The Prime Minister answered questions on a wide range of issues, including natural gas supplies to China.
Transcript:
Interview with Bloomberg TV
Ryan Chilcote: Prime Minister, thank you very much for joining us. President Putin has gone to China. One of the contracts that may be signed there concerns gas, and supplying gas to china. How likely is it that a deal can be done?
Dmitry Medvedev: Good afternoon. I'm glad for the opportunity to be interviewed by Bloomberg once again. It seems just a short time ago that we met in Switzerland. This time, it’s hot in Moscow. It’s nice when the warm weather arrives.
As for gas relations between Russia and China, we have been holding talks on supplies from Russian gas fields to China for quite some time now. There are two possible routes: one is called the Eastern route, and the other the Western route. These were not the easiest talks, since one side always wants to sell for a higher price, while the other wants to buy for a lower price. However, I believe it is very likely that there will be a contract, which means long-term agreements. The sides have agreed that it should be robust strategic cooperation designed to last for many years. The wording will be finalised very soon. I believe it’s time we reached an agreement with the Chinese on this issue.
Ryan Chilcote: The price that China will pay for the gas that Russia supplies it is less than what the average country in the European Union pays. Why does it make sense for Russia to charge China less than European countries? Is it because Russia wants to diversify its export markets?
Dmitry Medvedev: First, and this is very important – we haven’t signed the document yet.
Second, the price is never fixed when it comes to gas cooperation. The price is calculated according to a specific formula, and it depends on the volume of gas sold and the distance it is transported, that is, the pipeline system, that length of pipeline that makes up this transit line. Of course, it depends on the quality of gas, and on other factors, including the replacement of gas with other types of fuel. The calculations are usually based on so-called gasoil, coal or something else. So it is very complicated. This is the second thing.
And finally, third. I am absolutely certain that these prices will be comparable. But clearly, delivering to Europe is one thing and delivering to a new market is another. To attract a new market and to agree on all terms of collaboration, a variety of means is used to stimulate deliveries, including advance payments, bonuses and so on. All these factors are taken into account when establishing rates. I believe that in the long run the price will be fair and totally comparable to the price of European supplies.
Ryan Chilcote: But it's very important for Russia to have China as an export market.
Dmitry Medvedev: Of course, without a doubt. We value our European partners very much. We have worked with them for decades. It is a very important and very valuable market. I want everybody to understand that. On the other hand, we cannot supply our gas to the European market alone, because we have enough for the Asian market, which is the most rapidly developing market, including China, a major economy.
Ryan Chilcote: Especially if Western Europe, the European Union, is constantly saying that they want to diversify away from Russian gas, right?
Dmitry Medvedev: No.
Ryan Chilcote: This is a way of handling your problem with western European threats to diversify from Russian gas.
Dmitry Medvedev: It’s not because we attach much importance to statements of this kind. First, each country or group of countries, including the European Union, has the right to diversify their supply sources. This is true. But we don’t attach much importance to this simply because, so far, there is no viable alternative in sight to Russian supplies. We just happen to think that we, as a major energy-supplying power, must have an opportunity to deliver gas not only to Europe but also to Asia. We are benefitting from this. Today, I wouldn’t look for politics behind this, but I have no doubt that supplying energy to the Asia Pacific Region holds out a great promise in future. More than that, we have enough capacities and enough gas to send supplies via both the eastern and the western routes. But even if we look at the worst prospect – purely theoretically – any undelivered European gas supplies can be sent to China by the eastern route. But that, let me stress this point again, is so far an absolutely theoretical possibility.
Ryan Chilcote: If western Europe was to move away from Russian supplies…
Dmitry Medvedev: You know, all this talk is absolutely abstract or politicised in nature. Some of our partners, including in the United States of America, say: “We’ll heap you guys in Europe with LNG.” OK. Let them give us the calculations. As far as I understand, even if this is done on a very balanced basis, the price of LNG to be supplied from the United States of America will be 40% more expensive than the Russian pipeline gas.
