Vladimir Putin’s 2021 Annual Media Q&A

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By Chris Devonshire-Ellis

The Russian President’s annual news media Q&A was broadcast live by Rossiya 1, Channel One, NTV and Rossiya 24 television channels, as well as Mayak, Vesti FM and Radio Rossii radio stations. We provide the English translation and concentrate on the issues impacting the Russian economy, trade, investment, infrastructure development, and foreign relations. It provides a unique, high-level insight to the Russian national strategy, opportunities, and challenges. 

Included are specific Q&A about: Coronavirus / Economy / Trade / Growth / Vaccination Rates / State Budget / Inflation / Business Support / Regional Governors / High Speed Rail / China / Western Misunderstanding of Russia / Gas Supplies / Belarus / Land Allocation / Population Demographics / Kazakhstan / RUSNANO / Italy / Crimea Re-Development / Beijing Olympics Boycott / Pensions / Infrastructure Projects / Afghanistan /

Coronavirus

Vyacheslav Terekhov, Interfax:

Good afternoon, Mr President. You said you will talk about further economic development – the world has been waging a global war on the coronavirus for the past two years, and now we will be fighting the Omicron variant, of course. How has this war affected the Russian economy? It has indeed affected almost everyone in some way. What are the ways out of this economic crisis, out of this pit, what drivers are there? Do we have to wait until everyone gets vaccinated before we can discuss the possibility of economic growth? And the most important question, of course: how do you assess the work of your ‘general staff’ – the Government and the Central Bank – during this period?

Vladimir Putin:

This struggle continues, and we are aware of the dangers that Omicron, this new strain, poses. I think that we will have an opportunity to get back to this topic during today’s meeting. As you may know, a group of Russian scientists and experts is now in South Africa, where their colleagues actually discovered this new strain. They are working there, and are quite successful at that. Once again, I would like to thank our colleagues from South Africa. As for the impact this situation has had on the Russian economy, and what we are to expect in the near future, we have spoken about this, in general terms, many times. Faced with the challenges posed by Covid-19 and the restrictions the economy and the social sector have had to face in this connection, it is obvious that the Russian economy has been better mobilised and prepared to withstand these shocks compared to many other developed economies around the world, if we look at the top five, six, seven or ten major economies, or even twenty. I will discuss this in more detail later during our news conference today.

Economy

The Russian economy declined by three percent, which is much better than many of the world’s leading economies, and we recovered faster than many others. You know the numbers. Even last year, we could see the trends, and today I even have a chart here with me, and will share this information with you in order to be precise. GDP growth is expected at the level of 4.5 percent this year. It has added 4.6 percent as of the end of October, while manufacturing increased by 5 percent, and the processing sector grew by 5.2 percent.

Crop yields will be slightly lower in 2021 compared to the previous year, which is due to the weather. We had 133.5 million tonnes in 2020 and now have 123 million tonnes. Still, this is a very robust result which not only enables us to satisfy our needs, but also provides for a substantial export potential.

Fixed capital investment was up 7.6 percent as of November. We expect this indicator for the entire year to come in at 6 percent, up from a 1.4 percent decline in 2020.

The construction sector performed quite well, with a record high of 90 million square metres built. This is the first time we have achieved this figure in Russia’s contemporary history. I would like to congratulate all those involved in the construction sector, from the top executives to on-site construction workers, with this milestone.

Average wages have started to grow in real terms. There are also changes in terms of real disposable income. We had a 2 percent decline in 2020, but this year we expect this figure to rise.

We expect the inflation rate to be 8 percent. It is much higher than the forecast. But, even adjusted for inflation, real income has still increased by 4.1 percent. Our experts estimate that real income will show a 3.5-percent annual growth. Of course, this will not be true for all categories of citizens. Naturally, it is an average rate and I want to stress this once again, when people watch this and listen to this, they might say: it’s an average again. But we have to talk in average numbers since they serve as a certain benchmark. I think we will cover the topic of personal income in more detail today.

We set a goal of returning to the pre-pandemic unemployment rate – and it did go down. The unemployment rate before the pandemic was around 4.6‒4.7 percent. The current rate is 4.3 percent. It may go up a little to 4.4 percent by the end of the year. This is a very good indicator for the performance of the economy in general even though there are certain difficulties and challenges related to the labour market such as, for example, the number of people working at the construction sites we have just mentioned. It is a serious issue.

Trade

I would like to speak about the trade surplus. Last year, despite all the difficulties, Russia’s trade surplus amounted to US$94 billion. This year, the figure has almost doubled, reaching US$184 billion, which is also an excellent result.

Russia’s foreign debt has slightly decreased. It is the lowest level of foreign debt in the world, around four percent.

What other important indicators speak for the quality of governance and the performance of the entire state, the Government and the Central Bank, in particular? Our international reserves have grown from US$595 to US$625.5 billion. The National Welfare Fund is growing as well and currently amounts to US$185.2 billion. All these figures are an indication of stability and good macroeconomic results.

There are issues that cannot but cause concern, including life expectancy, which has slightly decreased from 71.5 to 70.1 years. We will most likely cover this topic today as well. It is one of the negative consequences of the coronavirus pandemic.

Right. So, on the whole, I believe that both the Government and the Central Bank deserve – let us be modest – an acceptable score. The results are positive.

Growth

About the growth drivers. Your question was about the potential growth drivers, and about vaccination – if we need to have the entire population vaccinated or not. We have already spoken many times about the growth drivers for our country based on the specific situation that has developed over a fairly extensive period. We can even consider the entire post-war period, since 1945. What are our challenges and what are the drivers, accordingly?

I have just spoken about an unfortunate decrease in life expectancy, an increase in mortality in our country, and in this regard, one of the most important problems, one of the most important challenges that we face is getting more acute – I am referring to demographics. It is a challenge both from a humanitarian point of view and from the geopolitical perspective as well, I mean the country’s population – 146 million for such a vast territory is definitely not enough; economically too, we have a workforce shortage.

The working age population is now just above 81 million. We must drastically increase this figure by 2024, by 2030. This is one of the factors of economic growth, let alone – I would like to emphasise this once again – the geopolitical and humanitarian components of this most important matter.

Therefore, preserving the people that Solzhenitsyn wrote about is becoming one of our most important tasks and one of the drivers of growth.

Second. What other growth drivers? The next driver is infrastructure, infrastructure development.

