Russian President Vladimir Putin talked with Bloomberg News Editor-in-Chief John Micklethwait on Sept. 1 about the U.S. elections, accusations that Russia was involved in the hacking of thousands of Democratic National Committee emails and documents, a possible oil-freeze deal with OPEC, plans to sell a stake in Rosneft PJSC, the relationship between Japan and Russia, and the future of the euro area after the U.K.’s vote to leave the European Union.
Click here to read the transcript in Russian.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
MICKLETHWAIT: President Putin, thank you very much for talking to Bloomberg. We’re here at Vladivostok, on the edge of the Pacific and on the eve of your second Eastern Economic forum. What do you hope to achieve at it?
PUTIN: It’s a way to capture the attention of our partners, potential investors in Russia’s Far East. In this sense, this event, this occasion is not much different from other regional forums of this kind. We hold a lot of them in Russia, such as the economic forum in St. Petersburg -- usually we hold that in the summer, at the beginning of summer -- or the economic forum in Sochi.
The Far East has particular importance for us, with priority given to the development of this region. In the past few years, let’s even say in recent decades, we have encountered many problems here. We paid little attention to this area, and it deserves far more because enormous riches and opportunities for Russia’s future development are concentrated here. Not only for the development of Russia itself, but the development of the whole Asia-Pacific region, because this land is very rich in natural and mineral resources.
Usually when we talk about the Far East, we have in mind the Far East proper: the Primorye region, the Khabarovsk region, Kamchatka, Chukotka. But it’s also the area called Eastern Siberia. Now, if we take them all together, these lands contain colossal resources -- oil, gas, say, 90 percent of Russia’s tin, 30 percent of Russia’s gold, 35 percent of its timber. Seventy percent of Russia’s fish are caught in these waters.
This is a region where the transport, rail infrastructure is well developed. And in recent years we have been busy developing the road network. There’s huge potential! Opportunities for the development of the aviation industry, space industry. If you noticed, we opened a new cosmodrome in one of the regions of the Far East. Traditionally, aviation, as I said, has been developed here, including military aviation, -- the world famous Sukhoi fighter jet is manufactured in the Far East of Russia.
Finally, we have resumed the production of ships, especially for civilian use. Just today, I witnessed the start of work at one of the very promising platforms in this regard.
It’s also a very good opportunity for humanitarian exchanges with our neighbors. We’re proposing to develop musical activities, exhibitions, theatrical events here. Our outstanding musician and conductor Mr. Gergiev performed here very recently; we’re opening a branch of St. Petersburg’s Mariinsky Theater here. We also plan to open branches of St. Petersburg’s Hermitage Museum here and the Vaganova Ballet Academy.
You and I are now in a building of the Far Eastern Federal University. I think you can also appreciate the scale of this academic institution. Thousands of young people from foreign countries study here, and there are many foreign teachers. We would very much like to see science, higher education, and learning developing here, so that it can become one of the prominent scientific centers in the entire Asia-Pacific region. Of course, there’s still a lot that could be done here, but given the requirements of the labor market, the need for this kind of institution is obvious.
There’s another area that’s very interesting and promising for us - marine biology. One of the leading institutes of Russia’s Academy of Sciences, for marine biology actually, has been here for many years, and we’re opening a new center here. We also built an aquarium as part of it, which should become not only a venue for the public, who, I think, would enjoy getting closer to nature, but also be part of this marine biology institute. An interesting and very promising cluster is forming here, and we would like investors and our foreign colleagues, primarily from the Asia-Pacific region, to know more about it.
MICKLETHWAIT: One of the guests who have coming is Shinzo Abe. He’s arriving at Vladivostok. There seems to be the beginnings of a political deal, if you like, where you might give up one of the Kuril Islands in exchange for greater economic cooperation? Are you open to a deal of that sort?
PUTIN: We don’t trade territories, although the problem of a peace treaty with Japan is, of course, a key one. And we would very much like to find a solution to this problem with our Japanese friends. We had a treaty signed in 1956 and, surprisingly, it was ratified both by the Supreme Soviet of the U.S.S.R. and by the Japanese parliament, but then the Japanese side refused to adhere to it, and then the Soviet Union basically nullified all the agreements within this treaty.
Several years ago, our Japanese colleagues asked us to return to a discussion of this topic. And we did, we met them part way. Though in the past couple years -- not by our initiative, but from the Japanese side -- these talks were frozen, but now our partners are showing a willingness to resume discussing this subject. We’re not talking about some swap or sales, we’re talking about finding a solution where neither party would feel defeated or a loser.
MICKLETHWAIT: But, are you as close to a deal now as you have been since the 1960s? Is it better now than any time since then?
PUTIN: I don’t think it’s closer than in 1956, but, in any case, we’ve resumed a dialogue on this subject and agreed that our foreign ministers and the corresponding experts at the deputy-minister level will step up their work.
Of course, this will always be a topic of discussion for the Russian president and for the prime minister. I’m sure that when I meet with Mr. Abe in Vladivostok, we will also discuss this topic. But in order to resolve it, it should be very well thought out, prepared and, I repeat, not on the principle of damage limitation but rather on the principle of setting the stage for the development of inter-governmental relations for the long term.
MICKLETHWAIT: You seem to be more relaxed about territory on your Asian front. We mentioned the Kurils, you gave the island of Tarabarov back to China. You’re not, you wouldn’t consider giving Mrs. Merkel back Kaliningrad as a tribute?
PUTIN: We didn’t give anything away. These were territories that were disputed, and we held negotiations with the People’s Republic of China about them for 40 years and finally found a compromise. Part of the territory was permanently assigned to Russia and part of the territory permanently assigned to the People’s Republic of China. I want to stress that this was possible only -- and this is very important -- against the backdrop of a very high level of trust that had been developed between Russia and China by that time. And if we can reach a similarly high level of trust with Japan, then we can find some compromises.
But there’s a fundamental difference between the question connected with the Japanese story and, let’s say, our negotiations with China. What is it? It’s that the Japanese issue arose as a result of World War II and is set out in international documents linked to the results of the Second World War. Our discussions with our Chinese friends about border issues had nothing to do with World War II or any military conflict. This is the first, or rather, I should say, the second point.
Third, about the western part. You spoke of Kaliningrad.
MICKLETHWAIT: I meant it as a joke.
PUTIN: But I’ll tell you without joking: if someone wants to start revisiting the results of World War II, well, let’s try to debate that topic. But then we need to debate not only Kaliningrad but the whole thing, from the eastern part of Germany to Lviv, which was part of Poland, and so on and so forth. There’s also Hungary and Romania. If someone wants to open that Pandora’s box and start to work with it, go ahead. Take up the flag and go for it.
MICKLETHWAIT: Can I ask you about the Chinese again. Back in 2013, you said you wanted to push trade with China up to $100 billion by 2015, $200 billion by 2020. And last year it went backward to about $67 billion-$70 billion a year. What went wrong? I know the problems with the ruble and problems with oil. But what went wrong, and do you still think that target of $200 billion in 2020 is achievable?
PUTIN: Yes, I think it’s completely achievable, and you yourself identified the reason for the fall in trade. At first, we set a goal of $100 billion in trade, and we almost reached that figure, it was about $90 billion, so that figure was almost met. We know the reasons. They include the decline in prices for our traditional exports, they include the exchange rate. This is simple, objective data, you know that well.
MICKLETHWAIT: Did sanctions make a difference?
PUTIN: The sanctions and our relationship with China aren’t connected at all, because we have built a relationship with the People’s Republic of China that we consider to be at an unprecedented high, both in its level and quality, we call it a comprehensive partnership of strategic quality, and sanctions have nothing to do with it.
The decline in trade was due to objective issues connected with energy prices and the exchange rate, but physical volumes haven’t fallen. They’re actually growing. Our trade and economic relations with China are becoming more and more diversified, which is something we have consistently sought with our Chinese partners. Note that, in addition to trade purely in traditional goods, from one side, let’s say, energy resources -- hydrocarbons, oil, and now natural gas and oil products -- and from the other, say, textiles and shoes, we’ve moved to a completely new level of cooperation.