Ryan Chilcote: What do you think about the idea of selling Rosneft stock to a Chinese company?
Dmitry Medvedev: To begin with, Rosneft is one of our biggest free-float companies, so some of its stock already belongs to foreign shareholders.
Ryan Chilcote: BP has a 20% stake, it’s the world’s largest crude oil producer that is publicly traded.
Dmitry Medvedev: Absolutely. So BP has some stock to begin with. Second, every deal should bring benefits primarily to the company itself. We are trying to make steady our energy market. In the final count, Rosneft should decide for itself what development sources to use. If Chinese investors make an interesting proposal, we don’t rule anything out. In any event, the Government is planning to privatise a considerable amount of Rosneft stock.
Ryan Chilcote: In this year? You want to sell a stake in 2014?
Dmitry Medvedev: For the time being, we spoke about next year and even 2016 but we may return to the issue this year.
Ryan Chilcote: What would be the point in selling a stake in Rosneft this year? Because when it comes to privatisation, so far everything has been pushed back, and now you are talking about moving privatization of Russia’s largest oil producer forward. It’s a bit surprising. Markets aren’t very nice…
Dmitry Medvedev: Yes, you’re right, so before making а decision on privatisation, we must weigh all factors before taking any decision regarding privatisation, primarily the stock price, which is to say how much privatisation will fetch. Our goal is to maximise revenue. That said, you can’t keep putting off privatisation because you think prices will be higher in 2015 than in 2014, or in 2016 rather than in 2015. Research needs to be done, and this kind of analysis and research is being carried out.
Ryan Chilcote: What do you think about opening up the Russian economy – and Russia in general – more to China?
Dmitry Medvedev: China is already a major trade partner of Russia, second only to the European Union.
Ryan Chilcote: But you have very big plans to increase China’s role in the Russian economy.
Dmitry Medvedev: That said, just recently – a week ago in fact – I held a special meeting with ministers and corporate leaders on promoting cooperation with the Asia-Pacific Region, which to a large extent means cooperation with the People’s Republic of China. We view this cooperation as critically important for Russia, and we believe it has great prospects in terms of expanding trade and attracting investment. These are issues that will be on the agenda of the Russian President’s talks with Chinese President Xi Jinping.
Ryan Chilcote: For many years, Russia was very concerned about opening up its economy more to China. In the Far East, there aren’t that many Russian there; China is nearby.
Dmitry Medvedev: We always try to analyse what would happen if we enter a certain market, just like all countries do. There are commissions that issue permits for foreign investment in the United States, Europe and Russia. By the way, as prime minister, I chair the government commission on foreign investment. This doesn’t mean that we don’t deny permission, but we should understand where we can invite investors, including our Chinese partners. Again, we view China as our strategic partner and a very promising market.
Ryan Chilcote: Are there some parts of the Russian economy – “Red Zones”, if you will – where Russia would prefer China is not?
Dmitry Medvedev: I wouldn’t phrase it like this. The issue doesn’t concern Chinese investment alone. I’d put it as follows: Will there be some red lines beyond which we won’t allow foreign investors, like the majority of countries do. Yes, these are sensitive technologies, primarily weaponry. I think we have the right to keep some sectors under government control, but the number of such sectors keeps decreasing, and the commission I have mentioned takes decisions to expand the opportunities for foreign investment at almost every meeting.
Ryan Chilcote: Do you think that China could actually replace, let’s say, the European Union as a trading partner?
Dmitry Medvedev: But why? We are doing just fine as it is. We want to have a good relationship with Europe. Our sales turnover is over 400 billion. We also want strong collaboration with China, India, Japan and other countries. The idea of any politically motivated scenario is simply conjecture. The fact is, we want to trade in both the west and the east. Do you remember what the Russian coat of arms looks like? The eagle is looking in both directions.
The full transcript of the interview will be posted.
