Russian President Putin’s Annual Q&A : Key Takeaways For Investors, Part 2

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Op/Ed by Chris Devonshire-Ellis 

“I have friends, I have colleagues, who are offended, because they have no sanctions imposed on them. They say, “How come? It’s humiliating. It makes me think that I might have done not enough to have sanctions put on me.”

Russian President Vladimir Putin held his annual live Q&A session last Thursday, with foreign journalists and Russian citizens all able to pose questions. The event, streamed across Russia, is extremely diverse and lasted for 4.5 hours. In these two articles I have highlighted issues raised during this event that impact upon investors into Russia and upon trade and relations with Asia. This is part two, part one can be found here.

The Humanistic West, Sanctions & Handling Covid-19

Putin: “Now, some western partners are saying that they are very humanistic in their policies inside and outside of their countries. Well, I think they should think of how to help others. Those who find themselves in dire straits, help them with the burden that they care, so that restrictions could be lifted. Sanctions could be lifted against those countries who experience problems these days, especially those strikes of cooperation, which are necessary to fight the pandemic. And, I mean restrictions on equipment, and pharmaceuticals, and doctor training. They should be lifted. I think others should think more about that, not about trying to find the culprit. We have good cooperation with many countries, China included. We work at the level of professionals, heads of regions, state level across the board.”

Pricing Conflicts Between Domestic & Overseas Markets

Putin: “We have harvested a record high amount of crops. Maybe we will have up to 130 million tons. That’s the harvest we have. Yet, the bread price is going up faster, becoming more and more expensive. Why? What’s the reason?

Sugar. I was once stated that we need to fight off the brown sugar coming to our market. We need to support our white sugar producers. We need that. Now we almost have deficit. The minister said we have enough white sugar for internal consumption. The same time, we see that there’s not enough. The prices went up by almost 75%. or sunflower oil, 17%. We have enough of sunflowers. The reason is that the prices in international markets went up. That is why Russian companies started exporting more, and the prices here in Russia have been adjusted to a level of the prices abroad, but that’s not acceptable. We had quite a tough talk over this, and the government has been responding actively.

What is important is that they would not be overdoing this. We should be working based on the market mechanisms. We should have adjusted the tariffs, exporting/importing tariffs. These mechanisms, we’re not inventing a bicycle here. We’re not inventing a wheel here. I think the agreement has already been signed, the agreement between the retail chains and the producers. So the producers are lowering the prices, and the retailers would reflect that on the most essential goods. Of course prices, this thing, it should be kept under close supervision. And I hope that in the next couple of days or weeks, the situation will change to the better.”

Ukraine & Republic of Donbass

Q: “What are the prospects for reaching a peaceful settlement in the Republic of Donbass? What are the prospects for the relations and further development of the relations between Russia and Ukraine?”

Putin: “Well, speaking about prospects for relations between Russia and Ukraine, that’s up to the Ukrainian leadership, not just Ukraine, or Ukrainian people, but specifically Ukrainian leadership. All the previous heads of state and the current president, Mr. Zelenskiy, all came to power, holding a banner that they want to end conflict, want to end violence in Donbass, and reunite the country. Also, they wanted to restore relations with Russia, but they never succeeded in that. Because the majority of the electorate, majority of the people who come to vote, actually for that, they are for peace, for relations with their neighbors.

But when these brand new presidents come to power, they see people around them, and they don’t have the will, the political will, or maybe the courage, to actually carry out what they’ve promised. When I met my counterparts during the meetings of the Normandy format, we’ve reached quite a lot. We were able to exchange prisoners and agree on some things, but nothing has been done to remove the obstacles towards the development of the social and economic spheres of social relations. And officials in Kiev, on many occasions, have publicly stated they do not want, they are not intent to carry out the Minsk agreements, and they want to change the key principles of the Minsk agreements.

I’d like to note to you that these Minsk agreements are actually supported by the UN. They are actually the same. They have the status of international law. So unfortunately, they cannot expect anything to be changed unilaterally.

I believe that a peaceful settlement is inevitable. The question is when? Again, this very much depends on the current Ukrainian leadership. Russia has always supported the Donbass people, and we will continue to do so. We will expand our support for them, in fact, and the same goes for supporting their industries, resolving their infrastructure issues, social issues, et cetera. We will work steadily along these lines. And you can rest assured that the situation that we currently see in the Donbass, again, not just in terms of humanitarian matters, but in terms of direct cooperation, this is something that we are very much interested in, and this is our priority.”

Competence Of Government & Pending Cabinet Reshuffles

Putin: “Our strategic long-term goals will remain in place. We have to adjust to the realities of the COVID-19 pandemic, as I said. Some of the reforms had to be rescheduled for six months, like in the primary care unit, because we needed funding, emergency funding, to fight COVID-19. To support our people, support the worst hit industries. We spent 838 billion rubles for direct support of our people. We had to find those funds, just like the funding we used to support our worst hit industries.

But the strategic goals are still there. The government has been working quite efficiently. As for the prices, and your Channel showed our discussion with the government officials. I believe that some government officials indeed did not respond in a promptly manner. They overlooked that situation. But overall, given the challenges of the pandemic, the government worked really efficiently, day and night, in a very intense way. And we need to thank them for it. And we will.