In this regard, I can say that we are making very strong efforts on this track. You know that we are channeling 500 billion rubles of federal funds directly towards the development of infrastructure. Then there are the National Projects; we started with 260 billion, I believe, then more than 400 billion, and next year, we will allocate 460 or so. We plan to allocate another 2.5 trillion rubles from the National Wealth Fund in the next few years – 2.5 trillion overall.

Of course, the third growth driver is increasing labour efficiency but this includes a whole set of programmes from education and digital transformation to healthcare, which we have already mentioned. This includes an entire set of programmes. Most of them are ready, so we know what to do. We have earmarked the resources needed to move in this direction, and we provide for regular allocations. The funds to this effect are available. All we need to do is set up this work properly and achieve maximum returns on every ruble we invest in delivering on these objectives.

Vaccination Rates

Finally, one of your questions was about vaccinating the entire country. Unfortunately, in Russia the vaccination rate is low, just like in many other countries – take, for example, some European countries where the low level of vaccination is also a matter of concern. This is the case for Germany with its developed healthcare, but even there the healthcare system, one of the most effective in Europe, faces a lot of criticism.

What is the vaccination rate in Russia? As of today, or maybe yesterday, it was 59.4 precent. I had no doubt that this would be one of the main topics during today’s news conference, so I talked to Ms Popova and Ms Golikova. The figure of 59.4 percent is where we are in terms of achieving herd immunity in Russia. This includes both those who have recovered from the coronavirus infection, as well as those who have received the jab. Some 70 million people have received the first dose, and a little over 70 have had both.

This is not enough. We need about 80 percent of our population to be immune to achieve herd immunity. I hope that next year, at least by the end of the first quarter or in the second quarter, we will have reached this level. Some countries are already talking about the need for 90–95 percent to be immune in order to achieve herd immunity.

State Budget

Veronika Ichetkina, TASS News Agency:

I would like to follow up on social spending by the state and the budget.

The state has recently increased its social spending. Judging by the budget for the next three years, as adopted recently, the state will continue doing so. It is curious that there was a lot of talk some time ago about social spending cuts next year.

Can you comment on this? Overall, how would you describe the new budget? Can it be called a development budget or a budget with a social focus? Are any further increases in social spending possible during the pandemic? If this does happen, have you assessed the risk of inflation spiraling out of control, considering that it is already quite jumpy.

Vladimir Putin:

First, about the characteristics of the budget. Of course, it is a socially-oriented budget.  I extensively discussed this matter with my colleagues from the Government yesterday. If you look at healthcare and social spending, the healthcare expenses, for example, are, obviously, growing. The federal budget expenditures, the compulsory healthcare insurance budget and the regional budgets amount to 1.5–1.7 trillion in total.

Moreover, I think we planned to allocate around 3.6 trillion for healthcare from two sources, the federal budget and the compulsory healthcare insurance system. This year we are about to reach 3.9 or 4 trillion in spending. Next year the plan is 4 trillion, and, obviously, the actual amount will be higher.

These are completely objective figures. And I did not include regional expenses, which vary from region to region and from year to year. They currently amount to 1.6–1.7 trillion, which is quite significant.

If we speak about the social sphere, there has been an apparent increase in spending. Even during the pandemic, when we were developing support measures for the most severely affected sectors of the economy (and the numbers were huge, 4.5 percent of the GDP last year and another percent of the GDP this year, which makes 5.5 percent in total), we did not just give away money randomly. Our support for the hardest hit industries focused on preserving jobs and supporting people with low incomes who are particularly vulnerable in these circumstances.

Who are these people? First of all, young families with children. I think I do not have to list all the measures, but I will mention some that are widely known. We added more categories of families to those receiving state support – for example, all families with children aged three and younger.

We started paying maternity capital for the first child. Then, we began paying benefits to pregnant women who are experiencing hardship. We paid additional benefits for children aged three to seven. We paid one-time benefits of 5,000 and 10,000 rubles to different categories – primarily people facing financial difficulties.

It is an entire toolkit of measures – worth 4.5 trillion rubles last year, and we continued this kind of support into 2021. Again, we did it all to either directly support people, or support them through businesses – we provided financial support to companies that kept people on board and maintained a certain level of wages.

Among other things, as you know, we have recently increased the minimum wage and subsistence level. At first glance, this might not be a significant increase, but the idea is to have social benefits indexed immediately, and this affects millions of people. All social benefits are calculated on the basis of the minimum wage or subsistence level, and by the way, this also leads to indexation of certain pensions. Therefore, without a doubt, this budget can be described as socially focused.

Answering your colleague’s question about growth drivers, I have mentioned some of our absolutely unprecedented, grandiose infrastructure development plans. Look at the massive resources to be invested: we plan to allocate 2.5 trillion from the NWF alone; 500 billion has already been allocated; and 460 [billion] will be additionally allocated next year.

We will also invest hugely in labour productivity and digitalisation in all industries, practically from top to bottom.

Therefore, as I am saying, this budget is socially focused, but it is also focused on development. This much is absolutely obvious if you look at the figures.

Inflation

Inflation is one of the key issues with maintaining macroeconomic stability, because many of the world’s leading economies have relaxed their macroeconomic policies and have significantly accelerated their money printing presses. This is an obvious thing, and it has led to a fairly high inflation in the leading economies – this much is also obvious. Everyone sees this – these are the numbers everyone can see.

Budget deficits are growing in all leading countries, all of them, higher in the United States, slightly less in the Eurozone, but still, this is a significant and unusual change.

For example, the inflation rate in the world’s leading economy, the United States, is 6.1–6.2 percent, if memory serves, whereas the target figure was 2 percent. In other words, the inflation rate is three time above the target figure.

Inflation is high in Russia as well, 8 percent, while the target was 4 percent. Our inflation rate has grown twofold, whereas it has tripled in the United States. This is serious. I believe that the FRS [US Federal Reserve System] will have to do something about this.

This soft monetary policy is having an impact on macroeconomics and ultimately cancels out the positive goals of this policy, including support for the economy and the citizens. We have this problem as well, because 8 percent is too high, and we certainly need to attain the target rate of 4 percent.

Of course, we can criticise the Central Bank. I am aware of this, because I maintain daily contact with our colleagues from the real economy sector, and I know that they are criticising the Central Bank, and I know their arguments. Trust me, we meet nearly every day, although this is not reported on television. They sit three metres from me, and we discuss problems. Television only shows a small part of my contacts and meetings, when we work in front of cameras. I hold such meetings and conferences nearly every day. They just sit down further away from me, just about three metres away. But we discuss things every day.