We’re already working, for example, on joint space programs, we’re developing and will soon start production of a heavy helicopter. We’re working on a wide-body long-haul airplane, we’re cooperating in machine building, high-speed rail, in manufacturing, in timber processing, and atomic energy. We have already built the Tianwan nuclear power plant. Two reactors are already functioning, and running very well, and we’ll build another two reactors. The goal that we’ve set for ourselves to diversify our relationship is being met.
MICKLETHWAIT: Just listening to you speak I wondered if you look back, you know, you became president first back in 2000. I wonder if you look back over that period whether you think Russia has become a little bit more an Asian country and a little bit less a European one?
PUTIN: You know, it’s become a more developed country. You know, I don’t want to draw a line between Asians and Europeans. The issue is on another level, on the level of development. The size of the Russian economy grew by 70 percent, nearly doubled. And by purchasing-power parity, Russia’s economy is now currently the fifth or sixth-largest in the world.
It’s completely clear that 10-15 years ago we couldn’t have responded to the sanctions that were implemented against Russia with retaliatory measures, say, in agriculture. We couldn’t have closed our market to agricultural goods from countries that acted in such an unfriendly manner toward Russia because we couldn’t have supplied the domestic market with food of our own. And now we can. That’s the first point.
Secondly, the freeing of our market gives our farmers an opportunity to increase production within the country. We had an overall decline in GDP connected to a whole series of events, not only sanctions, but also purely objective issues related to global economic trends; there’s been a slight decline in GDP and industrial production. Yet agriculture is growing at 3 percent a year -- growing steadily. And that’s stable growth. This year it will be 3 percent, maybe more, and next year too.
Therefore, if we’re talking about what took place over, let’s say, the last 15 years, then it’s a lot. But that’s not the only thing. Another thing is that the Russian economy has become significantly healthier. In 2000, we had $12 billion in gold and foreign-currency reserves and more than $20 billion in external debt.
Now Russia is among the top 10 countries with the healthiest ratio of external debt to reserves. On the first of last month we had nearly $400 billion in reserves, $395 billion, and foreign debt of only about 13 percent of GDP. That ratio is considered one of the best in the world.
We had a third of the population living below the poverty line, more than 40 million people. That number has now fallen by nearly two-thirds. Over the past year or year and a half, unfortunately, it has increased a bit given the economic difficulties and the overall decline in the population’s wages, but it’s still incomparable to what it was 15 years ago.
For example, pensions have increased several times over, real wages have grown, they’re incomparable to what they were. These components got us to what we were fighting for, which is at the core of every state’s development: demographics. In the early 2000s it seemed that we wouldn’t be able to reverse the negative demographic trend. The population of Russia was declining by nearly 1 million people annually, 900,000 each year. Now over the last three years we’ve observed natural population growth. We have the lowest…
MICKLETHWAIT: You’ve encouraged romance.
PUTIN: To our credit, we now have the lowest level of infant mortality and maternal mortality in our recent history, and I think even going back to the Soviet period. We’ve set a goal to increase life expectancy. Over the past five years it’s grown at a much higher rate than we planned. All of this gives us reason to believe that we were on the right track. Of course there’s a lot we could and should still do and we probably could have attained greater results but on the whole we’re moving in the right direction.
MICKLETHWAIT: You’ve just talked about the Russian economy and we’ll come back and I’ll ask you about reserves in just a second. But it struck me whilst you were talking, you know, you’ve detailed all the ways in which Russia has got stronger. You’re about to go to the G-20. You have studied and watched the West many times. You’ve been to the G-20 more than any other leader at the moment.
Have you ever been to a G-20 where the West has seemed more divided, more in doubt, more distrustful in itself. Look at all the things happening in Europe -- the migration, you look at the Brexit, you look at America with all the election and the problems with that. Does the West seem particularly disunited at the moment to you? What do explain that by?
PUTIN: There are many problems in the world economy on the whole, and the economy in the West also has a lot of problems: an aging population, declining productivity growth rates -- these are obvious things. On the whole, such demographics are very difficult. Then, the experts -- and you are one of the best experts in this subject -- surely think that the EU’s expansion policy didn’t account for the readiness of this or that economy to join the euro zone, for example.
It’s very difficult to support growth rates and protect the economy itself from hardship after joining a single currency with fairly weak economic indicators. We in Europe weren’t the only ones to experience this. For example, take Argentina, where 10 years ago, or maybe more, they tightly pegged the national currency to the dollar and then didn’t know what do to. And that’s what entering the euro zone was like…
MICKLETHWAIT: Do you expect the euro to survive?
PUTIN: I hope so. I hope so because, first of all, we believe in the foundations of the European economy. We see that west European leaders in general -- there are disagreements of course, which is understandable, we see, observe, analyze -- but they stick to very pragmatic approaches to resolving economic issues. We can’t say whether they’re right or wrong. It depends on your perspective.
They don’t misuse financial instruments or liquidity. They primarily strive for structural changes. In fact, the same problems are no less acute in our economy, perhaps even more so. I’m referring to a problem that we can’t overcome, specifically the dominant role of the oil and gas sector in Russia and, as a result, our dependence on oil and gas revenue.
But in Europe, without dependence on oil and gas, they’ve also needed structural reforms for a long time. I think that the leading economies have taken a very pragmatic and intelligent approach to resolving the economic problems facing Europe. That’s why we hold about 40 percent of our gold and foreign currency reserves in euros.
MICKLETHWAIT: You expect the euro to survive and you expect Europe to keep the existing membership, they are not going to lose any more, they are not going to lose another country like they lost Britain?
PUTIN: You know, I don’t want to respond to your provocative question, even though I understand that it could be interesting.
MICKLETHWAIT: Come on, many, many times you’ve criticized Europe. You could take some…
PUTIN: I’ve been critical, but I’ll repeat: we hold 40 percent of our reserves in euros, and it’s not in our interest for the euro zone to collapse. Although I don’t rule out that there could be some decisions made that would consolidate a group of countries with equal levels of development and thereby, in my opinion, strengthening the euro. But there might be some other interim decisions in order to preserve the current number of euro-zone members.
It’s not really up to us, but we always very attentively monitor and wish our European partners success. What you said about criticism, I criticized their foreign policy, but that doesn’t mean that we should agree on everything. We have criticized many things and believe that our partners have made more than a few mistakes, as probably we have too. Nobody is safe from these mistakes, but in regards to the economy I’ll say it again: in my opinion, the European Commission and the leading economies of Europe are acting pragmatically and are on the right track.
MICKLETHWAIT: Can we talk about the Russian economy, then. You mentioned... Let’s maybe begin with the exchange rate. I know you will say that the exchange rate, a lot depends on the central bank and the exchange rate is set by the market. But I saw back in July, on July the 19th when the ruble was at 62.8 to the dollar you said the ruble was too strong, you criticized that. And the ruble has now come down to 65 to the dollar. Has it weakened enough to make you happy? Or do you want to see it weaken a bit further?
PUTIN: I didn’t criticize the central bank’s position. I really have always believed, and believe, that the central bank should act independently. In fact, that is how it acts, you can believe me. I don’t interfere with central bank decisions and I don’t issue any directives to the leadership of the central bank or the governor of the central bank. The central bank looks at what’s happening in the economy and, of course, I’m in contact with the governing members and the governor.
But I never give directives. And if I say that the ruble strengthened too much, I’m not saying that the central bank’s position is wrong. I’m saying that this is imposing an additional burden on the export-oriented parts of the economy. We are well aware that’s the case. When the ruble is weaker, it’s easier to sell. You can produce here with cheap rubles, and sell for expensive dollars and earn large revenues in dollars, and then convert them to rubles and make a big profit. These are basic things.
But if we talk about the fundamentals, then the issue of regulating the exchange rate is decided by the main regulator -- specifically, the central bank. Of course, it should consider how the economy and industry will react, but it should also consider its fundamental goals and provide a stable exchange rate.
The main issue is the exchange rate’s stability, and this, in one way or another, the central bank manages to ensure, despites all the nuances, and it was finally able to do so after the central bank switched to a floating exchange rate for the national currency. But the central bank should also consider other things. The stability of the country’s banking system, how the money supply is growing or contracting in the economy, and how that’s influencing inflation. There are many components that the central bank needs to consider, and it’s best not to interfere in its competencies.
MICKLETHWAIT: But do you personally, would you like to see the ruble be a little bit weaker still, would that help the Russian economy in your view? I know it’s not your job but you made a comment before. Where do you stand now?
