:: Russia - Prime Minister Vladimir Putin talks with journalists about the outcomes of his visit to the Primorye Territory

Question: Mr Putin, you attended the opening of the East Siberia - Pacific Ocean oil pipeline yesterday. It is a very expensive project, as you said yesterday. Was it worth it?

Vladimir Putin: Of course, it was worth it economically, as the issue is not only the oil pipeline but also the development of the region.

You may remember that we have talked a great deal about this over the past few years, but made only modest progress. Now we are putting the plans we formulated in the past into action.

First, we are developing the infrastructure. An airport is being built, and we have started implementing other projects to develop the transport infrastructure, in particular building roads.

We are also solving energy problems, which is very important for the region because the Far East is separated from the rest of Russia in terms of energy. It needs to develop its own energy system, including electricity generation, the production of hydrocarbons, gas and coal.

Work is under way to build a gas pipeline from Sakhalin. You probably know, many of you attended the groundbreaking ceremony, that the pipeline will stretch from Sakhalin to Vladivostok via Khabarovsk.

In addition to the energy sector, we will also focus on mechanical engineering, in particular aircraft manufacturing, which has been developing quite well in the region. The Komsomolsk-on-Amur plant mostly built combat aircraft but now it is also working on a civilian project, the SuperJet 100 aircraft, which it is manufacturing in broad cooperation with European partners. The project is making good progress.

Next, shipbuilding has always been a strong factor in the Far East, but, like the aircraft plants, local shipyards mostly built warships.

The plant we visited yesterday built and later salvaged nuclear submarines, which is a very narrow specialty with few broader applications.

We attended presentations of two major projects yesterday. I am confident that they will be implemented. This will allow us to develop a cutting-edge civilian shipbuilding industry, whose output can then penetrate promising markets. We held six meetings of potential producers and customers, we met six times, but yesterday we signed contracts totalling some $5 billion.

This means we will have a market for our products, which is crucial for starting production. We have good and highly competent partners in South Korea and also in Singapore, with a Singaporean-Chinese company. We are also in talks with Japanese producers. In short, we are confident that we have found our niche and will be able to develop civilian shipbuilding.

This is only a question of time, and we are talking about the near future. In fact, work began on the project yesterday: Rosneft has ordered a floating rig. This contract alone is worth $700 million. As you see, other companies, Russian companies are continuing to place their orders as before. And they will continue to do so, because their needs cannot be met by plants that only exist on paper. They will place some of their orders in South Korean shipyards and in Japan.

Still, I am confident that we will develop our shipbuilding niche at the highest technological level. As our partners have said, these plants will be among the best in the world, and I am confident that this will be the case. We are working in compliance with international practice, according to which a plant built from scratch is designed as a cutting-edge enterprise. This is a fact and there is nothing extraordinary about this. This is how we will do it.

Moving on, these are high-tech sectors. Aircraft manufacturing and shipbuilding are considered high-tech sectors of industry, but as you know we also intend to build a space centre here. It will be a challenging and expensive project, but it will be expedient in Russia with its vast territory. We will allocate modest funds for its initial development. The project is to be implemented not in the Primorye Territory but in the Amursk Region. These plans will be realised in stages.

They cannot be implemented without personnel and a research and technical base. This is why we will set up universities on Russky Island. This is why we plan to continue to provide assistance to the Far Eastern Research Centre. It has its own areas of expertise but they will be expanded to encompass those areas I mentioned above.

All of this taken together, including efforts to open a new export window for hydrocarbons, I am going to answer your question now, will ensure entirely new development prospects for Russia's Far East.

As for the ESPO pipeline, it is a strategic project because it will allow us to diversify our export risks. It is difficult to make predictions in the ever changing global economy. Our exports will become more reliable, if we get an opportunity, or already have an opportunity, to shift some of our exports away from the European markets when the situation there is unfavourable or if economic cooperation is unnecessarily politicised.

You know that Russia is so poorly represented in the Asia-Pacific hydrocarbon market, that it is an embarrassment to mention it. Arab countries account for 69% of oil in this hydrocarbon market, while Russia's share is a meagre 5% or 6%. This is too little. There is hard work ahead.