As for the changes, the re-shuffle, it’s up to the head of the government. I agreed with those changes as for other changes for any other reshuffle. Well, we don’t have any other initiatives from the chairman of the government. I think that the existing composition of the governance needs to work like a clock. We need some stability. We need to give everyone time. That’s a response to part of your question. So, no other changes are expected. As for the strategic goals. Indeed, we picked the right people for the government to pursue those national development goals. And I believe that governance is still on track to do that. It is fit for a purpose. We have identified the goals. Indeed, we had some initial criticism, whether we can achieve those goals using the tools that we’re supposed to use. The ones we call the national projects or the national programs. Overall, I believe they’re fit for purpose.”

Changes To The Russian Constitution & Military Development

Q: “The change of the constitution, this year. Why?”

Putin: “Well, you have to do everything right on time. Fighting prices that has to be done in a timely way, and changes to the constitution had to be done in a timely way. We can’t do it earlier. Let’s look at it. The fundamental part of our constitution remains the same. The previous constitution was adopted when people were dying here. Fire was on the streets and tanks were shooting at the parliament. We had shootouts here in Moscow. So that’s still on our memory and it wasn’t happening elsewhere, it was here right in front of of these buildings, right on the streets. And the constitution was adopted amidst that situation. I mean, those hostilities.

The constitution indeed had a stabilizing role to play, helped to create the certain political base to help the country move forward. But, we’re in a different situation now. And in line with this situation, we had to change the main law as we call it, to introduce amendments to the constitution. We were not able to do certain things earlier. Take these social guarantees, social securities guarantees that perpetuates that the adjustment of pensions. Would it have been possible to do that in 1993? People didn’t get retirement benefits or salaries or allowances for six months.

It’s a different situation now. Current heads of companies and future heads of companies would have to do those adjustments. They have to adjust the pension benefits to inflation. We now have the fundamental economic conditions that help us to do that.

Some of our colleagues raised the issue of how difficult and how struggling our people are. But definitely our salaries need to be higher than the minimum wage set in the law. So these adjustments are set forth in the constitution. There could be other issues. We adjusted salaries for some of the workers, but some of the other professions are underpaid right now. But the government would have to do it. The minimum wage cannot be lower than the minimum subsistence level. And definitely they would have to take action and the amendments also asserted priority of Russia’s legal system over international ones. Or the inviability of our territory.

Take the state of the Russian Army it was in, in 1993. Where we were able to do that? No, you won’t use a nuclear bomb forever incident. And the conventional forces were all in disarray. The army was in tatters. We needed an army of 50,000 to fight the terrorists in the Caucasus. And we weren’t able to do that, since the army back then was one million. But we couldn’t find 50 thousands of capable soldiers. Right now our army is smaller, but it’s one of the most efficient armies around the world. It’s smaller, but it’s more efficient. So, okay, we’re strong. We can now put it on paper and make it as part of the constitution. We did it on time.

And by the way, you know how many of the suggestions we had to update the constitution, thousands of them came in. So I’d like to thank our people for what they did. It was an all Russian vote and many people came to cast their ballots and choose what they wanted to see in the constitution. That was basically a referendum. So the people are the office of these amendments to the constitution. It was necessary. It was timely. And I would like to thank the people of Russia for doing that, for supporting these amendments. Thank you.”

Tourism Industry Development

Q: “So could you please share your plans as to how to support tourism in Russia. In many countries, as we know, tourism is a huge contributor to the state budget. For instance, Turkey has a lot of resorts and tourism industry is given a lot of benefits and has always been famous for its resorts and certainly today we are still a perfect place for tourists. We have ski resorts, gastronomically we are very rich. We need infrastructure. Without federal help this region cannot prosper and thrive.”

Putin: “Well we already mentioned tourism because St. Petersburg is waiting for the borders to open. So their foreign tourists would come in. I think it’s very important to let the tourism industry to prosper. And I know that people in Russia are quite familiar, quite accustomed to going abroad for vacations. 52 million people tend to travel abroad when they have a chance to have a vacation. Russian tourists spent US$35 billion overseas in 2019.

Tourism inside Russia is also important. And this year we’ve been doing our best to help people spend their vacations here in Russia. You know, we have that cash back system, where we gave some of the money that people spent on vacations back to them. Here is something I want to point out, this cash back system. We earmarked 15 billion people only 1.2 billion rubles have been used already. We agree that this money will not be allocated and we will use this money and we will add the same amount next year. We will be doing our best to build up the speed and efficiency or our work. So I would like to reach out to you and your colleagues, all the media out there, those who work online and offline, we need to support internal tourism, domestic tourism. And I think we should be doing better in terms of informing the population about the regions and the resorts that we have here in Russia, rather than abroad. I know and I understand that people say, “Well, it’s beautiful,” but there is no water closet, there’s nowhere to wash your hands, restaurants, roads, all this infrastructure is insufficient and we need to pour colossal amount of money to change the situation, change the tide. I hope that businesses will chip in because the state is meant to provide support and we are doing that. We are providing the infrastructure and we will be allocating the money. It has already been envisaged by our recent plans, and we will be supporting regional businesses.