PUTIN: You know, my position is that the rate should correspond to the level of the economy’s development. So there’s always a balance, a balance of interests, and this balance should be reflected. A balance between those who sell something overseas, who benefit from a weaker rate, and the interests of those who buy, who need a stronger rate. Balancing the interests of producers inside the country, for example agricultural producers, since 40 million Russian citizens are connected with our rural areas one way or another. This is very important.
But we also can’t forget about the interests of ordinary consumers, who need the prices in shops to be a little bit lower. So, I repeat, the rate shouldn’t be oriented toward a specific group or one or two groups. It should correspond to the fundamental interests of the development of the economy itself.
MICKLETHWAIT: So you are no longer complaining. So I will take it that you are not too unhappy where it is... What about reserves?
PUTIN: But I didn’t express dissatisfaction and didn’t complain. I simply pointed out that one group – exporters – would benefit from a weaker rate.
MICKLETHWAIT: On the question of reserves, you mentioned them earlier... Russia used to have $500 billion. You came down to 400. A lot better than when you came in, but down to 400. You have this target to go back up to $500 billion. What do you think is a realistic target to aim for and in your opinion should the central bank be buying more dollars in order to push it back up toward that $500 billion?
PUTIN: The central bank is constantly buying, buying and selling, buying and selling. That’s their job. I believe the gold and currency reserves have risen by 14 percent in the past half year.
MICKLETHWAIT: They’ve gone back up a little bit, but they haven’t been buying dollars in the same systematic way as they did once.
PUTIN: You and I know, about the necessary amount of central bank reserves, and the target is well known. But for the general public we can say that the point of the central bank’s gold and foreign currency reserves isn’t to finance the economy, but to guarantee foreign trade. And for that we need a level that’s sufficient to support foreign trade of a country the size of Russia for at least three months.
But we’re at a level that that can support our trade turnover for, at minimum, half a year or more, if everything stops working and we only use our gold and currency reserves. So that’s more than enough.
From the viewpoint of safeguarding stability of the economy and foreign trade, we absolutely have enough gold and foreign-currency reserves. And everything else -– the buying and selling of currency –- is related to the regulation of the domestic currency market. But how the central bank reacts to this, whether it will lead to an increase in the reserves, it’s so far difficult to say. Let’s not forget that we have two governmental reserve funds: the Reserve Fund itself and the National Wellbeing Fund. And together they make up about $100 billion.
MICKLETHWAIT: Can I ask you about the oil price - your favorite subject. Almost two years ago you said that if the crude oil fell below $80 a barrel there would be a collapse in oil production. Well, the price is still below $50 and production hasn’t stopped. Has your thinking changed on that at all?
PUTIN: Well, if I said that oil output would cease, then I was mistaken. I really don’t remember where I said that, probably in the heat of the moment. I don’t think I said that. But maybe I just don’t remember. I said that new deposits probably wouldn’t be commissioned at a certain oil price. Strictly speaking, that is what happened.
But perhaps even surprisingly, our oil and gas companies, mainly the oil companies, are continuing to invest. In the past year, the oil companies have invested 1.5 trillion rubles, and if you take the state’s investment in the pipeline network and electricity sector, then the overall investment in energy is 3.5 trillion rubles in the past year. That’s quite significant.
Our oil output and electricity production are increasing. Production has declined a little, I think by about 1 percent in... By the way, we are the world’s leader in terms of natural gas exports, with a global share of about 20 percent.
In the export of liquid hydrocarbons, we’re also among the leaders, we’ve been first in liquid hydrocarbon exports. Even though we’re still first in gas exports, our internal production has slipped a little, but this is due to an increase in hydropower output. Demand for gas from thermal power stations has dropped somewhat. That’s the result of the restructuring of the situation on our domestic energy market. On the whole, Gazprom is in great shape and is increasing exports to its traditional partner-countries.
MICKLETHWAIT: You’re going to talk to the Saudi Deputy Crown Prince at the G-20 Mohammed bin Salman. Would you still be in favor of a production freeze if the Saudis want that?
PUTIN: Mr. Salman, as far as I know, is the deputy crown prince, but that’s a detail. He is a very energetic statesman, and we really have struck up a friendly relationship. This is a man who knows what he wants and knows how to achieve his goals. But at the same time, I consider him a very reliable partner with whom you can reach agreements, and can be certain that those agreements will be honored.
But still, we weren’t the ones who rejected the idea of freezing output levels. It was our Saudi partners who at the last moment changed their view and decided to take a pause in taking this decision. But I want to repeat: our position hasn’t changed and if Prince Salman and I speak about this, then I shall, of course, put forward our position again.
We believe that this is the right decision for world energy. That’s the first thing. The second thing is that everyone knows what the dispute was about. The dispute was that if production were to be frozen, then everyone should do it, including Iran. But we understand that Iran is starting from a very low level, related to the well-known sanctions against this country. It would be unfair to leave it at this sanctioned level.
I think that from the viewpoint of economic sense and logic, then it would be correct to find some sort of compromise. I am confident that everyone understands that. The issue isn’t economic, it’s political. I would very much like to hope that every participant of this market that’s interested in maintaining stable and fair global energy prices will in the end make the necessary decision.
MICKLETHWAIT: So you would be in favor of a production freeze but giving Iran a little bit of leeway to do what they need to do?
MICKLETHWAIT: I just want to jump back. One effect of the oil price and of all these different things is on your budget. You have budget deficit, you have just given some more money which you mentioned earlier to pensioners. You will have to go and borrow money at some time. Are you likely to go this year? And will you go to the domestic market or will you go to the international market to borrow money?
PUTIN: There’s no need yet, we don’t need to borrow on international markets. Although, this is a traditional instrument of international finance, we always use it and we’re using it now. We have had sales and there have been enough people willing to buy our financial instruments. We simply don’t have the need today with the government’s reserve funds of about $100 billion. This is pointless, bearing in mind the cost of borrowing. You always need to look carefully. By the way, borrowing is also possible. You just have to understand what is more advantageous at the given moment. That’s the first thing.
Second, as far as the deficit goes, last year the federal budget deficit was 2.6 percent, which is a fairly acceptable level. This year we expect that it will be a little bit bigger, somewhere in the region of 3 percent, maybe three and a bit. This is also an acceptable size.
But what path have we chosen? We’ve chosen to take the path of optimizing budget spending. In these difficult conditions, we, in my view, have taken a very pragmatic approach to resolving the economic and social issues. We’re tackling the main social issues and are fulfilling our promises to the public.
Just recently the government announced we had indexed the pension by 4 percent, but won’t index it in the second half of the year, instead making a one-time payment at the start of next year. We’ll make a one-time payment of 5,000 rubles to every pensioner, which is basically commensurable.
We’re acting very pragmatically, very cautiously. We’re cutting expenses on those items that we don’t see as priorities and aren’t going to mindlessly throw away our reserves, or mindlessly burn through them for some political ambition. We’ll act very cautiously and, I hope, at any rate, that we’ll have no particular need to seek financing from overseas.
Note, our trade surplus fell, but remains positive. We had last year, I think for the first half of this year a trade surplus of $45 billion. Compared with last year, inflation has slowed considerably, significantly. If we look at August, we had inflation around 10 percent last year, and now it’s a bit above 3 percent. Unemployment remains at quite an acceptable level:
Our macroeconomic indicators are stable and this gives me grounds to think and hope that we shall calmly and confidently get through this difficult period for our economy, which certainly has already adapted to the current conditions.
MICKLETHWAIT: Can I ask you about privatization and oil again? The privatization of Bashneft -- you’ve delayed it. And now as we reported Igor Sechin of Rosneft has come forward and said he would like to buy half of it for $5 billion. But you have always said that you don’t want the big state companies to be buying the newly privatized ones. You wouldn’t allow that, would you?
PUTIN: You spoke just now of state companies. Rosneft, strictly speaking, isn’t a state company. Let’s not forget that
19.7 percent of it belongs to BP, which, by the way, is a British company. You’re a British subject, so you’re essentially, you’re also…
MICKLETHWAIT: I think you may have more control over Rosneft than Theresa May has over BP.