How can the pipeline from East Siberia to the Pacific Ocean change the situation? First, it will create an environment for the further development of East Siberia, where new deposits are being discovered.

When we discussed this issue, we had other plans in mind. What if we channel the funds, which we are now spending on the pipeline, into the north of European Russia? But those projects that we could develop there would have only one market, North America. There is a good depth there, there is a certain logic to it. Perhaps we will follow this up, but a little bit later.

Strategically, a pipeline to the Pacific Coast will allow us to develop East Siberian deposits. Their development has already begun.

When we first considered the project, we were not sure we would be able to supply enough oil for the pipeline. Initially we will supply 30 million metric tons annually and subsequently 50 million metric tons. The second phase of the pipeline will be built to allow for up to 80 million metric tons of oil to be pumped annually. As a result, oil companies are now queuing for access to the pipeline. Increased production has begun.

What does this mean for this region? It means the development of East Siberia and Yakutia. Many of you accompanied me to Vankor and saw that the project entails modern systems, new jobs, new technology, and new infrastructure. We have built not only the ESPO pipeline but also roads, electricity transmission lines and power generating companies along its route. The seven pumping stations are not simple iron boxes but mini-plants complete with the latest technology. We have created 3,000 well-paid jobs for skilled workers.

We have also created a new oil blend. Mr Bogdanchikov (Sergei Bogdanchikov, president of the largest state crude producer, Rosneft) spoke about this yesterday. It is so far called the ESPO oil blend. It will take time for it to be accepted on the world market.

So, we took the right decision and implemented it in a quick, effective and I would even say spectacular manner. Look at our foreign partners' reaction. Your foreign colleagues first of all ask if we will unveil it or not, and what result do we expect to attain? Everyone wants to know, and I can understand why: because we are easing our dependence on transit countries.

I would like to remind you that the East Siberia - Pacific Ocean pipeline, all of it, is located in Russia.

Question: Mr Putin, many publications and TV companies review the results of the outgoing year on New Year's Eve. Some shows give the year a rating. How would your personal rating look this year? What events would you highlight?

Vladimir Putin: The most important achievement is that we have overcome the biggest threats posed by the economic crisis. We have prevented unemployment from spiralling out of control. The unemployment level has grown, but not as dramatically as it could have. This is the first point.

Second, the country's banking system survived. I have already mentioned this achievement, and let me repeat myself now. Remember 1998: all of the country's largest banks, Incombank, Onexim Bank and others, went out of business, disappearing with their clients' money.

We have not allowed that to happen. Five or six lenders, which found themselves on the verge of bankruptcy, were bought by the state for one rouble.

Vladimir Putin: For a token sum, yes. But they survived. We are currently reorganising them. Some are to be consolidated, others merged. But none of them have been abandoned. That is my second point.

True, the loans market has contracted. But this trend is being reversed, albeit slowly and gradually. As you know, the Central Bank has already decreased its refinancing rate to 8.75%, which will certainly bring down commercial lenders' interest rates. I think the most important achievement is that our anti-crisis plan has worked. That is the most important result.

Question: Many important Russian politicians went down in history with epithets given for their achievements, such as Alexander Nevsky or Alexander II the Liberator. What would you think if your successors were to remember you as Vladimir the Reformer?

Vladimir Putin: I am still alive, thank God. Let us not think of epithets or awards for the moment. The best and most important reward for all - you and me included - is that we are given this chance of doing what we are doing now, of serving our nation.

Question: Mr Putin, the first decade of the 21st century is drawing to a close. You have been actively involved in the country's economy and state administration. You have said much about your policies' successes and we wrote about them. But were there any blunders during the past decade?

After all yesterday President Dmitry Medvedev mentioned plans to change the country's economic policy and so on. Your critics point to your "hands on" approach to management: you personally go to Pikalyovo to handle local problems, you sit down and disentangle the shareholding structure of the aircraft engine maker Saturn, and so on. That is to say, you get involved in issues that come under the regional governments' purview. There is also the mineral resources dependence, among other problems.

Vladimir Putin: Our most obvious error is that we failed, or were reluctant to pursue a harsher economic policy, to show more thrift with regard to national resources instead of channelling them into economic diversification.

