Meeting of the Russian-Ukrainian Interstate Commission’s Committee for Economic Cooperation
Joint press conference by Dmitry Medvedev and Mykola Azarov
Dmitry Medvedev’s introductory remarks:
Meeting of the Russian-Ukrainian Interstate Commission’s Committee for Economic Cooperation
Mr Azarov, participants, today we are holding the 10th meeting of the Committee for Economic Cooperation here in Kaluga. Mr Azarov knows this area well. I hope that other members of the Ukrainian delegation will also enjoy their visit to this place, as this has become a good tradition to travel to various cities in our two countries to hold meetings.
Russia and Ukraine’s regions have some 300 agreements in effect, which involve 26 cross-border projects. The Kaluga Region is a good example of efficient work with investors. I hope that our Ukrainian colleagues have appreciated this.
Dmitry Medvedev: Russia and Ukraine’s regions have some 300 agreements in effect, which involve 26 cross-border projects. The Kaluga Region is a good example of efficient work with investors. The potential for our economic cooperation remains vast.
The potential for our economic cooperation remains vast. Today, we will hear reports by the related commissions and define our priorities. I will speak a bit on this as well.
The first thing I would like to mention – and we have spoken about this at both restricted and expanded meetings – is our cooperation in aircraft and engine technology, the nuclear power industry, rocket-and-space, and other knowledge-intensive industries. We have good prospects that, sadly, have yet to be implemented in full, which has been rightfully mentioned here. Yet, we have a good foundation, and we are starting to implement a number of programmes, including those in outer space exploration and use.
Another large project is on the move. The construction of a plant producing nuclear fuel began in the Kirovograd Region in September.
The second issue concerns infrastructure and transport. At the expanded meeting, we have discussed the need to launch as soon as possible all business processes concerned with the bridge across the Kerch Strait. This should be done indeed. Everybody needs this, both Russians and Ukrainians, and, of course, it will produce a strong economic effect, and most importantly, it will make the lives in and the links between our regions more comfortable.
The third issue concerns cooperation in grain production between Ukraine, Russia and Kazakhstan. We have discussed this for some time. Finally, our ministers have formed common approaches. We have just heard a relevant report, and hopefully we will make some progress. I mean that our countries are major grain exporters worldwide, and creating new logistical chains and new marketing chains will be favourable for our countries and our farmers. In any case, this year’s harvest creates such possibilities for all three countries.
However, the last two years were not easy. Our trade decreased. There are differing calculations, but generally our trade decreased by almost one-quarter. The Ukrainian share in foreign trade has decreased by 1%. It has always been considerable, and yet it decreased by 1%. Of course, these trends are not very good, to put it mildly; therefore, it is necessary to analyse and think over possible measures to stimulate mutual trade.
Today we are signing a roadmap to settle matters in investment, financial and sector cooperation. We need to advance on complicated issues. The list of these issues is on the table. To say the truth, the progress on this list is insignificant. To remove obstacles, barriers for trade and investment cooperation, we should take decisive efforts and unblock a number of problems in this sphere.
Dmitry Medvedev: Сooperation in grain production between Ukraine, Russia and Kazakhstan. Our countries are major grain exporters worldwide, and creating new logistical chains and new marketing chains will be favourable for our countries and our farmers.
We are at the stage of major changes in bilateral cooperation. Russia, jointly with our partners from Belarus and Kazakhstan, is developing customs cooperation. Ukraine is an observer in these processes and simultaneously participates in some other economic procedures, and soon the Ukrainian trade and economic policy in its legal and practical aspects will be more in harmony with EU policy. Of course, this is Ukraine’s sovereign choice, but we should analyse all the ensuing consequences of the relevant decision, the document to be signed, in respect to our bilateral cooperation, so that we do not create additional problems or increase risks on our markets. I am referring to the risks of pushing out commodities to the customs troika market, risks of re-export, and risks of commodity dumping, resulting from the possible lifting of import duties on some European products. There is no policy regarding this issue, but we are simply obliged to discuss and propose options for developing the whole range of our trade relations to prevent possible problems.
