The Russian president on the future of Europe, why he’s bullish on Gazprom, and the coming U.S. election.
Interview by John Micklethwait
| September 8, 2016
From Bloomberg Businessweek
On Sept. 1, in the Siberian
port city of Vladivostok, Russian President Vladimir Putin discussed a wide
array of issues with Bloomberg Editor-in-Chief John Micklethwait. The two-hour
interview ranged from islands disputed with Japan to the price of petroleum and
the vicissitudes of Gazprom, the immense state-owned enterprise that supplies
natural gas not only to his country but to much of Europe. Putin, the
longest-ruling Russian leader since Leonid Brezhnev, weighed in on the U.S.
election, as well as his relationship with Turkey’s Recep Tayyip Erdogan and
Syria’s Bashar al-Assad. Here are excerpts from their conversation.
John Micklethwait: There seems
to be the beginnings of a political deal with Japan where you might give up one
of the Kuril Islands in exchange for greater economic cooperation. Are you open
to a deal of that sort?
Vladimir Putin: We don’t trade
in territories, although the problem of a peace treaty with Japan is, of
course, a key one. And we would very much like to find a solution to this
problem with our Japanese friends. We had a treaty signed in 1956, and,
surprisingly, it was ratified both by the Supreme Soviet of the USSR and by the
Japanese Parliament, but then the Japanese side refused to adhere to it, and
then the Soviet Union basically nullified all the agreements within this
treaty.
Several years ago, our
Japanese colleagues asked us to return to a discussion of this topic. And we
did, we met them partway. … We’re not talking about some swap
or sale, we’re talking about finding a solution where neither
party would feel defeated or a loser.
Do you expect the euro to survive?
I hope so. I hope so because, first of all, we believe
in the foundations of the European economy. We see that west European leaders
in general—there are disagreements, of course, which is understandable, that we
see, observe, analyze—but they stick to very pragmatic approaches to resolving
economic issues. We can’t say whether they’re right or wrong. It depends on
your perspective. They don’t misuse financial instruments or liquidity. They
primarily strive for structural changes. In fact, the same problems are no less
acute in our economy, perhaps even more so. I’m referring to a problem that we
can’t overcome, specifically the dominant role of the oil and gas sector in
Russia and, as a result, our dependence on oil and gas revenue.
But in Europe,
without dependence on oil and gas, they’ve also needed structural reforms for a
long time. I think that the leading economies have taken a very pragmatic and intelligent
approach to resolving the economic problems facing Europe. That’s why we hold
about 40 percent of our reserves in euros.
You expect Europe to keep the existing membership?
They’re not going to lose another country like they lost Britain?
You know, I don’t want to respond to your provocative
question, even though I understand that it could be interesting.
Come on—many, many times you’ve criticized Europe.
I’ve been critical, but I’ll repeat: We hold 40
percent of our reserves in euros, and it’s not in our interest for the euro
zone to collapse. Although I don’t rule out that there could be some decisions
made that would consolidate a group of countries with equal levels of
development and thereby, in my opinion, strengthening the euro. But there might
be some other interim decisions in order to preserve the current number of euro
zone members.
We have criticized many things and believe that our
partners have made more than a few mistakes, as probably we have, too. Nobody
is safe from these mistakes, but in regards to the economy, I’ll say it again:
In my opinion, the European Commission and the leading economies of Europe are
acting pragmatically and are on the right track.
Russia used to have $500 billion in reserves. It is
now down to $400 billion. You have this target to go back up to $500 billion.
Should the central bank be buying more dollars to push the reserves back up?
You and I know about the necessary amount of central
bank reserves, and the target is well-known. But for the general public, we can
say that the point of the central bank’s gold and foreign-currency reserves
isn’t to finance the economy but to ensure foreign trade. And for that we need
a level that’s sufficient to support foreign trade of a country the size of
Russia for at least three months.
But we have such a level that we’re not only
able to safeguard our foreign trade, but also stop working and live off the
reserves for, at minimum, half a year, if not more. So that’s more than enough.
From the viewpoint of safeguarding stability of the economy and foreign trade,
we absolutely have enough gold and foreign-currency reserves. And everything
else—the buying and selling of currency—is related to the regulation of the
domestic-currency market. How the central bank reacts to this, and whether it
will lead to an increase in the reserves, is so far difficult to say.
Almost two
years ago you said that if crude oil fell below $80 a barrel, there would be a
collapse in oil production. Well, the price is still below $50, and production
hasn’t stopped. Has your thinking changed on that at all?
Well, if I said that oil
output would cease, then I was mistaken. … I said that new deposits
probably wouldn’t be commissioned at a certain oil price. Strictly
speaking, that is what happened.
But perhaps even surprisingly,
our oil and gas companies, mainly the oil companies, are continuing to invest.
In the past year, the oil companies have invested 1.5 trillion rubles [$23.3
billion], and if you take the state’s investment in the pipeline network and
electricity sector, then the overall investment in energy is 3.5 trillion
rubles in the past year. That’s quite significant.
By the way, we are the world’s
leader in terms of natural gas exports, with a global share of about 20
percent. In the export of liquid hydrocarbons, we’re also among the leaders.
We’ve been first in liquid hydrocarbon exports. … On the whole, Gazprom is in
great shape and is increasing exports to its traditional partner countries.
Would you still be in favor of
a production freeze if the Saudis and Deputy Crown Prince Mohammed bin Salman
want that?
He is a very energetic
statesman, and we really have struck up a friendly relationship. This is a man
who knows what he wants and knows how to achieve his goals. But at the same
time, I consider him a very reliable partner with whom you can reach agreements
and can be certain that those agreements will be honored.
But still, we weren’t the ones
who rejected the idea of freezing output levels. It was our Saudi partners who,
at the last moment, changed their view and decided to take a pause in taking
this decision. But I want to repeat: Our position hasn’t changed, and if Prince
Salman and I speak about this, then I shall, of course, put forward our
position again. We believe that this is the right decision for world energy.
That’s the first thing. The second thing is that everyone knows what the
dispute was about. The dispute was that if production were to be frozen, then
everyone should do it, including Iran. But we understand that Iran is starting
from a very low level, related to the well-known sanctions against this
country. It would be unfair to leave it at this sanctioned level. I think that
from the viewpoint of economic sense and logic, then it would be correct to
find some sort of compromise. I am confident that everyone understands that.
The issue isn’t economic, it’s political.
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