I know that the real economy is not happy with increased interest rates. But if we do not do this, the situation will be like in Turkey. This is the problem. It is a serious matter and a major challenge. Of course, this instrument should be used carefully, but the Central Bank has an independent policy. This may seem strange to you, but I do not interfere with the Central Bank’s operations. However, I have a positive view of them, and I believe that we usually manage to find a middle ground.

Why? What are the risks of raising interest rates? This can hinder growth. We must grow faster that the world’s average, by 3.4–3.5 percent a year in the near future, not even as high as now – by 4.6 percent. The target of 4.4–4.5 percent would be great. But increased interest rates are decreasing the possibility of attaining this goal.

We cannot see this now, because the lending volume is not decreasing, and banking possibilities are growing. Sberbank will report 1 trillion rubles’ worth of profits this year. In other words, we have found a middle ground, by and large. 

Business Support

Yelena Glushakova, RIA Novosti:

Mr President, just now you were talking about social support measures, but the business side of the question is of no less importance. In your opinion, how can we balance anti-COVID restrictions with the need to keep the economy going? Not only major corporations suffer from restrictions, but small businesses too: retailers, small restaurants, cafes, small shops, the cinema industry, and the entertainment sector. I have a second question in this connection. How well did the Regional governors perform? They received a lot of authority during the pandemic but used it in different ways, introducing various restrictions. In your opinion, how well did they perform? What grade would you give them for their efforts?

Vladimir Putin:

Let me start with the question on businesses and how we have been supporting them.

You said that major corporations are not the only ones to suffer, and that small enterprises suffer as well. In fact, it is primarily small businesses that suffer, even if major corporations also felt some negative consequences. We devised support measures for these sectors, in fact, for all major sectors of the economy, if you remember, for all major corporations. I specifically asked the Government last year, at the very beginning of the year, and the Government complied.

Our key industries and major corporations have clearly benefited from a number of measures. After all, they operated without any or virtually no interruptions, and in some cases even increased their output. This is the case for the defence industry, which reported higher production volumes.

As for small and medium-size enterprises – catering, gyms, cinemas, and even theatres, museums, etc., all the enterprises in the service sector – of course, they were the first to suffer. However, they were also the first to receive our support. There was a whole range of measures. I do not know whether I need to list them all. This included subsidised loans, direct support to save jobs and wages, reduced interest rates, loan payments in installments, lease subsidies, etc. By the way, some of these measures are still in place, and you know this.

We have allocated and continue to allocate large sums of money from the federal budget to this effect. The Government is doing this intentionally and understands what is going on. That said, it may well be that some things should have been done in a more sophisticated and responsive manner. Still, I would like to praise my colleagues’ work. After all, this is all happening in direct contact with the business community.

As you know, I recently attended events held by the Russian Union of Entrepreneurs and Industrialists and had meetings with the heads of other business associations, including those working with SMEs. Overall, these people have expressed their understanding and overall were quite positive about the Government’s efforts to support businesses.

Incidentally, the result was not bad at all. As I have said, we overcame the crisis faster than many other world economies. Our fall was not as bad and we came out of the crisis quicker. This is a result after all.

Regional Governors

As regards Regional Governors, an assessment of the heads of the regions.

You know, I have said many times and I would like to reiterate – I think you will agree with me: many countries have followed our path. Indeed, we were the first to say that ours is a large country and the situation in various regions is different and is developing in different ways. So, with overall guidance from the federal centre, and a government commission was set up for this purpose, we must still give the regions the opportunity to regulate the situation locally, considering the subtle nuances. Is it possible to compare, say, Chukotka and Moscow? They are completely different, and the epidemiological situation has been different from region to region because of our vast territory.

Let me repeat, like any complex issue, some things could probably have been done better and with more urgency, but in general, the heads of the regions showed the utmost responsibility and were not afraid to make difficult decisions.

In turn, the Government and the federal centre has always supported the regions that made the required decisions and needed assistance, say, from the federal centre. Assistance for the regions has been increased many times over.

Cooperation between the federal centre and the regions has produced positive results, the results we needed.

High Speed Rail

Lyudmila Danilkina, of Veliky Novgorod

Our city, Veliky Novgorod is not big but it is very beautiful and has an ancient history. I am talking about the city for a reason because my question is part personal and part business, about the urban environment. Which city would you personally choose to live in, except St Petersburg and Moscow? This is the first, personal part of my question.

The second part is about Novgorod Region. Our region is very fortunately placed between the two capitals, which is, of course, a plus for our territory. But we would develop much faster if there were a high speed railway not far from Novgorod. There is a lot of talk about it now at both the federal and regional levels.

I would like to know the prospects for the development or, to be more precise, implementation of this project on our territory.

Vladimir Putin:

As for my place of residence, you said “other than Moscow and St Petersburg.” Why did you exclude Moscow and St Petersburg? These cities are part of the Russian Federation as well, and I was born in one of them. It is my hometown, so when you asked this question, my first thought was about St Petersburg.

Our cities, large and small alike, are developing at a fairly fast pace, although we should focus primarily on developing small cities. We have been discussing this lately and are making efforts to expand infrastructure, primarily, to ensure transport connectivity both by rail and road, as well as by air, sea and river transport. I have already spoken about this, it is one of the growth drivers in which we plan to invest enormous resources.

Much depends on connectivity, because one can and should be able to live in a favourable environment – I am not talking about myself – and to commute to work or change where you work. Increasing mobility of the population is one of our goals. So, it is possible, and I would, of course, think of St Petersburg first and foremost as my hometown.

Krasnodar in the south of Russia is developing quite well. Look at how the coastal area and Crimea are developing.

Now, speaking of infrastructure, we are talking about developing the Eastern Operating Domain, but not only. Let us say, Moscow–Kazan, and we plan to extend it further to Tyumen and then make it a loop.

All of that makes the people feel they live in a favourable environment with easy commutes from their places of work to their homes, where they can meet with their friends and go to places catering to other aspects of life, such as cultural centres with internationally recognised museums, and so on. I think we have many beautiful and worthwhile places where people can and should feel comfortable.