Thus, we have great opportunities and important challenges to our bilateral relations – Russian-Ukrainian relations. I believe that in resolving these issues and in establishing our priorities we should primarily be guided by long-term interests, the interests of our countries, and the interests of our populations, and we should implement the agreements we have already reached.
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Joint press conference by Dmitry Medvedev and Mykola Azarov
Dmitry Medvedev: Colleagues and media representatives, we held the 10th meeting of the Committee on Economic Cooperation today. Mr Azarov and I held a bilateral meeting. Yesterday, a Russian-Ukrainian business forum took place in Kaluga. These are all positive developments that are part of our detailed and regular discussions of the most important issues of Russian-Ukrainian cooperation. Of course, we talked about the current situation and outlined plans for the future.
Industrial cooperation in the high-tech industries is the key topic which was discussed by all panels today. We are almost done creating a joint venture to build An-124 aircraft. I hope we will launch production in the near future.
It is necessary to finalise other issues of industrial cooperation, including other types of aircraft. We just signed several documents on space exploration. We are embarking on a programme of the exploration and use of outer space for peaceful purposes.
We started building a plant to make nuclear fuel in the Kirovograd Region. We have good projects in this area. Not all projects are being implemented as quickly as we would like, but our prospects here are quite good.
Today, we focused particularly on transport issues and infrastructure projects. During the committee meeting, we discussed the situation with our trains that travel from Russia to Ukraine. Plans are in place to launch a high-speed Moscow – Kiev train next year. Over time, the travel time should be cut to seven hours and this route will be served by new trains. We also discussed how to streamline en route inspections. We agreed to develop a joint approach on how to do this on nonstop trains.
We returned to the issue of building a crossing over the Kerch Strait. People have been waiting for this issue to be resolved for many years now. The project is expensive, complex and must be carefully analysed, but we need it, because it will improve contact between people and, of course, strengthen regional ties.
There’s one more issue that we discussed last time regarding the cooperation in the sphere of grain trade with the participation of Russia, Ukraine and Kazakhstan. We have a good grain harvest this year, and we have a vast export capacity measured in the tens of millions of tonnes. So if our countries join hands to form a grain union, we will be able to work with buyers more actively. The coordination of our agricultural policies and marketing strategies would give us certain advantages within the framework of existing rules and WTO requirements. But even considering that, we will enjoy an advantage on the global market.
We have signed many documents, and I hope they will benefit us. Of course, we also talked about the future, which our people are vocally discussing. I think the journalists will also ask us about other issues, but we did discuss the planned agreement between the EU and Ukraine called the Association Agreement, because Ukraine’s decision will affect the Russian market. I am referring to zero import duties and the adoption of EU standards and technical regulations in Ukraine. We need to analyse all possible risks which may arise for our country and for our Customs Union partners in this connection. This is why we spent a long time discussing these issues one-on-one with Mr Azarov and together with our colleagues.
First, we need to analyse the possible consequences of relevant decisions. And we certainly must do this with our colleagues in the Government and the expert and business communities of our countries, because our attention will be ultimately focused on our businesses, which will be the first to be affected by the new relationship between Ukraine and the EU. In short, we need to pinpoint the rough spots and determine their influence on established businesses. Of course, we must keep a level head, secure our long-term interests, try to honour all the agreements we’ve reached over the past few years, and also try to minimise the problems. I hope that we’ll eventually find the right solutions.
We have agreed that the next committee meeting will be held in Ukraine in the first half of 2014, as it should be, because in accordance with rules committee, meetings are to be held alternately in Russia and Ukraine. Thank you. Mr Azarov, please…
Mykola Azarov: Thank you Mr Medvedev. You have talked at length…
Dmitry Medvedev: This is one of the host’s benefits.
