Vladimir Putin gave an interview to Bloomberg

Friday, 02 September 2016 15:28

The interview was recorded on September 1, in Vladivostok.
John Micklethwait: Mr President, thank you very much for talking to Bloomberg. We are in Vladivostok, at the border of Russia, practically the Pacific Coast is its border, and this is already the second Eastern Economic Forum that is about to start. What are you planning to achieve at the Forum?
President of Russia Vladimir Putin: We would like to draw the attention of our partners, of potential investors to the Russian Far East. In this sense, the Forum as an event is similar to other regional forums of this kind. Russia hosts a lot of such forums, including the International Economic Forum in St Petersburg, (usually in the beginning of summer), as well as the Economic Forum in Sochi.
The Far East is of particular significance for us in terms of this region’s priority development. Over the last few years, let us say even over the last decades, we were faced with many problems here. We paid little attention to this territory although it deserves a lot more of it, because it concentrates great wealth as well as opportunities for Russia’s future development. Not only for Russia alone, but also for the development of the entire Asia-Pacific region (APR), because this land is very rich in natural and mineral resources.
When we talk about the Far East we usually mean the Far East itself, including Primorye Territory, Khabarovsk Territory, Kamchatka, and Chukotka, as well as Eastern Siberia. All this area contains tremendous resources, including oil and gas, 90 percent of Russian tin, 30 percent of Russian gold, 35 percent of forest, 70 percent of Russia’s fish is harvested in the local waters.
This is a region with a substantially developed transport and railroad infrastructure. In recent years we have been actively developing road connection. There is also a huge potential for developing the aviation and space industries. As you might have noticed we have launched a new Russian spaceport in one of the Far Eastern regions. As I have already said, the aviation industry, including combat air force, has been traditionally developing here. It is the Russian Far East where the SU aircraft, which are well known worldwide, are manufactured.
Finally, we are resuming the manufacturing of sea vessels here, first of all for civilian purposes. Just earlier today I witnessed the commissioning of one of the most promising sites of this kind.
And this is also a good opportunity for humanitarian exchanges with our neighbours. Our intention is to develop music, theatre and exhibition activities here. Just recently Mr Gergiev, a distinguished Russian musician and conductor, held his concerts here. We are going to set up a branch of the St Petersburg Mariinsky Theatre here. We are also planning to open local branches of the Hermitage Museum and the Vaganova Academy of Russian Ballet.
As you can see, we are now present in the building of the Far Eastern Federal University. I am sure you too have had a chance to assess the size of the University – the number of foreign students studying here is already in the thousands; there is also a great number of foreign professors. We would like to see science and higher education developing here, so that it could become one of the major research centres in the entire APR system. Undoubtedly a lot remains to be done here, but given the labour market demand, the relevance of such a university is undeniable.
In addition to everything that I have already mentioned, there is another domain that we consider relevant and having good prospects – marine biology. For many years this region has been home for one of the leading institutes of the Russian Academy of Sciences, the Institute of Marine Biology. You know, we are launching a new centre here; we have built an oceanarium on its premises, which is supposed to be not only a public place where people, I am sure, will enjoy the wildlife, but also part of the Institute of Marine Biology. A very interesting and promising cluster has formed here, and we would be happy if our potential investors, our counterparts from abroad, first of all those from the Asia-Pacific region, knew more about it.
John Micklethwait: One of the [forum] guests is Prime Minister of Japan Mr Abe. He is coming to Vladivostok and it appears like a political deal, so to say, is in the making. Maybe you would trade in one of the Kuril Islands for serious economic cooperation, its expansion. Are you ready for such a deal?
Vladimir Putin: We do not trade territories although concluding a peace treaty with Japan is certainly a key issue and we would like to find a solution to this problem together with our Japanese friends. Back in 1956, we signed a treaty and surprisingly it was ratified both by the Supreme Soviet of the Soviet Union and the Japanese Parliament. But then Japan refused to implement it and after that the Soviet Union also, so to say, nullified all the agreements reached within the framework of the treaty.
Some years ago our Japanese counterparts asked us to resume the discussions of the issue and so we did meeting them halfway. Over the passed couple of years the contacts were practically frozen on the initiative of the Japanese side, not ours. At the same time, presently our partners have expressed their eagerness to resume discussions on this issue. It has nothing to do with any kind of exchange or sale. It is about the search for a solution when neither party would be at a disadvantage, when neither party would perceive itself as conquered or defeated.
John Micklethwait: How close are you now to such a deal? Closer than in 1956?
Vladimir Putin: I don’t think that we are closer than in 1956 but anyway we have resumed our dialogue and agreed that our foreign ministers and relevant experts at the level of deputy ministers will intensify this work. Naturally, this issue has always been a subject of discussions between the Russian President and the Prime Minister. I am sure that during the meeting with Mr Abe here in Vladivostok this issue will also be discussed, but finding a solution requires it to be well thought out and prepared, and I reiterate, a solution that is not based on the principles of causing damage, but, on the contrary, on the principles of creating conditions for developing long-term ties between the two countries.
John Micklethwait: Indeed, the territory on the eastern flank, it seems to me, is not a concern for you. In 2004, for instance, you handed over the Tarabarov Island to China, could you do the same, let us say, to Kaliningrad?
Vladimir Putin: We handed over nothing, those territories were disputed and we have been negotiating this issue with the People's Republic of China, let me stress that, for 40 years, and finally managed to come to an agreement. One part of the territory was assigned to Russia, while another part – to the People's Republic of China.
Notably, it was only possible, and this is very important, due to the high level of trust Russia and China reached in their relations by that time. If we reach the same level of trust with Japan, we might be able to reach certain compromises.
However, there is a fundamental difference between the issue related to Japan’s history and our negotiations with China. What is it all about? The Japanese issue resulted from World War II and is stipulated in the international instruments on the outcomes of World War II, while our discussions on border issues with our Chinese counterparts have nothing to do with World War II or any other military conflicts. This is the first, or rather, I should say, the second point.
Thirdly, regarding the Western part. You have mentioned Kaliningrad.
John Micklethwait: I was just kidding.
Vladimir Putin: All jokes aside. If someone is willing to reconsider the results of World War II, let us discuss this. But then we will have to discuss not only Kaliningrad, but also the eastern lands of Germany, the city of Lvov, a former part of Poland, and so on, and so forth. There are also Hungary and Romania on the list. If someone wants to open this Pandora's box and deal with it, all right, go for it then.
John Micklethwait: Can I ask you about the Chinese again. Back in 2013 you said you set $100 billion of trade with China as a target for 2015. But it was about $67 billion-$70 billion a year. What went wrong? I know the problems to the ruble and problems to the oil. Do you still think that target of $200 billion in 2020 is achievable?