High-speed rail is a separate topic that is still in the works. First, if there is to be a high-speed railway, I think Veliky Novgorod should feel its presence, because even though it is high-speed rail, the train must stop somewhere. Veliky Novgorod is one such place where the train can make a stop. Moscow–St Petersburg air service will clearly cease to exist, because it will take just three hours to get from central Moscow to central St Petersburg, whereas now it can take up to 90 minutes to get to the airport in Moscow. So, air service on this route will no longer make sense.

We need to weigh everything, think it over and have a look at high-speed rail in other countries. For example, the People’s Republic of China has many such railway systems. Until recently, they were all operating at a loss, even in China with its population of 1.5 billion people. This is economics, and numbers must be taken into account.

This is important for our country and can provide a solution for traveling certain distances. Air travel is a better solution in some places. These things are still being studied at the expert level.

China

Ao Li: Xinhua:

You recently held talks with President of China Xi Jinping via videoconference. You remarked that Russia‒China relations are a true example of cooperation between states in the 21st century. Today, in view of the current complicated international situation, how should we understand this description?

Vladimir Putin:

That is exactly how you should understand it. There is no hidden meaning. Indeed, the relationship between the People’s Republic of China and the Russian Federation has evolved to be as I described it. Perhaps you noticed that President Xi Jinping and I always address each other as “my friend.” And it is true: we have a very trusting personal relationship that helps our professional relationship as well.

In terms of the economy, first of all, Asia is a rapidly and successfully developing region, and China is the absolute leader of both the global and Asian economy. It is only natural that we are developing our economic relationship with China. Bilateral trade currently exceeds US$100 billion, which is above the pre-pandemic level. China is our biggest trade and economic partner with which we cooperate in many different fields.

In terms of energy, both China and Russia committed to achieve carbon neutrality by 2060. But before that deadline, we will be supplying all types of energy resources to China. We are willing to continue beyond the deadline because life will not stop in our countries in 2060, and there are many ways to achieve carbon neutrality, even while still using hydrocarbons, provided that they are used appropriately.

We continue to cooperate in nuclear energy, high technology and space – in almost every industry, including technology-intensive sectors. Our people-to-people cooperation includes organising mutual years of youth exchanges, years of science, education, culture and so on. These initiatives, of course, bring people together at the most basic level, in humanitarian sphere.

We cooperate on security. The Chinese army is extensively equipped with the most advanced weapons. We even develop some technologically advanced weapons together. We cooperate in space and aviation, on both airplanes and helicopters. Finally, we promote cooperation between our armed forces through joint military exercise and international military games, joint maritime and air patrols. Ours is an overarching partnership of strategic nature that has no precedents in history, at least not between Russia and China.

This daily hard work benefits both the Chinese and Russian people. It is, of course, a strong stabilising factor in the international arena.

Western Misunderstanding of Russia

Diana Magnay, Sky News:

What is it that you think that the West does not understand about Russia or about your intentions?

Vladimir Putin:

Does the West understand or fail to understand something? You know, sometimes I get the feeling we live in different worlds. I just talked about things that are obvious. How can you not understand them? They told us: there will be no expansion, but they expanded. They promised us equal guarantees for all under several international treaties. But this equal security has failed to materialise.

Look, back in 1918, an aide to US President Woodrow Wilson said that it would be a relief for the entire world if instead of one huge Russia, that a separate state in Siberia and another four countries in the European part be created.

In 1991, we divided ourselves into 12, I believe, parts, and we did this ourselves. Still, it seems that this was not enough for our partners. They believe that Russia is too big as it is today. This is because the European countries themselves turned into small states. Instead of vast empires, they are now small states with 60 to 80 million people. However, even after the Soviet Union collapsed, and we were left with just 146 million, it is still too much for them. I believe that this is the only way to explain this unrelenting pressure.

Take the 1990s, for example. The Soviet Union did everything to build normal relations with the West and the United States. I have said this many times, and I will repeat it, so that your listeners and viewers understand. I do not recall what media outlet you represent, but this is not the point. We had representatives from American intelligence services at our nuclear, military facilities; monitoring Russia’s nuclear weapons sites was their job. They went there every day and even lived there. Many advisors, including CIA staffers, worked in the Russian Government.

What else did you need? Why did they have to support terrorists in the North Caucasus and use organisations of a clearly terrorist nature in attempts to break the Russian Federation apart? But they did this, and as former Director of the Federal Security Service, I know this all too well. We worked with double agents, and they reported to us on the objectives set for them by Western intelligence services. But why? They should have treated Russia as a potential ally, and made it stronger, but it all went in the opposite direction; they wanted to break it down even further.

And then they started expanding NATO eastwards. Of course, we told them not to do this, arguing that they promised not to. But they asked us: “Do you have any paper record? No? If not, go away, we don’t care about your concerns.” This continued year after year, every time we showed our teeth and tried to prevent something and voice our concerns. But no: they did not want to hear anything, saying that they would do what they considered necessary.

There were one, two, three, four, five – five waves of expansion. What is it they don’t understand? I don’t know. You can say that this is all abundantly clear. I do believe that it is clear as daylight: we want to ensure our security.

Gas Supplies

Pavel Krasnov, Channel One.

Mr President, the issue of gas is dominating minds, above all in Europe, of course. We are seeing an extremely acute gas crisis. However, when it broke out and prices soared, we started to hear endless accusations directed at Gazprom and Russia in general with ever increasing frequency. Another round of accusations on restricting supplies via the Yamal-Europe pipeline came the other day. Generally speaking, the accusations are contradictory: we are accused of monopolising the market, while also not supplying enough gas.

Yesterday, our Ukrainian neighbours made some news. Naftogaz again asked the European Commission for nothing less than to compel Gazprom to offer more gas for sale. This seems funny, of course, but the Europeans are not in a laughing mood. The situation in Europe is very difficult: gas prices set an absolute record – more than $2,000. This never happened before and was impossible to even imagine. But is Gazprom to blame for this? s there at least a tiny grain of truth in these accusations against Gazprom?

Vladimir Putin:

Certainly not. There is no truth to them. This is like trying to say that down is up.

Our colleague here asked what the West does not understand. They lie all the time. This is why they are muddying the waters. Gazprom supplies all the gas requested by our counterparties under their contracts. Moreover, it has even increased supplies by almost 12 percent, I think, or by about 20 percent if we exclude Russia’s immediate neighbours. Overall, it is increasing supplies to Europe as well.