PUTIN: Yes, we may have more control, but, strictly speaking, it’s not a state company. I wanted to say that I think this is a clear fact: 19.7 percent belongs to a foreign investor, but nevertheless, given that the controlling stake belongs to the state, probably it’s not the best option when one company under state control acquires another purely state company. That’s one position.
The second, in the end, the important thing for the budget is who gives the most money in the sale that’s supposed to be organized as part of the privatization process. And in this sense, we can’t discriminate against market participants, not a single one of them. But it’s not relevant at the moment, as the government decided to delay Bashneft’s privatization.
MICKLETHWAIT: So that’s gone. But on the question of privatization, you said back in 2012 that you wanted to expand privatization. You’ve had a difficult time of it. Why has that not worked? Is there a case, why does the Russian government need to own 50 percent of these companies? Maybe you could sell more?
PUTIN: The Russian government has no need to hold such large stakes and we are committed to carrying out our plans. The question isn’t whether we want to or not, it’s whether it makes sense or not, and at what moment?
On the whole this makes sense from at least one point of view, from the standpoint of structural changes in the economy. The state really is perhaps too big in the Russian economy now. But in a falling market, even from the point of view of fiscal interests, it doesn’t always make sense, so we’re taking it carefully. But our trend, from the standpoint of privatization and the state’s gradual withdrawal from certain assets, is unchanged and will remain unchanged.
By the way, you mentioned Rosneft. We’re actively preparing to privatize part of our Rosneft stake. This is the best confirmation that we haven’t changed our fundamental plans.
For example, one of the world’s largest diamond producers is a Russian company, and we sold a stake in it.
PUTIN: Alrosa. We’re working the same way in other areas. So we aren’t changing our fundamental position. It’s just not a moment when we should, as we say, bustle about, that is, react nervously like we must do it immediately at any price. No, we’re not going to do that at any price. We should do it with the maximum effect for the Russian state, for the Russian economy.
MICKLETHWAIT: So you would do Rosneft this year? You would sell those shares in Rosneft this year you hope?
PUTIN: We’re preparing for this deal this year. I don’t know whether the government will be able to prepare and do this deal together with Rosneft’s management, whether appropriate strategic investors will be found. I think that we should be talking about precisely such investors, but we’re preparing and planning to do the deal this year.
MICKLETHWAIT: And do you, do you, again just to push you on that 50 percent, would you be happy in a world where the Russian state had less than 50 percent of these big companies?
PUTIN: We don’t see anything horrible in this. You know I remember that we had one company, I won’t name it now, but when foreign shareholders took 50 percent of it, foreign investors, the contributions to the federal budget, tax payments increased several times immediately and the company’s efficiency didn’t deteriorate at all. So from the viewpoint of the state’s interests, the end interests of the state, from the standpoint of its fiscal interests, we have a more positive than negative experience.
MICKLETHWAIT: Can I push you a bit on this? Because when I look on your record over all these years, in foreign policy you’ve been very aggressive, very decisive, very bold and everyone agree on that. On economic policy you seem a little more timid.
PUTIN: I won’t agree with that. I acted decisively but not aggressively, I acted in line with the circumstances that arose.
MICKLETHWAIT: So bold, decisive.
PUTIN: I acted in accordance with the circumstances.
MICKLETHWAIT: But on the economy by contrast you’ve been slightly more, you have been less decisive, in terms of pushing reforms through. If you look at countries like China and Vietnam, you know, they have changed their economies completely. Russia, as you’ve said, is still one dependent on oil, still dependent on a few companies, still run largely by the same people. Do you think that’s been a sort of failing throughout those years that you have not reformed enough?
PUTIN: No, I don’t think so. And moreover, we…. Look, we held a land reform. It was hard to imagine that this would be possible in Russia. Note that, unlike many countries in the world with a very developed market economy, our, say, oil sector, it is almost fully privatized. You just mentioned Rosneft and Bashneft, and the rest are private companies. And look what’s happening in this sector in Saudi Arabia, in Mexico, and in many other oil-producing countries. Why do you think Russia has made less progress toward these reforms?
Another thing is that with high oil prices it’s very hard to redirect economic players from industries where they get big profits, and to encourage them to invest money and resources in other areas. For this we need to implement a whole, pursue a whole set of measures. We are doing that gradually. Unfortunately, the effect may not be as significant as we would like it to be….
One moment, I’ll finish. A bit of patience. But still there’s a result.
So look, the year before last oil and gas revenue accounted for 53 percent of budget revenue, this is the year before last, in 2014, and in 2015 it was 43 percent, and this year it will be about 36 percent. So, structural changes are also taking place, and it’s not only about the price, but also about the distribution, about economic growth, about the expansion of certain industries. Say for example, we’re seeing industrial production growth across the country at 0.3 percent. Not much, but it’s something. But, say, in the Far East, where we are now, industrial production growth -- industrial, specifically -- is
MICKLETHWAIT: Let me give you an example. You’ve recently made changes on the political side within your administration. If I look at the business, if I look at a company like Gazprom, for instance, I just checked in dollar terms, Gazprom is worth less than a fifth of what it was ten years ago, and it’s fallen from being in top-10 companies in the world to the 198th. And you’ve had the same manager, running it for 15 years - Alexey Miller -you’ve now given him another 5-year contract. What I’m saying, you’re not as tough on business people who are running the oil side as you might be on other people. Why have you put up with this? You’re famously efficient man.
PUTIN: Listen, Gazprom is clearly undervalued. This is an absolutely obvious fact. We have no plan to sell it yet. And this is because of the peculiarities of the Russian economy, the social sphere and Russian energy industry. One of Gazprom’s functions is to ensure the country gets through the peak periods of autumn and winter, to supply Russia’s big power companies. And it fulfils this function.
I think Gazprom’s valuations today are quite speculative. This absolutely doesn’t worry us or bother us. We know what Gazprom is, what it’s worth and what it will be worth in the coming years, despite, for example, the development of shale gas in the United States or in other regions of the world. Pipeline gas will always be cheaper. And Gazprom is increasing its exports to traditional partner countries, to Europe. Look at Gazprom’s reports, especially for the past few months –- sales are rising.
I’m certain this will be the case in the future. Why? Because in the near future, despite the development of alternative energy, when you look at the economics and environmental standards, then there’s no other source of primary energy in the world than natural gas. Well, perhaps there is nuclear energy but there are also a lot of issues there and there are opponents of nuclear energy. Gas doesn’t have those opponents. But there is a country that is, obviously, the world leader in gas reserves. That’s our country, the Russian Federation.
And Gazprom carries out all the functions that it has been assigned, that management has been assigned. Of course, there are issues and there are problems. We see them. I know that Gazprom’s management is taking the necessary steps to resolve these issues and that it fights for its interests on world markets. Whether it does that well or poorly? That’s another question.
Many criticize it, they say that it needed to be more flexible, that it should have switched to a floating price depending on the current state of the economy, but the gas business is very specific. It’s not even like trading oil. It’s a separate business that’s linked to big investments in output and transportation, and this means that production structures must be sure that they can sell at a certain price.
You can of course agree with partners on some kind of floating limits depending on certain conditions. I think this could also be the subject of negotiations. But, if, for example, our European partners want to guarantee their competitiveness on world markets, they should themselves ultimately be interested in long-term contracts with Gazprom.
Look, when prices were high, how many complaints were made against Gazprom about how it needed to do something to lower the upper plank of prices a bit? Now oil prices have fallen, but gas prices are tied to oil and for some reason no one is raising the question about whether gas prices need to be raised. Everyone is fine with it. There are natural contradictions between sellers and buyers, but there are some frameworks within which they can agree to minimize their risks. But, probably, they can talk about this.
MICKLETHWAIT: But all the same, I know you’re a generous man, but if you had a general who had lost 80 percent of his army, you might not keep him as a general. Gazprom still has the export monopoly, you wouldn’t think of taking it away from them, given that performance, because it is worse than other gas companies.
PUTIN: Listen, that’s a different story. If we were talking about a general, then the general in this case has lost nothing, he’s sent troops into reserves, which can be called back at any moment and put to use.
MICKLETHWAIT: The G-20. This will be one of the last times you will see Barack Obama. And as you well know, there is an American election underway, and as you well know, there is a choice in that between Hillary Clinton and Donald Trump. Who would you rather have at the other end of the telephone if there is a geopolitical situation - Donald Trump or Hillary Clinton? Do you have a feeling at all?