We spent too much, but this was due to the particular circumstances in the country in the early and mid-1990s. Looking back now, from a pragmatically economic point of view, we should have spent less on social programmes and more on economic diversification and development.

However, from the social perspective, we were right to do as we did, since Russians were faced with serious challenges in the early and mid-1990s, such as loss of their savings and the collapse of many social services. We needed to give people at least some compensation for their losses to boost public confidence in the government, because public confidence was crucial for any further reforms.

Therefore, had we acted differently, Russia would have been even less affected by the global economic crisis, because it would have had a more diversified economy. This is probably the weakest point of the past decade: we should have diversified the economy.

However, as you may see, much has been done in this sphere: we have established institutions to promote development, free economic zones and so on. Unfortunately, the global recession interfered with our efforts. But even so, all that we have done in the past few years, the economic growth we achieved, has helped us get through these difficult phases of the crisis less painfully than other countries.

Question: I have two questions. The first one concerns the case of Major Yevsyukov who opened fire in a supermarket, wounding many people. This is an incident concerning our law enforcement system. The Interior Ministry has been severely criticised, and some authorities proposed a radical reform of the system. State Duma deputies even proposed the total elimination of it. At the same time, President Dmitry Medvedev said that there was need to reform it, but there is no comprehensive plan how to do that. My first question is: how are you going to reform the system, to which extent?

And my second question: yesterday you were briefed on the first phase results of introducing digital TV broadcasting in the Far East. I am interested if you have time to watch anything besides news on Russian TV?

Vladimir Putin: The law enforcement system, like any other system in the state, is absolutely bound up with the state itself. It is what we are.

What makes you think there is no reform plan? It is included in the Presidential Decree.

We have been thinking about this issue for a long time, not since yesterday, and not since the tragedy in the supermarket. This concerns additional financing.

There are some limitations, though: in any state, the Armed Forces have the top priority in the state's security-related structures. And employees of other security agencies cannot receive a salary higher than the Army and Navy officers.

Apart from that, the number of personnel in the Interior Ministry is higher than in the Army and the Navy combined.

Secondly, we should not limit ourselves to boosting financing: a certain moral environment should be created in the law enforcement agencies and around them. Speaking of financing: at the present moment, the Interior Ministry is being financed from federal and regional budgets. We need to start financing it from the federal budget only.

The Presidential Decree includes this issue. According to it, we will gradually start financing the Interior Ministry from the federal budget. It is obvious that we will not be able to do that in 2010 or 2011, but preliminary calculations show that this is likely to happen in the beginning of 2012.

The regional authorities are also interested in supporting the activity of the Interior Ministry in the regions. This concerns not only salary, but also supplies of equipment and machinery, maintenance of service buildings, transport, etc.

At the present moment, a large part of the funding comes from the regional budgets, and the burden for the federal budget can be very heavy, including accommodation for the personnel. The federal budget cannot finance everything, so we need to set priorities.

But what is happening in the law enforcement agencies today needs special attention by the federal centre. And we should allocate the needed resources. This must be calculated thoroughly. And, I repeat, by 2012 we will create the conditions needed to start financing this system from the federal budget.

Once again, I would like to stress that it is not only money we need. We need to develop a whole series of measures: increase responsibility for official misconduct, improve the morals of the personnel, and create a certain environment in the society and in the law enforcement agencies themselves.

But we should remember that this all must be carried out extensively and systematically, like any other problem of this kind.

I think, has become quite interesting over the past two years. I particularly like everything linked with history and nature.

Question: What do you think about the image or stereotype of yourself that is currently evolving? When something happens, like the fire in Perm or those events in Pikalyovo: Vladimir Putin must go there to be personally involved. What do you personally think about this stereotype?

And one more short question. What decisions have you taken this year that really touched you? Are there any that you will recall on the first night of the New Year?

Vladimir Putin: You know, I have a lot of ongoing routine work, and naturally, I think about the long-term consequences of what I am doing. We must react promptly to everything we see and hear, especially during a crisis.

People are not often interested in grand conceptual debates and pronouncements. They have every right to expect their national leaders to react promptly to problems that arise, and they expect practical help and support from us.

Consequently, any fears concerning my trip to some place, or possible demands for me to go elsewhere are unjustified. People are making the right demands. The government is here to respond to people's demands.