In my opinion, this is the only country, the only global company that behaves like this. I have already said at many meetings, including international events, that American suppliers withdrew considerable amounts from Europe, from the European market, I believe. I think the total amounts to 14 million tonnes of LNG. They took it to premium markets, first to Latin America, to Brazil, and then to Asia: China, South Korea and Japan. Because they pay more for this gas. The Europeans thought they had premium markets, but no. It appears that these markets are in other places as well. Prices began to soar. There are many factors: bad weather, a long and cold spring last year, a shortage of gas in underground storage facilities and windmills failing to work. All this contributed to the shortage.

In the process, government authorities are harassing their oil and gas companies, which do not invest enough in expanding production as a result. This is how the shortage emerged. They did not pump enough gas into underground storage facilities and now they are taking it out in a big way. Of course, this is a problem. Now some Western operators are storing their gas in Ukraine’s underground facilities. They are actively withdrawing it and using it in their own countries. This is understandable since the gas from underground facilities is many times cheaper than on the market.

We were saying – and I want to repeat it – that there was no point in destroying long-term contracts. The European Commission was telling us: no, it is necessary to move to market relations, the market will set it right. This is how the market made its adjustment – over $2,000 for a thousand cubic metres. Take it. No!

You are correct, just yesterday they were shouting: help, this is Russia and Gazprom expanding and taking over the market. We are not taking over anything. Indeed, we supply a lot, but we are not the only suppliers to the European market. However, we are probably the only ones who are increasing our supplies.

We are being told to pump to cover the needs of the spot market, since they need to first meet the demand of their counterparties under long-term contracts.

Look at what is happening. Germany is our largest consumer in Europe. I might have my numbers off a little, but they take about 50–51 billion cubic metres a year. We supplied an extra 5.6 billion cubic metres there, which is more than 10 percent. Listen, this is a decent amount. We supplied an extra 4.4 billion cubic metres of natural gas to Italy.

You just mentioned the Yamal–Europe natural gas pipeline. I see Russia and Gazprom accused of Gazprom failing to book capacity for gas supplies to Europe via the Yamal–Europe route for the second or third day in a row. That is disgusting, how should I put it… Well, okay. This is just totally out of line. After all, it failed to book capacity, because its counterparties and companies, mostly German and French, who buy gas from this route, failed to submit bids for purchase. What is there to transit if Gazprom has not received purchase requests? What did they do then? They turned on this route in reverse mode and have been pumping gas from Germany to Poland for several days now.

I think everyone would find it interesting. Why? Because we supply gas to Germany under long-term contracts at prices that are three, four, six, or even seven times lower than on the spot market. Should you resell even 1 billion cubic metres of gas, you will make almost a billion dollars, 900 million plus. This is business. This is my first point.

They have stocked up on gas, having received from us 5.6 billion cubic metres on top of what is provided under long-term contracts, and are now reselling it. But there is more to it. After all, they are pumping gas in reverse mode, so how can it be supplied in the other direction? Gas cannot move in both directions in one pipe at the same time. So, they: a) failed to place an order; b) turned it on in reverse mode.

But this is only a portion of the information.

There is a connecting pipe that connects the Polish pipeline system with the Ukrainian system. The volume is about 3 million cubic metres per day. This is exactly the amount that Germany is supplying to Poland. I have every reason to believe that this gas is eventually supplied to Ukraine. Consumers in Europe and Germany should know what is really happening, and, perhaps, ask certain authorities to clarify their stance.

Instead of supplying gas to Poland and then to Ukraine in an effort to help someone tide over, it would be better to continue supplies to Europe, Germany, for instance, and to reduce the spot price, because the more product on the market, the lower the price. No, they began to pump in reverse. This is the problem. How is Gazprom involved in this?

So let them tend to their business and address their issues in time and not think that they are so smart and that God fell asleep on them. They should address the problems of their own making, and we are willing to help them do so, which is what we are doing. I think I just made a convincing case for it.

Belarus

Guzel Kamayeva, Mir Television and Radio Company:

Mr President, your meeting with the President of Belarus is scheduled for the end of this year. You are going to meet for the sixth time this year. When will the citizens of Russia and Belarus feel some tangible results of the Union State roadmap? Free mobile roaming maybe, a unified document flow, as an option?

Vladimir Putin:

We actually have a long list of cooperation options to bring our economies closer together and to make them more competitive. There is more than just roaming, although it definitely should be on the agenda. I certainly agree with you – people should actually feel the changes. But we have already done a lot, especially on social matters. I am referring to free movement, the labour market situation, and even social security in a number of areas.

At present, we are trying to synchronise taxes, customs procedures, and laws. This is extremely important to ensure a uniform understanding of how we should work together to achieve the best result. These are, in fact, fundamental things – the fiscal policy, laws and customs.

It has been a long and difficult process of coordinating our approaches. I must say that Mr Lukashenko and his entire team are not easy negotiators, but we have generally reached an understanding of the pace we should move at and the steps we should take in this direction. This concerns access to the procurement market for goods and services organised by the state, by Belarusian economic operators. This concerns transport and many other matters.

Therefore, I am sure that our citizens will feel it, feel the impact on their lives. You know, it is not going to just fall from the sky, like manna from heaven, all of a sudden. But there are obvious things that ensure our competitiveness.

We are building the Union State. But the level of integration is still far lower than in the European Union; it is simply incomparable. I am not even talking about a single currency, never mind that. Perhaps it will be a subject for the future if our respective economic services come to an agreement on this score.

But first, we need to synchronise our economic laws including antimonopoly laws, and tax and customs regulations. We have agreed on this; we have agreed, and now we will start working. I am sure that there will be results.

Land Allocation

Kirill Shlykov, KazanFirst internet publication, Kazan, Republic of Tatarstan:

Like many other regions of Russia, Tatarstan has a programme to allocate plots of lands for families with many children – I am sure you know about it. The programme is working, plots are allotted, and everything is going well with this.

But now it is necessary to develop these areas. They need hospitals, kindergartens, schools and roads. Families with many children are eager to have a separate federal programme that would provide for the development of these areas because, unfortunately, the regions do not have enough funds for developing these “villages with many children.”

Maybe, it is worth drafting a separate federal programme, a subprogramme under a national project? Is it possible to do this? What do you as President, as the head of state, plan to do for developing the programme on allocating plots to families with many children and providing facilities for these areas?

Vladimir Putin:

You raised a very important question, Kirill.

