John Micklethwait: Can I ask you about the Chinese again. Back in 2013 you said you set $100 billion of trade with China as a target for 2015. But it was about $67 billion-$70 billion a year. What went wrong? I know the problems to the ruble and problems to the oil. Do you still think that target of $200 billion in 2020 is achievable?
Vladimir Putin: Yes, I find it absolutely attainable. You have just listed the causes of this fall in bilateral trade yourself. At the first stage, we set the target at about 100 billion US dollars, and we almost got there – it reached 90 billion. So we are almost there. But we also know the reasons for the fall. These include a decline in the prices of our traditional export goods and the exchange rate difference. These are objective reasons. And you know that very well.
John Micklethwait: Did sanctions make a difference?
Vladimir Putin: The sanctions have nothing to do with our relations with China, because our relations with the People's Republic of China are at an unprecedented high both in terms of their level and substance. They are what we call ”a comprehensive partnership and strategic cooperation“. Sanctions have nothing to do with this. The decline in our mutual trade has objective causes, which are the energy prices and the exchange rate difference. But the physical volumes have not decreased, quite the opposite actually. They are growing.
As to our trade and economic relations with China, they are growing more and more diverse each day, something we have worked on for a long time with our partners from China. I would like to draw your attention to the fact that we have gone from pure trade in traditional goods (energy resources, such as hydrocarbons, oil and now natural gas, petrochemicals on the one hand and textiles and footwear on the other) to a whole new level of economic cooperation. For example, we are working together on space programmes. Moreover, we are developing and soon will begin the production of a heavy helicopter. We are now tracing the plan for the creation of a wide-body long-range aircraft.
Russia and China also cooperate in mechanical engineering, high-speed railway transportation, lumber processing, nuclear energy production and so on. We have built the Tianwan Nuclear Power Plant. Two units are already operational and are showing good results. There are two more to go. So, the goal we have set for ourselves, which is to diversify our cooperation with China, is making progress.
John Micklethwait: Can I ask you about the oil price — your favourite subject. Almost two years ago you said that if crude oil fell below $80 a barrel there would be a collapse in oil production. The price is still below $50 and production hasn't stopped. Has your thinking changed on that at all?
Vladimir Putin: If I said that oil production would collapse I was wrong. By the way, I do not remember when I said this, maybe in the heat of the moment, but I do not think I even said it, but I may just not remember it. I was saying that at a certain level of oil prices new deposits will not be explored. That is what is actually happening. However, surprisingly, our oil and gas workers (mainly oilmen) continue to invest.
Over the past year, oilmen have invested 1.5 trillion rubles, and if we take into account government investments into the development of pipeline transport and electric energy, general investments into the energy sector were 3.5 trillion rubles last year. It is a considerable amount.
Oil production, energy production are growing, though the latter has gone down by about 1 percent here, I believe… By the way, we occupy the first place in the world in gas export, accounting for 20 percent of the world market. We are also first in the sphere of liquid hydrocarbons export.
Though we still come first in the sphere of gas export, national production has diminished due to the increasing volumes of hydrogenation for the electric power industry and therefore there is a lower need for gas at thermal power plants. This is the result of the restructuring of the situation at the national energy market. In general, Gazprom is doing well and is increasing export in its traditional partner countries.
John Micklethwait: You're going to talk to Saudi Deputy Crown Prince Mohammed bin Salman at the G-20. Would you still be in favor of the production freeze if the Saudis want that?
Vladimir Putin: As far as I know, Mr. Salman is deputy Crown Prince, but this is not so important. He is a very active statesman, we have really warm relations. This is a person who knows what he wants and can achieve his goals. At the same time I consider him to be a reliable partner with whom one can negotiate and be sure that agreements with him will be implemented.
However, it was not us who refused to freeze oil production; our Saudi partners changed their point of view at the last moment and decided to slow down the adoption of this decision. I would like to reiterate our position, it remains the same. Firstly, in my conversation with Prince Salman on this issue I will reiterate our position: we think that this is the right decision for the world energy sector.
Secondly, it is well known what we were arguing about: if we freeze oil production, everybody should do so, including Iran. But we understand that the Iranian position is very bad because of the well-known sanctions against that country, and it would be unfair to leave it on this sanction level. I believe that in fact it would be economically reasonable and logical to reach a compromise, I am sure that everybody understands this. This issue is not economic but political. I hope that all market participants interested in maintaining stable and reasonable world energy prices will finally make the right decision.
John Micklethwait: So you would be in favor of a production freeze but giving Iran a little bit of leeway to do what they need to do?
Vladimir Putin: Yes.
John Micklethwait: Can I ask you about privatization and oil again? The privatization of Bashneft – you've delayed it. And now as we reported Igor Sechin of Rosneft just come forward and said he would like to buy the half of it for $5 billion. You have always said that you don't want for big state companies to be buying the newly privatized ones. You wouldn't allow that, would you?
Vladimir Putin: You know, you have just mentioned state companies. Strictly speaking, Rosneft is not a company. Let us not forget that BP has a stake in Rosneft and BP is a British company. You are a subject of the UK, are you not? It means that you also to a certain degree…
John Micklethwait: You may have more control over Rosneft than Theresa May has over BP.