We’re currently working to establish an institution that would work solely on domestic tourism issues. I talked with Mr. Chernyshenko (Russia’s Deputy Prime Minister). He is spearheading this effort. He’s very active. Mr. Chernyshenko is fighting tooth and nail for you. And we are aware that this is a very important sector for us. You mentioned Turkey, and Turkey is quite close to us, and they’re building up their tourism capacities for decades now. And the government of Turkey supported massively the tourism industry in Turkey. It’s not an exception to the rule when it comes to ship building. We know that South Korea set up a whole state system to help facilitate the growth of that particular business area and they’re building the biggest ships these days. Turkey did the same helping its tourism sector and we should follow suit. As for the money, 15 billion rubles, we’ll just put them for the next year.”

On Localized Internet Coverage In Remote Villages

Putin: “There was a question about the internet and whether online education is possible. I have had a lot of questions here. Some of them have to do with the bandwidth or the quality of the internet connection. I think that is very important for those who are currently studying online for schools in the year 2021, we will introduce better access to the internet for schools across Russia.

And if we take cities and towns of Russia, each and every one should have a universal system, which would bind together telephones and other devices using the internet. That should be done by the year 2021. I won’t be giving you all the nitty-gritty of this issue, but the cities and towns like people say, “Should we be climbing up the trees to get access to the internet?” Because there is no connection. Well, by the end of the year 2021, these problems will be solved. We have allocated 12.6 billion rubles and this money will be used and I hope it will be used in such a ways to let people see the difference. I hope people will see the difference. So the settlements between 100 and 500 people will also be entitled to these new program benefits.”

Russian Foreign Policy, Nord Stream 2

Q: “Let me ask you about our foreign policy and about the foreign policy of our Western partners, as we call them. Over the last four years, who among the global leaders become the… Well, the difficult negotiator, and the most comfortable negotiator. I remember you say at one of the G20 meetings, giving some geography lessons to Macron and Merkel over the issue of the Kerch Strait. What about Mr. Erdogan? What about Mr. Trump? They are quite interesting people and also Lukashenko. I think he’s a rather interesting interlocutor as well. And another question, if I may. It has to do with the Nord Stream 2 project. The United States is putting unprecedented pressure on the EU and surprisingly so, Europe, Germany in particular, are pushing back against this pressure. So in your opinion, what are the prospects? Will we build, will we complete the construction or not?”

Putin: “Well, comfortable, not comfortable partners in negotiations. I’m not passing the judgment on anyone here. All these people are highly professional and exceptionally well-prepared for any talks, for any negotiations, they are laser focused to achieve the tasks which they have set for themselves for their country. The means of achieving these goals might be different. So there are no bad or good politicians. There are only interests of your country. It’s the same with me. I don’t say that this politician is good and this one is bad. I work with everyone because my goal is to get as much as I can for my country, for Russia. Sometimes you have to reach compromise. Sometimes you have to insist that our interest should take priority, but that’s how it works. All the rest is counterproductive.

You mentioned some of the countries, well actually you forgot China. With China, our interests are quite similar on many issues. Maybe they saw maybe some chemistry at the personal level has helped us to build very good business relations and also personal relationship with the head of China, Xi Jinping. And that helps a lot, actually. Right now our views might be different on some issues with President Erdogan. Sometimes we are worlds apart, but he’s a person who always delivers. He’s a real gentleman. He never does anything. He never walks back from a promise. He does everything to do good for his country, and it’s easy to forecast what his next step will be.

And being predictable is a very good quality. It’s good for me because I know what to expect from him or other such people. He mentioned the Nordstrom 2 project. This project is undoubtedly, absolutely clear that it is a win-win for everyone. It’s a huge, huge win for the EU and for Germany in particular. There’s a different option for them. They can buy a more expensive energy resource. Liquefied gas from the United States, it’s priced 20% higher than the pipeline gas that we supplied with. That will make the economy of Germany less competitive and the prices for households would skyrocket. That’s all pretty simple. It’s cut and dry. You don’t need to be a professional to know things.

And, of course, this project reflects national interests of Germany and the EU. By the way, we have a lot of people who we deem friends in Germany. I’m not exaggerating anything. So the leadership of Germany does not interfere in this because this is a purely business project, economic project, and they are quite open about their position. They support the project wholeheartedly.

I think what is needed is to complete the construction of 160 kilometers. That’s for both the pipelines. It’s 165 maybe if I remember it right. So it’s almost finished. I think it will be completed and I hope the new administration of the United States would treat it’s partners, it’s allies with respect. Not be trying to force them into neglecting their own national interests. Now, I hope that the administration will work following the principle of fair competition. I hope this project will be completed.”

On Putin Becoming President Again

Q: This is Kommersant newspaper. Mr. Putin, Valentina Tereshkova (Member of the Russian State Duma, first Russian woman in space) put forward an initiative to say that the presidential terms can be zeroed. As we say, it means that when 2024 comes, you might become president again. What does that really mean? Are you ready to become president again? Or you don’t want to be a lame duck before time and that’s the reason why that happened such a way. What did you think about the situation which happened when many people started to express their solidarity? Actually, that was quite tough on the constitution. That’s what I think, and many other people agree with me. So Mr. Putin, I want to ask you, is it really worth it?”