As far my emotions are concerned, I am very calm. I have a purely logical approach and am used to functioning without excessive emotion. That's why I think I will disappoint you. I do not feel any excessive emotions in connection with my recent official duties.

Vladimir Putin: There have been so many important decisions. I say this seriously without any hint of irony. There have been many such decisions. Many decisions are made by the country's leaders and the Prime Minister.

For instance, I personally proposed the establishment of regional anti-crisis headquarters, and I saw to it that they were headed by regional governors. I think this was a highly important and timely decision. Most importantly, we managed to consolidate all levels of the government and management, pooling everybody's anti-crisis efforts.

If you remember, in the mid 1990s everybody used to accuse each other of every deadly sin there is. The governors accused the President and the Government, while the Government and the President blamed the governors for their failure to get things done. But this time, nothing of the kind happened and we successfully consolidated their responsibilities into pragmatic work to overcome the problem. In my opinion, this is very important. The people's belief in our efforts is probably the only element that is more important.

Question: Mr Putin, I get the impression that the country did not get rid of its dependence on oil during the crisis.

Question: And there are no guarantees that subsequent price fluctuations will not lead to those US bonds issued in 2009. Is this impression correct, or have you managed to do something?

Vladimir Putin: This impression is correct but it will be incomplete unless we bear other developments in mind. For instance, right here... We are not only concerned with the East Siberia - Pacific Ocean Oil Pipeline System, and we have done more than just opened a new export-oriented pipeline. We have also announced the creation of two shipbuilding enterprises. You and I have just visited a newly-opened automotive enterprise which was established in six months' time and which will manufacture motor vehicles. This is what economic diversification is all about.

If we allocate funding for the development of the banking system, we imply that such banks must be consolidated, enlarged and made more viable. Everybody, including representatives of the banking community, believes that having 1,000-plus banks is a bit excessive. We must see how they can be enlarged. We plan to accomplish this smoothly and calmly, without taking away anything from anyone and creating the conditions that enable people to work more effectively and more reliably.

As you can see, we are making progress on all these areas. Naturally, we could have endless discussions about how everything's lopsided, how hard life is, how we are not accomplishing anything... This is not so. We are working. But, as you know, this movement, this economic development is an extremely lengthy process or cycle. It requires time and vast capital investment.

You can talk to Vadim Shvetsov, General Director of Sollers-Far East, who has established an automotive enterprise here. Ask him what problems he encountered. It takes a lot of time to hire people, to train them and to create the required infrastructure. It is a lengthy process.

We have discussed support for the aviation industry. An extremely negative environment was created in the early 1990s and the mid-1990s. Everything was sold off. As you know, the aviation industry has only two global players, namely, Boeing and the European Aeronautic Defence and Space Company EADS. The rest are tiny fragmentary particles operating on the global market. Brazil manufactures something, and there's some production somewhere else. But there are only two major producers, with Russia standing not far off.

Look at what we had done! We had carved up our aviation industry and sold it off. It was inappropriate to treat this sector, a sector which requires substantial, often high-risk and long-term capital investment, in such a way. The state is directly involved in this sector.

Or take the energy sector. Look, for example, at what's going on inside the French energy sector. What do you think about state involvement in the energy industry? Look at this market, this production sector.

It took us several years to consolidate these assets in the aviation industry. Certain laws have to be observed. We ought to have turned these enterprises into shareholding companies. All this required several years of painstaking, difficult work. Corporate managers and shareholders immediately began to consider their own commercial interests. Whatever transpired, they clung to those interests without sparing a thought for the company's future, even if it looked like it might go under. It was easier to sell the assets for next to nothing and to pocket the money.

We had to change that sponging mentality which arose so quickly. This takes time. I think we are acting and moving in the right direction. I repeat once again that an institute for development, and free economic zones have been established.

The tax regime is adapting to this. We are not talking about economic development and diversification, the development of the engineering and other sectors just for the fun of it. If you examine the taxes applied to this sector, you can see that we are trying to reduce the tax burden little by little, and have been raising energy-sector taxes lately.