PUTIN: I would like to work with a person who can make responsible decisions and implement any agreements that we reach. Their last name doesn’t matter. Of course, it’s necessary for that person to enjoy the trust of the American people, so that they won’t just have the desire but also the reinforced political will to fulfill all those agreements. That’s why we never interfered, don’t intervene and try not to intervene in domestic political processes. We’ll closely monitor what happens and wait for the election results. And then we’ll be ready to work with any administration if the administration itself wants that.
MICKLETHWAIT: Can I just push you on that? Back in 2011, you accused Hillary Clinton of seeking to trigger the protests that you were facing in Russia at the time. And by contrast, when I look at some of things that Donald Trump has said about you… Back in 2007, he said Putin is doing a great job, in 2011 he praised your no-nonsense way, the next year he said you were his new best friend, next year he said you’re outsmarting the Americans, he said you have good ratings together ...
I could go on and on like that. And you are really telling me that if you have a choice between a woman, who you think may have been trying to get rid of you, and a man, who seems to have this great sort of affection for you, almost sort of bordering on the homoerotic, you are really going to go for, you are not going to make a decision between those two, because one of them would seem to be a lot more favorable towards you?
PUTIN: You know, I essentially already answered your question. I’ll reformulate it again, say it in different words. We are ready to work with any president, but, of course -- I also said this -- to the extent that the future administration is ready. If someone says that they want to work with Russia, we’ll welcome it. And if someone, as you said -- although it may be an inaccurate translation -- wants to get rid of us, that will be a completely different approach. But we will survive it, and it’s not clear who has more to lose with that approach.
But the thing is, I’ve repeatedly seen the anti-Russian card played during domestic political campaigns in the States. I think that it’s a very short-sighted approach. At the same time, they send us all sorts of signals from all sides that actually things are just fine. With previous administrations, that’s the way it was during the campaign. That we’ll restore everything later. You know, it seems to me that it doesn’t fully meet the level of responsibility that lies on the shoulders of the U.S. I think that all this should be more dignified, calm and more balanced.
As for the fact that someone is criticizing us, you know, criticism is leveled at us by Mr. Trump’s team as well. For example, one of the members of his team said that we paid, that Russia allegedly paid money to the Clinton family via some foundations. What’s that? Does that mean that we control the Clinton family? It’s complete nonsense, I don’t even know where Bill spoke and through which funds. So both one side and the other are using it as a tool, using it as a tool in a domestic political struggle, and that’s bad in my opinion. But, obviously, when someone says that they want to work with Russia, we’ll welcome it. Regardless of that person’s surname.
MICKLETHWAIT: Very quickly: the other accusation you’ve faced -- or that they’ve said a lot -- is that people connected with Russia or backed by Russia were the people who hacked into the Democratic Party’s database. Is that, you would also say that is completely untrue?
PUTIN: No, I don’t know anything about that. You know how many hackers there are today and they act so delicately and precisely that they can leave their mark at the necessary time and place or even not their own mark, camouflaging their activity as that of some other hackers from other territories or countries. It’s an extremely difficult thing to check, if it’s even possible to check. At any rate, we definitely don’t do this at the state level.
And then, listen, does it even matter who hacked this data from the campaign headquarters of Mrs. Clinton? Is that really important? The important thing is the content that was given to the public. There should be a discussion about this, and there’s no need to distract the public’s attention from the essence of the problem by raising some side issues connected with the search for who did it.
But I want to tell you again, I don’t know anything about it, and on a state level Russia has never done this. And to be honest, I couldn’t even imagine that this sort of information is interesting to American society -- specifically that the campaign headquarters worked in the interests of one of the candidates, in this case Mrs. Clinton, rather than equally for all of the Democratic Party candidates. It would simply not even occur to me that this could be interesting to anyone. So even from this point of view, we couldn’t have officially penetrated it.
You understand, to do that you need to have a finger on the pulse and understand the specifics of domestic political life in the U.S. I’m not sure that even our Foreign Ministry experts are sensitive enough.
MICKLETHWAIT: Do you not think, this is sort of time when everyone should sort of come clean about it? You know, Russia tries to hack America, America tries to hack Russia, China tries to hack America, China tries to hack Russia. Everyone tries to hack each other. That one of the purposes of the G-20 is to come up with a new set of rules so this can become a more ordered version of foreign policy when everybody is doing it. Allegedly.
PUTIN: I think that it would be better for the G-20 not to get involved as there are other venues for this. The G-20 was formed as a platform to discuss issues mainly concerning the global economy.
If we are going to add to that -- of course politics influence the economic process, that’s a clear fact -- but if we add some squabbles or not squabbles but very serious issues that relate purely to world politics, then we’ll overwhelm the G-20’s agenda. And then instead of working on the issues of finance, structural changes to the economy, taxation and so on, in place of that, we’ll endlessly argue about Syria’s problems or some other world problems -- and there are plenty -– then we’ll talk about the Middle East. It’s better to find other venues and other forums and there are plenty. The UN Security Council, for example.
MICKLETHWAIT: Can I ask you one last question on Donald Trump. Some people say that he is toо volatile to be an American president. You would be happy with him as American president in the same way as you would be happy with Hillary Clinton in that role.
PUTIN: You know, we can’t answer for the American people. After all, with all the shock tactics of not only one but the other candidate, they are both busy using shock tactics, just each in their own way.
They are smart, they are very smart people. They understand which buttons they need to press a bit so that the voters of the United States understand, feel and listen to them. Trump is focusing on the traditional Republican electorate, the average man, people with average incomes, the working class, a select group of business people, and people who support traditional values. Mrs. Clinton is focusing on a different part of the electorate and is trying to influence them in her own way. So that’s why they attack each other. In some cases, I wouldn’t want us to follow their lead. I don’t think they are setting the best example.
But that’s the U.S. political culture. You have to just accept it as it is. America is a powerful country and it has earned the right that nobody from the outside can interfere with it or comment on it. To answer your question for a third time, we will work with any administration, with any president who will win the support of the American people, if of course they are ready to cooperate with Russia.
MICKLETHWAIT: Let me ask you about another country. Another person you’re going to meet at the G-20: Theresa May. Britain has ended up in the same situation as Russia, it is in Europe, but not, likely not to be in European Union. Will you approach them with a free-trade deal?
PUTIN: Look, to finish my answer to the previous question: You’ve been working in journalism for many years, you’re very well-informed and you understand all the threats linked to the deterioration of the international situation, right? Especially between the biggest nuclear powers. We all understand that. Of course, it’s you interviewing me, and not vice versa. But I’ll allow myself to ask you. Do you want to see an escalation to the level of the Cuban Missile Crisis? No?
MICKLETHWAIT: No, nobody does.
PUTIN: No, of course not, no one wants that.
MICKLETHWAIT: But that is one reason why I asked about Donald Trump because he is seen as a more unpredictable force than Hillary Clinton.
PUTIN: You surely would also want for Russia to have good relations with the U.K. and the U.S. Am I right? And I also want that. And if someone in the U.S. says “I want to establish good relations with Russia,” then we need to welcome that -- you and I, and people like me and people like you. And what’s going to happen in reality, what’s going to happen after the elections, we don’t know yet. And that’s why I’m saying that we will work with any president that the American people elect.
As for the U.K., we have a meeting scheduled with the prime minister in China on the sidelines of the G-20. We’ve spoken by phone. Unfortunately, relations between Russia and the U.K. haven’t been the best lately, but that’s not our fault, we didn’t scale back our relations with the U.K. It was the U.K. that decided to freeze our mutual contacts in many areas. If the British side thinks that there’s a need for dialogue in some areas, then we’re ready, we aren’t going to pout or be mad at someone, we’re very pragmatic about cooperation with our partners, and see it as beneficial for our two countries.
We’ve talked about our biggest oil company, Rosneft. And I’ve already mentioned at the beginning that about 20 percent of it, 19.7 percent, belongs to BP -- whose company is that? British Petroleum, right? Perhaps, that’s already not bad. I must say that British Petroleum’s capitalization is meaningfully tied to the fact that it owns more than 19 percent of Rosneft, which has large reserves in Russia and abroad. That has an effect on the company’s stability. BP landed in a tough situation after the well-known tragic events in the Gulf of Mexico, and we did everything to support it. Is Britain not interested in that? I think it is.
