 Okay, well good morning everybody and welcome to this session to discuss the outlook for Russia. I understand this session was heavily oversubscribed which is no surprise because Russia finds itself at an absolutely fascinating juncture this morning. Economically it is facing a crisis following the collapse in the oil price and the impact of sanctions. Geopolitically it's at a very delicate moment given the confrontation with the West over Crimea and Ukraine and politically there are a lot of very important cross currents right now given that although President Putin appears to be extremely popular at home there are growing criticisms both internationally and within Russia. So we have a fantastic panel this morning to look at the outlook for Russia at this very very delicate juncture. I'm not going to have lengthy introductions because I think most of them are probably known to you and there is a lot to discuss but on my far left you're right. We have Wu Jingbo who is an academic in China who can put the situation into a geopolitical context and in particular look at the crucial question of the degree to which China is or is not willing to help Russia at this very interesting moment. Next to him we have Alexei Kudrin who is a man very closely watched at the moment who was previously Finance Minister in Russia, is currently an academic but has been voicing some very interesting views about the current economic situation and I'm sure that many of you will want to hear what he has to say. Next to him we have Sir Michael Rake who is single-handedly representing global business outside Russia. He is the President of the CBI, the Chief British Business Group and he'll be giving us a perspective on how Russia is or is not open for business at the moment. Next to him we have one of the most important bankers in Russia, Andrei Kostin who is CEO of Chairman of VTB Bank who can talk to us about the impact of the sanctions on the Russian financial sector and the help it is or is not going to receive from the central bank. And on my immediate left, you're far right, we have Deputy Prime Minister Igor Shruvalov who is going to be explaining to us exactly what the Russian government can or cannot do to get out of the current situation and whether it has any regrets about some of the events over the last year. But I'm going to start with Kudrin to ask you, you have expressed some very strong views about the severity of the economic crisis and the challenges. And so I'm curious, when you look at the economic situation today in Russia, is it worse than say in 1998 or 2008? And do you think it's going to be possible to exit the current problems without a full blown crisis? And the speakers will be speaking both in Russian and in English. I think most of you do have headphones, so do look at those. And I will say that although this session is closed to reporting media, it is on the record and it's also being webcast. Thank you. A couple of issues which are extremely crucially important for the Russian economy. Probably, we have already exhausted the previous model of development when an average growth was about 7 percent annually. And this growth was based on the growth of demand. And this driver, we have lost it. It doesn't work anymore. Even two years ago, with high prices on oil, we didn't get this growth. And the most important problem, low productivity, which doesn't secure and this productivity is not supported by the competitiveness that we need by the corresponding relevant institutions. And thus we have to have a totally different structure of economy. We lost some time and we didn't finish building some of the relevant institutions and structural reforms. And this is also, I'm talking about myself here because I worked in the government at that time. And of course, I was not alone in taking all these decisions. But there was a certain movement. There were shifts in terms of political challenges that we faced at that time in terms of being good for our constituencies, huge expenditures for social support, and we didn't pay sufficient attention to infrastructure. So when we say let's start searching for structural reforms, well, we have to say that there is a share of the government state in the economy. I mean, a strong regulation on the part of the institutions. But at the same time, the government, the state shouldn't work in the market as it happens today in the oil and gas sector in industries. One of the problems is that state corporations were not successful in creating innovation economy. This is absolutely so. We are doing something of, okay, but it's 20 times less that what we had to do in terms of the competitiveness of Russia. So this model of state corporations failed them. Social security, social protection. Traditionally, Russia and Soviet Union, the country was very strong in terms of social protection. But now we spend a lot on this item, but it didn't bring us any results. So we have a gradual reduction in poverty, but it's not adequate in terms of the resources that we invest in this area. And now it is important to have specific social support and protection. And the remaining of the resources we have to use to fight crisis situation to support those who suffer as a result of the crisis, but it should be done more efficiently and in an economic way than before. We don't know what the price for oil will be. Now they say that probably the drop in prices will lead to the drop in investment, and then the prices will go up again. I supported this idea before, but it was before what the price will be in two or four years. $40.60, $80, we don't know, we just don't know. There are quite a few factors involved here, and thus we just don't know which will be the driver that will identify the key elements of this. The anti-crisis program should not contain the specific elements of supporting citizens or individual enterprises. The most important problem for the government is trust. Without the structural reforms, it is, without the structural reforms, we won't have trust, and thus we won't be able to get out of this crisis situation, come out of it. Second, the steps that we have to take, they should be directed against the crisis situation in the area of social support or distribution resources within the budget, the so-called budget maneuvering. It means that the gradual increase in investment into infrastructure will be structural reform in itself, etc. And another point, sanctions are quite felt in Russia, and even under the conditions of sanctions, we can