Putin: “Okay, whether it was worth putting forward that amendment to the constitution or not. I have one universal rule, answering that question, you should understand one thing. Will what we do help the country or not? If it is not going to help our country, we shouldn’t do it. If it will help, we should do it. For me, I haven’t decided yet. I don’t know whether I will be running again in 2024. As for stable growth and development of Russia, that’s the ultimate goal. Formally speaking, the people supported this amendment. I will consider the options.”

Environmental Responsibility

Q: “I’m from the Irkutsk region, Baikal, I’ll talk about environment. Mr. Putin, here’s my question. We’ve had several major environmental disasters in the past year. And you had to intervene personally. The Norilsk, Usoliekhimprom incidents, what kind of punishments do they deserve? And do you support the following idea? Maximum penalties for those who inflict this environmental damage. First is the so-called accumulated damage related to industrial plants starting from the Soviet times, something which is not related to any specific commercial or government institutions. It’s the government that is in charge of this. It’s federal, regional authorities. They’re all in charge of it. They’re all responsible, and we need to respond to these incidents.

Putin:
“The sooner we start dealing with it, the better. There are current issues, and manmade disasters, which take place right now. Definitely we need the law enforcement to audit institutions that need to look into it and ascertain their level of responsibility and definitely those polluters need to be held to account, held to accountability, and the penalty needs to be in line with the damage to the environment and to the people who reside in that place. As for Norilsk Nickel, I just don’t interfere. I know that the penalty is really high. People have to take ownership. Take the city of Norilsk itself. The company needs to work more on environmental issues. Take a closer look at the healthcare sector, the emissions. I’m sure the company could take a certain load for these areas.”

On Recent Political Developments In The CIS

Q: The CIS will soon be marking its 30 year anniversary. The CIS seems to be going through a phase. We saw the president and the government stepping down in Kyrgyzstan, the protest in Belarus and the statement by the newly elected president in Moldova about the need to withdraw the Russian peacekeepers from the Transnistria region. Here’s my question. Can Russia lose some of their allies in the CIS?”

Putin: “You said it’s a phase. Take Kyrgyzstan. Well, it’s not the first time that they have this. They have these kind of a mess all the time.

They want to follow some of the political patterns of other countries. But the level of maturity is not the same as in France. Take France, the political system… Or take Germany. Their political system has evolved over decades and even centuries and the parliamentary forum was built over time for centuries. The political parties with resilient political platform which is clear to everyone, which has a certain base.

What about the CIS countries? Do we have these traditions? No. So this is the results not of what we see today. We have to treat everyone with respect? They are looking, they’re searching for their own identity, for their own path. It’s not that we are in a phase.

And the president of Moldova, I wish all the best and wish her success. But, she represents a political force. Her statement is not something new to us. The representatives of different western countries have called on the withdrawal of our peacekeepers. And Maia Sandu is the President of Moldova, but she’s also a citizen of Romania. Okay. We heard the calls from foreign countries to withdraw our peacekeepers. Yes, we are in favor of that once we have the right to environment. Once we have normal dialogue between the Transnistria Region and Moldova. Once we are in the reconciliation and peace phase, we are in favor of that. And we were close to that with the previous president [inaudible 02:59:05] the representatives of Western countries pushed him and the last minute we said, “Okay, we won’t do it.” He made a step back and the resolution and the settlement of the Transnistria conflict was put off for an uncertain time.

“Why?” I asked counterparts, “Why did you do that?” They said, “Well, you know, we did that.” And that’s the way it turned out. I don’t want to go into detail, but this issue has to be resolved at a certain point.

Now, take Belarus. I made multiple statements on that matter. The people themselves need to sort out those issues in a calm way. The President made a statement about that, he spoke multiple times. I agree with him that it needs to be done in a calm environment and in a safe environment, initiate amendments to the constitution. Well, let’s wait and see.

The only thing we really wanted to achieve here is that there’s no interference from the outside in the domestic affairs of Belarus. Because there is interference at this point, there’s information support from abroad, there’s financial support for certain parties coming from abroad. And this never leads to anything good. I can see through the mask that you’re smiling, but this is critically important.

You know why? Because it is difficult… When there should be change within a society, it has to be grounded in something that has been developing for a long time within then the country. Not thrown in from the outside, like a grenade blowing up. All you have to do is actually be patient, wait for all the domestic political forces, not to start conflict, but to engage in dialogue towards protecting people’s interests. That’s how it should go.”

Covid-19 Business Support

Putin: “The COVID pandemic, of course, had a very serious effect on the region and on its output and the lives of people there. But let me get into detail with respect to this specific question. So the industries which are most, let’s say affected, of course transportation, especially air transportation, railroad transportation, especially passenger traffic. And of course that’s sales and services. And of course that’s the fitness center, that’s retail, that’s restaurants, cafes, etc.

So what have we done? What has the government done? And I’ve said that over the year, the government has been worrying, working very intensively to support both the citizens and the economy. So on the whole… I have just named outlined Ural industries, so what has been done?

So we have postponed all the payments except for the value added tax. We have provided special financial grants and subsidies. We have provided 0% loans. We have provided some companies with 2% loans with the guarantee that the loan will be written off if the company pledges to maintain 90% of their personnel or writing off 80%, if they actually managed to keep 80% of their personnel.