But if we have energy resources, oil and gas which are either lacking or found in limited supply in other parts of the world, what does this mean? These are our natural competitive advantages. We must use them skillfully, effectively and moreover, we must skillfully and promptly spend the proceeds from such products on that very economic diversification which we are trying to implement, and about which you asked me.

Question: Mr Putin, may I ask you a question about the more prosaic aspects of life?

Vladimir Putin: The housing and community utilities sector is an eternal problem for this country. The problem is rooted in the fact that this monopolised market was primarily developed by the bureaucracy, rather than those involved in the economic activity. We know what we must do in this sector. The relevant principles for developing the housing and utilities system were formulated long ago. The sector's modernisation should not always be linked with higher tariffs.

First of all, we must create a market, we must get rid of tiny pocket companies monopolising the market of utility services. This is the main and most important condition. Naturally, they are often unable to do this when the enterprise, and housing and community utilities systems themselves, are in a deplorable state. We must support them and help them to attain a level that will yield profits within this sector of the economy. It has great potential for profitable work.

Naturally, inflation is another factor that needs to be taken into account. Incidentally, we will post unprecedentedly low inflation this year. I have just talked to the Central Bank Chairman. Two weeks ago, inflation totaled 8.7 to 8.8%. Accumulated inflation will reach about 9% in the last few days of 2009. This is an all-time low. Still 9% is also much, because it is not 3%, 4% or even 5%.

Enterprises in the housing and utilities sector must react promptly to these macroeconomic conditions because funding shortages will continue to increase, and the degradation of the utilities network will become unacceptable.

Naturally, no one has the right to speculate and misuse these macroeconomic indices in this sensitive public sphere and to unjustifiably inflate the costs of these services. Unfortunately, this does happen sometimes. The federal government is trying to limit the rise in these costs, the utilities tariffs, and will continue to monitor this process.

Question: Mr Putin, you recently proposed rebuilding the war memorial which was destroyed in Georgia, in Moscow. According to media reports, the Georgian architect has refused to help, saying the sketches had been lost. Then there was another media report that the project ...

Vladimir Putin: As far as I know, Georgian sculptor Merab Berdzenishvili, the author of the project, who is a People's Artist of the USSR, has reacted positively to the idea of restoring this monument in Moscow. By the way, he is already rather elderly, over 80 years old.

Clearly, given the situation, the Georgian government will exert political pressure on him. They have committed yet another crime. This is a clear fact, all the more so as people were killed during the monument's demolition.

Of course the Georgian authorities want to minimise any negative political consequences for themselves. Everybody realises that the reconstruction of this monument in Moscow would mean another smack in the face for them. Everyone understands that. Naturally, they will exert pressure on the sculptor in order to persuade him not to take part in such work. Although initially he publicly welcomed this project and stated his willingness to help.

We understand his difficult situation. He lives in Georgia and has to deal with the reality on the ground. If despite this, he decides to be part of this project, then we will welcome his involvement. If for some reason he feels he cannot do this, we will be content with his general creative advice.

But when I spoke about this in Moscow, I meant that standards at the Georgian art school are very high, and that this is generally recognised in this country and the world as a whole. And there are many talented members of the Georgian community in Moscow who could become involved in this work.

As far as Zurab Tsereteli is concerned, he is the President of the Russian Academy of Arts, and he is in a position to make contact with Georgians who have connections with their colleagues in both Georgia and Russia. He could play a role in organising this work.

But I think this community should decide whether the project will be headed by those who were originally involved in creating the monument, or whether a creative team should be established in Russia.

I don't want to predict who will head it. That is none of my business. These people have been engaged in creative work all their life. We have the Ministry of Culture. I have talked to Alexander Avdeyev. Their general reaction has been extremely positive. I do not see any problems hindering the implementation of this project in Moscow.

Question: You have already mentioned the diversification of routes, operations on Asian markets and transit risks. The problem of oil transits via Ukraine recently arose. Do you think that Europe could be deprived of Russian oil in January? And what would you say to European customers who have reasons to believe that Russia is just as responsible for reliable deliveries as the transit countries are? Whatever we say, such situations tarnish Russia's reputation as a supplier.

Vladimir Putin: This is why we are diversifying export routes in order to minimise such speculation. We are ready to begin supplies, we have signed the relevant contract. But what can we do if someone misuses his transit-country status?