achieve growth. I spoke about that, but we have to understand that we have to have a vector of our activities to take steps to settle, to regulate, and then the sanctions gradually are going to be reduced. At least we have to know that they will be not increased, they will not be tougher, stricter, so that we could fix a certain problem at certain level and move ahead. If the sanctions are going to be increased, the 50 percent of them measures that we are proposing, they will be just inefficient. And the final point, it is very dangerous today when the government is hugely committed in terms of social support and defense expenditures, measures against crisis situation, very expensive, to turn back to the central bank. So to get additional reforms, emission resources from the central bank, to start to regulate the central bank activities, it is a bad way. Probably it will, and most likely it will reduce the attractiveness of the Russian financial market. We heard about bad expectations in the market. If the central bank is going to credit major corporations, saving them, the financial policy in Russia will become worse, and the investors just won't come. Well, thank you very much, and deep, Professor Grugrin, for that very coherent set of, one might say, criticisms of the current policies. I'm going to ask the minister to react in a minute. But first, you sound as if you have quite a clear idea about what the Russian government should do next. Would you like to be in it again? You're from Financial Times, and usually journalists ask me this question, and I always answer, no comments. Okay, well, that's a pity. Well, that buys the minister more time to think about how he can react to the comments of perhaps, maybe in the future, of a future colleague. But, Minister Shulvalov, you've had a number of criticisms that Professor Grugrin thinks you should be having privatization. You should not be using the budget to support particular actors within the system. I would imagine the banks would be one of those. And you have also heard that he does not think you should be turning to the central bank to simply support the financial sector. Presumably, there is concern about whether the reserves are sufficient and whether that's going to impact the credibility. What is your response? First of all, whatever Alexei Kudrin has just said, I totally support publicly. We always say the same, but in private we always argue. But here I support him and dangers. There are certain apprehensions, but this is not reality. And today, when the economy of Russia is in a very difficult situation, a lot of talks were here and gossips what we plan to do or the president of the Russian Federation plans to do, etc. We start with the central bank. The bank, which acquired its status a year ago, has a unique status and unique opportunities and possibilities. And the Russian government, even if there is a will and desire to control the authorities of the bank, it is not possible. And it was done as an institutional achievement. And because of the skillful leadership, the previous leadership of the central bank of Russia, Mr. Ignatiev, they carried the work and they built the bank as an independent institution. Well, many think independence is totally independent, even from the reasonable approach. No, they always carried independent policies. And the Bank of Russia became a single regulator on the financial markets, including it took independent decisions. We had a certain period of time so that the government wouldn't encroach on the authorities of the central bank, when the government couldn't interact with the bank, but it's in the past. We'll learn how to interact with the bank through the Board of Directors and other instruments to interact and cooperate with the leadership of the bank, but I'll be open. Maybe you know how it works. The Bank of Russia is taking its decision independently and often takes this decision against the position of the Minister of Finance and the Minister of Economic Development. And there are no signals that we have to change the situation. Often we have to listen to the Minister of Finance because that's his responsibility as a whole. So, both the president and the administration of the president, they understand the responsibility that we have, totally all of us, so that to maintain these achievements with respect to the central bank of Russia. And nobody is going to ask questions about the stages of the Bank of Russia. Not a single additional measures to influence the banks so that we could just squeeze out of them the liquidity, so to save some state corporations. We are not going to do it. We don't have plans to do it. And we don't have the possibility to do it. But we have still here, Gossips, et cetera. And, well, for instance, recently I heard that we are going to introduce a certain control in terms of currency operations, currency control, in other words. But we cannot even explain this position. Why should we do it when a dramatic change in exchange rate happened? People are scaring themselves with certain fairy tales themselves. So, when all that happened, why would we do it to reintroduce the institution when we had, well, we personally could and me and others, we wanted to kill the currency regulation. And it shouldn't be there, the currency control. And it is difficult to recreate it. It's very difficult. If we take the law, it does nothing because when we had commercial banks before 2007, whereas commercial agents, we had a very efficient currency control. Then we lost it. Okay. There are many other things. There are no crazy people in the Russian government. Even if you want to see them, they are not there. And we don't have crazy ideas. We don't discuss them. Indeed, we have a parliament. Many think that they absolutely, that it is totally subordinate to the Kremlin. But I am dealing with the economic policy. And I can say that you cannot order anything to the parliament. We cannot ask a president or Prime Minister Medvedev, please help us in putting through a certain legislation. It is not possible because they have certain, they are certain and sometimes very tough position. Well, for instance, sometimes they are against the position of the government and sometimes even interfere with the policy of the government. I mean, in terms of everyday politics and activities, well, about the legislation about MasterCard and VisaCard, it is legislation that is very difficult to implement. And the administration of the president and the government advise