Mykola Azarov: Yes, he who takes the floor first is in a more beneficial position, so naturally, I am at a disadvantage here. I could possibly be more emotional about the atmosphere of this large meeting that was held yesterday and today… By the way, I’d like to use this opportunity to express my gratitude to the regional leaders for the competent organisation of our meeting today and the large business forum held yesterday, which was attended by Ukrainian businesspeople and members of the Government. Today we broke ground for the construction of a large neighbourhood with 200,000 square metres in Kaluga – it is Ukraine’s largest investment project in Russia.
Dmitry Medvedev: Just perfect.
Mykola Azarov: Also, this morning I attended a highly emotional event, the transfer of the relics of St Kuksha of the Kiev Caves, a monk and martyr from the Kiev Pechersk Cave Monastery, who spread Christianity here nearly a thousand years ago. Today we handed over this sacred gift to the Holy Trinity Cathedral. I see this as a symbol of our people’s unity which no one will be able to sever. We will do everything in our power to strengthen it.
As for the talks proper, I’d like to say that I have held many talks and have worked on many intergovernmental commissions over the years, but I don’t remember any other meeting as complicated and intense as the one we held today. To begin with, we had a completely candid discussion of all the aspects of our relations. I would say that we’ve discussed all possible issues and outlooks with Mr Medvedev. We have resolved a large number of long-standing issues. Mr Medvedev, I’d like to once again thank you publicly for the stand you have taken with regard to the large space exploration programme called The Dnieper, as well as for many other decisions that have been taken thanks to you. I hope that they’ll form a solid foundation for cooperation.
I have said this before but I’d like to say again that we need to focus on the spheres where our international positions are strong – so far strong – such as space exploration, aviation and many research technologies. This is why we formalised our approach to these issues in clear documents, some of which were signed today and the rest are to be signed later. If we break up, both Russia and Ukraine will stand to lose, failing to reach the global market positions we can secure if we work together. This is a tough and highly competitive market, in particular in the sphere of high technology such as space exploration, aviation and many other high-tech industries. We have the wherewithal now to keep, and possibly even strengthen our positions and take the lead in these areas.
Of course, agricultural cooperation is very important too, and we talked about that today. We have promised you gift boxes of chocolates, Mr Medvedev. Honestly, we are waiting for the commission and we have agreed on the deadline for its work. We can’t say whether its conclusions will be positive or negative, but anyway, we have agreed to dot the i’s in this “sweet” matter.
Dmitry Medvedev: Depending on this, I will decide whether to open the box or not.
Dmitry Medvedev: "Ukraine has clearly made its choice based on its own views of how integration should be developed. Do we consider its choice dramatic or fatal? Absolutely not. We believe that Ukraine, as a sovereign state, is free to make any choice."
Mykola Azarov: Yes, certainly. No one intends to bring bad quality products to Russia, that’s for sure. The standards which we plan to adopt are standards of high quality aimed above all at benefiting our customers, our people. I’m not going to speak at length on this issue, but I will say that although it was a difficult meeting which addressed very complex issues, it has made me optimistic. I sense the Russian leaders’ intention to improve our relations. I’d like to share my optimism with you. For our part, the Ukrainian president and government will do their best to promote this cooperation.
Question: A question for Mr Medvedev. There has been a lot of talk recently about the possibility of Ukraine joining the EU or, rather, signing an association agreement. Numerous negotiations have been held on this issue at different levels. Have you reached an agreement today on the future of your trade and economic relations in view of this, especially since bilateral trade has been falling dramatically with each passing year, as never before? What is the reason behind this plunge? Is it possible to at least stop it, if not reverse this negative trend?
Dmitry Medvedev: Yes, certainly, we discussed the future of bilateral trade and economic relations with our Ukrainian partners. We discussed it in detail and very frankly, as Mr Azarov said, but also as partners should – within the framework of bilateral dialogue. And later we also discussed it with our other colleagues, although not in such great detail. What will come of this? That remains to be seen.
Ukraine has clearly made its choice based on its own views of how integration should be developed. Do we consider its choice dramatic or fatal? Absolutely not. We believe that Ukraine, as a sovereign state, is free to make any choice. The Ukrainian President and Government, acting in accordance with the mandate they received from the Ukrainian people, are acting as an international participant, a participant in international relations, and has the right to develop its future policy based on these priorities. For our part, we keep an eye on the processes underway in Ukraine.