I said in the very beginning that we allocate huge funds for developing infrastructure. It is simply necessary to include these requirements in the projects you have just mentioned and in the infrastructure development projects for the surrounding areas.

I made a note for myself and I will certainly set this task for the Government and the regions, so that the regions submit their applications for the development of the regional road network among other things. For the time being, the level of the regional road network is below that of the federal network. I am referring to its compliance with standards.

But we have plans, for every year, on how we should bring these roads in line with standards. All this is supported by funding, and it is only necessary to tie in the problem you mentioned with our development plans. I will certainly raise this issue before the Government. Thank you for telling me about this. You are absolutely right.

Population Demographics

Veronika Ivashchenko, Spas TV channel.

Here is my question. Mr President, you started talking about demographics today, specifically, about large families. The question is, we all know that demographics are the biggest unsolved problem with Russians. Why? Because at this point Russia no longer wants to have children. Living standards are going up, everything is fine, things are good outwardly, but for some reason, people decide against having children, and if we look at divorce statistics, we can see they have also forgotten how to build relationships.

What do you think the reasons are? These ailments, one might say, are not of economic, but of spiritual nature. This is something we used to be proud of, my great-grandparents had seven to ten children, I mean, in my family, we have always had many children and we have always respected the traditions of a strong family. What measures could be taken, apart from economic ones, such as the maternity capital and other benefits – what measures do you think could help change this situation? Thank you.

Vladimir Putin:

You mentioned the Russian tradition of having large families. I can tell you that both my parents also come from large families, and their parents’ families had many children, nine to ten, both boys and girls. Incidentally, almost all of them – not all, but nearly all – perished during the Great Patriotic War. That was a huge tragedy and a crushing blow to our demographics.

As a reminder, Russia suffered one demographic gap in 1943–1944 and another in 1991, after the collapse of the Soviet Union. Why? Because the planning horizon narrowed dramatically, and oddly enough, in 1991, after the collapse of the USSR, people apparently had the same sentiment as during the Great Patriotic War. The family planning horizon narrowed to a few days, and this is what happened.

As for Russia no longer wanting to have children or not knowing how, we recorded far more births in 2004 and 2006 than in 1991, and later too, the birth rate began to grow. And, prosaic as this might sound, that had to do with an improvement of the economic situation and the expansion of the planning horizon.

Getting children on their feet is no easy business and quite a challenge from a financial standpoint. It is for this reason that in everything we do, including during the pandemic, we seek to support families with children. I already mentioned this at the beginning, and I would like to say it one more time. I will not repeat everything, because there is even more to it: our objective is to develop an entire motherhood and childhood support framework for accompanying children from the moment they are born right until they graduate from school. This must be done soon, next year and the following years.

We will enact the relevant support measures at every stage. They already exist, but there are certain age gaps. We will bridge them within the next 18 months. I do hope that this will play a positive role in terms of improving the demographic situation.

Of course, there are also delicate issues that lie far below the surface and are hard to understand at first sight. In fact, all post-industrial nations face the same demographic problem. Just look at Europe: it is the same everywhere. What is causing this? It is not that people are not interested, but they, including women of childbearing age, have other priorities: education, post-graduate education, careers, and only then kids, but by then they are already 30 years old. There is hardly any time left for the second child. This is a general trend, and quite a delicate issue. Demographers study this professionally and have been working on this subject their entire lives, but even they lack definitive and clear answers to these questions. This is how things stand, more or less.

As for the spiritual side of the question, you are right of course that careers and wellbeing are important, but we need to drive home the message that the happiness and the joy of fatherhood and motherhood are more important than the financial wellbeing you may enjoy today. We need to impress this on the people gradually and calmly, without imposing anything on anyone.

Let me reiterate that we must refrain from imposing anything on anyone, but we still need to give positive publicity to the idea of a large, friendly, good-spirited, and beautiful family, and show that happiness is about having children, in order to convince people that there is nothing in the world or in life that can bring more happiness. However, this requires a creative, talented approach that must also be eye-catching and sophisticated. This effort must include the mass media, artists and NGOs. We need to offer financial support to people who decide to have children. Let us all come together and move in this direction.

Kazakhstan

Indira Begaydar, Kazakhstan TV channel.

Mr President, which items on the regional and international agendas will Russia prioritise in the near future in its dialogue with Kazakhstan? As far as we know, this year you planned a visit to Kazakhstan, which did not take place due to the unfavourable epidemiological situation. Are you planning to visit our country next year? Thank you.

Vladimir Putin:

Here is what I would like to say. Kazakhstan is one of our closest allies. We have a unique relationship with Kazakhstan which was laid down by its First President Nursultan Nazarbayev, and the new President [Kassym-Jomart Tokayev], with whom I have very close and friendly relations, picked up these policies and maintains the quality of our relations.

Indeed, the pandemic prevented Kazakhstan from carrying out the planned activities, but I hope that the President of Kazakhstan and the First President of Kazakhstan will accept my invitation and come to St Petersburg next week for the traditional, informal meeting of the EAEU and CSTO member states. I am very much counting on this, and the leadership of Kazakhstan has preliminarily accepted the invitation.

Our cooperation focuses, primarily, on the economy. Relations with Kazakhstan in the economic sphere cover a variety of areas but changing the structure of our economic ties and focusing on high-tech areas are among our key goals. This includes, above all, digitalisation, and other important areas such as genetics and medicine, as well as joint space exploration since we continue and will continue to work together at Baikonur. There are many areas of focus between us.

Nevertheless, I agree with the way our Kazakhstani friends framed the question, namely that if we work together, Kazakhstan should be more than a platform for launching spacecraft, it should be involved in broader and more meaningful space exploration and develop its own competencies in this area. I share this approach, and we are now exploring options. I am confident that we will get to implementing these plans.

We have deep ties in culture and education. I am grateful to the leadership of Kazakhstan for their efforts to support and develop Russian language studies. You are aware that many people in Kazakhstan are studying Russian. This is a Russian-speaking country in the full sense of the word. The number of schools where children studying the Russian language and university branches that teach Russian, is on the rise, and the number of applicants applying for admission to these education institutions is quite high.

We cooperate with Kazakhstan as an active member of the CSTO as well. Notably, military equipment and materiel are supplied to Kazakhstan mostly at domestic Russian prices. And, the First President of Kazakhstan was the one to initiate the creation of the Eurasian Economic Union.

So, I very much hope that the pace we have gained and the quality of our work will be maintained. 