them not to do it, the law which will be difficult to implement, which will become too productive. But they didn't listen to us and they adopted this legislation. Sometimes leaders of the Communist Party or leaders of some political factions, they say that reintroduce currency control through emissions. We have to carry out investment programs. They talk a lot. But we have to look at the legislation that exists in Russia. And it's quite modern in Russia. We have problems in terms of the implementation of the existing legislation. And so that every would understand that everyone should abide by the law. But at the same time, when we hear these absolutely extravagant, absolutely different positions expressed, well, about the crisis situation, sometimes you identify parameters of the crisis situation. But Andrei Yudovitch and others and other colleagues in France and in this room, we went through the most difficult crisis in 91, 93, when we didn't have food on the shelves on the shops. We didn't have money. The enterprises didn't work. We had a natural exchange of goods. A total collapse of the country. The country just collapsed. The Soviet Union collapsed and a new country appeared, the Russian Federation. And we had to learn to live in these conditions. Then, 98, people don't remember that. They don't talk about this. But probably we remember, some of us, that it was quite a painful situation for an investor suffered, the Russian companies and citizens of Russia, because we went through the collapse of the banking system. Many deposits of the people were just lost and very high devaluation. And then the crisis 2008, 2010. So when we ask the question of what we think of this present situation, well, I can say that it looks like it's softer than before. But this is just, if we take the depth and the complexity of the situation, I think that we are going into a longer crisis situation, more protracted one. Of course, well, what would happen if the prices go up? Alexei Kudrin said that nobody knows what the price will be. But the difficulty of our economy is going to be more difficult, because our constituencies want the more expenditures if the prices go up for oil. So nothing is good in this current situation. It is a very difficult situation. It's going to be worse. And the anti-crisis plan should be aimed at the adaptation to the hard landing, as we said before. And we have to learn how to live from citizens of Russia to corporates in these difficult situations. And we have to carry our three forms now, reforms that we've been talking about a long time. And my apprehension is that this agenda can disappear quickly if we get a back-expert income. So this agenda will be changed, and that's what I'm afraid of. Thank you very much indeed for that very interesting presentation. I mean, just a quick question before I turn to a view from the banking sector. When you look at the current situation, and given that you've said you think it could get worse, do you think that the cost of what has happened in the Ukraine and Crimea is too high in terms of the economic cost? Do you regret that? You know that many believe, and many want to say this, that whatever is happening now, it's because of the crisis in Ukraine. I would say more. If we didn't have the crisis in Ukraine, and we would have the price for oil at 47, and probably below that, and we wouldn't have this factor, sanctions, Ukraine, et cetera, the situation would be much worse, tougher. Because after Crimea and Ukraine and sanctions, because people don't link sanctions to Putin because people believe that this is a tech Russia. Why he has these huge ratings? Because people see that it's a tech against Russia. So we have to unite around our leader. We have the mentality, certain mentality. You have to know the Russian history. And in these conditions of this high consolidation, and with all the conditions, tough conditions outside and inside, we have to implement this agenda. If we didn't have this consolidation, and the prices would be high, it would be twice as difficult to implement this agenda. So if we just put aside politics and just concentrate on political objectives, these consolidation and tough conditions, it's a huge starting point for reforms. But to carry out reforms in bad conditions outside and inside, and with low support from the population, it is hardly possible nobody would be, nobody would dare to carry it on. So it's not that I regret, I don't regret. I'm just saying that it gives us a good canikap. So just before I turn to Mr. Kostin, you're basically arguing that there is no chance of a change in the strategy towards Ukraine because of the economic crisis. Have I understood you correctly? Well, I'd be curious to hear your views as well. You can choose. Well, why don't I ask both of you? That's the interest of democracy. You can both get a chance to voice your opinions. I mean, I don't understand why you asked to change. I think there's a process of mutually finding the right solution to the crisis. And the more you press on Russia, I don't think the situation in Ukraine will improve. What we expect that we would like you to, or the West, to listen to Russia and jointly to find the common solution. I think what we discuss now, we discuss the German, Germany, France, Ukraine, Russia. I think that's the format we should discuss. Asking Russia to change the policy is not the correct way. Russia is very eager to find the solution. I can tell you from my personal meeting with Mr. Putin and Mr. Shovalov, I'm sure, would support me in this. Mr. Putin is probably more than anybody else is keen to resolve the issue. Russia is not benefiting from the situation. Russia doesn't want to benefit from the situation. Russia is very concerned about the both economic and political situation in Ukraine. We're not benefiting from sanctions which are imposed by the West on Russia. We are losing from the situation. So I'm quite sure that we are very much interested in resolving this issue. But just pressing on Russia, just imposing more sanctions will not resolve this issue. Russia, you can't speak to any nation with sanctions. No nations, I think, will bend to sanctions. No Germany, no France, no Russia. And I think that's a completely wrong approach. And I think the business community, I have to openly say that I'm meeting a lot of people here, no businessmen. I'm at least, no banker, I'm at saying that sanctions are the correct way. Right. Well, thank you for that very clear view. I don't know whether the