Vladimir Putin: We may have more control, but my point is that, strictly speaking, it is not a state company. I think that this is an obvious fact, as a foreign investor has a 19.7 percent stake in it. However, given the fact that the State has a controlling stake in the company, it might not be the best course of action when one company under State control buys another one fully owned by the State. This is one point.
Another point is that ultimately, as far as the budget is concerned, of major importance is who offers more money during the bidding that must be organized as a part of the privatization process. In this sense, we cannot discriminate against any market participants, not one of them, but this is not relevant at the moment, as the Government has decided to postpone the privatization of Bashneft.
John Micklethwait: That's gone. But on the question on privatization, you said back in 2012 that you wanted to expand privatization, you've had a difficult time on this. Why has that not worked? Is there a case, why does Russian government need to own 50 percent of these companies? May be you could sell more?
Vladimir Putin: There is no need for the Russian state to hold such large stakes and we do intend to put our plans into practice. It is not about whether we want it or not, it is about this being practical or not and the best timing. In general, it is practical from at least one point of view – from the point of view of structural changes in the economy. It is true that the role of the state in the Russian economy may be too big today, but from the fiscal standpoint, it is not always practical to do this in a falling market. That is why we are careful, but our trend in the privatization process and gradual withdrawal of the state from certain assets remains unchanged.
By the way, you have mentioned Rosneft. We are actively preparing a partial privatization of Rosneft itself. It is the best proof that our major plans have remained unchanged. Another example would be one of the largest Russian diamond mining companies in the world. We are privatizing part of our stake in that as well.
John Micklethwait: ALROSA?
Vladimir Putin: ALROSA. We are working in other areas as well, so there are no radical changes to our position. It is not the case when we have to, as we say, make a lot of fuss about it. In other words, we do not have to be obsessed with privatizing immediately and at any cost. No, we will not do it at any cost. We will do it in a way that ensures maximum benefit for the Russian state and the Russian economy.
John Micklethwait: So you would do Rosneft this year, you would sell those shares in Rosneft this year you hope?
Vladimir Putin: We are getting ready for the deal this year. I do not know whether the Government will be able to get ready to conduct this transaction together with the management of Rosneft itself, whether the appropriate strategic investors will be found. And I believe it is about such investors that we should talk. But we are getting ready, and it is in the current year that we are planning to do this.
John Micklethwait: And do you, do you again just to push you on that 50 percent, would you be happy in a world where the Russian state had less than 50 percent of these big companies?
Vladimir Putin: We do not consider this disastrous at all. You know, I remember that when foreign shareholders, foreign investors, got 50 percent in one of our companies, I will not name it now, their contribution to the federal budget and tax payments increased several times over at once and the company's efficiency did not decrease. Therefore, in terms of the interests of the state, the ultimate interests of the state, in terms of its fiscal interests, we have a positive experience, most likely, not a negative one.
John Micklethwait: Very quickly: the other accusation you've faced or heard a lot is people connected with Russia or backed by Russia were the people who hacked into the Democratic Party database. Is that, you would also say that is completely untrue?
Vladimir Putin: I know nothing. There are a lot of hackers today, you know, and they perform their work in such a filigreed and delicate manner and they can show their “tracks” anywhere and anytime. It may not even be a track; they can cover their activity so that it looks like hackers operating from other territories, from other countries. It is hard to check this activity, maybe not even possible. Anyway, we do not do that at the national level.
Besides, does it really matter who hacked Mrs. Clinton’s election campaign team database? Does it? What really matters is the content shown to the community. This is what the discussion should be held about. There is no need to distract the attention of the community from the essence of the subject substituting it with secondary questions dealing with the search of those who did it.
I would like to repeat: I know absolutely nothing about it, and Russia has never done anything like this at the State level. Frankly speaking, I could never even imagine that such information would be of interest to the American public or that the campaign headquarters of one of the candidates – in this case, Mrs. Clinton – apparently worked for her, rather than for all the Democratic Party candidates in an equal manner. I could never assume that anybody would find it interesting. Thus, in view of what I have said, we could not officially hack it. You know, it would require certain intuition and knowledge of the U.S. domestic policy peculiarities. I am not sure that even our experts from the Ministry of Foreign Affairs have such intuition.
John Micklethwait: Do you not think this is sort of the time when everyone should sort of come clean about it? Russia tries to hack America, America tries to hack Russia, China tries to hack America, China tries to hack Russia? Everyone tries to hack each other.
One of the purposes of the G-20 is to come up with a new set of rules so this can become a more ordered version of foreign policy when everybody is doing this. Allegedly.
Vladimir Putin: I believe that the G20 should not interfere, because there are other platforms for that. The G20 was established as a forum to discuss, first and foremost, world economic issues. If we load it with… Of course, politics affects economic processes, this is obvious, but if we bring some squabbles, or not squabbles, rather, some matters that are really important but relate purely to world politics, we will overload the G20 agenda and instead of addressing such issues as finance, structural economic reforms, tax evasion and so forth, we will engage in endless debates concerning the Syrian crisis or some other global challenges, of which there are many, or the Middle East problem. We should find other platforms, other forums for that, and there are plenty of them, including, for example, the UN and the Security Council.
Part Three to be published.