Excerpts from a Transcript of a Meeting with Italian Entrepreneurs 2003-11-06 18:56:00 Excelsior Hotel, Rome Vladimir Putin: Esteemed Mr D’Amato, gentlemen, I see today’s meeting as one of the important moments of my visit to Rome. We all know that business is the driving force of any country’s economy. No generation of Italian businesspeople has proven this better than yourselves. Your successes in various areas, including in small and medium-sized business, are clear and we would like to follow your example in Russia. I was very pleased to hear in your introductory words that our country has attracted the attention of Italian businesspeople. First of all, I would like to tell you briefly about the results of our work in Rome concerning Russian-Italian bilateral relations and relations between Russia and the European Union. Overall, our discussions had very positive results. We have taken new and completely practical steps towards developing the Russian-European Union integration processes and intensifying cooperation between Russia and Italy. I would emphasise here that both Mr Berlusconi and I see our main task as being to implement the agreements we have reached on a practical level, and this is particularly important for cooperation in the business sphere. Trade and economic questions and scientific-technical cooperation were a central focus of all our talks. The Russian-EU summit also approved very important decisions for forming a common European economic space. This includes developing the ongoing energy dialogue between us. In this sector there are new horizons and prospects opening up. New opportunities arise as a result of the agreements between Gazprom, Eni and the European Commission on changing the conditions for sale of gas supplied by Gazprom to Italy, and also as a result of the initiative from the Unified Energy Systems of Russia (RAO UES) to synchronise and unite the energy systems of Russia and the European Union. Developing our economic ties with Europe is a real priority for Russia. I have already said that after enlargement the EU will account for more than half of Russia’s foreign trade. Our trading relations with Italy are important to us. Over recent years Italy has been Russia’s second-biggest trading partner among the European Union countries. Our trade turnover rose by 11% over the first semester compared to the same period last year, and I think that this year it will exceed $10 billion. We want to increase the volumes of our mutual supplies, and I think we still have many reserves we can draw on in this area. But I think that the most important area today is investment. Italy comes ninth in terms of the investment it has made in Russia, and this obviously falls short of the possibilities we have and the potential of our economic opportunities. Another area of much importance is integrating Russian and Italian potential in the high technology sector. This would create opportunities for us to work more effectively and to be more energetic in promoting our products on third country markets. I think that the agreement signed today between Roseximbank and its Italian partners Simest and Sache will encourage this process. As you know, we signed memorandums on information and information technology cooperation yesterday. We also hope to see our traditional cooperation in the automobile industry pick up again. I hope that the agreement signed today by Ruspromavto and Fiat will mark a change in Fiat’s cooperation policy with regard to Russia and will give the required impetus to carry out previously agreed projects. The automobile market is growing quickly in Russia today. The Russian government has approved a decision that will encourage investment in the sector and will set tougher conditions for importing foreign-made cars, above all second-hand cars, to the Russian market. The aim of this decision is to encourage carmakers to set up production in Russia itself. We have already mentioned the idea of industrial districts. Here to my right are the heads of a number of Russian regions, and many of them are interested in developing just such projects. For our part, we are taking serious measures to create attractive conditions for foreign investors. I think that we are starting to see the results. Investment from all sources increased by 12% over the first half of 2003 compared with the same period last year. Companies in the main economic sectors have seen their financial results improve considerably. This shows that investment in production is becoming the best form of investment. Both the raw materials extracting and processing sectors showed economic growth in the first quarter of 2003. A huge amount of work has been done over recent years in Russia to improve the country’s laws and judicial system in order to provide better guarantees for investors’ rights. In conclusion I would like to thank Mr Antonio D’Amato, the President of General Confederation of Italian Industry. This is not our first meeting – we met in Milan in 2000 during an earlier visit I made to Italy. I think that these kinds of direct contacts can sometimes be even more important than official agreements. I and my colleagues – present here are also Economic Development and Trade Minister German Gref, governors and heads of the regions and Deputy Prime Minister Viktor Khristenko – will be happy to hear your comments, remarks and proposals, and if necessary, we will try to answer your questions. Question: Mr President, Eni has been mentioned here as having signed a deal with Gazprom. We have been working with Russia on oil imports for 40 years, and on gas imports for more than 30 years. We had an opportunity to meet you in 2000 in Milan when you visited Italy, and in Moscow when Italian President Carlo Azeglio Ciampi visited Russia. And the long history of relations with Gazprom was bound to result in a major contract being signed in 1998. I am referring to the Blue Stream project, which today has become a reality. Gas is already flowing to Turkey and we are looking at Russia with great interest in terms of possible exploration and extraction of various minerals. We went to Astrakhan for that purpose and we are trying to implement an ambitious project. We will explore at great depth and we hope to win a contract based on clear-cut legal terms. I would like to compliment Gazprom on the way the project was realised, a contract to sell gas from Russia all over Europe. It is very important. By signing the contract Gazprom has clearly indicated that it is open and forward-looking in concluding its deals. That may indicate that Gazprom has realised the importance of global markets in Europe. Thank you. Vladimir Putin: I wish you success. I don’t know, though, where in Astrakhan they have large depths, they speak about 6 kilometres. As for Gazprom’s decision, it is revolutionary. By granting re-export rights Gazprom has taken a serious step to meet you. I think such cooperation will create conditions for stable economic development of Europe using Russian energy and catering to the interests both of Russian suppliers and European consumers. It will make our negotiating parties less aggressive towards us in