some other products – become unmarketable. And Ukrainian partners in this case get a huge advantage of a non-market nature.

Q: But the Ukrainian economy will not change in the visible future. So when is gas going to flow to Germany?

A: First of all, gas is flowing to Germany. There is more than one channel delivering gas to Germany, thank goodness. Secondly, there are gas storage facilities in Europe, including Germany, where Gazprom's gas is being kept. And this is not just about the Ukrainian economy - we are also talking about Russia, Belarus, Kazakhstan, and all others. If there are no clear market signals for prices on primary energy sources, then these economies will never strive for energy saving. And it will be impossible to encourage saving using just administrative measures. As for Ukraine, unfortunately today's situation has not only collided with the desire to benefit from their transit status, but also with the internal political crisis. Many people, during the so-called Orange Revolution, thought they were going to have better lives. They were hoping to fight corruption, to switch to clear market relations, strengthen democracy. Many are disappointed today. Former leaders of the Orange Revolution did not fulfill their hopes, and abused their trust. And political competition has now turned into fights between clans. The goals of these clans is not strengthening democracy or building the market, but perusing personal ambitions, struggling to get access to financial flows, one of them being the trading of Russian gas inside Ukraine as well as on the European market. In order to move away from this, regardless of what happens inside Ukraine, we need to diversify the flows, transporting gas from the producer to the supplier in Europe. These transit counties should have no illusions, the girls should have no illusions - the groom has other choices, they have to understand it.

Q: But unfortunately, this doesn't change the fact that so far gas has to flow through Ukraine in order to get to Ukraine. So what's the solution?

A: There is a solution. Ukraine signed the energy charter. It wants to look like a civilized European state. So it should not close its transit to European countries, regardless of its burning desire to get gas at lower prices. Europe needs to give a clear signal, not to Russia - saying that we should give our gas for almost nothing, but to Ukraine, saying that it has to act in a civilized way. There is also another option. For example, what we do with Belarus. In order to stabilize everything, we need to switch to market relations, market prices and market transit. If there are not enough resources for today, for example, the economy is not ready, the economy is very energy-consuming, or other systems are not ready, give them credit. So we gave credit to Belarus - $US 2 billion. And we wrote in the contract with Belarus that we will switch to a European price formation in three years. And we raise the price each year, even though our Belarusian partners are not happy about it. Here we also have many arguments, but Belarus still pays. There is also a third choice - we offered this several years ago. Actually, Russia and Germany proposed it. And at that time it was practically accepted by the Ukrainian leadership. Ukraine, Russia and Germany signed a memorandum. The memorandum stated that we were organizing an international syndicate, involving other European partners - Italy, France, maybe other European countries. And this syndicate was to rent the gas transportation system of Ukraine. We can also participate in privatization, if Ukraine wants it. But they tend to make a fetish out of this gas transportation system, consider it some sort of national heritage of an almost heavenly origin. And it is not up for privatization. But if Ukraine finally decides to do it, we can participate in the privatization. But we suggested a long-term lease with Ukraine, still being the system owner. I think everyone would benefit from that. But we could privatize too, why not? Russia has been rebuked many times, and in some sense those were correct rebukes, it has been suggested that we should keep striving for liberalization of our energy market. But we can say the same about our Ukrainian friends

Q: Of course, when we talk about Russian gas, we have to mention Gazprom. Gazprom is a state industry, and in essence, Gazprom is a success story. In the 1990s, it was a very turbulent time in Russia, when many appropriated state property. But Gazprom remained state property. Can we say that you learned the lessons of the 90s, realizing that it is not bad when the state has its own resources?

A: The information you have is not quite correct. Gazprom is not a state industry. It is a joint stock company. And until recently the state only had 38% of Gazprom's shares. Now, using only market methods, we have increased the state's share to a little bit over 50%. But Gazprom functions as a joint stock company within the framework of a market economy and following all the market rules. And more than 49% belongs to private owners, many of whom are foreigners. But of course in such an important area as energy, the state's influence is very significant in the Russian economy. And there are several reasons for that. First of all, the one that I mentioned speaking about the Ukrainian, Belarusian, Kazakh or Russian economy. We are talking about the type of economy that is really energy consuming, inherited from the Soviet times, the time of managed economy. But it does not mean we are going to leave things the way they are now. Even inside Russia we are going to switch our consumers to the European gas price formation. And this of course is not some sort of economic masochism. We are doing this on purpose, understanding that only by using market methods can we encourage the economy to switch to new technologies, including energy saving. Only this way can we make it marketable. But that is not all either. Even though this process takes time and we are supposed to reach European prices by 2011, we already have as one of our objectives giving access to Gazprom's pipelines to our so-called independent gas producers.