RUSNANO

Anastasia Yefimova: Rossiya 24:

Good afternoon, Mr President. My question concerns the situation with RUSNANO. (nanotechnology-based hi-tech industry) According to some experts, it is unfolding under a negative scenario, let me quote, “Little information, a lot of debt.” In fact, the company itself considers the debts to be exorbitant and talks about restructuring them.

Meanwhile, Fitch believes that the developments around RUSNANO is a kind of a test for the government referring to the loans issued to the company with state guarantees. Consequently, the state now must act on them. But will it back up such high-risk investments? What would your answer to this question be? In other words, will the state somehow settle RUSNANO’s debts and, overall, what do you think about the company’s prospects? Thank you.

Vladimir Putin:

This is indeed a challenge. I will not quote the figures now – some say the debt amounts to 140 billion, others say 102 billion. These problems are assessed differently in terms of value by the Government and the company itself.

You know that the company’s new leadership has set to work. They have a free hand in conducting an objective evaluation and engaging the best experts to assess the real situation in the company. There is indeed a fairly big volume of guarantees provided by the Government of the Russian Federation for their projects.

I have to say that RUSNANO is actually a venture company. I will not hide that I was among the proponents of establishing this company. Back in the day I also pushed the Government and its finance and economy block towards funding the creation of our constellation of satellites and the GLONASS constellation. Otherwise, we would have been in zugzwang, like when satellites were being decommissioned after a protracted operation on the orbit due to their technical capabilities, and with the existing funding volumes we would never have created a fully operational constellation that would have allowed us to resolve the issues facing GLONASS. However, we did it. Our GLONASS appeared straight after GPS, before our Chinese friends launched BeiDou. And the company is operating and developing, albeit not without problems. The same is true of RUSNANO.

Obviously, they were largely blazing a trail. Clearly, some of the projects were fulfilled successfully whereas some of them, regretfully, could not be finished. Those are risky investments. This is why the state decided to provide its guarantees to ensure this work. But we have to look into the real state of affairs. The company, not the government, should work with its creditors, with the banks.

Sberbank, for instance, got rid of most loans; it sold them away. Sberbank’s top management probably had some insider information but they did it somehow.

The state guarantees, nevertheless, exist, and they must be enforced which does not mean the company should not work with banks or work to enhance and improve its economic performance.

By the way, as far as I know, the company recently satisfied some of its obligations, its securities, with its own funds. It means that overall the company is viable. It is just a process that should continue steadily in view of the economic situation and the projects and programmes which must certainly bring a profit because the company must operate in the market. We will definitely support the process. 

Italy

Sergio Paini, Rai, Italian television.

Good afternoon, Mr President. How much change has the Russia-Italy relationship undergone with Prime Minister Mario Draghi in office? Do you think Italy can act as a mediator in Russia’s relations with the European Union?

Vladimir Putin:

As far as I can tell, if not exemplary, Italy-Russia relations are good and stable, and transcend partisanship. Regardless of the forces that are currently at the helm in Italy, the Italian Republic and its Government, we are following in the tracks of what was laid down by Mr Berlusconi, who initiated stronger relations between Russia and NATO, among other things. He came up with a number of long-term projects, including, by the way, in the sphere of small and medium-sized businesses.

All of that continues regardless of the political forces that, at any given point, find themselves at the top of political power. I believe that this supra-partisan nationwide consensus is key in Italy-Russia relations. Of course, Italy is a NATO country and an EU member, but this does not keep us from working in the way I just mentioned. I hope that it will remain like that as we go forward.

Mr Draghi and I have spoken on the telephone several times. We communicate in a very friendly and meaningful manner on a number of issues that are of interest to the Italian Republic in terms of expanding our economic ties. Bearing in mind our good and friendly relations, Italy could play its role in normalising Russia-EU relations even as part of the Russia-NATO talks that are being planned.

Crimea Re-Development

Alexander Fedorchak, Krym 24 television channel, Crimea:

On behalf of our Crimea republic, I would like to thank you for the ongoing transformations. Our infrastructure has changed a lot over the past seven years, with roads, kindergartens, and so on under construction.

Regrettably, however, mobile communications have remained where they were, and major Russian telecom operators have so far been unable to do business in Crimea. How can this matter be resolved at the government level? Can we expect major telecom operators to come to Crimea any time soon?

Vladimir Putin:

Clearly, this is because of the sanctions that our Western partners have imposed on Crimea and its residents. As I mentioned earlier, the situation is quite odd. If someone believes that Crimea is occupied, then its residents are victims of aggression. Why punish them even more then? And if they joined Russia, and returned to Russia of their own volition by way of a referendum, then it is a manifestation of democracy. Is it that someone out there is fighting democracy? No answer. There may be only one answer: they spit on the interests of the Crimeans, Russia and democracy. All they are doing is addressing their geopolitical issues.

However, being aware of this, we must respond accordingly, and we will continue to do so, just as before. Perhaps, not completely, but I am sure we will resolve issues with water supply, just as we have resolved the issue of energy supply and power supply, in general, the development of infrastructure, not just the Tavrida Motorway. I asked the Government to plan for exits from this motorway to the coast, and I know they have been planned and exits to the coast will be built.

We will certainly engage in expanding urban infrastructure, including in off-the-coast cities of Crimea. Just like you said, we will continue to build hospitals, kindergartens and schools, and we will renovate housing, including structurally unsafe buildings.

By the way, Crimea and Sevastopol joined the programme for housing renovation and relocation from structurally deficient buildings later, so they are lagging a little behind. Crimea and Sevastopol are a little behind this programme, but we will definitely address, on a systematic basis, every problem that Crimea is facing, including relocating residents of dilapidated buildings.

With regard to mobile communications, just like in other matters, we will find ways to ensure the people’s interests. I will not get ahead of things and will not share our plans with you and everyone in this audience so as not to hinder the process. But we will think it over and hopefully overcome this challenge.

There are also issues with individual incomes and high prices – I am aware of that – and we will gradually resolve them. Gradually, but surely. I hope that the people in Crimea and Sevastopol feel it already today and will feel it tomorrow.

Beijing Olympics Boycott

Dmitry Guberniyev, Match TV

My question, Mr President, is about the Olympics, where you will travel to attend the opening ceremony in Beijing. However, considering the political boycott many leaders already announced, including the President of the United States, why is this happening, in your opinion? China and people heading there to compete in a fair and clean way are being pressured. Doesn’t this remind you of what was going on ahead of the Sochi Olympics?

