TRANSCRIPT: Dmitry Medvedev’s meeting with Russian and German business leaders at the Munich Security Conference

(Government.ru – February 13, 2016)

Dmitry Medvedev: Mr Buechele, colleagues. I welcome you to our breakfast on this Saturday morning. It’s this kind of morning meal where you don’t usually have the chance to eat anything. The goal of such meetings is naturally different.

I consider this meeting to be useful and timely. Despite all that’s going on and all the issues that Mr Buechele just mentioned, Germany remains Russia’s most important European trade and economic partner and one of our most important trade and economic partners in the world. In fact, Germany is our country’s second largest trade partner behind China. It’s economic interests that must steer our development priorities.

I would like to thank the Committee on Eastern European Economic Relations for organising this meeting and for continuing to bring the opinions of business community to our attention – to the attention of politicians and strategic decision makers.

Indeed, we have seen better times in the past, when the political aspect of relations between our countries was different and the Russian President’s and Prime Minister’s dialogue with German business people did not contain such a big dose of politics. But this is how things stand now, and even though I would rather not discuss politics until the plenary session, I will still say a few words on this. Of course, I would like to discuss what we can do to bring back the former level of trade and economic cooperation, what steps can business circles make to further it, and what actions you expect governments to take.

However, as I said, we can’t avoid talking about politics. Economic logic was often outweighed by political expediency, at least, in Russian-German relations and in Russia-Europe relations. When I’m asked what the main problem is at the moment, I always say it isn’t sanctions, which, of course, will be gone eventually, as they always do, producing the same zero result. The main problem consists in missed opportunities and lost profits. That’s the most regrettable aspect of today’s situation.

Mutually imposed sanctions, as well as the issues mentioned by Mr Büchele – I mean a drop in fuel prices and some other structural problems – cost us over a third of trade turnover last year. If we look at Russia’s trade with the EU as a whole – we realise that there is a common European economy as a whole – the loss equals nearly half of trade turnover of the last few years. That’s truly a shame. In other words, we peaked at 450 billion euro, and fell to 235 billion now. This is not good.

Exporters suffer the pain as they lose their strong market positions they worked for years to achieve. The question is whether this is profitable. Like I already said, no, of course it isn’t. Another question is whether it will bring about the political results that certain political circles expected to materialise when they made specific decisions. The answer again is no, it won’t. All of you are pragmatists, all of you know very well from the history of our country, whatever it was called at the time, that whenever it was hit by sanctions, they achieved no result. I’m not trying to analyse the reasons why, let alone make any judgment as to who was right and who was wrong. It just simply makes no sense.

It is clearly damaging to long-term economic interests. You are active in different countries, on many continents, and can see how rapidly the economic landscape can change. What’s the problem I’m talking about? Vacant market niches are quickly occupied by competitors. Rivals won’t wait! Entire enterprises, at times even entire industries, are left behind as progress in technology goes on.

I won’t deny it, I have repeatedly met with colleagues from different European countries, with businesspeople and politicians, heads of state and government to hear them ask me to lift sanctions on a particular sector with respect to their countries. But we cannot do it. First, because these sanctions are reciprocal in nature and, second, because WTO rules won’t allow it since otherwise it will look like a selective approach.

For that reason, our position is that the ball is in the court of those who first imposed the sanctions. As for the policy framework to lift them, it’s a matter of political dialogue. Naturally, we will maintain this dialogue, including on Ukraine, as well as on some other matters that we are always ready to discuss.

It is now clear that we waste our resources on political confrontation. We make concrete proposals that could mutually strengthen our positions. We have formulated a new approach to cooperation between integration associations, or the Eurasian Economic Union and the European Union. Today, Eurasia is a 180-million market with a huge potential for trade development. We have been working closely on this with the countries of the Asia-Pacific region, particularly with China, but I would like to hear – and I am asking you now – a clear statement by European politicians and, of course, by European businesspeople. We believe that it’s time to begin a relationship at this level as well.

Nord Stream-2 is another example of a project that is important and yet politicised. I attended the launch of Nord Stream-1. The first two legs of that pipeline are now in operation with a load of more than 70 percent. The main thing is that there are no associated transit risks. All concerns related to environmental security have also been addressed. This project has improved Europe’s energy security. Now Nord Stream-2 is on the way. As is the case with any large-scale enterprise, some countries are unfortunately trying to artificially politicise this project, although we can see the interest of a number of countries in the second stage of the project. I recently discussed this issue with the Prime Minister of Finland, members of the Austrian Government and with other colleagues. We hope that in the end a positive decision will be taken, especially because it benefits businesses in Germany and Europe more broadly. I am sure that those present here today know the answers to most of the questions.

I can see here representatives of large, reputable companies, which have had a presence in Russia for decades. We have many joint projects in industry, power engineering, metals, transportation, chemical industry, automotive industry, which create thousands of jobs in Germany and in Russia. There are over 5,500 companies partially or fully owned by German enterprises that have been successful in the Russian market, with cooperation firmly established both between large corporations and between small and medium-sized businesses.