Q: Since we've started to talk about infrastructure projects, we should mention such an important project as Nord Stream. The cost of the project is over $US seven billion. It will bring gas from Russia to Germany. So let me ask you this question: what are the reasons for favouring Germany in particular?

A: It is not about love, it is about mutual interests. A European gas system was first established between Russia and Germany, as there were plans to provide Soviet gas for the German economy. So from the very beginning Russia and Germany have been the "founding fathers" of this system. And now it is clear to both European consumers and us that when transit countries emerged, we began to experience additional threats. And the current crisis confirms this. And note this: today Germany helps some countries whose conditions are extremely critical in this crisis. Today the situation is different. Germany is one of the EU leaders. And the potential that Nord Stream brings strengthens Germany's leading role in the European Union. The Nord Stream project is not bi-lateral any more. It involves Russian, German and also Dutch companies. It's two German companies, one Russian and one Dutch company. The idea is that in the future gas from the Shtokman field will flow into this system as well. And we have Gazprom, French Total and Norwegian Statoil working at the Shtokman field. And not just Germany, but many other European countries will get the gas. So we have a full right to say that this is project is not between just two sides, but several European partners. But again it was started by Russia and Germany for obvious reasons. Germany is our major consumer. And the same reason for Germany. We sell about 149 billion cubic meters of gas to Europe annually, and over 40 billion goes to Germany.

Q: Is the reason why you invited two German representatives, Mr. Schroeder and Mr. Varnik, to be part of the executive team for this project?

A: No, not for this reason. They were invited to be part of this project not because of their German origin, but because of their personal qualities and experience in business. More than anyone else, they understand the importance of this project for Europe, for Germany, for Russia. They have all the professional experience to do the job that has been entrusted to them.

Q: Now, of course, the project is being developed, pipes are being made for it. 70% of the pipes are produced in Germany, 25% in Russia, but the project is not quite approved. Many European countries are against it. Some demand more gas deliveries, others apparently still have a bone to pick with the Soviet Union. What will happen if this project is not realized?

A: I think all the talk about past problems, about cut deliveries are meaningless. First of all, our partners pursue their pragmatic interests. Look at what transitory countries do if they realize they have the monopoly on transit. They demand their price be lower than the market price for the gas that they get from us. For some European countries additional transit opportunities may mean strengthening their status in the European Union. But I would like to emphasize again – we don't hurt anyone by this project, we don't take anything away from anyone. There are routes already set on the territories of transitory countries. We are not closing them. More than that, all the countries that sign long-term contracts with us on a market basis, receive gas in full volume. No refusals on the part of Russia. None - I want to stress that. We will work with the countries that have not given their permission yet. I hope that those European countries that are potential consumers of our gas in the future will also put their effort into it. Now, to answer your question what will happen if the project is not realized. Of course, there will be gas in Europe, there will be less of it, and it will be more expensive. Why? Because the same transitory countries will create problems by raising transit prices, trying to get cheaper gas for themselves, so it will be more expensive for the other consumers. And also we will have to transport our resources to markets in other regions of the world - the United States, the East. It means that we will focus more on other delivery methods - such as liquefied gas - and that is a very expensive process. First we need to build mooring facilities, build liquefying plants, then build a special oil-carrier fleet, then build mooring facilities in receiving countries. Then we need to build plants that will de-liquefy this liquid, turn it into gas again. All this will be included in the final product price, and hit the wallets of the rank-and-file consumers.

Source: http://www.russiatoday.com/news/news/35922

In other news:

Sergey Lavrov Sums up the Year 2008



FM Sergey Lavrov sums up the year 2008, P1: http://www.youtube.com/watch?v=I6rTsUgaNHw

"Not simple, and at times – dramatic” – Russian Foreign Minister Sergey Lavrov sums up the year 2008 at a news conference on the results of Russian foreign policy. "The world entered the year 2009 accompanied by the combat operation in the Gaza Strip and with artificially created problems of gas supply to Europe," Sergey Lavrov said on Friday. He stressed that the world problems nowadays cannot be settled through the use of force or illegal methods, adding that "there should be no room for national egoism."