We have long argued about gas deliveries to Ukraine and other transit countries. We all realise, and all our main customers have come to understand what the problem is all about. The problem is that transit countries are misusing their status in order to obtain exclusive domestic prices. More often than not, this implies not so much domestic consumption as the creation of favourable conditions for domestic businessmen. They are creating a grey market for reselling and re-exporting our energy resources.

Vladimir Putin: ... As for oil transit, we have contracts, and expect them to be fulfilled to the letter. What is signed and in effect, should be fulfilled.

Question: The government is currently working on amendments to investment legislation. Will investor access be restricted or expanded next year?

Vladimir Putin: Firstly, the existing procedure includes consultations with investors. There is a government Council on Foreign Investment. As head of government, I hold regular meetings with our major partners. We listen to them, hear them out and respond to their requests. We try to take their proposals into account and adjust the existing legal framework to make it an agreeable environment for our partners. We can even make amendments to laws if necessary.

According to recent reports, in the first quarter of this year, Russia had around $35 billion of accumulated foreign investment, probably less than last year by a small margin, but this is only natural given the market contraction due to the recession. Shrinking investment is normal in this situation, it is nothing special, and I repeat, 35 billion for three quarters is not bad.

There is a problem with short-term investment. Russia currently offers favourable conditions for speculative capital, which eagerly flows in and works well, but soon flows out again, causing us problems in these straightened times. What we need to do is change the rules so as to make Russia a less attractive destination for short-term speculative investment, which flows in for a very short time and flees at the slightest sign of danger. On the other hand, we need to create a more favourable environment for long-term direct investment in Russia.

This is our general course of thinking. There will not be any revolutions here because these are routine regulatory issues.

As for whether or not the new arrangement will be more liberal, I'd like to tell you it is very liberal now. As you may have noticed, in the energy sector, neither the Middle East countries, nor Latin America have such liberal rules. In Mexico, for example, only the government can invest in the energy sector.

Russia offers free access for investors. All major global companies operate here. There are certain limitations on the so-called mineral deposits of national importance. But what are these limitations? Are we ready to give foreign investors access to these deposits? They have access now, no bans are in place.

The only issue here is that their requests have to be considered by the government commission on foreign investment. They are welcome to submit their requests, which we will consider. And so they do. They come directly to the government, or to Russian companies developing major mineral deposits.

We are going to continue working this way. In any case, we are not planning any additional restrictions.

Question: You have mentioned policies to limit the inflow of speculative capital. What measures can be taken here?

Vladimir Putin: You have got to the heart of the matter. Let me tell you one thing: we are not going to do anything that would shake the market. We are currently analyzing it to understand what is happening.

They are profiting on exchange rate differences. We, I mean the government and the Central Bank, will try a very a smooth transition to floating exchange rates. It will be very smooth. Russia's economy, which is not yet sufficiently diversified, is not ready for full-fledged floating exchange rates to be applied to our national currency.

However, along with gradual diversification, we will be introducing elements of the floating exchange rate policy, but very carefully. It will be one of the measures to change the environment for speculative capital. But again, by saying "speculative capital" I do not mean to imply any illegal activity. They are operating in compliance with existing rules. Moreover, this inflow of short-term capital even has certain benefits.

True, these investors cause us some macroeconomic problems, when they bring in too much capital, because the Central Bank is forced to take surplus foreign currency out of circulation. Their sudden withdrawal then hits Russia's liquidity profile.

Question: What do you think is the problem with the new arms reduction treaty? When will it be signed, if at all? Do we need it at all strategically, in the first place?

Vladimir Putin: You know, some do believe it is not needed. Others believe it is. I think we do need certain generally accepted arms reduction rules, which would be interpreted in the same way, easy to verify and transparent. Having such rules is certainly better than not having any.

As for the problem, it is as follows. As everyone knows, our American partners are building a global missile-defense system, and we aren't. But missile-defense and strategic offensive weapons are closely interrelated issues. A balance of forces was what kept aggression at bay and preserved peace during the Cold War. The missile and air defense systems and offensive weapons systems contribute equally to this balance.