Vladimir Putin: Yes, I find it absolutely attainable. You have just listed the causes of this fall in bilateral trade yourself. At the first stage, we set the target at about 100 billion US dollars, and we almost got there – it reached 90 billion. So we are almost there. But we also know the reasons for the fall. These include a decline in the prices of our traditional export goods and the exchange rate difference. These are objective reasons. And you know that very well.

John Micklethwait: Did sanctions make a difference?

Vladimir Putin: The sanctions have nothing to do with our relations with China, because our relations with the People's Republic of China are at an unprecedented high both in terms of their level and substance. They are what we call ”a comprehensive partnership and strategic cooperation“. Sanctions have nothing to do with this. The decline in our mutual trade has objective causes, which are the energy prices and the exchange rate difference. But the physical volumes have not decreased, quite the opposite actually. They are growing.

As to our trade and economic relations with China, they are growing more and more diverse each day, something we have worked on for a long time with our partners from China. I would like to draw your attention to the fact that we have gone from pure trade in traditional goods (energy resources, such as hydrocarbons, oil and now natural gas, petrochemicals on the one hand and textiles and footwear on the other) to a whole new level of economic cooperation. For example, we are working together on space programmes. Moreover, we are developing and soon will begin the production of a heavy helicopter. We are now tracing the plan for the creation of a wide-body long-range aircraft.