Deputy Prime Minister wishes to add anything about that. Can I add later something? Because otherwise, you know, I wouldn't be able to comment after everybody. Okay. Well, perhaps I can then ask about the financial situation and the banking situation because the Deputy Prime Minister has said that the Russian Central Bank is independent and yet at the moment you do have the Russian banking system with a large amount of foreign debt. I think you have 4.3 billion of foreign debt coming due this year at your own bank. Are you assuming that the Central Bank will continue to help you? And just how bad is the situation in the banking sector because we've already seen trust bank, for example, have a serious problem. How much help do you think you need? The situation probably not bad, but it's different. And I would say it's not the way which I would like my bank to develop because starting from 2007 when VTB was 100% government owned, we set a program with the agreement of the government of course who was and still our main shareholder. We set a target to privatize our bank, to fully integrate the bank into international banking system. And that's how we started our privatization programs. In that time, we had a number of privatizations and we successfully sold I think up to 14 billion value stocks to the international market. But today mainly because of the number of reasons. One of the sanctions which are not allowing foreign investors to buy our new stocks and secondly because of the worsening in the economic environment, we are not in a position to further privatize our banks. Mr. Kudin mentioned that one of the problems for the Russian economy is too much government in the economy. But we are now restricted by, for example, sanctions by further privatization. So 60% of our stocks belong to the government and we now have no possibility to approach the international market for the debt market. So the only the final resource for us is the central bank. So we are borrowing from central bank and we get a large support from the Russian government for our capital. But our external debt to foreign debtors at the moment is around 30 billion dollars. It's equally spread for the next 10 years. This year, as you correctly pointed out, we have to repay about 4.3 billion dollars, which represent only two and a half percent of our liabilities, which is absolutely no problem for our bank. And we don't need any support of central bank or the government from this point of view. I'm quite sure that overall neither Russian government nor Russian corporate sector would have any problem of repaying the debt either this year or next year. Besides the Russian central bank already announced the program of assistance to the rather corporations who would need the hot currency funds to repay debt. So I'm quite sure that foreign creditors and foreign investors would be quite comfortable from this point of view that they will get their money back. Well, I'm sure that's going to reassure people in the room or I hope it does. But on another question, I mean everyone's assuming that the sanctions will stay the same or maybe be lifted over the next year or two. If the sanctions in fact increased and for example, there was an attempt to exclude Russia from Swift, how damaging would that be for a bank like VTB? And can you find an alternative, say by building a system with China? You know, we already created the domestic system which might replace Swift. We'll definitely in discussions with our Chinese partners in order to create the system of settlement in local currencies. But I would like to stress one thing, if things like this happens, it will lead to an immense worsening of a general relationship between East and West. I once mentioned openly to American ambassador and Russian new ambassador that I think if it happens the next day both ambassadors in Washington and Moscow can leave the capitals because it happened before. For example, the relationship between Iran and America but then it was a completely different kind of relationship. There was no political dialogue, there was no cultural or any other relationship between Iran and America. It means that Russia and America might have no relationship after that. If there is no Swift, if there is no banking corresponding relationship, it means that the country is on the verge of war or they're definitely in a cold war so we should better prevent this kind of relationship between East and West. I think it's not that will be a matter of VTB Bank, it will not be just a matter of banking sector, it will be a very dangerous situation. I don't think anybody in this audience will be interested in this kind of relationship. Well, as someone who read about the financial system for years, never before has such a geeky obscure corner of the financial world managed to potentially be the source of a war so that's fascinating. But on that note, I'd like to ask Min Zhiyunbao, on the issue of China's relationship with Russia, I mean many of my Russian friends have indicated they hope to get support from China and hope that in fact that if there is a worsening of sanctions China will step in and so what's happened with Swift of course is very symbolic in that respect. Do you think that Chinese government is willing to provide significant support to Russia over issues like Swift if the situation gets worse? Well, China and Russia are certainly good friends, not only between two countries and also between two leaders, between Chinese apprenticeship and apprenticeship pudding. So in China we believe that you need friends indeed. So now Russia is in a difficult situation and if they need and ask for some assistance from China, I think China would be willing to do something it can to help our neighbor and friend to turn over the crisis. There are several things that China can do when it comes to the financial issue. You just mentioned the alternative to the Swift system. I recall that last September the Chinese Vice-Premier Zhang and Deputy Prime Minister Shulokov, they reached an agreement about you know our two countries may develop some interbank payment system. So actually this idea from the Chinese side to create a different cross border interbank payment system came up earlier when according to the Snowden revolution that the USS has been monitoring the transactions down through Visa and also Swift. So that reminds us that we need to create an alternative to the current Swift system. Other things we can cooperate with Russia is that our two countries have the