Vladimir Putin:

This is an unacceptable decision, a mistake. I had this conversation with one of the former Presidents of the United States – you can go ahead and guess who that was. That was quite a while ago. He told me that the boycotts of the Olympics in Los Angeles and in Moscow were big mistakes, including on behalf of the United States.

The United States just keeps making the same mistake. Where does this diplomatic and political boycott of China come from? From attempts to contain the development of the People’s Republic of China. There are no other reasons whatsoever.

Just like art, sports must bring people together instead of causing problems in people-to-people and state-to-state relations. When sport is unable to live up to its core values, this hurts the entire international community. In fact, this shatters the last remaining scarce opportunities to restore, maintain and develop relations between nations, and this is being done for the sake of momentary political gain. This is a mistake.

That said, what can we do about this? Everyone makes mistakes. However, some keep making them. There is only one reason for this, which also applies, for example, to Russia. There are no other reasons, trust me. This is not about the surname of the country’s leader, or any current issues or challenges. There is only one reason for this. This is an attempt to contain development and deprive someone of the opportunity to rise above the possible competitors.

I have already talked about the situation with NATO’s eastward expansion. Why did they have to do this? Take, for instance, Egon Bahr. He was a politician from the Social Democratic Party of Germany and proposed building a new security architecture in Europe after the Soviet troops left Germany and Eastern Europe: keeping NATO without expanding it to Central and Eastern European countries, and creating a new system of equal security with Canada, the United States and Russia. According to the archival documents on his talks with the Soviet leaders, including Falin and others, otherwise the virtual Berlin wall will keep moving east, leaving us with the same problems. This is precisely what happened. Why? This was an attempt at containment. However, this is an erroneous policy, just like the attempt to use sports for momentary political gain.

There is no way they can contain China’s development. Eventually this will dawn on them. No way they can contain China. Today, China has a bigger economy than the United States in terms of purchasing power parity. As years go by – 2035, then 2050 – China will inevitably emerge as the world’s number one economy in terms of all other indicators as well. We need to understand this. Who knows? Maybe they do understand this, but are still acting this way. But this is a mistake.

As for us, we always have stood against using sport for political aims.

Pensions

Yuliya Izmailova, Editor-in-Chief of Molodoi Leninets newspaper, Penza.

Mr President, next year pensions are expected to be adjusted for inflation at the rate of 5.9 percent, which is significantly lower than the actual inflation rate. In fact, prices are growing at a much faster pace. Do you have any plans to offset the difference for retirees? Under the law, pension increases must correspond to the rate of inflation. Thank you.

Vladimir Putin:

Yes, I fully agree with you, and we must not forget this. The Government of the Russian Federation must do everything it can to deliver on the promises it made over the past years. Until now, we have been able to do this, in general, and we will definitely do it now. This is the first thing I want to say.

Second, for reference, please note that next year we will take the corresponding decisions on law enforcement and defence agencies to provide for a more even income distribution to people working in law enforcement and defence agencies. This also must apply to military pensions.

Infrastructure Projects

Olga Arslanova, Public Television of Russia:

My question is prompted by large cities are carrying out serious and expensive infrastructure projects. Meanwhile, the countryside remains archaic in our country even in the 21st century. It lacks the simplest things. It happens that schoolchildren go by bus to a neighbouring village 20 km away because their school at home is in critical condition. It happens that buses do not run because the road has fallen apart. Sometimes, the situation becomes ridiculous. There is no toilet or water in a village, but it has internet installed. Is the state going to implement infrastructure projects in rural areas instead of just filling some gaps?

Vladimir Putin:

Most certainly. First, this is being done under a relevant programme for the social development of the countryside, which will receive the required funds. This is the first point.

Second, the projects, including the national projects I have already mentioned today are largely oriented to focus primarily on rural areas. Our villages have been doing really well in the past few years. This should certainly have an impact on the social wellbeing and social attitudes of the people that are giving us this level of production and confidence in providing the country with the necessary set of basic food products.

Thus, I think we have already mentioned the programme for renovating existing schools and building new ones. These programmes will be primarily implemented in rural areas. This is what I requested and what will be done.

As for the internet, there is a reason you said it is installed in rural areas whereas some basic amenities are missing. Of course, it is possible and necessary to think about basic amenities, but it is also important to have the internet up and running. It enables rural residents to get an up-to-date education and use many services online even in remote areas and small communities. As for small communities, additional funds are set aside for this purpose. In general, this is, of course, a big comprehensive goal that requires, in part, the development of infrastructure. A significant part of the funds planned for infrastructure development will be spent on the development of rural areas.

Afghanistan

Zokhra Ishmukhametova, Sputnik news agency:

A question about Afghanistan. On August 15, we all watched as the Taliban took over in Afghanistan after President Ashraf Ghani, now the ex-president, fled. The question is, does Russia recognise the Taliban government? What is the outlook for Russian-Afghan relations?

Vladimir Putin:

I would like the relations between Russia and Afghanistan to develop in the best possible way. I am referring to our mutual interests in stabilising the region. For us, this is not idle talk, since we have open borders with the Central Asian republics, the former members of the Soviet Union, and naturally, the possibility of extremist infiltration raises understandable concerns. Among other things, there is the continuing flow of drugs from Afghanistan; some 90 percent of the opiates on the global market are Afghan-made. This is another alarming factor, of course.

As for recognising it, generally, we need to proceed from reality, assuming that the forces that now lead Afghanistan are setting their minds on having all ethnic groups represented in the country’s government. I think this is the only alternative that can, hopefully, pave the way for stabilisation in Afghanistan.

What do we need to do now? We definitely need to help the Afghan people. This should primarily be done by those countries that have caused such enormous damage, such harm to the Afghan economy and Afghan society. Those who have been there for 20 years, have destroyed the local economy – they must be the first to provide assistance.

For our part, we will do everything that depends on us. But the first thing to do here is to unfreeze Afghanistan’s assets, the money it had in foreign, primarily American, banks, in order to provide the required assistance to the Afghan people. Otherwise, the country could plunge into famine; there will be grave consequences that will affect the neighbouring states as well.

As for recognition, we are working collectively with all parties in international communication. We have our own position, and I have explained it clearly enough just now. But we will strive to achieve a consolidated approach.

Happy New Year to all of you! I wish you all the best! 

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