Russia and China also cooperate in mechanical engineering, high-speed railway transportation, lumber processing, nuclear energy production and so on. We have built the Tianwan Nuclear Power Plant. Two units are already operational and are showing good results. There are two more to go. So, the goal we have set for ourselves, which is to diversify our cooperation with China, is making progress.

John Micklethwait: Can I ask you about the oil price — your favourite subject. Almost two years ago you said that if crude oil fell below $80 a barrel there would be a collapse in oil production. The price is still below $50 and production hasn't stopped. Has your thinking changed on that at all?

Vladimir Putin: If I said that oil production would collapse I was wrong. By the way, I do not remember when I said this, maybe in the heat of the moment, but I do not think I even said it, but I may just not remember it. I was saying that at a certain level of oil prices new deposits will not be explored. That is what is actually happening. However, surprisingly, our oil and gas workers (mainly oilmen) continue to invest.

Over the past year, oilmen have invested 1.5 trillion rubles, and if we take into account government investments into the development of pipeline transport and electric energy, general investments into the energy sector were 3.5 trillion rubles last year. It is a considerable amount.

Oil production, energy production are growing, though the latter has gone down by about 1 percent here, I believe… By the way, we occupy the first place in the world in gas export, accounting for 20 percent of the world market. We are also first in the sphere of liquid hydrocarbons export.

Though we still come first in the sphere of gas export, national production has diminished due to the increasing volumes of hydrogenation for the electric power industry and therefore there is a lower need for gas at thermal power plants. This is the result of the restructuring of the situation at the national energy market. In general, Gazprom is doing well and is increasing export in its traditional partner countries.

John Micklethwait: You're going to talk to Saudi Deputy Crown Prince Mohammed bin Salman at the G-20. Would you still be in favor of the production freeze if the Saudis want that?

Vladimir Putin: As far as I know, Mr. Salman is deputy Crown Prince, but this is not so important. He is a very active statesman, we have really warm relations. This is a person who knows what he wants and can achieve his goals. At the same time I consider him to be a reliable partner with whom one can negotiate and be sure that agreements with him will be implemented.

However, it was not us who refused to freeze oil production; our Saudi partners changed their point of view at the last moment and decided to slow down the adoption of this decision. I would like to reiterate our position, it remains the same. Firstly, in my conversation with Prince Salman on this issue I will reiterate our position: we think that this is the right decision for the world energy sector.

Secondly, it is well known what we were arguing about: if we freeze oil production, everybody should do so, including Iran. But we understand that the Iranian position is very bad because of the well-known sanctions against that country, and it would be unfair to leave it on this sanction level. I believe that in fact it would be economically reasonable and logical to reach a compromise, I am sure that everybody understands this. This issue is not economic but political. I hope that all market participants interested in maintaining stable and reasonable world energy prices will finally make the right decision.

John Micklethwait: So you would be in favor of a production freeze but giving Iran a little bit of leeway to do what they need to do?

Vladimir Putin: Yes.

John Micklethwait: Can I ask you about privatization and oil again? The privatization of Bashneft – you've delayed it. And now as we reported Igor Sechin of Rosneft just come forward and said he would like to buy the half of it for $5 billion. You have always said that you don't want for big state companies to be buying the newly privatized ones. You wouldn't allow that, would you?

Vladimir Putin: You know, you have just mentioned state companies. Strictly speaking, Rosneft is not a company. Let us not forget that BP has a stake in Rosneft and BP is a British company. You are a subject of the UK, are you not? It means that you also to a certain degree…

John Micklethwait: You may have more control over Rosneft than Theresa May has over BP.

Vladimir Putin: We may have more control, but my point is that, strictly speaking, it is not a state company. I think that this is an obvious fact, as a foreign investor has a 19.7 percent stake in it. However, given the fact that the State has a controlling stake in the company, it might not be the best course of action when one company under State control buys another one fully owned by the State. This is one point.

Another point is that ultimately, as far as the budget is concerned, of major importance is who offers more money during the bidding that must be organized as a part of the privatization process. In this sense, we cannot discriminate against any market participants, not one of them, but this is not relevant at the moment, as the Government has decided to postpone the privatization of Bashneft.