bilateral currency swap arrangement up to something like 225 billion US dollars. And also last year among the BRICS countries, China, Russia, India, and Brazil and South Africa, we are working on some emergency arrangements up to 100 billion US dollars among the five members of the BRICS. So and then last year we signed two major deals with Russia on the net gas which in the next 30 years will be up to over 400 billion US dollars. Although this you know will not happen until after 2017-2018 but the construction work for the pipeline for the infrastructure on the way. So and also I think Russia is now encouraging China to invest more and direct investment in Russia's energy sector. So in many ways we can help our Russian friends to turn over the current difficulty. Right. Well I'm sure they'd like to hear that Deputy Prime Minister. Yes, I wanted to comment on China and on our eastern vector as a whole another urban myth. I don't know who the author of that myth is. It's not important when sanctions were introduced. It was said that due to the fact that the West is reducing its cooperation with Russia, Russia is now forced to cooperate with China and whatever Russia was obtaining from the West, Russia will try to obtain from the eastern primarily from China because it's a huge market in a country with huge reserves. But this is a myth. It is not the truth. Well before these events Mr. Putin asked me to work with the Ministry of Economic Development on its eastern vector. I was asked to do that in 2010 when we were developing our Vladivostok Summit agenda. We started to develop that agenda for the Vladivostok Summit in 2010. We had no problems with the West and no frictions with the West at that time. So when we produced the report to Mr. Putin the report was based on a balanced, simple road map. Our main partner is the EU, 50% of our export potential goes to the West and to the EU. We're a nation country, not just a European country. We have a vast border with China. Korea is another name but Japan is also very close. Our trade relations with the eastern vector is not very well developed. A political dialogue however was developing very vigorously with Japan, with China and North Korea. Everybody has difficult relations with North Korea but we had some trade in the far east with North Korea. We had our own ambitions and our own competencies there in the east and at that time we understood that EU is not the only one who says that it shouldn't be that dependent on Russian energy sources. Russia also needs to have a well-balanced structure of its export and the possibility to trade equally, to have a parity of trade on its eastern and western flank. And what did we see? We saw that at the very highest political level we have very good relationship with political leaders of China but trade is lagging behind trans-border trade, pre-border trade is developing but trade between Russia and China was not developing whereas the US did that very vigorously. We all had to study Henry Kissinger's book very thoroughly because he gives an example of sanctions and what to do with sanctions. Anyway, when we decided that we had to develop our relationship with the east and President Putin talked about in September 2012 it was not emotional. It had no wicked intention behind it. This was a very pragmatic agenda in order to be a strong economic system. We should learn to trade with the east as well as we're trading with the west not just in terms of volumes but with a totally different range of products. But when sanctions were introduced many said well we won't trade with you we will force you to behave in a particular way but you must know Mr. Putin's personality. Sanctions will never ever force him to do anything differently. Russians are like that and that's it but the west only knows this way of acting so it's acting as it can but we must think about our own people so we immediately immediately started our dialogue with China on all possible channels. I've never worked with China but I was asked to look at investment into our energy sector and we've achieved quite a lot there but there was a vast amount of stuff where we never really thought of each other we're never really interested in trading with each other so we are liable by JT common all these companies all these possibilities of private Chinese business were never even tested or tapped by us so we have to investigate this agenda very quickly and develop it very quickly of course I would lie if I would tell you it's very easy to go to China or to receive Chinese guests at home and to agree something it's difficult to negotiate but then it takes time but we have goodwill we have the interest at the government level we have vigor and large Chinese corporations are coming to our private investors are coming to us in the government and asking for political support and say we'll do everything ourselves we've never seen these investors before but now these young chaps who are multi-billionaires are coming to Moscow and I've learned that young billionaires exist not just in Moscow but also in China's but you must understand that we have no illusions vis-à-vis China it's not that we are hoping that whatever we're losing as it were in the west where we'll immediately regain at the east but the west should not think that we will never gain anything in the east we will we're an interesting partner for the east and we will develop this agenda so on the one hand we understand that they're a difficult partner on the other hand this partner has a huge potential and opportunity and of course we're moving forward we've created many institutions and platforms that are developing this agenda very vigorously now right well that's fascinating well I'm going to ask in a minute so Michael to talk about how the new excitement about embracing China makes British business or European business feel but first I'd just like to ask Deputy Prime Minister I mean one way that China could potentially practically help Russia pretty soon would be through the issue of foreign currency reserves you have already used up one-fifth of your foreign currency reserves and one issue which is obviously weighing on the ruble is the question of whether those reserves can be maintained indefinitely or not would you like to ask your newfound Chinese friends for help with supporting the ruble I would say the following that the Central Bank of the Russian Federation has its own competency and it is independent and I know that the Bank of Russia and Miss Nabyulina they