Now, we also decreased payments for rent of state property and for small and medium enterprises, we have reduced social payments from 30% to 15%. And this is something that is here to stay. This is permanent. Also, thanks to the subsidies in mortgage. For example, we have a 6% mortgage provided to a lot of people and a lot of other subsidies and measures tasked with helping the people. They have been worth 4.3 trillion rubles, which is over 4% of the Russian GDP allocated to support Russian people and Russian companies. So this is an entire package of measures developed and initiated specifically and formalized to effectively help our population.”

Support For Auto, Construction & Shipbuilding Industries

Putin: “We have also worked with representatives of systemic industries, such as the car industry, aircraft construction, ship building industry, agriculture, and of course construction. Yes, this year fewer buildings have been built, but we have maintained the industry at a very good level because we supported mortgages. About the car industry, we’ve a very active program. For example, yesterday, we had PD-14 Russian engines used in MC-21 new products. And this is also an achievement of our car engineers, of our aircraft engineers. We’ve had new modifications of new cars. Civil ship building has seen a 30% increase despite all the problems associated with the pandemic.”

Forecast For 2021/2022 GDP Growth

Putin: “As for our economy, according to different estimates, by the end of 2021, or maybe first quarter of 2022, we’ll have overcome all of these issues. And over the next year we expect to see a positive GDP growth. But to do that, to achieve that we have to contribute to that. All of us. We all have to work to resolve these problems.”

On Terrorism Threats & Multiculturalism In Russia & Europe

Q: “My question is about safety and security and the terrorist threat. Russia has always condemned all terrorists acts and continues to do so. Specifically, terrorist acts taking place in Europe, for example, this year. Which were a reaction to the publication of Prophet Muhammad in one of the newspapers, of one of the publications. Russia does not support these publications. Where do you believe is the threshold between human rights and material offensive to believers? And what can Russia do to prevent this European type of scenario? So where’s the border? Where’s the threshold?”

Putin: “Well, there’s nothing new I can tell you about that. What do you mean a border between a threshold between one right and one right? One freedom and other freedom? Where does one person’s freedom and another person’s freedom begin? I mean, it’s some very general things we’re talking about here. Those people who brazenly try to offend people’s religious views, people’s religious feelings, they must understand that this will have a negative reaction a blow back. But on the other hand, this kind of reaction should not be an aggressive one, a violent one. And in all global religions, in Christianity, in Islam… I’ve just quoted some lines from the Bible, from the Qur’an and etc. In all global religions, in all world religions, there is nothing about aggression. There’s nothing that asks you to be aggressive or infringe on people’s rights. So the reaction should never be to murder people. It always goes against the idea of all world religions.

God gave you your life and He’s the only one who can take it away. And so how do we treat this problem in Russia? What can we do to prevent that from happening, this European scenario? What you see from the very start, Russia has been a nation of multiple religions and multiple views. We have different ethnicities, different peoples, this is a legacy given to us by our ancestors. During our history we’ve had multiple very dark and violent pages. For example, the deportation of peoples after the Great Patriotic War. We try not to raise this part of our history. I’m not going to make my personal assessment of what happened, but the representatives of the people who were affected, who suffered during those times… On the other hand, there were people among those who suffered that were actual traitors to the motherland who actually welcomed the Nazi forces coming to Russia. On the other hand, there were other people among these ethnicities who actually fought to their last breath to protect their Homeland.

So, the thing I’m coming to is that there were no repressions based on religious belief. Of course, there was certain persecution of Christians, but this was the overall idea that Christian belief was unacceptable at some point in the Soviet State. But there was no specific persecution based on specific beliefs. And so we’ve had this tolerance forged in Russia over hundreds of years. So we do not accept when people are offensive towards other people’s beliefs. I ask you to never do that. This is something that could destroy our country from the inside. We cannot allow that.

As for what’s happening in certain European nations. Well you see, the problem is, in some European nations representatives of say Islam are say 10% of the population. But these are usually immigrants or second, third generation immigrants. But in Russia, representatives of different beliefs and faiths have been living here for hundreds of years. And this is a very critical difference that we have between us and Europe. And this is what define the way we talk to each other.

As you know, the project of multiculturalism in Europe failed. And many people who called for this project, for carrying out this project, had to actually admit that they failed. But in Russia what happened here happened organically over hundreds of years, and we value that.”

On Pension Reforms

Q: “Mr. Putin, indexation of pensions was abolished five years ago. It was suspended, that’s what was sad, but now we still see that happening every year. So, will, add how will, indexation happen again for those retirement benefit receivers who still work?”

Putin: “The condition is simple. Budget efficiency. We need to have enough money in the budget. In the Soviet times, some of you don’t remember it, but it’s good to see that you care about the elderly. And, in the Soviet Union, those who continued working, they didn’t get any pension, any retirement benefit. That’s how it was in the Soviet Union. In today’s condition, especially so when we have the pandemic, job losses, and the incomes are going down, it’s important to upgrade retirement benefits, to increase them. We need to know how to make that happen. We need to do our best so that the retirement benefits would be increasing.

I think we should think about establishing some specific categories of retirement benefits, receivers who need additional support. I think we can do that. It won’t require too much money, because oftentimes, retirees take up the jobs which are not really in demand on the part of other people. And, for the state, it’s good that the retirees are taking these jobs. Next year, we will be increasing pension at a level higher than inflation. We expect the inflation will be 4.1%. We will be indexing pensions at the rate of 6%, even more than that. We will do everything to deliver on this promise. We of course think of how to start indexing pensions again, because our retirees, they deserve that.”