John Micklethwait: That's gone. But on the question on privatization, you said back in 2012 that you wanted to expand privatization, you've had a difficult time on this. Why has that not worked? Is there a case, why does Russian government need to own 50 percent of these companies? May be you could sell more?

Vladimir Putin: There is no need for the Russian state to hold such large stakes and we do intend to put our plans into practice. It is not about whether we want it or not, it is about this being practical or not and the best timing. In general, it is practical from at least one point of view – from the point of view of structural changes in the economy. It is true that the role of the state in the Russian economy may be too big today, but from the fiscal standpoint, it is not always practical to do this in a falling market. That is why we are careful, but our trend in the privatization process and gradual withdrawal of the state from certain assets remains unchanged.

By the way, you have mentioned Rosneft. We are actively preparing a partial privatization of Rosneft itself. It is the best proof that our major plans have remained unchanged. Another example would be one of the largest Russian diamond mining companies in the world. We are privatizing part of our stake in that as well.

John Micklethwait: ALROSA?

Vladimir Putin: ALROSA. We are working in other areas as well, so there are no radical changes to our position. It is not the case when we have to, as we say, make a lot of fuss about it. In other words, we do not have to be obsessed with privatizing immediately and at any cost. No, we will not do it at any cost. We will do it in a way that ensures maximum benefit for the Russian state and the Russian economy.

John Micklethwait: So you would do Rosneft this year, you would sell those shares in Rosneft this year you hope?

Vladimir Putin: We are getting ready for the deal this year. I do not know whether the Government will be able to get ready to conduct this transaction together with the management of Rosneft itself, whether the appropriate strategic investors will be found. And I believe it is about such investors that we should talk. But we are getting ready, and it is in the current year that we are planning to do this.

John Micklethwait: And do you, do you again just to push you on that 50 percent, would you be happy in a world where the Russian state had less than 50 percent of these big companies?

Vladimir Putin: We do not consider this disastrous at all. You know, I remember that when foreign shareholders, foreign investors, got 50 percent in one of our companies, I will not name it now, their contribution to the federal budget and tax payments increased several times over at once and the company's efficiency did not decrease. Therefore, in terms of the interests of the state, the ultimate interests of the state, in terms of its fiscal interests, we have a positive experience, most likely, not a negative one.

John Micklethwait: Very quickly: the other accusation you've faced or heard a lot is people connected with Russia or backed by Russia were the people who hacked into the Democratic Party database. Is that, you would also say that is completely untrue?

Vladimir Putin: I know nothing. There are a lot of hackers today, you know, and they perform their work in such a filigreed and delicate manner and they can show their “tracks” anywhere and anytime. It may not even be a track; they can cover their activity so that it looks like hackers operating from other territories, from other countries. It is hard to check this activity, maybe not even possible. Anyway, we do not do that at the national level.

Besides, does it really matter who hacked Mrs. Clinton’s election campaign team database? Does it? What really matters is the content shown to the community. This is what the discussion should be held about. There is no need to distract the attention of the community from the essence of the subject substituting it with secondary questions dealing with the search of those who did it.

I would like to repeat: I know absolutely nothing about it, and Russia has never done anything like this at the State level. Frankly speaking, I could never even imagine that such information would be of interest to the American public or that the campaign headquarters of one of the candidates – in this case, Mrs. Clinton – apparently worked for her, rather than for all the Democratic Party candidates in an equal manner. I could never assume that anybody would find it interesting. Thus, in view of what I have said, we could not officially hack it. You know, it would require certain intuition and knowledge of the U.S. domestic policy peculiarities. I am not sure that even our experts from the Ministry of Foreign Affairs have such intuition.

John Micklethwait: Do you not think this is sort of the time when everyone should sort of come clean about it? Russia tries to hack America, America tries to hack Russia, China tries to hack America, China tries to hack Russia? Everyone tries to hack each other.

One of the purposes of the G-20 is to come up with a new set of rules so this can become a more ordered version of foreign policy when everybody is doing this. Allegedly.