And the same goes for other areas. Right now we’re celebrating the anniversary of the Arctic Convoys. Do you know about that, yes? We really -- and I’m not saying this to sound good -- we see the veterans of the Arctic Convoys as heroes. They were heroes indeed. We know in what conditions they fought, in the most challenging ones. They faced death every time for the sake of our common victory. And we remember that.
MICKLETHWAIT: Do you think Britain might be more compliant or more likely to do a deal with Russia now it is outside or going to leave the European Union?
PUTIN: The U.K. is leaving and has practically left the European Union, but it hasn’t exited its special relationship with the U.S. I think the U.K.’s relations with Russia depend not on its presence or absence from the EU, but on its special relationship with the U.S. If it conducts a more independent foreign policy, then, perhaps, it would be possible to achieve. If Britain will be guided by a commitment to its allies and will think that this is of greater national interest than cooperation with Russia, then let it be that way.
It’s not our choice at the end of the day. It’s the choice of our British partners. It’s a choice of priorities. But in any case, we understand that in light of relations with the U.S., Britain in its relations with Russia will need to take into consideration the opinion of its key partner, the U.S. We see this reality as a given. But I’ll repeat that as far as the U.K., will be ready to go in its renewal of the partnership with us, that’s how far we’ll be ready to go as well. This doesn’t depend on us.
MICKLETHWAIT: Can I ask you about one last person in the G-20: President Erdogan. You didn’t protest that much when Turkish tanks rolled across the Syrian border the other day. You know, why? Do you think Turkey has now moved closer to your idea that the future of Syria has to involve President Assad staying in some way or have you changed your mind about President Erdogan. Only a little bit ago you were complaining that you had been stabbed in the back and you had the problems to do with the jet being shot down. Has something changed in Turkey in terms of what you can see?
PUTIN: First off, we’re operating on the basis that Turkey apologized for the incident that took place and for the death of our people. It did it directly, without any reservations, and we value that. President Erdogan took this step. We see a clear interest on the part of Turkey’s president in restoring full-scale relations with Russia.
We have many common interests in the Black Sea region and more globally, and in the Middle East. We very much expect that we’ll be able to establish a constructive dialogue. We have many big projects, including Turkish Stream in the energy sector. And I think that ultimately we’ll complete it, at least the first part relating to expanding transport capacity and boosting deliveries to the domestic Turkish market. There will be the possibility of transit to European partners, again, if they want it and if the European Commission supports it.
We have a large project to build a nuclear power station on unique terms. They consist of several elements: We will finance, own and operate it. This uniqueness gives us reason to believe that the project is realistic, taking into account the agreements on its economic terms, which are based on the price of a kilowatt hour of energy. This will be an economically beneficial project for both sides.
In addition to everything else, as I already said, we have a mutual desire to come to an agreement about the region’s problems, including the Syrian one. I continue to believe that nothing can be decided externally about the political regime or a change of power. When I hear someone saying that some president must go, not domestically but externally, it raises major questions for me.
I am simply sure and I get this confidence from the events of the last decade, specifically the attempts at democratizing Iraq and attempts at democratizing Libya. We see that in fact led to the collapse of statehood and the growth of terrorism. Where do you see elements of democracy in Libya? Maybe they will emerge eventually, I very much count on it. Or the continuing civil war in Iraq. And what will happen in general with Iraq in the future? So far these are big questions.
It’s the same with Syria. When we hear that Assad should go, for some reason someone peripheral thinks so, I have a big question: what will it lead to, will it be in line with international legal standards and what will it lead to? Wouldn’t it be better to be patient and facilitate changes to the structure of the society itself, to muster this patience, allowing changes to the structure of the society, waiting for when these changes happen naturally within the country? Of course it won’t happen today or tomorrow. Maybe that’s what political wisdom is, not rushing or getting ahead of yourself, but gradually working toward structural change. In this case, within the society’s political system.
In regards to Turkey’s actions: We are in contact with our Turkish partners, and we consider everything that violates international law to be unacceptable. But we are in contact on a political level and at the level of the Defense Ministry and Foreign Ministry. And I’m sure that at the meeting with Turkey’s president, Mr. Erdogan, in China we’ll also discuss this.
MICKLETHWAIT: Very quickly on Syria. Are we any closer to having a Russian-American deal about how, a plan for what to happen with Syria. You’ve had talks recently. It seems that you’ve got a little bit closer, but is there any progress on that? And do you think we’re closer to that than we have been?
PUTIN: You know, the talks are very difficult. One of the key problems is that we insist, and our U.S. partners are not opposed to this, that the so-called healthy part of the opposition should be separated from the radical groups and terrorist organizations such as Jabhat al-Nusra, while we get the impression that Jabhat al-Nusra and the like are hiding under other names, they already call themselves differently, but in fact nothing is actually changing -- they are starting to absorb the so-called healthy part of opposition and there is nothing good in this.
Besides, this is not an element of the internal conflict; these are foreign fighters, who get arms and ammunition from abroad. And in essence our American partners agree with this, but they don’t know what to do about it. Nevertheless, despite all these difficulties, we’re on the right track and I have to mention that Secretary of State Kerry has certainly done colossal work. I’m surprised by both his patience and determination.
But nevertheless, in my opinion, we’re gradually, gradually heading in the right direction, and I don’t rule out that we’ll be able to agree on something in the near future and present our agreements to the international community. It’s too early to talk about this, but I think, as I said, we’re working in the right direction.
MICKLETHWAIT: If you look back over all the time you’ve been president, you could argue the relationship with the West has had all these problems to do with trust… And we can go through each of the individual conflicts. But when you look back over that period in the way that relationship with the West has not always worked, do you think there are things looking back you would have done differently if you would had known about it?
PUTIN: No, I wouldn’t do anything differently. I think that our partners should have done a lot of things differently. When the Soviet Union ceased to exist, a new Russia emerged; we just opened our arms to our partners in the West. Remember at least what it cost us, the gesture to reveal our bugging systems at the American Embassy in Moscow. Nobody has done anything similar to that, do you think that CIA has no bugging devices somewhere with us? Of course, they have. Moreover, they’ve intensified their work.
We, for example, halted flights of our strategic aviation along U.S. borders. We didn’t make any flights for a decade. But the U.S. didn’t stop, they’ve kept flying. Why? We’ve said that we were ready to create new European security systems involving the United States. Instead, the process of NATO expansion closer to our borders began. One stage, and then a second.
We spoke about the need to solve problems connected with missile defense systems together and to keep or modernize the anti-missile treaty. The United States unilaterally withdrew from the ABM treaty and pursued the intensive development of a strategic anti-missile system, precisely strategic systems, as part of their strategic nuclear forces. They have been deployed on the periphery, and construction work was started on missile-defense facilities in Romania and then Poland. At the time, initially, you remember that this was done citing the Iranian nuclear threat. Then Iran signed the agreement, the United States among others ratified it, and there’s no threat, but the missile-defense facilities are still being built.
The question is against whom? They told us then that it’s not against you. We responded, “then we’ll improve our own strike systems.” We were told –- “do what you want, but we’ll think that it’s not against us.”
We are doing this and we now see that when something starts to get going for us our partners start becoming worried. They think what’s going on there? Why was there such a response? Because no one thought, probably, that we were capable of doing it.
We started from the early 2000s against the backdrop of the complete collapse of Russia’s defense complex, against the backdrop, to put it mildly, of our Armed Forces’ low military capabilities, and it crossed no one’s mind that we would be able to restore the Armed Forces’ military potential and resurrect the military-industrial complex. We had observers from the United States, you know about this, who sat in our nuclear weapons factories; they sat right in the factories. That was the level of trust. Then the steps followed: first, second, third and fourth.
Well, should we respond to this somehow? And we’re told all the time: this isn’t your business, this doesn’t concern you, and it’s not against you. And that’s not even mentioning the sensitive period of our history, of the difficult times in the Caucasus, in the Chechen Republic. You’re a journalist, you know how the West’s political establishment reacted. And the press. Would you call that support for the lawful Russian authorities and bolstering the statehood? No, absolutely the opposite. It was support for separatism and, in essence, terrorism, because no one wanted to hear that al-Qaeda was fighting on the side of the militants and separatists. We were told not to worry, ‘we’re just thinking about the development of democracy in your country.’ Thanks so much for that concern.