On The Prospects Of A New Cold War & NATO

Q: “BBC news. Mr. President, more and more often, we hear the phrase, “Cold war,” used to describe relations between Russia and the west, and we hear a lot Russia blaming foreign powers, America, Britain, NATO, for being responsible, and making these relations seem like a cold war. But, don’t you think that over these years, over the last years. You also have born part of the responsibility for making these relations seem like a cold war. For example, the use of chemical weapons in Salisbury. Or, are you going to say that Russia’s authorities are nothing to blame for? Or, for example, have you read the Bellingcat report, the investigation, saying it is Russia’s State that is responsible for the poisoning of Alexei Navalny?”

Putin: “Well, speaking about the attempt to take the life of a famous blogger of ours, like I said before, we are ready to investigate anything. If you have specific data about the use of specific chemical weapons, like the Novichok everyone’s talking about, please, do provide us with information. We are ready to send our specialists to Germany, to France, wherever. And there, with our colleagues, we can address the problem. Or, please come to us, bring us the biological material, and at least provide us with the official statement, the official results. Why is it, that despite the multiple times that our investigative committee has addressed European nations to provide us with this data, nothing has been given to us? For example, citing Germany, their opposite counterpart did not give us any information citing Germany that prohibited them from disclosing anything. Why is it happening? Can you specify that?

Now, saying that Russia is all good, and there’s nothing that we are to blame for. Well, let me say that I believe that I’m personally responsible for the wellbeing of the Russian people, and I will do everything, and anything in my power, to protect the interests and well-being of my people. For example, look at what happened and Crimea. I did what I did because the Russian people decided this through democratic means. Let’s see what happened in Grenada, before that. I remember that nobody in the west opposed that decision, despite it not being very democratic. So, should we accept these types of activities, or not? There should be no double standards.

Now, the sanctions you imposed against the Crimeans, the Crimean people, is it because of the annexation? Then, well, how are these people responsible for that? If it is because of the annexation, then what have other people to blame for? You should leave them alone, and not impose sanctions on them. As for Russia being all peaceful, and all good, yes, exactly that. We are peaceful, and we are all good.

Indeed, we heard statements from NATO that it’s not going to move eastwards, it’s not going to expand eastwards. Yes, those were oral statements, not written statements, but we were betrayed. There was a wave of expansion, and NATO military infrastructure is getting closer to our borders. Aren’t we supposed to react to that? Was it us who withdrew from the missile defense treaties? So, as a result, we have to create systems to defend ourselves. Of the INF Treaty, for example, was it us who withdrew from the INF treaty? No, it wasn’t us. It was the U.S.

Okay, then we said, “We’re not going to produce, or place such weaponry in Russia, as long as the U.S. doesn’t do that as well.” We received no response. Then, the Open Skies Treaty, what can we say about that? The U.S. withdrew from the treaty, and what can we do about it? Are we just supposed to allow you to send your planes, and American planes flying in our skies, and not react to that in any way? You know, you do realize that we are smart people. We’re not idiots. We understand these basic things, we understand the basic things that’s happening in the world. There are certain other issues that raise our concerns, and we have to react to them.

That said, for example, the New Start Treaty is going to expire soon. When it expires, there’s going to be nothing left of the infrastructure that used to prevent the world from engaging into a new arms race. Will you propose to the Americans to expand, to prolong, the New Start Treaty for at least one year? Because, we understand that this is important, and we know that now Russia has a supersonic weapon systems that are something that no other nation has. They are unique, and still, we see no reaction. We see no other country talking to us about that. We know that similar systems are being developed in Europe, in the U.S., in the UK, and nobody’s trying even to talk to us about that.

So, the question is, who really is peaceful and good, and who is aggressive? We have two military bases in Damascus, and Port Said, and in Syria. These are important areas, and military bases there are used to protect us from the terrorist threat. But, look at the U.S. They have a huge network of military bases.

You know, our military budget, how big it is? US$46 billion. Look at the UK. It’s much bigger than that. In the U.S., it’s US$770 billion. Russia is sixth in the world in terms of how much money was spent on our military. France, Germany, Japan, UK, the U.S., everyone else is ahead of us. So, who is the violent one here? Who’s the peaceful one here? I think we can clearly say that Russia is certainly very good mannered and polite, and we want to work towards diplomatic resolution of conflicts. So, quoting one of the famous Russian cartoon characters, let’s all be friendly here.”

LNG Supplies

Q: “About gasification, about the high pressure pipelines. They have been installed back in 2015, but there’s still no gas.”

Putin: “So, first of all, this issue can and should be resolved. The level of gasification in Russia is 71.1%, and this year, we spent 22 billion more additional rubles. The baseline is 50 billion rubles. The gasification efforts for villages, for agricultural regions, is much higher, much faster than in cities and smaller towns. So, by the end of 2025, we would like to reach 90% gasification of the country, because we understand that there are certain regions where gasification is very difficult, or outright impossible. Overall in Russia, by 2025, it should be 90%. Now, speaking about your specific village, I assure you we’re going to solve that very quickly.”