Vladimir Putin: I believe that the G20 should not interfere, because there are other platforms for that. The G20 was established as a forum to discuss, first and foremost, world economic issues. If we load it with… Of course, politics affects economic processes, this is obvious, but if we bring some squabbles, or not squabbles, rather, some matters that are really important but relate purely to world politics, we will overload the G20 agenda and instead of addressing such issues as finance, structural economic reforms, tax evasion and so forth, we will engage in endless debates concerning the Syrian crisis or some other global challenges, of which there are many, or the Middle East problem. We should find other platforms, other forums for that, and there are plenty of them, including, for example, the UN and the Security Council.

John Micklethwait: You've just talked about the Russian economy, we'll come back and I ask you about reserves in just a second. But it struck while you're talking in detail in all the ways Russia got stronger. You're about to go to G-20 you have studied and watched the west many times. You've been to G-20 more than any other leader at the moment. Have you ever been to G-20 where the west is seen more divided, more in doubt, more distrustful in itself. Look at all those things happening in Europe — you look at migration, you look at 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. How do you explain that?

Vladimir Putin: There are many issues in the global economy in general and in the western economy as well: population ageing, drop in labour productivity growth rates. This is obvious. The overall demographic situation is very complicated.

Then, the specialists themselves, and you are one of the best specialists in this area, probably believe that in the course of EU expansion, for example, some elements concerning the readiness of some economies to enter the Eurozone have not been taken into account.

It is very difficult to enter a single currency zone having fairly weak economic parameters and maintain a favourable state of the economy, not to mention positive growth rates. We have witnessed it not only in Europe, but for example in Argentina (nearly 10 years ago or more), when they tied the national currency to the dollar and later they did not know what to do about it. It is the same with entering the Eurozone…

John Micklethwait: Do you expect the euro to survive?

Vladimir Putin: I hope so, because we believe in the fundamental principles of the European economy. We see that leaders in Western Europe (there are some debates of course, we also see that and analyse it all) stick to, I cannot say right or wrong ones, it always depends on someone's view, but I think, very pragmatic approaches in addressing economic issues.

They do not misuse financial instruments, financial injections, but, first of all, seek structural change. This is urgent for our economy as well, maybe even more urgent bearing in mind the problem that we cannot yet deal with, namely the prevalence of the oil and gas sector in the Russian Federation and, as a result, dependence on revenue from oil and gas.

This is also evident in Europe, not the dependence on oil and gas, but the fact that structural reforms are long overdue, and I think that the leading economies are very pragmatic and efficient in addressing the issues facing the European economy. That is why we keep approximately 40 percent of our gold and foreign currency reserves in euros.

John Micklethwait: You expect that Europe won't keep the existing membership, and they going to lose more like they lost Britain?

Vladimir Putin: You know, I do not want to answer your provocative question, though I understand that it may be interesting.

John Micklethwait: Come on, many, many times you've criticized Europe…

Vladimir Putin: Well, yes, I have criticized it, but I repeat: we keep 40 percent of our gold and foreign currency reserves in euros, we are not interested in the collapse of the Eurozone, but I do not rule out the possibility of decisions being made that would consolidate a group of countries equal in economic development and this, in my opinion, will lead to a consolidation of the euro. But there can also be some interim decisions in order to keep the present number of members of the Eurozone unchanged. This is not our job, but we always follow the actions of our European partners closely and we wish them luck.

Now, regarding that criticism you spoke about. I have criticized foreign policy, but that does not mean that we should agree with everything. Indeed, we criticize a lot of things, we think that our partners make many mistakes (may be we make mistakes too, no one is immune to making mistakes), but as for the economy, I repeat that, in my opinion, the European Commission and the leading European economies are acting very pragmatically and are on the right path.

John Micklethwait: Can we talk about the Russian economy. I know you will say that exchange rate a lot depends on central bank and the exchange rate is set by the market. I saw back in July, on July the 19th when the ruble was 62,9 with the dollar you said the ruble is too strong, you criticized that. And a ruble is now come down to 65 to the dollar. Is it weakened enough to make you happy? Or do you want to see it weakening further?

Vladimir Putin: I did not criticize the Central Bank's position. I have always thought and I still think that the Central Bank should act independently. Indeed, it does, you can take my word. I do not interfere in the decisions of the Central Bank and I do not give instructions to the Bank management or to its head.