Russia - US relations

The minister expressed hope for changes for the better in Russia–U.S. relations once Barack Obama’s administration comes into power. "We are certainly ready for any scenario,” he said. “But, like a large number of other countries, we have serious hopes that changes for the better will take place in the policy of the United States, including Washington's policy in the international arena." "We are prepared for such changes and hope for close cooperation," the Foreign Minister added. Lavrov expressed hope that the new U.S. administration will not see the inclusion of Georgia and Ukraine into NATO as a priority. The Russian minister said that tackling the financial crisis will probably be more important for the United States than the geopolitical project that would “undermine stability” and “create tension” in the area. He said that he believes Russia and the U.S. need an agenda that would unite them, rather than divide.

Caucasus concerns

The Russian minister has also touched upon the situation with Georgia, South Ossetia and Abkhazia, stressing that Georgia should fulfill its obligations in accordance with the plan by Medvedev and Sarkozy. He expressed Russia’s concern at the buildup of Georgian forces near its borders with the South Ossetia and Abkhazia. "EU monitors working in areas adjacent to South Ossetia and Abkhazia have been reporting a buildup of Georgian military units and special forces near the borders with South Ossetia and Abkhazia, and our 'technical devices' have also recorded this,” he said. Sergey Lavrov said that Moscow insists on the criminal prosecution of those “responsible for giving orders to attack Tskhinval.” “I can assure you that we are not forgetting this subject," he stressed. Lavrov has also stressed that the recognition of Kosovo’s independence is drastically different from that of Abkhazia and South Ossetia. "In Kosovo’s case Belgrade never violated resolution 1244 of the UN Security Council accepted by the sides of the conflict, while Tbilisi constantly violated its obligations on peace agreements accepted after its failed attempt to conquer South Ossetia and Abkhazia in the early 90s," Sergey Lavrov said. He closely watches the situation in the Caucasus and receives daily reports on the region. The minister also noted that both Russia and international monitoring bodies are seeing increasing numbers of Georgian troops on the borders with South Ossetia and Abkhazia, and that it’s an alarming sign. The Russian minister has urged OSCE presence in the South Ossetia, saying that Russia will support it.

Russia-Ukraine gas conflict

In regards to the longest gas supply crisis in history, Sergey Lavrov said that moving towards market principles in foreign policy is a healthy tendency that “will make the basis for real collaboration stronger and will make integration processes more effective”. Russia’s foreign policy is based on legitimate interests. The country wants to collaborate with others without confrontations and on an international legal basis, and also on market principles, he added. “This also concerns the problem that was created by Ukraine in supplying gas to Europe. The President and Prime Minister are doing everything possible to find a way out of this situation with gas supplies to Europe and with absolute respect to the existing agreements and contracts. Most western partners understand well that Russia today has clear foreign policy based on clear interests, legitimate interests.” “Everyone wanted market relations, now we live with market relations, and need to play according to the rules of the market,” he noted. Russia hopes that all parties interested in the resolution of the current gas conflict will take part in the ‘gas summit’ planned for January 17 in Moscow. Members of the European Union and other countries affected by the shut-off, like Serbia, are invited. When asked about alternative routes to deliver Russian gas to European consumers, Lavrov said the pipeline projects South Stream and North Stream will be finished in due time, and no financial crisis will interrupt the construction.

Russia in Iraq

Russia’s presence in Iraq was also discussed. Currently there are a number of contracts including those of oil extraction in West Qurna Phase 2. “We are constantly in touch with Iraqi authorities. Our business circles, foreign ministry delegations and other ministries’ representatives visit Iraq regularly”, the minister said. “We see there’s a mutual interest with our Iraqi partners to develop trade and economic collaboration. We want the contracts signed with our companies to be respected.” Russia and Iraq have a long history of collaboration, and not just in economic terms. From the Soviet times Iraqi specialists received higher education in Russian universities.

Source: http://www.russiatoday.com/news/news/35988

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