On Chechnya & Relations In The Middle East

Q: “As we all know, the Chechen Republic is one of the most developed regions in the country, and one of the most safe regions in the country. It was in part thanks to the Mr. Kadyrov, the father of the current leader of the region, and your collective efforts. Unfortunately, we are facing some collective threats, coming from the west, from the U.S., for example. Mr. Kadyrov himself has been a subject of foreign sanctions, as well as his relatives. So, Mr. Putin, what is the goal that the west is trying to achieve? Why are they coming up with sanctions against Mr. Kedyrov and Chechnya?

Putin: “I don’t think that Mr. Kadyrov is the only one who faces sanctions, and all sorts of things. I think Russia is the main target. He is defending the interests of Chechnya, Chechen people, and Russia as a whole. So, he is one of the targets for our so-called opponents. There’s nothing special about that, nothing unusual. I know that. Mr. Kadyrov is quite philosophical about that. He isn’t troubled. I have friends, I have colleagues, who are offended, because they have no sanctions imposed on them. They say, “How come? It’s humiliating. It makes me think that I might have done not enough to have sanctions put on me.” That’s what they say regarding our partners.

So, there’s nothing to worry about. We are a self-sufficient country. The Chechen people are self-sufficient, too. Chechnya is growing, the scars are there, we all remember what happened in the ’90s. The country is growing fast, thanks to the new, and young, vibrant team. I know Mr. Kadyrov personally, I know him very well. His whole life, he dedicates himself to the Chechen people, and to Chechnya, so I wish all of you only the best. I’m sure that Chechnya will soon look like Grozny does.

Q: “You quoted the Qur’an, and you always support the Muslims. So, in your opinion, is it important to be closer to the Arab world, and maybe Chechnya has a role to play here?”

Putin: “Well, the Arab world, and Mr. Kadyrov plays just the same role as the other heads of regions have. The Ministry of Foreign Affairs is in charge of foreign policies, but of course, Chechnya contributes a lot to the work of the foreign ministry on this track. As for the Arab world, the Islamic world, traditionally, our relations have been very good with countries of the Arab world, and the organizations. By the way, we observe certain number of international, reputable organizations, traditionally relations with the Arab world, for Russia, and for the Soviet Union, have always been very important. We have ties which go deep into history, and these ties are strong, and vibrant. Today, I think we are expanding our relations. In the Soviet times, there was ideology. Now, we have such a scope, and magnitude of cooperation with the Arab world, with the Islamic world. We can say it’s way more than what we had during the Soviet time. So, we will continue working hard to make it better. The Russian Direct Investment Fund cooperates with almost every sovereign investment fund in the world. With every one of them. With some of the Arabic funds, we have a unique relationship. They trust our Direct Investment Fund so much that they automatically, I stress this, automatically co-finance all the projects that the Russia’s Direct Investment Fund carries out. That shows how much trust is there.”

On The Russian Welfare Fund & National Asset Controls

Q: “Interfax here. Let me start with a question about the economy. I guess the background of the ongoing pandemic, Russia hasn’t tapped into the Russian Welfare Fund. Because we’ve been mostly doing borrowings to top off our budget, does it mean that we are preparing for some more sharks? Maybe in the commodity market, and those who wanted to get investments from the welfare fund, should forget about getting any? And, another clarification, if I may. Lately, we’ve been hearing from some people that made me the outcomes of the privatization might be canceled. So, may I ask, is the government content with our economy as it is now, or maybe there should be some more control over the assets which have gone out of the reach of the government.”

Putin: “The National Welfare Fund proposal. I think we can discuss it. It’s true that the amount of the fund has gone up. It went up by 70%, and the ruble equivalent. It has to do with the exchange rates, to some extent. That’s our safety net. It’s not that we’re preparing for something, for some sharks going forward. It’s a safety net, and we must have one. At the same time, we have a law which says that we can spend money from this pot, if it exceeds the threshold of 7% GDP. We are now reaching the level of 7.1% of the GDP. That’s how big our welfare fund is. As for liquidity, it’s 8 trillion rubles. (US$110 billion) What do I mean by that? That’s how much we have. That’s the budget, in this year alone.

We’ve been investing in the development of the Trans-Siberian and national highways and road networks heavily. Some of the money comes from the welfare fund. Also, we use it to give social benefits to people, families, both children, doctors, and students. Those who study to become doctors, and nurses. We also use that money to support the sectors of economy which suffered the most. We use that money to help larger companies. So, the overall amount of money that we are taking from the fund, is going to be 350 billion rubles. 250 has already been used up. This year is flying, and it’s so quick, it’s so speedy today. I think that we will do it spend the rest 100 billion quite soon. So, we do use the welfare fund, but we do that carefully. I already said that next year, we’ll have over seven trillion rubles, which is good, but the Ministry of Finance always looks ahead for three years. Given the exchange rates and everything, the economy is growing, and there are some events happening outside of country. All those things are taken into account. We do everything that we can to allow the budget to be stable. We of course take the money, at the same time, we use the welfare fund when needed.”