The Central Bank observes the economic situation and, of course, I keep in touch both with the managers and the President of the Central Bank, but I never give instructions. If I said that the ruble had become too strong, I did not say that the Central Bank's position was wrong, I said that it added pressure to export‑oriented sectors of economy. We all understand that this is true. When the ruble is weaker, it is easier to sell, to produce here for a cheap ruble and sell for an expensive dollar, get revenue in dollars and then exchange it for rubles and get a bigger income. This is simple.

But if we speak about fundamental things, regulation of the rate is actually the function of the main regulator, namely the function of the Central Bank. And it should think of how the economy and industry react, but also of its fundamental tasks in order to ensure the stability of the rate. The stability of the rate is the main issue and the Central Bank manages to ensure it one way or another. This was finally achieved after the Central Bank switched to a floating national currency exchange rate.

The Central Bank should take into account other things as well: the stability of the bank system in the country, the increase or decrease of money supply in the economy, its influence on inflation. The Central Bank has a lot to handle and it is best not to interfere with its competence.

John Micklethwait: You personally, would you like to see ruble a little bit weaker still, with their help? I know it is not you job but you made a comment before. What do you say now?

Vladimir Putin: You know, my position is that the rate should align with the level of economic development. Because it is always about a balance, a balance of interests, and it should reflect this balance. A balance between those who sell something across the border and those who benefit from a low rate, as well as a balance between the interests of those who buy, who need the rate to be higher. A balance between national producers, for example, agricultural producers who are interested in it. Here we have 40 million Russian citizens involved in the sphere of agriculture one way or another. This is very important. We should not forget either about the interests of the regular consumers who need the prices in supermarkets to be a little bit lower.

Therefore, let me reiterate that the rate should not meet the interests of a specific group or one or two groups, it should meet the fundamental development interests of the economy itself.

John Micklethwait: So you are no longer complaining. I will take it that you are not too unhappy where it is?

Vladimir Putin: I did not express any disagreement, did not complain. I simply noted that one of the groups, especially exporters, would prefer to have a weaker rouble.

John Micklethwait: You mentioned earlier Russia used to have $500b. Now it is $400 billion. You have this target to get back to $500 billion. What you think is the realistic target? And your opinion: should the central bank be buying more dollars in order to push it back up towards $500 billion?

Vladimir Putin: The Central Bank is constantly purchasing, purchasing and selling and vice versa – this is their job. I believe that over the last six months gold and foreign currency reserves increased by 14 percent.

John Micklethwait: They gone back up a little bit, but they haven't been buying dollars in the same systematic way as they did once.

Vladimir Putin: You and I know very well about the necessary level of reserves of the Central Bank as well as the purpose. We can tell the general public that the gold and foreign currency reserves of the Central Bank are not designed to finance the economy, but rather to ensure foreign trade turnover. Therefore, we need this level to be able to provide the necessary foreign trade turnover for such an economy as Russia’s for a period of at least three months. If everything stops functioning our level will be able to ensure our trade turnover using its gold and foreign currency reserves for at least six months or more, which is more than enough.

Therefore today we have an absolutely sufficient level of gold and foreign currency reserves in order to ensure economic stability and sustainable foreign trade turnover. All other issues – purchasing and selling of currency – are related to the regulation of the national currency market. However, it is still difficult to say what will be the reaction of the Central Bank and if it would lead to increasing the gold and foreign currency reserves. Let us not forget that we have two governmental reserve funds: the Reserve Fund and the National Wellbeing Fund that represent together $100 billion.

John Micklethwait: I want to jump back — all these things affect budget. You have budget deficit, you just given some more money which you mentioned earlier to pensioners. You will have to borrow sometime. 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?

Vladimir Putin: There is no such need at the moment. We do not have to borrow in the external market, but we have used and are using this traditional instrument in international financial relations. We have issued financial instruments in the past, and there is a strong demand for them, it is simply unnecessary now. Given the cost of borrowings and the $100 billion in Government reserves, there is no reason for us to borrow. We should review the situation carefully. Besides, borrowings are possible, but we must understand what is more profitable at this point. This is one point.