If we do not develop a missile defence system, the risk arises that our partners will feel entirely secure and protected against our offensive weapons systems. If the balance I mentioned is disrupted, they will feel able to act with impunity, increasing the level of aggression in politics and, incidentally, in the economy. In order to maintain the balance without planning to develop a missile defence system, which is very expensive and of unclear effect, we should develop offensive strike systems.

But there is a catch. In order for this balance to be maintained, if we want to exchange information, then our partners should give us information about their ballistic missile defence system and in return we would give them information about our offensive weapons.

However, I would not like to talk about this in detail now. Our analysts in the Defence Ministry and the Foreign Ministry are working on this. In general, negotiations are proceeding in a positive atmosphere. Ultimately, the decisions on these issues are to be taken by the Russian President, on our side and the US President, on behalf of our American partners.

Question: I have a question about the ESPO pipeline. Will a refinery be built at its terminus? It is simpler and quicker to sell crude oil, but nonetheless...

Vladimir Putin: May I interrupt you? We should initiate only those projects that will be profitable. Paradoxically, it is now much more profitable to sell crude oil than refined oil products.

One needs a workforce, electricity, transportation, and so on to produce refined oil products. But crude now costs more than petrochemicals. This is the distorted reality of today's economy. There are many reasons for this, such as the fact that oil is mostly traded in futures, in deals that are signed today but will be realised tomorrow.

Considerable amounts of oil is stored. Some companies, including traders, buy oil and lease tankers only to store oil rather than sell it. Everyone is waiting for the global economy to grow, and oil consumption with it.

Strategically, we should establish oil refineries in Russia, to process oil here and sell refined oil products. But today this strategy, and this objective reality, as I have said, sometimes clashes with the economic logic.

Therefore, this issue should be analysed carefully; we need to determine what and where to build, and to whom we should sell. After this scrupulous in-depth analysis, we will be in a position to make a decision about the construction of oil refineries, including for the oil pipeline we commissioned yesterday.

Question: You recently met with Mikhail Shmakov (Mikhail Shmakov, chairman of the Russian Federation of Independent Trade Unions) to discuss unemployment issues. He said that unemployment would not decrease but would grow next year. Does this news clash with the government report on effective measures taken to curb unemployment? Shmakov seems to have different information.

Vladimir Putin: No, he has the same data. We are in full agreement with the trade unions on this issue; there is no other data. The results of our surveys coincide. The ministers responsible for areas relating to the economy, welfare and the social sector have said more than once that our emergence from the crisis will be long and difficult. It will take time and additional expenditures.

The global economy will recover slowly. This means that the consumption of our main products, which we supply to the global market, will grow slowly too. I have said this more than once and can repeat it again here.

Take some of our steel companies... Miners exported 50%-60% of their output, but demand for their products has slumped. What should they do? They can hardly stockpile metal in Russia. Therefore, production and the ensuing employment will not grow as fast as we would have wished.

This is why the government has decided to continue anti-crisis assistance to the economy and the employment market. This year we channelled 47.3 billion roubles ($1.6 billion) into the employment market, and allocations next year, although smaller, will still be considerable, at over 36 billion roubles ($1.22 billion). These funds will be used to support the employment market, create new jobs, and so on.

We have no differences with the trade unions in this respect, and the trilateral commission is working hard to improve the ways we support the employment market.

This trilateral commission met yesterday to discuss these issues. Deputy Prime Minister Alexander Zhukov, who is working on this issue in government, and Mikhail Shmakov himself both told me that they understand the scope of the problem.

They differed on one issue: the use of migrant workers, which was not settled at the recent meeting. This year we cut the number of migrant workers by 50% compared to last year, to 2 million from 4 million people, and the government plans to keep to this 2 million quota in 2010. The trade unions insisted that the figure should be further cut by 50%, compared to 2009.

When we raised this issue in Novo-Ogaryovo I pointed out that it is technically very difficult to do since entrance to Russia is visa-free for most CIS citizens. When a person enters Russia it is very hard to trace what he or she does, how long he/she stays in Russia and so on.

However, any kind of quota is an important regulatory tool, and I agreed with the chairman of the Federation of Independent Trade Unions that in 2010 we should further reduce the size of the foreign workforce. Given that the government initially planed to set this quota at two million people, I agreed with Mr Shmakov that we could reduce this, to say, 1.3 million at the expense of the so-called reserve.