work hard on this particular agenda I mean about the authorities and competence of the bank I don't have the right I know in greater detail what is going on but I don't have the right to tell you about this as about the expansion of the trading group Yuan Ruble and etc we expect that the Minister of Finance of Russia will come to China in pretty soon and the Minister of Finance of China is quite friendly towards Russia so we have several draft projects currency reserves the possibility of settlements the use of resources to support expert operations once again it would be not true if I say that it works everything works but within one year we can build the foundation when the foundation would be a real support and does does President Putin have any plans to go to China soon you know President Putin and Mr. Senipin they meet annually several times G20 different visits recently we had a big visit of Mr. Putin to Shanghai to China and they met the two leaders and after long protracted negotiations they signed the gas contract and many other contracts and agreements 40 of them but they meet on a regular basis several times a year and of course it will be the same in the future but you should remember that the first foreign visit which was conducted by the Chinese leader was the visit to the Russian Federation it was a state visit and the agenda was quite tense and exhaustive and they he proposed several formats but unfortunately Russian probably couldn't read the signals and now we're coming back and the Chinese way and etc so that way we are going to develop further with China I'm going to turn to question in a few minutes I'd like to ask sir Michael when you hear about Russia's growing interest in building links with Chinese businessmen do you think that that means that the door is effectively shut to European business now I mean do any of the members of the British CBI have any interest in trying to start new investments in Russia today yeah let me I'll come to that but just a few brief general points I mean firstly obviously as we all know business prefers predictability and stability however all global companies have had to learn to deal with the opposite in the last decade or so most recently I think as we begin to see a recovery that was so important economically and politically we've been rocked by a few things and no one expected perhaps we could have predicted the Middle East but from left field came Ukraine completely unforeseen was the fall in the price of oil the Swiss currency movement and the volatility in the ruble so this creates an enormous environment of instability that we have to manage through and look at I think in so far as Russia is concerned you know we have to understand from a business perspective we have no choice but to respect sanctions to the letter because the penalties are draconian and you could be put out of business for not respecting those sanctions having said that I think business is concerned that these sanctions are damaging to both sides particularly countries like Germany Italy France and London and financial services and we don't think that's healthy what we would like to see obviously is engagement at a private level particularly between the leaders of these countries Europe United States and Russia to respect each other's history strategic interests and to come to some conclusions as to the misunderstandings that clearly did seem to have occurred in relation to Ukraine and to put this right because that's what we believe would be best for everyone and for the creation of jobs because we see enormous opportunities for business with Russia it's one of the largest in the largest country in the world with huge resources I mean specifically on Russia if we look at the history from the post-soviet time there was a bit of a bonanza huge amounts of investment some degree of concern about consistency of application of the legal system the fiscal system and I think we were beginning to see progress there but I think you know these latest events are unfortunate in those in that respect and I think what we're seeing with business actually whilst respecting sanctions it's difficult to see because of instability much investment but I think a lot of companies want to maintain their position in Russia and hope that we seize to an easing of tensions I think also actually one must remember for Russia that they've been much wiser than for example than the United Kingdom about conservatism over their reserves some of their assets in terms of reserves they have so they do have an opportunity to reform to move the economy forward on a knowledge basis so I think there's some really interesting opportunities for Russia here you know to make those changes that the first deputy prime minister also has referred to and I think business should see it as an opportunity equally I don't think at all we should see Russia doing business with China as a threat the UK likes very much to do business with China I think most business leaders biggest concern would be what what my colleague here talked about was that this translates into a severance of the relationship between Russia and the west that's much more dangerous rather than any issue of trade I think the issues of mutuality of access to energy are really important for everybody there's a mutual interest in this and business hopes the common sense will prevail and our political leaders can get together and create an environment which business can invest and create jobs well I'm sure many people in the room would would echo that I'm going to ask the audience now for questions but before I do quickly Professor Guzlin do you have anything else to add and what another you've heard the rest of the panel commenting if not we'll turn to questions but I would like to add maybe I am more independent now than when I was in the government the role of the sanctions is really really high we should not underestimate it I am against sanctions I also do believe that they destroy the international infrastructure not only Russian but international global as well because we see local conflicts there are local conflicts and and if you select an instrument I mean sanctions we get a totally different form of globalization more expensive one when there is an attempt to impose your own rules and it is done through the mechanisms or instruments which undermine agreements conventions and of course it it is an instability factor not only in relations with Russia but unfortunately it has an impact on the rest of the world