The second. The deficit. Last year the federal budget deficit was 2.6 percent. I think you would agree that this is a rather acceptable level. This year, we expect a slightly higher deficit of about 3 percent, maybe a little more than 3 percent. It is also an absolutely acceptable level. But what are we seeking to achieve? We are seeking to optimize budget spending. I believe that even in such uneasy times we employ a very pragmatic approach towards economic and social issues. We do address major social problems and deliver on our promises to our people.

The Government has just announced a four percent indexation of pensions. There has been no indexation in the second half of the year, but early next year we will make a one-time payment of 5,000 rubles to each pensioner, which is actually comparable to the indexation. We act in a pragmatic and careful manner. We reduce spending on budget items that do not constitute a priority. We are not going to waste our reserves and burn them for any political ambitions. We will act very carefully.

I hope that there will be no particular need for us to attract external funding. It is worth noting that despite the fact the turnover is smaller now we are still maintaining a trade surplus. I believe that we now have a trade surplus of $45 billion for the first half of the year. Year-on-year inflation has dropped several-fold. Several-fold! Year-on-year it was about 10 percent compared to last August, but now it is only a slightly more than 3 percent. The unemployment rate of 5.7 percent is also acceptable. Our microeconomic indicators are stable and it gives me reason to believe that we will calmly and steadily pass this uneasy period in our economy, which has already no doubt adapted to the current situation.

John Micklethwait: The G-20, this one will be the last times when you'll see Barack Obama. And as you well know there is American election on the way 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 geopolitical situation — Donald Trump or Hillary Clinton? Do you have a feeling at all?

Vladimir Putin: I would like to deal with a person who is able to take responsible decisions and implement the agreements reached. The name does not matter. Of course, this person is to have the trust of the American people, then he or she would not only have the wish but also the supported political will to implement all these agreements.

We have never meddled in the domestic affairs of any state and we never will. We will keep a close eye on what is happening and wait for the election results and after that we will be ready to work with any Administration given that it wants to work with us.

John 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 the contrast when I look at some of things that Donald Trump said about you back in 2007 that Putin is doing a great job, in 2011 he praised your no-nonsense way, the next year he said you is new best friend, next year he said you're outsmarting the Americans, he said you have good ratings to get … And I can go on like that. And you are really telling me that if you have a choice between a woman, who you think may've been trying to get rid of you, and a man, who seems to have this great sort of affection to you, almost bordering on the homoerotic, you not going to make a decision between those two, because one of them would seem to be more favorable towards you?

Vladimir Putin: You know, actually I have already answered your question, but I can put it differently, say it in other words: we are ready to deal with any President, but of course, and I mentioned that, it depends on the readiness of the future Administration. We always welcome when somebody says he or she is ready to work with Russia. But if anybody, just like you said, (inaccurate translation possibly), wants to get rid of us, then this is a different approach. However, we will get over it; you never know who is going to lose more with such an approach.

Here is the thing: I have seen several times that anti-Russian cards are being played during domestic campaigns in the United States. I find this approach very short-sighted.

At the same time we receive different signals all around that in fact, everything is fine. The same situation occurred with the previous administrations during the election campaigns, claims that everything will be restored later. I do not think it matches the level of responsibility shouldered by the United States. I suppose it should be more sound, calm and balanced.

As for the criticism we receive, you know, even Mr. Trump's team criticize us. For instance, one of the participants or members of his team claimed that Russia was giving money to the Clintons through some funds and that in fact Russia is controlling the Clinton family. This is nonsense. I do not even know where Bill Clinton delivered his speech and I know nothing about any funds. Both parties simply use it as a tool in their internal political contention, and I am sure it is a bad thing. But again, we welcome the fact that somebody expresses readiness to work with Russia whatever the name of that person.

John Micklethwait: Can I ask one last question on Donald Trump. Some people say that he is too 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.