Our economy is going through a difficult period. This isn’t an easy situation for us but we’re managing. The country is adapting to the dramatic external change. The drop in oil prices can’t be ignored but it isn’t critical because we have a fairly good safety margin, minimal sovereign debt and considerable reserves. Despite the circumstances, we finished last year with a surplus in trade and payment balance. The weakening of the rouble has created new opportunities to boost exports, and, of course, it is important to use this window of opportunity to make certain changes and rectify the structural imbalances in the economy. At the same time we are also actively engaged in import substitution. There are some good results in a number of sectors, including agriculture and food industries. Russian farmers are willing to fill in the gaps in other areas, too. We understand that the longer the sanctions remain in place, the less chance the Europeans have to maintain their positions in the Russian market as suppliers and as investors. For that reason, we must act quickly. Yet we also hope to continue our work with European companies in our market in the future. We will continue to engage in the development of innovative and high technologies. In fact, theses processes were launched some time ago with my involvement, including the economy modernisation project. We shall continue to increase the competitiveness of our economy, and we will not stop working towards this goal. There remains a sound foundation for cooperation in the automotive industry and transport engineering, and we will be happy to continue working with our German partners in these areas.

I would like to thank those German businesses who are still active in Russia in difficult times like this, contributing to its development by sharing knowledge and technology as well as through continued investment. It is naturally important to us that our partners should have long-term business plans in Russia, create jobs and set up high-technology manufacturing. One traditional platform for business dialogue is the Foreign Investment Advisory Council, with large German companies among its members. This year will see an anniversary, the 30th meeting of the council, and we will be glad to see our German partners in attendance.

Colleagues, there is no alternative to cooperation; it is evident both in Russia and in Germany. We see that the interest of our countries’ businesspeople in resuming full-scale cooperation, and we are making certain steps to achieve this. On that note, I would like to point out that the Petersburg Dialogue Forum has been resumed. In October 2015, the first meetings of a Russian-German business platform also took place. I hope this dialogue will continue at future international economic forums in St Petersburg and Sochi, the forums to which you are all invited and I very much look forward to your participating in them.

I think I’ve said enough for a start. Let us now turn to issues of common interest.

Wolfgang Buehele: Mr Prime Minister Medvedev, Mr Prikhodko, business leaders. Mr Medvedev, it is a great honour for me to welcome you to this breakfast today.

It is the second time this year that a German-Russian breakfast has taken place. It’s enough to look at the list of attendees to understand how keen Russian and German businesses are on maintaining bilateral cooperation.

Judging by the number of 5,600 companies, no other country is more represented in Russia than Germany. Unfortunately, this has not been reflected in recent statistics. In 2015, our bilateral trade dropped by a further 25 percent. 2012 was a record year, by contrast, so we can say that our trade has fallen from €80 billion to €20 billion. The outlook for 2016 is fairly gloomy.

According to a recent poll of German businesspeople, 81 percent of German firms in Russia believe the prospects are negative. Still, I think it’s a good thing that an overwhelming majority of German companies are maintaining their faith in the Russian market and believe the economy will rise.

It is clear exactly what has brought about this crisis. It is the result of historically low oil prices, the rouble’s plunge, and bilateral sanctions. Further exacerbating the situation are Russia’s structural problems, which you, Prime Minister, brought up at the time of your Presidency.

We believe that the focus on modernisation was at that time the right response to the need for reform in Russia. We hope that modernisation will be promoted and developed further.

The reducing of state control and the minimisation of red tape, in concert with state support for small and medium-sized enterprises would be a very important task and one that we believe is worth engaging in.

German businesses, who eagerly follow your policies for relocating production to Russia, can stimulate these efforts through their local investments.

Another objective is improving the competitiveness of the Russian economy. We will address this later when my colleagues will discuss this in a narrower circle. We believe, however, that the Russian economy will continue to face difficulties without European de-escalation, without the settlement of the Ukrainian crisis. The EU’s policy for the lifting of the sanctions is tied to the implementation of the Minsk agreements. We hope that in this respect, starting from summer, we may begin easing the sanctions, and I believe that this meeting will contribute to this process and, hence, may bring about a positive development in international relations. We badly need it to resolve many common problems. The Committee on Eastern European Economic Relations endeavours to benefit this dialogue, as do all those who are in attendance. In order to lift the sanction step by step, it must be made clear that the key provisions of the Minsk agreements are being implemented. These provisions include a continued ceasefire and the access of OSCE monitors to the entire conflict area. Mr Medvedev, we place great hope in you and the Russian Government. German-Russian relations are of a special nature for many economic and political reasons. We count on flagship projects, such as Nord Stream 2. In this context, we are counting on the Federal Government’s support to convince sceptics in the European Union. I hope the Russian-German working group on strategic issues will resume its important work. The strategic working group led by you, Deputy Prime Minister Likhatchyov, is very important for this cooperation. Economic cooperation with Russia specifically can greatly contribute to achieving security, stability and peace on Earth. For that reason, we advocate the creation of a common economic zone from Lisbon to Vladivostok, which will also include Ukraine. Ukraine must remain a bridge to Russia, it should not become a dead-end. We would like to see the resumption of the tripartite talks between Russia, the EU and Ukraine. It is equally important that the talks between the European Commission and the Eurasian Economic Commission take place. My task for the coming months and years is to introduce new meaning to the relations we have with Russia and to improve upon them. And we have plenty of reasons to do this. And therefore I’m sure this partnership will materialise.

Mr Prime Minister, on behalf of my esteemed colleagues I would like to thank you for your time to meet with us, and I look forward to the forthcoming discussion. Mr Prime Minister, I pass the floor to you.