but unfortunately Russia of course feels the serious pressure on the part of sanctions and the fall of the ruble the plummeting of the ruble of course it is connected connected with sanctions we don't get foreign financing not sufficient but we are going to pay the credits 120 billion dollars part of it it will be refinanced apparently but again this is a lot of pressure on the exchange rate and about 90 billion dollars will leave the country and this is a huge blow to the Russian economy so we shouldn't underestimate that we should clearly understand the price that we pay and search for the ways how to reduce this price that's what I wanted to add basically do you think the president Putin understands the price of course he on a continuous basis takes advice from the experts consults with them it is very difficult for me to say something because I am not in the government with the government it is difficult for me to evaluate the strategy and tactics on the part of the president but as everyone else I would like I am trying to understand it well I see the objectives relating to the position of the Russian Federation in the international world as a stronger state they probably have more value than the price that we are going to pay but we don't know what price we are going to pay anyway not now that's my point of view all right well that seems like a good moment to turn to questions from the audience I know many of you have got questions I would ask you to make any questions very short and if you wish to direct them to someone in particular please indicate who you'd like to direct them to please do not make lengthy statements because there are clearly a lot of highly emotional issues at work now and it would be easier just to get some short questions or very very brief comments and lastly it's not compulsory to identify yourself but it would be courteous any questions right one in the front I think we have some microphones could we reach a point where um I'll start answering Alexei said I have fewer opportunities because I'm a member of the government but I can speak quite frankly and sincerely without beating around the bush notwithstanding the fact that I'm working the government and without uh and of course even if I'm not inside the government and when I vote with and I go to the polling station with my family we discuss very vigorously who to support inside our family but when of course I support President Putin as a voter as a citizen not as a member of government but given all of this I'll make one remark with regard to what Mr. Kudrin said I think that also that the sanctions are destructive and I don't like them if in my words I gave you a signal to the contrary that's wrong but we just work differently with each other the atmosphere exists and we must get the maximum out of it we must get maximum benefit for our people out of the situation that exists of course it would have been better if we had no sanctions at all if we didn't have such a standoff with the western world it would have been wonderful if we didn't have high inflation etc but since we have this given the fact that we have this we should not relax we should tone ourselves up and get the maximum positive effect from this situation and as to your question I'm being asked this all the time we're in Moscow and abroad but I think that when people ask me this question they just don't understand the makeup of a Russian person I don't mean ethnic Russian a person who was born and who has grown up and lives in Russia sort of a Russian makeup person you don't know Russian history these people don't understand how it works they understand our mentality we are a complicated federation where we have national ethnic republics Mr. Minyanov here represents one of the best regions he is the president of this is a muslim republic because the majority and the kind of eponymous nation are Tartars who are Muslims the more 22 million Muslims live in our country we have Finno-Ugurian people Slavic people whatever were a complicated mix once I had an opportunity to sit at a table with Mrs. Merkel and to discuss Russia with her it was the 60th of the Eastern Committee for the German economy and in Russian she suddenly asked me Mr. Putin does he think about freedom because she said that she's thinking about the freedom of the German people daily and I said of course Mr. Putin is thinking about freedom but imagine that you are sitting in the Kremlin and you need to say something that will unite people who live in Kaliningrad and in Petropavlovsk, Kamchatsk and the Far East they look the same they speak the same language with perhaps a few acts and differences but we have no dialects like in other countries and the president sitting in one place has to unite all these people and if some go to do shopping in Poland and Lithuania others go shopping to Korea and somehow they should be a unification platform for all of these and of course in this context President Putin should ponder freedom and he does ponder it and I remember there was a very interesting representative of the German nation who was a Russian Empress for 34 years running and if you know your history her first measure that she wanted to introduce was to free the Russian peasants but she was explained they explained that they she was told very quickly she was told very quickly that should she meddle with these things she'll be dealt with how she dealt with her husband I murdered and she wrote letters to Voltaire and Voltaire thought that she was very liberal and enlightened but there was no freedom in Russia because that freedom as understood by Voltaire would have been brought grief to the country so when you give some freedom to somebody you should not bring them misfortune and grief the last reform that brought freedom and grief and misfortune was Gorbachev's reforms it seemed that they will bring freedom and immediate well-being in fact this freedom and liberty brought poverty collapse and disaster so when we talk about this we must remember the nature of the Russian people and we must remember our history I would like people if they're keen to understand us to read a little bit of our history and how we developed for the last 250 years have a look at what existed in Russia the eve of the first world war what happened and why did the revolution take place what happened in the Stalinist times those who are lawyers are trained as lawyers we just had to learn our history and look at the history of state and law so if a Russian if a Russian feels any