It is a fact that Ukraine’s association agreement with the EU will raise issues and potentially create problems for the Customs Union and the Russian market. I have specific problems in mind. I think everyone knows about them (and I mentioned them today). For one, customs duties could be reduced to zero, groups of commodities may be ousted from the Ukrainian market, while EU-made products will come to the Ukrainian market and will compete with the goods made in the Customs Union countries, moreover in dumping conditions or in conditions of unfair competition. We have drafted a number of decisions to counter this possibility, including decisions related to the CIS Free Trade Area Agreement and the so-called sixth protocol, which allow using protection mechanisms that are in full compliance with the WTO regulations.
This possibility has become a firm probability after the Ukrainian leadership adopted its decisions. As partners and colleagues in this dialogue, we informed our Ukrainian colleagues about our opinion quite frankly, and told them about the consequences of their decision and what things should be better avoided. Members of the Russian Government, in particular the deputy prime ministers responsible for this issue, are negotiating this issue at our request, and I hope that they will find a common approach to the things that should be avoided and dangerous consequences to be prevented. Anyway, we will continue talks on this issue. We hope that our colleagues will take our concerns into account, but if they persist [in their decision] we will have to take decisions within the framework of the WTO procedures and the sixth protocol, which will not have a beneficial effect on our trade and economic cooperation.
You mentioned declining trade. Unfortunately, this is a reality. Last year our trade amounted to $45 billion, but this year it has decreased by nearly 25%. There are several reasons behind this, and most of them are connected with economic problems currently plaguing Europe and our economies, as well as with our partners’ decisions. Can we do something to help our trade resume growth? We are certainly trying, but the outcome will depend on the global situation and, frankly, on what happens after Ukraine signed an agreement on a free trade area with the EU. Developments can take different turns. We will do our best to protect our trade and economic relations with Ukraine, but, frankly speaking, the outlook is not clear. We’ll see what happens next year.
Question: I have a question for Mr Azarov. Much has been said today about the need to promote industrial cooperation between Ukraine and Russia. Have you reached any practical agreements on promoting cooperation in such a vital sphere as nuclear generation? My second question concerns the possibility of creating a grain pool of Ukraine, Russia and Kazakhstan. Talks on this issue were launched long ago. Can you provide a timeline for its creation?
Mykola Azarov: Thank you for your question. Our meeting today can be considered fruitful: we have coordinated and signed several practical agreements, one of them on the establishment of a grain pool, though we had a different name for it. We have agreed to establish it within six months. This is very much to the point, and the timeline is strict.
Mr Medvedev said a lot in his address about the practical agreements we have reached and the practical projects we have in mind, so I will not repeat it. I believe that we will issue a detailed press release about this meeting. I am optimistic about all of this, including practical decisions, deadlines and those in charge of these projects.
What is trade turnover? People only have a vague understanding of this term. But trade turnover translates into very practical things: jobs and wages. This is why we are working to keep it up or better still, to increase it. A decline in trade amounts to the loss of jobs in Russia and Ukraine. And an increase in trade means the creation of new jobs. So this is not a trifling matter for us, but a very serious socioeconomic issue.
As for nuclear cooperation, we recently started building a plant to produce intermediate nuclear products. It is the largest joint project in the last 20 years. We also discussed several other issues related to nuclear cooperation today.
Question: First, I’d like to praise the host’s smart decision to meet Mr Azarov in his native city. He said the idea was proposed by Mr Medvedev. In a way, this could be considered a forbidden trick, a psychological weapon. I’d like to address my first question to Mr Azarov. Mr Azarov, Ukraine has opted for association with the EU. It is not very clear to people in Russia – I cannot understand this at all – what was the deciding reason for that decision? What advantages does the EU have over the Customs Union? Did you ask people’s opinion on this issue? As far as I know, you have not held a referendum. And lastly, is it possible that Europe will have no need for Ukrainian goods, which are in demand in the post-Soviet republics?