All in all, we have reached an agreement with the trade unions on this issue, although negotiating with unions is a very laborious job during a recession. As you know, practically in all countries that are facing the global crisis salaries are frozen and almost all sectors of the economy are in decline.

In Russia, salaries fell somewhat in the commercial sector. At the same time, the salaries of state-employed workers grew by a little over 5%, to be exact, by 3.8-5%, thanks to boosting the funds allocated for salary payments by 30% in December 2008. The effect was felt in 2009. Pensioners' revenues also surged, compared with what they received before.

Salaries dropped by 10-12% in the commercial sector, but there was a slight increase in other economic sectors. Taken altogether, these factors resulted in real disposable incomes being down -0.4%, which is virtually the level of 2008.

I think these are good results to see during the downturn, but we must certainly try our utmost next year to restore production rates. As a result, wages in the commercial sector will start growing too. Happy New Year!

Vladimir Putin: How? At home, watching President Medvedev's speech. I think I'll drink a toast to you. Thank you very much!

Vladimir Putin: I do. And who doesn't? I like to receive presents. And what will you get?

Vladimir Putin: My wife will certainly give me something and my daughters will too. By the way, you reminded me just in time, I should make sure I've got presents for them, too.

Vladimir Putin: I enjoy giving presents more. I think it's more rewarding to give presents. Don't you?

Journalist: It is nice to give a present because you think about the person. It is nice to see the emotions when you give presents.

Vladimir Putin: No. Let's be honest. It is gratifying because you feel like a decent person. Your self-esteem improves. "Well done!" you think to yourself. So it is we who should be grateful to those who accept our presents.

Vladimir Putin: My tiger cubs are fine by the way. The tigress we tagged here was caught on camera. Incidentally her blood test showed that she was pregnant. And then she got snapped with two tiger cubs. They have grown up by now, I guess, it's been a year since then.

Question: What about the leopards that the Turkmen leader shipped to you? There were reports of certain problems?

Vladimir Putin: Problems with leopards? Leopards have long been facing problems, there aren't any left, they were all shot.

Question: I am referring to the leopards kept in Sochi that were to be delivered from Turkmenistan. They are at the customs office. They can't...

Vladimir Putin: Oh, yes, I heard about that. It'll be fine, we'll sort out all the necessary paperwork. The main thing is that they should be fed on time, and as for paperwork, we'll process it.

Speaking of leopards, I have already made the point - if I'm not mistaken, there is a leopard on the coat of arms of every Caucasian republic, or on almost every coat of arms. And yet there are no leopards left in the wild. They all have been killed.

We need to bring at least six more leopards into the country to begin this repopulation. They cannot be just brought in and released. It's very difficult. First, three pairs must be placed in special open-air enclosures; then they should breed, that offspring then needs to be taught to hunt, as if they were in the wild.

Vladimir Putin: Nature is nature. Indeed, the artiodactyla are bred there to teach predators to hunt them. They will be released in the wild only after two years of training.

Question: You have said next year will be the year of the Polar Bear, as far as we know...

Vladimir Putin: Well, the Niva is smaller and a bit more rugged. And this car is relatively smooth.

Vladimir Putin: Well, he said he would. I told Mr Shvetsov that Mr Berlusconi is our number one customer. Mr Shvetsov offered to give it to him as a present. I replied that Mr Berlusconi promised to buy it. Mr Shvetsov said he would offer a 10% discount. So, we'll ship it to Mr Berlusconi.

Vladimir Putin: You know, I liked the car. Has anyone in here tested it? Indeed, it's very enjoyable; it drives well, and it has a powerful engine. It's an Italian engine, quite sufficient for this car. It's a good smooth car.

Vladimir Putin: It costs 850,000 roubles? Of course, we wish it'd cost 300,000. However, it is so because of production rates. To become cheap, it must be mass-produced, and the related infrastructure would need to be created.

Mr Shvetsov requested that special tariffs be introduced not only on bringing vehicles here from the European part of Russia, but also on the transportation from here to the European part. This would allow us to market the goods produced here in the Far Eastern Federal District, nationwide, which would create the conditions necessary to expand production and reduce prices.

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