Vladimir Putin: We cannot decide for the American people. After all, despite the scandalous behavior of one and, by the way, the other candidate (they are both scandalous in their own ways), they are smart, they are really smart and they are aware of the leverages they should use to make the voters in the United States understand them, feel them and hear them. Donald Trump is targeting the traditional Republican voters, the average person with an average income, the working class, a certain group of entrepreneurs and those people who embrace traditional values. Mrs. Clinton is focusing on a different part of the voters trying to influence them in her own way as well; so they attack each other and in some cases, I would not want us to follow their pattern. I do not believe they are setting the best example. But this is the political culture of the United States, which one should accept as is. The United States is a great country and it deserves non-interference and no third-party comments.

Answering your question for the third time, I can tell you that we will work with any Administration and with any President in whom the American people have placed their trust. That is, of course, if they wish to cooperate with Russia.

John Micklethwait: Let me ask you about other country. Another person you'll meet at 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?

Vladimir Putin: Well, I would like to finish my answer to the previous question. You have been working as a journalist for a long time. You are quite knowledgeable and you understand all the threats that may arise from a tense international environment, don't you? Especially if there is tension between major nuclear powers of the world. We all understand this.

Of course, you are the one asking me questions. It is you who is the interviewer, not I. However, let me ask you a question: do you want another Cuban Missile Crisis? Or don't you?

John Micklethwait: No, nobody does.

Vladimir Putin: Of course, nobody does.

John Micklethwait: But that is one reason why I asked about Donald Trump because he is seen as a more unpredictable force than Hillary Clinton.

Vladimir Putin: And you too would prefer that Russia maintained good relations with both the United Kingdom and the United States, wouldn't you? I would prefer it as well. If anybody in the U.S. or in the United Kingdom says: ”I would like to establish good partnership relations with Russia“, then both of us, you and me, should welcome that. So should people like me and people like you. However, we have no idea yet what would actually happen after the elections. That is why I am telling you that we will work with any President designated as such by the American public.

As for the United Kingdom, we have a meeting scheduled with the Prime Minister in China on the G20 sidelines. We had a telephone conversation. Unfortunately, the relations between the United Kingdom and Russia have not developed in the best possible way; however, it has never been our fault. It was not we who decided to discontinue relations with the United Kingdom; it was the UK who preferred to ”freeze“ our bilateral contacts in various fields. If the United Kingdom considers it necessary to start a dialogue on certain issues, we are ready for that, we are not going to pout or sulk. We take quite a pragmatic approach towards cooperation with our partners and we believe that it would be beneficial for both our countries.

We were speaking about our largest oil company Rosneft, and I recalled in the beginning that almost 20 percent of it (19.7) belongs to BP. Who’s company is that? British Petroleum, isn't it? I suppose that is not bad. I have to tell you that British Petroleum’s capitalization is significantly related to the fact that it owns more than 19 percent of Rosneft, which has vast oil reserves both in Russia and abroad. This has its impact on the company's stability as well.

Thus, BP found itself in a difficult situation after the tragic events in the Gulf of Mexico. We did everything we could to support it. Britain is interested in this, isn't it? I think it is. The same is true of other areas.

We are marking the anniversary of the Arctic convoys. You know about that, don't you? We really do consider members of the Arctic convoy to be heroes. This is true. I am not saying this as a fashion of speech. Indeed, that is exactly what they were. We know that the conditions in which they fought were appalling. Time and again they faced death in the name of a common victory and we remember that.

John 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?

Vladimir Putin: Britain is leaving and has de facto left the European Union; however, it has not withdrawn from its special relationship with the United States and I believe that the UK's relations with Russia depend on Britain's special relationship with the United States rather than on its presence in or absence from the European Union. If Britain pursues a more independent foreign policy, it might be possible then. And if it is guided by commitments to its allies and considers this to be of a bigger national interest than its cooperation with Russia, so be it.

After all, this is not our choice; this is the choice of our British partners, the choice of priorities. Anyhow, we obviously understand that, being a United States' ally and having a special relationship with it, the UK in its relations with Russian has to make an allowance for the opinion of its partner ‑ the U.S. We take this reality as a given fact, but let me underscore once again that we will be ready to do as much as Britain will be ready to do in order to resume our mutual cooperation. This does not depend on us.

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