Mr Medvedev, I’d like to ask you a question too, if you permit me. It was said in Europe that Russia pressured the countries that opted for ties with the EU, and now they say that Russia is putting pressure on European countries, too. Take the recent interview by European Commissioner for Trade Karel De Gucht, published by RIA Novosti. He said that sanitary control and utilisation duty decisions are arbitrary and politically loaded. I will ask you directly, from the perspective of De Gucht: Why are you blackmailing Europe?
Mykola Azarov: In Russia, you ask such tough questions. What I would like to say… First of all, I would like to act as a lawyer to Mr Medvedev. It was my initiative to hold a meeting in Kaluga. When a question arose as to where the next meeting should be held, I told Mr Medvedev, “Maybe Kaluga?” Although I realised that it would be difficult, as the Government would have to arrive there... But I asked for this because I was eager to see the effects of the large-scale regional programme to attract investment. I heard that a great number of investment projects had been implemented, but I could not see that myself as I had not been in Kaluga for three years.
And now, let’s move on to the second question. So, why are we signing a EU Association Agreement? As if we have made our choice, and it allegedly means that we have given up something. But this is not so. Yesterday, I toured a Peugeot-Mitsubishi production factory in Kaluga. We visited a welding department, an assembly department, and so on, the whole of the production chain, up to the moment when a driver got into the manufactured vehicle and started testing it. At each stage, I intentionally asked the French head of the factory: “Are any Russian spare parts used here? Or maybe anything made in Ukraine?” Nothing! One-hundred percent of the technology and equipment have been imported from Europe.
The Soviet Union collapsed 20 years ago; and it was on the verge of collapse for the last 10 years of its existence, so in total we have 30 years of lag in technology. But we have an industry where we still have some advanced technology. Modern machine tool building is non existent… Should I go on? So, we have not made any choice. We are taking steps towards a high-tech market free of duties, barriers, and the like... I believe that we have won by the signing an association agreement, and thus gaining the most favoured treatment status, zero duties for our goods, and preserving a 10-year protection period (a five-year protection period for some goods), during which we will gradually reduce protection duties. Yes, there are risks and considerable disadvantages. I have to handle this situation. For example, what does the introduction of technical standards and regulations into our national economy mean? This means huge expenses. As estimated, they will amount to from 100 to 150-160 billion euros within a 10-year period. But we face a dilemma – to accept the challenge and succeed, or to keep falling behind. That is all, my dear colleagues, from Echo of Moscow. So we are not making any choice.
Mykola Azarov:There is enormous potential for cooperation, first of all, in industries where we keep leading positions and can further strengthen them, in industries where acting alone none of our countries will be able to achieve this any time soon without spending huge resources. That may be a hard-hitting goal for Ukraine, and Russia may only succeed having spent a lot of money.
And now let’s move on to cooperation with fraternal countries, our traditional partners. I hope that the signing of this agreement will not weaken or create setbacks in our relations. There is enormous potential for cooperation, first of all, I am stressing that for the third time today, in industries where we keep leading positions and can further strengthen them, in industries where acting alone none of our countries will be able to achieve this any time soon without spending huge resources. That may be a hard-hitting goal for Ukraine, and Russia may only succeed having spent a lot of money. I am saying this openly to the Prime Minister and thinking how to live up to the challenge. Yes, there are serious risks involved, but still, I believe that we have taken the right decision.
Dmitry Medvedev: May I also try to answer why Ukraine is signing the Association Agreement? Here is my answer: I don’t know. It is Ukraine’s decision. I see no benefits in it, but probably our Ukrainian counterparts know better. We will see what happens next.
I can only say that Russia boasts an impressive trade turnover with the European Union – a turnover of over 400 billion dollars – but we have not signed an Association Agreement. We do not need it, everything develops well without it. It is always the country’s decision as to which form of cooperation to choose. It is important that this form does not interrupt the development of economic processes, promoting integration with European countries as well as other states that Mr Azarov has just mentioned.