But nevertheless we’re favorably disposed, we understand the logic of the political and geopolitical struggle. We’re ready for cooperation if our partners are ready for such cooperation.
MICKLETHWAIT: If I had to look at the West and to sum up where they think, their side of the argument would be, that they, I think, at the root of their distrust is the idea that they think that you want to expand Russia’s zone of influence, in some cases geographically, but at the very least to control the countries on your border. And at the moment, the main area of nervousness on that is the Baltics -- Estonia, Lithuania, Latvia. Would you be able to… You talked about the trust… Would you be able to say something that would give them reassurance on that count?
PUTIN: I think all sober-minded people who really are involved in politics understand that the idea of a Russian threat to, for example, the Baltics is complete madness. Are we really about to fight NATO? How many people live in NATO countries? About 600 million, correct? There are 146 million in Russia. Yes, we’re the biggest nuclear power. But do you really think that we’re about to conquer the Baltics using nuclear weapons? What is this madness? That’s the first point, but by no means the main point.
The main point is something completely different. We have a very rich political experience, which consists of our being deeply convinced that you cannot do anything against the will of the people. Nothing against the will of the people can be done. And some of our partners don’t appear to understand this. When they remember Crimea, they try not to notice the will of the people living in Crimea -- where 70 percent of them are ethnic Russians and the rest speak Russian as if it’s their native language -- was to join Russia. They simply try not to see this.
In one place, Kosovo, you can use the will of the people, but not here. This is all a political game. So, to give reassurances, I can say the Russia has pursued and plans to pursue an absolutely peaceful foreign policy, directed toward cooperation.
As far as expanding our zone of influence is concerned: it took me nine hours to fly to Vladivostok from Moscow. This is a little less than from Moscow to New York, through all of Western Europe and the Atlantic Ocean. Do you think we need to expand something?
The question is not at all about territory. And in terms of influence, yes, we would like Russia’s influence to be more noticeable, more significant, but we are putting absolutely peaceful and positive content into this: economic influence, humanitarian influence, the influence derived from developing equal cooperation with our neighbors. And this is what our foreign policy is aimed at. And no one should doubt this.
MICKLETHWAIT: Just to use one example on the issue. You mentioned Crimea, you mentioned what happened then and back then in terms of the reassurances you might give is, back then, on March 4th 2014, we just checked -- three times our reporter asked you what is happening inside the Crimea, did you know anything about the Russian troops, which were taking over the Ukrainian government. And you said no, you knew nothing about that, nor the military bases. Then a year later you talked about directing the operation to bring Crimea home yourself. Do you accept that sometimes you could maybe have said things in a much clearer way when they are actually happening?
PUTIN: Of course, I have already commented on these things on many occasions. There is nothing simpler than that, I have already spoken about it. Yes, our servicemen guaranteed safe voting in the referendum. If we had not done this, then we would have been confronted with a worse tragedy than the burning alive of people in the Trade Union house in Odessa, when nationalists surrounded defenseless, unarmed people and burned them alive. This would have been widespread in Crimea. We didn’t allow this to happen.
That people came themselves to the polling stations and voted is a fact. No one would have gone to the polling stations under the barrel of a gun. It’s so obvious that you can’t argue with it. Go to Crimea yourself now, take a walk and everything will become clear. And that’s the end of the matter. So yes, our troops were in Crimea. We didn’t even exceed the numbers of our units that were there in accordance with our agreements with Ukraine. But that’s not the most important thing.
The most important thing is that the Crimean parliament voted for the referendum, and then for independence, and they were elected two years previously under Ukrainian law. In other words, this was an entirely legitimate body representing the people living in the Crimea. That’s the first position. And the second is that the element of international law.
During the decision on Kosovo, a UN international court made a ruling, and all the western partners applauded this ruling. And the ruling was that decision of the central authorities of one or another state isn’t needed when determining issues of independence. And that’s that. So we acted entirely in accordance with international law, the United Nations charter and on the basis of democratic principles. And this, above all, is nothing more than an expression of the people’s will.
MICKLETHWAIT: One last set of questions about your legacy or your current achievements. The future: Have you yet decided if you will run in the presidential elections of 2018?
PUTIN: We are now on the brink of parliamentary elections. We need to hold these elections, to see the results. But after that, there will be almost another two years. So it’s far too early to speak about this. In the modern, rapidly changing world it’s simply harmful to talk about this. We need to work, to make sure the plans and tasks we set ourselves are completed. We need to raise people’s quality of life, develop the economy, the social sphere, and increase the country’s defense capabilities. Depending on the resolutions to these tasks, we’ll see how to organize the presidential election campaign in 2018 and who should take part. I haven’t yet made a decision for myself.
MICKLETHWAIT: Do you think Russia is getting easier to run or harder?
PUTIN: Easier than when? Compared with Ivan the Terrible’s time, Nicholas II’s, Brezhnev’s, Khrushchev’s?
MICKLETHWAIT: In your time.
PUTIN: I think it’s more complicated because, despite all the criticism of our western partners, our domestic democratic process is developing. Significantly more parties are going to take part in these elections than in previous years, and this will obviously leave its mark on the course and result of the campaign. There is a practical dimension. We now see that the rating of our leading political force -- the United Russia party -- slid a little. And many people are asking: What’s up? What’s going on? What’s happened?
Clearly, it’s the start of an active election campaign. And the large number of parties that are now taking part in the election process, they are all on the television screens, in the media and the papers. And what do they have to offer? They all criticize the authorities. They, meanwhile, don’t say how to make things better and even say such things that even a person who has superficial understanding would find barely realistic and sometimes totally unfeasible. But then they look great on the television, they criticize and pour scorn on the representatives of the ruling party. But they don’t say if they are ready to take responsibility for taking some not very popular but ultimately necessary decisions.
MICKLETHWAIT: Are you envious of the Chinese who don’t have to go through these elections?
PUTIN: There is a different political system in China, and it’s a different country. I don’t think you’d like to see 1.5 billion people sense some sort of a disorder in their society and in their government. So let’s give the Chinese the right and the possibility to decide how to organize their country and their society. Russia is a different country. We have different processes, a political system that’s at a different level of development. It’s a different quality - it’s not about the level per se - it’s about the quality of the political system. But it’s developing and it’s becoming more complex. In fact, that only makes me happy, and I’d like for the system to become stronger so that we have a balance in our political system that would allow it to be always in an effective state and aimed at development.
MICKLETHWAIT: Do you have an exit strategy? In 2018 you will have been the longest-serving president since the war. You will have been longer than, about the same as Brezhnev. Do you have an idea about how eventually you will leave power?
PUTIN: I can either participate in the elections or not. If I don’t participate, then there will be another head of state elected, another president, and the citizens will decide how to cast their vote. In any case, and I want to draw your attention to this, in any case we already need to start thinking about how we -- and when I say “we” I mean myself, the members of my team, the government, the presidential administration -- how we see the future development of the country. Both the political and the economic processes - that’s why we’re already working on the economic development strategy and, most importantly, the economy after the year 2018.
And regardless of how the internal political process develops, I’m sure that we’ll have to offer our vision to the country. The role of the future president, and the future government, is to agree or disagree with that vision, to adjust it, or to propose something completely different.
MICKLETHWAIT: You’ve just reorganized part of your government. You’ve promoted some people, some former bodyguards and people like that. Do you think that might be the sort of area where the next leader from Russia will come? Will it come from this younger generation of people who are beginning to emerge?
PUTIN: Yes, of course, I think the future leader has to be a fairly young person.
MICKLETHWAIT: A young man like Alexey Dyumin or someone like that?
PUTIN: But also a mature person. As for members of various special forces and the military - this is nothing new, this is not the first time that we have members of the Defense Ministry and the Federal Security Service being promoted to a regional administration. The Federal Guard Service shouldn’t be an exception, why are they any worse?