connection with Russia’s accession to the WTO. Because if these proposals are put into practice, it would have dire consequences both for us and for the European economy. It may destroy the Gazprom system. Who will do the economic and financial work? Who will repay the debts? Who will fulfil the contracts signed for many years ahead? The wish to cut the price of these commodities may be counterproductive and raise the actual price for European consumers. You have rightly said that we have good experience of cooperation. We are open to such cooperation and we are ready to compromise. But let us never forget that it is sometimes necessary to leave well alone, and we should proceed carefully. But we are ready to develop these relations on a bilateral basis and with the European Commission as a whole because corresponding mechanisms exist in the shape of the energy dialogue, but not as part of Russia’s accession to the WTO. I would like to give the floor to the President of the Republic of Tatarstan, Mr Shaimiyev. Mintimer Shaimiyev: First of all, I would like to say that the work conducted at the political level between the Russian Federation and Italy is creating a good climate for our economic cooperation. All of us – every region and every federal agency – are working to increase the gross output in the country. Tatarstan has powerful petrochemical and construction industries. We pay great attention to expanding our petrochemical projects because they are the most effective. A contract was signed today on the production of polypropylene with the company Tekhremont worth about $150 million. Earlier we signed contracts with Carelli, and we have several proposals on the production of polystyrol and polyethylene. We like the idea of industrial districts. Speaking about the Republic of Tatarstan, we have infrastructures in place for starting up medium-sized and small businesses. I would like to invite Signor D’ Amato with a group of businessmen for large-scale work and I think we will have something to report in the future. D’Amato: I would like to say something that the Russian President undoubtedly knows. Cooperation between Russia and Fiat has a long history going back to practically the 1920s when the country we were cooperating with was called the Soviet Union. At the time it all started with a ball-bearing plant. I thought that this first step made by Fiat helped to use these mechanisms in Russian industry. In the 1960s Fiat took a risky step in cooperation with the Soviet Union to build cars at the VAZ plant. But it came off well, it was a great success. That project was supported, among others, by Kosygin. Unfortunately, the operation of VAZ envisaged that components and spare parts were supplied from enterprises scattered over the territory of the former Soviet Union. Not surprisingly, the plant met with a crisis. In the new Russia, I think, we have found a new valuable partner to resume our industrial and commercial relations. I assure you that we will pursue them in the same spirit in which we implemented the earlier initiatives. Vladimir Putin: Thank you very much. I’ve just been told that Fiat organised the production of ball-bearings in Russia before the 1917 revolution. VAZ was launched in 1966. There was a time gap of 40 years between the two events. It is high time to move forward and make further steps. D’Amato: We hope the Russian President will be by our side during this work. Vladimir Putin: Definitely so. You have a good team which has experience working in Russia, which has roots in Russia. These people know the Russian situation on the ground. I am sure they will do a good job, give my best regards to them. We will support them if necessary. D’Amato: I think those present would be interested to know that the Intesa Bank, which I represent, is about to open a branch in Moscow; we obtained a license just last week. We hope that before this year is out the bank will be up and running on Russian territory. I would like to stress that the bank will immediately begin its operations in the sphere of relations between the enterprises and companies. But in the first couple of years at least the bank’s operations with private individuals and private transactions will be limited, and it is amazing that in spite of the huge volume of trade between our countries there has been no bank on Russian territory providing such services. I am sure that starting from today and in the future these gaps will be filled. Vladimir Putin: The truth of the matter is that you have yielded that part of business to your rivals, the American and other European banks – that’s all. These 10 billion are circulating, including on Russian territory. But did I understand you correctly? Will it be a branch or a subsidiary? D’Amato: It will be a Russian bank which we have bought, it will be 100% owned by the company, the banking group. Vladimir Putin: So it is a subsidiary. D’Amato: A company with 100% control. Vladimir Putin: Excellent. I wish you success. D’Amato: As you know, we have massive cooperation with Belarus on communications, digital and mobile, on aircraft simulators and air traffic control equipment. And especially in the aerospace area where we will provide satellites. And we hope that you will provide us with a launching device. Vladimir Putin: Launch vehicles? D’Amato: The business could expand even faster if the problem with customs duties is solved. As you know the Italian Parliament has already voted on the issue in a positive way. And we hope that the Russian Parliament will do the same. Fifteen days ago Mr Kasyanov promised that the issue would be solved quickly, certainly before the end of the year. I hope it will happen. That would make a difference to the joint work of the Italian Space Agency and the Russian Space Agency on a key project. Vladimir Putin: It needs to be ratified. Before coming here we had a meeting on a number of problems, including this one. And it is not because you have raised the issue but because we ourselves have realised that the Russian side was unduly slow on this issue. And the trading agencies have assured us that all the problems have been ironed out and we will complete the procedure in Parliament very soon. Naturally, it will make good progress if we jointly implement a project on the Kourou launching site together with the European Space Agency. Let me note that Italy provides 12–14% of the total funding. And other European partners are waiting to see if Italy takes that step. That applies to Germany, which is to provide much more funding. But the Germans are telling me, “We will not do it until they start doing it.” So for my part I would ask you to urge the Italian government to make that decision. We raised this issue with Italian Prime Minister Mr Berlusconi yesterday. For our part we will tackle these problems. And we would appreciate it if you exerted your influence to make sure that the Italian side covers its part of the way. I assure you that we are aware that you and your colleagues are working in other areas. The point I want to make is that our cooperation is constantly under the review of the Russian government and the political leadership.