I can just say that after signing the Association Agreement (this is our open, simple and sincere position) it will be difficult for Ukraine to join the Customs Union, if it ever decides to. As regards full, not associate, membership, not just observer status, I think that there is no chance at all. Because initially we told our Ukrainian counterparts that we were willing to consider different forms of cooperation, but it was important for us that all members of the Customs Union had equal rights and duties. The option Russia – Kazakhstan – Belarus plus Ukraine or some other country, in this case it does not matter, is unacceptable because we want to create a full-fledged union, a full-fledged Eurasian economic union, not just some amorphous association. This is what we will proceed from in future.
Regarding our European partners, it is hard for me to comment on the position of a single EU commissioner. I can just say that the Europeans have many problems of their own, and I think that the European Commission should pay most attention to the recovery of the European economy and try to avoid a repetition of the crisis. At least, I think, this is more important than to look around and criticise one’s partners.
Question: Mr Medvedev, I have a question. Neither you, nor Mr Azarov touched gas issues. I would like to know whether the price for gas is still a subject for discussion, or is it no longer relevant? This is the first part of my question.
And second. You used to talk about how you were interested in the modernisation of Ukraine’s Gas Transportation System. Several years ago the Nord Stream was put into operation. Now the South Stream project is underway. I would like to know whether you are still interested in the modernisation of Ukraine’s GTS.
And one more small question. Some Russian politicians say that if the Association Agreement is signed, a visa regime may be introduced between Russia and Ukraine. Are we to expect the introduction of visas?
Dmitry Medvedev: Are you addressing all these questions to me? I see.
Of course, we have discussed the gas issue because this issue always surfaces during all our talks. But, on the other hand, there is a subject which can be discussed, and there are specific legal realities which currently exist. These realities are as follows: Russia and Ukraine abide by several gas delivery and gas transportation agreements. These long-term agreements should be fulfilled because they are generally binding and because they are international agreements.
The issue or issues of fair prices and terms of future cooperation can, naturally, be raised. But, before we reach agreements on future parameters of cooperation, it is our opinion that all provisions of current documents should be fulfilled because things cannot happen otherwise in international relations and inter-state relations and simply because this is a customary aspect of international law. Therefore, in my opinion, any comments that we hear sometimes, concerning a possible refusal to fulfill specific provisions … I believe these assessments are largely emotional, and we should proceed from the letter and spirit of existing international treaties. This is the only way for us to maintain normal and productive relations in the future.
As for modernising the gas transportation system, we are interested in this issue if our Ukrainian colleagues are interested in it. But I think that this issue is no more of interest to our Ukrainian partners. We have repeatedly offered our services, and not only repeatedly but also for several years, to modernise the gas transportation system. Our services were also linked with possible parameters of cooperation, legal forms of cooperation and those specific investment volumes which we are ready to contribute. But, unfortunately, we have failed to adopt any decisions. From this, I can draw the conclusion that our partners probably don’t perceive this as the main issue now. In the long run, this is your gas transportation system, and it’s up to you to decide whether it should be a modern system or whether it should continue to rust away. And it’s up to you to decide on the future of our bilateral gas relations.
Indeed, we are using alternative gas delivery routes, and I see nothing bad in this. This is competition which every state would like to see, and which ensures their economic potential.
As for visas, this issue is not being discussed in our relations, and I hope that we will not face this situation.
Mykola Azarov: Mr Medvedev, I will only add a bit more because I know how the Ukrainian journalist will interpret your answer.
Dmitry Medvedev: I believe that he will do it objectively and in accordance with the code of journalism.
Mykola Azarov: Mr Medvedev, I can comment: The gas price is wonderful, Ukraine is reportedly not interested in upgrading the gas transportation system because they allegedly did not show any interest, so to say … Well, I would like to say that this is not so, and this is not what Mr Medvedev had in mind.
Dmitry Medvedev: Yes, guess for yourselves.