Promotion Of Russian Language & Culture

Q: “Good afternoon, my question has to do with promoting the Russian language, and Russian culture. There are examples of how business approaches can get a lot of audience, a lot of sway inside country, outside of country. We all know about Disney, and our Misha and the Bear, another very famous cartoon. So, they have been widely liked by many, and our colleagues sometimes say that these cartoons have been a hit job, paid for by Government. Maybe we don’t know something, and it really is like that. But, let me ask you this. Do you believe in private initiatives, and can we couple our official efforts of the government, which are aimed at promoting our language and culture, how can we help them become just as strong, and vibrant, and well-known by everyone?”

Putin: “Okay. Self power. It has to do with culture, education, Unitarian ties. In that context, I can tell you that these instruments are the most universal. They are all meant for cooperation. You can’t sanction them. Of course, some try to put sanctions on such ties. But it’s counter-productive, especially for those who impose these sanctions themselves. Some things are fundamental. They express the culture of Russia, of the Russian peoples. The Russian people, and other ethnic groups. The fact is, we are a highly cultured country, a civilized country. We support every culture in Russia at the state level. Classical music, ballet, theater.

Our schools here the best across the board. We have lots of theaters in Russia supported by the government. It’s unparalleled, in terms of scope of magnitude of the support. Yes, there are problems, many problems, and yet, I can tell you that the government here does a lot to support arts and culture. Private initiatives, you mentioned it. These are cartoons for children, and actually these cartoons are now very famous, and I can tell you that, those truly are talented people who produce such works. I think we need more support here. We are proud that we have such teams giving birth to such great characters, great cartoons who are so popular across the world.

I think we can do more. I think the state should support the cartoon business, the whole industry more than it does. I won’t be going into all the details, but discussed it with my colleagues quite recently, actually. We spoke a lot about the Bolshoi, because some problems remain unsolved. I think we need to double down on that. Especially so, in relation to cartoons. Why? Well, cartoons are the material on which we bring up our children, and we should be raising our children using some very good material. Give them the best we have. We should teach them solidarity, love, love towards motherland, and their relatives, and nature. All the crazy shooters, they might attract your attention. They might attract the attention of the younger ones, but I think they’re more damaging rather than they give anything good to our younger population. So, we need to create more positive content, and any such endeavor should deserve more attention than it does. It’s self power. It cannot be a hit job. It can’t be ordered by anyone. No, the only thing we can do as a state is to support such efforts. We shouldn’t be ordering anything. We should be just giving support and that’s it.”

On Western Perceptions Of Russia

Q: “Mikhail wrote us, he’s 10 years old, and he says he really loves watching the news. He understood that Russia is not really loved by other countries, and he wants to know why, because we haven’t done anything wrong to them.”

Putin: “Well, to start off, people in many countries love Russia a lot. If we have some disagreements with certain people, these are grownups deciding their own disagreements. This is what happens between grownups. This is what happens between these specific people. But, relations between nations of the world, between peoples, are always really good, and based on mutual respect.”

On A Russian Toast For 2021

Q: “We’ve heard a lot of questions. Mine is a little bit different. Over this year, we really felt it that the year might be difficult for everyone. Emotionally, it’s been a rough year, couple of years ago during your big conference, you said that you collect emotions. What about the last years? What emotions did you collect more? What are the emotions can you highlight of something you felt over the last years? Maybe you could share what kind of toast you will give when the new year comes.”

Putin: “Take your seat, please. The good and the bad, every year is special. Every year we face problems. Every year brings a lot to be happy about within your family or maybe something good that happens at the national level. Achievements come, there are many accomplishments that we are proud of, we should be proud of. And we are. This year has been a difficult one, however, there is something I would like to point your attention to. Here is something I want to say. Before we had difficulties as well. In the history of Russia, we’ve seen a lot. The 90s, for instance, the early 2000s, back then we thought that there was no hope. We lost every piece of hope. There was no army, no social welfare, unemployment was skyrocketing. One in three people lived below the poverty line. And now look at what we have today. Of course, problems remain. Many people still struggle. And yet the foundation of the Russian statehood is here. It’s firm.

The pillars of the Russian economy are standing strong. We have a lot more today than we used to. It’s incomparable to what we had in the 90s, in the early 2000s. And this instrument gives us the instruments that we could only dream of before. Now we can focus on the priority areas, on the most pressing issues. And we shouldn’t forget about our strategic goals. Now, you asked me about the toast, the things I will be saying when raising my glass. Well, just any person, we have a lot to say when new year comes, we would like to wish a lot of things. But let’s just be careful, careful with the amount of champagne and other spirits that you take. It doesn’t matter how many times you wish something. I will be wishing the best things to my relatives, to my family, my friends and colleagues. They are dear to me, my friends and I, my family, we always wish one thing.

We wish each other to have happy Russia. It’s all Russia. So we drink to Russia every time. And now to wrap up with something less high convoluted, with something not as loud, let me say something else. During this meeting, some asked about our plans and whether we have any plans to support families with children. And here is what I want to tell you. Volunteers, they actually said to me that they have lots of interesting ideas and initiatives, how to support children at the time of the new year. Today, we have a pandemic on our hand and many events have been canceled. So all these concerts, they have been canceled. Theaters, children clubs, they’re not going to be open. And yet this day, this holiday is a special one. It brings a lot of hopes. We have so many anticipations. We hope that the future will be bright and happy. Yes, today we see a lot of bad things happening, and yet we have hope.”

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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