The most important thing is that the right person wants to grow, is capable of growing and wants to serve the country in a line of work with wider powers and more responsibility. And if he wants it, and I can see that the person has potential, then why not let him work? And then after all representatives of regional governments will also have to participate in elections and let the region’s citizens judge their proposals, get to know their programs, them personally. There must be a certain chemistry between the head of the region and the people who live there. The people must have a feel for what kind of person their potential future leader is, and if they vote for him, for me that means that they trust him.
MICKLETHWAIT: You just referred to the system surviving after you. People might say there were two ways in which Russia is very difficult to rule. One is it is a very personal system at the moment. Many people vote for you rather than for a party. And the other reason is Russian is still a fairly, you know, lawless place. You still have difficulties in Chechnya, you have things like murder of Boris Nemtsov which I know you’ve condemned and you have brought people in, but the people, whatever, mastermind is still being sought. Is Russia a very, very hard place to govern at the moment?
PUTIN: Any country is hard to govern, believe me. Do you think the U.S. is easy to govern? Is it easy to solve what would seem to be simple tasks, such as, say, Guantanamo? President Obama said in his first term that he would close Guantanamo, but it’s still open. Doesn’t he want to close it? Of course he does, I’m certain that he wants to. But a thousand things come up that don’t let him completely settle the matter.
Speaking of which, that’s actually bad, but that’s another topic. Any country is hard to govern, even a very small country. It’s not a question of whether the country is large or small. It’s a question of how you relate to the work, to what extent you feel responsible for it.
Russia is also hard to govern. Russia is at the development stage of both its political system and the creation of a market-based economy. It’s a complicated process, but very interesting. Russia, actually, is not just a large country, it’s a great country. I mean its traditions, and its cultural particularities.
Yes, there are particularities and traditions in the political sphere. Why hide it? We all well know that we had an absolute monarchy, and then almost immediately the Communist period began. The base broadened a bit, but to a certain degree, the country’s leadership became even harsher. It was only in the 1990s that we moved toward building a completely different system of domestic politics, a multiparty system, and that’s also a difficult, ambiguous process.
You can’t skip over steps of it. You need the public to get used to it, so that they felt their own responsibility when going to vote. So that they don’t put their faith in populist decisions or reasoning, or one group of candidates that’s just bashing another group. The public needs to carefully analyze what’s being proposed by the candidates. That goes for elections to parliament, and it goes for presidential elections.
By the way, in places where it’s a clear presidential system of government, people generally tend to vote not so much for the party as for the president’s candidate. It’s like that almost everywhere. So there’s nothing unusual in this sense about our country’s situation.
MICKLETHWAIT: Surely if you look at Chechnya and, say, the influence of someone like Ramzan Kadyrov. He has a very full rein, it does not seem as if he is brought under power much. That is completely different to what would happen, say in Mississippi or Tennessee. That is a different system, what is happening in Chechnya. Surely that is different. It is more lawless and it is more personal.
PUTIN: You know, that depends on how you look at it. We shouldn’t forget what things were like there not long ago. People were bought and sold openly at markets, representatives of international terrorist organizations were in charge, including al-Qaeda. People were beheaded. Do you think we’ve forgotten all that? No.
The head of Chechnya now, Ramzan Kadyrov, was armed and fighting against federal forces in the so-called First Chechen War. That’s a very complicated and big transformation. When his father, at first, the first president of Chechnya, and then he himself came to the conclusion that Chechnya’s future was tied with Russia, they didn’t do that under coercion. They did that based on their internal convictions.
I remember extremely well my first conversations with Ramzan Kadyrov’s father, with the first president of Chechnya. He said to me directly - I was prime minister at the time in 1999 - he said that we see - we see - that the future of Chechnya can’t be separated from Russia, otherwise we would fall under the way of other powers of the world, and there we’d be worse off.
But most important, and I’d also remember this very well, was that you didn’t betray us. It was a very complicated situation then. The federal government wasn’t acting consistently. It attacked, then retreated. It agreed with someone and then ripped up the agreements. The Chechen people needed a consistent, clear position from the federal authorities.
And don’t forget the transformations that those people have undergone. We signed an agreement with Chechnya. That document is entirely in line with the constitution of the Russian Federation. We have a federal state, and the members of the federation are endowed with certain rights. As we see in Chechnya, for example, that doesn’t destroy and it doesn’t damage the country, but rather unites it.
Sure, probably there’s a lot that still needs to be improved, a lot needs the difficult events of the mid-1990s to be finally forgotten, healed. That all takes time, and I’m certain that we will strengthen our domestic political structure and economy. I have absolutely no doubt about that. I think Russia has already turned the toughest pages in its history. We’re only moving forward now, only get stronger.
MICKLETHWAIT: Can I ask you a personal thing? You’ve managed to rule Russia for 16 years. If you look at the chief executives and the business people who tune in to Bloomberg and watch it, very few of them last longer than 5 years-6 years, what advice would you give them to hang on to their jobs for longer?
PUTIN: As strange as this may sound, you shouldn’t cling to it, you shouldn’t try to remain in your position at any cost. After all I wasn’t, as you said, here for 16 years. I was president of the Russian Federation for eight years, and then, not violating the constitution, not changing it for myself, I simply didn’t run for a third term, which was impossible under the constitution.
Our constitution says: we can run for two consecutive terms. That’s what I did. I was elected to two terms, and then I simply left for a different job. I worked for four years as the prime minister. According to the constitution I had the right again after four years, and I ran again for the presidency. And I was elected, and I’m working now. So it’s not 16 years. It’s four and four - eight, and now four. I’ve worked as president for 12 years.
MICKLETHWAIT: What is the reason for your success?
PUTIN: As for the length - one of the Canadian prime ministers, I think, was in power for 16 years. The German chancellor - how long has she been in power? If we’re talking about the top job in the executive branch.
MICKLETHWAIT: Not 16 years. You have done longer than most.
PUTIN: And I haven’t been for 16 years, I’ve been for 12. For her, I think, it’s not less. And that’s not the main thing. I don’t know how there could be secrets here. I have always tried to sense the mood of the people, their needs, their attitude toward ways to solve problems, their priorities. That’s mainly what I go by. And I think that’s the most important thing in any person’s work, in the work that the people of Russia entrusted in me.
MICKLETHWAIT: You look around the world at the moment and there are so many countries that have become dynasties - the Clintons, the Bushes in America. You have, as you say, on your southern fringe a lot of people. You have children whom you have very successfully kept out of the public eye. Would you ever want your daughters to go into politics? Would you want them to have the same life as you?
PUTIN: I don’t think I have the right to wish something for them. They’re young, but already adults, they should determine their futures themselves. On the whole, to the extent I see it, they’ve already made those choices. They’re doing science and some other things that are absolutely noble and needed by people. They feel needed, they get joy from their work, and that makes me very happy. They are responsible and honest about the profession they have chosen for themselves.
MICKLETHWAIT: When I flew here on Korean Airlines I had a choice of two films to watch: one was Doctor Zhivago, and the other was the Godfather. Which would you recommend to somebody trying to understand Russia?
PUTIN: You know, we have a well-known phrase. “Russia cannot be understood with the mind alone. No ordinary yardstick can span her greatness: She stands alone, unique. In Russia, one can only believe.”
Russian culture is multifaceted and diverse. So if you want to understand, to feel Russia, then of course you need to read books, Tolstoy and Chekhov and Gogol and others. Listen to music. Tchaikovsky. Watch our classical ballet.
But the most important thing is that you need to talk with people. Believe me, when you start to meet with ordinary people you understand that a Russian person, really any person from Russia, a Tatar, a Mordvin, a Chechen, a Dagestani, they are very open people, even a little naive. But there’s one defining trait that probably all peoples have, although it comes out especially strongly in us. That’s a drive toward fairness. It’s one of the dominating, I think, traits in the mentality of a person from Russia, a Russian person. It is the drive toward something - and of course I’m speaking generally, we have millions of people, but on average.
We of course want to be materially well off, and I will try to do everything that I possibly can so that people live better, so that their quality of life improves. But despite all that, in the soul of a Russian person there is always a drive toward some kind of lofty moral ideal, lofty moral values. That definitely sets us apart, and I’m certain it’s in a good way.
MICKLETHWAIT: That sounds like Doctor Zhivago to me. President Putin, thank you very much for talking to us. You’ve been very generous with your time. Thank you.
PUTIN: Thank you very much for your interest.
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