pressure from outside the Russian will never never turn away and give up his or her leader so any decisions taking in the country to consume less to consume less electricity to consume fuel commodities to tighten the belt fine but if we feel that somebody from the outside wants to change our leader and to influence our will we shall be united as never before of course there is an other side of the medal as soon as we stop feeling this outside pressure things start changing from the inside gradually I know that the west cannot move away from these sanctions very quickly and that's the problem the longer the sanctions last the worse for the economy but politically politically Putin will enjoy greater and greater support and coming back to this the government should nevertheless have a lot of courage and a lot of wisdom to undertake serious much-needed reforms based on phenomenal support enjoyed by the president Putin enjoys massive support widespread report and he should use it and the government should use it to introduce reforms one comment with regard to the fact that Gorbachev wanted to bring us freedom and brought his collapse destruction and poverty I absolutely disagree as a matter of principle I disagree because the reason for difficult reforms and complicated reforms after Soviet Union war that the political Soviet really elite from the end of the 60s to the 70s etc was totally inadequate was totally incompetent the problems were mounting the problem were shoved under the carpet the industrial output was reducing economy was inefficient there was no competition all of that corrosion of Russian of the Soviet economy brought down by high oil prices collapse when oil prices collapsed at the same time as Gorbachev came to power so when one says that Gorbachev brought freedom and brought destruction to the country that is totally wrong okay I have to apply this polemic is very interesting I said what I said and I'm responsible for my own words and remember Mr. Yakovlev's last interview before he died Mr. Yakovlev was the political ideologist of Gorbachev's reform he said this was their mistake they thought that bringing human freedoms human rights and freedom to people they will motivate people to work better and to become and to to build their own well-being I did not invent this a person very close to Gorbachev said that what I'm saying is that freedom of liberty should go hand in hand with a particular certain degree of cultural motivational economic development freedom which people are trying to impose on us this absolute freedom freedom from common sense freedom of media to insult anyone to insult an elected politician to throw dirt in his face is that freedom no that's not freedom if you have this kind of to have this kind of legislation to have this kind of liberty you have to have people have to have their own internal limitations and checks and balances but that takes centuries do you think we don't want western type democracy of course we'd love it but it can't happen overnight it can happen through decades of hard work okay I'll make a very short comment then I agree with mr. shuvalov that yes internal culture should exist but institutions should also exist and they should be created and when we say that today we're not ready for freedom and liberty or when we say we don't have enough culture and internal motivation that's not quite right this way we justify the fact that our courts are managed from a center that our courts are not independent I didn't say that I agree that we need institutions I didn't say that lack of culture is a motivation for limiting freedom well what I heard you say is that for a while we could turn away from freedom for the sake of other things well this is democracy in action but it was interesting very interesting any more questions I'm anything chief of the mosco based independent political magazine the new times I have to say that mr. shuvalov your interpretation of russian history is quite peculiar I would remind you that the same time that captain the great was the tsarist of Russia she created the pale of settlement where all Jews were put this great ghetto for Jews so there were you know she was a very peculiar representative of the russian tsarist family and I wouldn't say it was very smart I'm sorry to say this to address to address to the history of Catherine the great there was bit of the great there were a couple of other tsars who did something or you know tsar Alexander the second who conducted reforms of the russian judiciary and gave freedom to russian slaves but my question is the following okay brief because we have a lot of questions to go through yet I had to say this because I'm a citizen of russian federation but brief my question is the following if not for the freedoms that were given to you given to you personally Mr. Shuvalov by Gorbachev and Yakov and the whole the whole process of perestroika that gave freedom to millions of russians to take care about their lives to take care about their lives and to help others as Amartya said once said if not for that did you have a chance to become a very wealthy person did you have a chance to become the first deputy prime minister of the russian federation did you have the chance for anything Mr. Shuvalov if not for perestroika that happened when you were a kid thank you briefly and we'll look to the future right okay well I'm speaking calmly so perhaps you can put these questions to me calmly there's too much temperament in your question but going back to Catherine the great I spent two years studying her reign this was my job at the university or had to do it so I don't judge her as a person I judge her as a stateswoman and I talk about her reforms I'm just I just said that she really really wanted to give freedoms to the russian people the president of tatarstan was here but he left they love Catherine the great they all remember Ivan the fourth who was a buddy who conquered tatarstan and they love Catherine the great because she allowed them to build tall minarets well she was ardent to bring more freedom to the russian people and wanted to do it but she could not do it she could not undertake her agenda because she realized that she had a higher level of responsibility perhaps I am not entitled to interpret Putin's policies I'm not involved in political processes but I think that he is very much very keen to give the russian people freedom and well-being but without destroying the basis of the country and without killing many many people as far as me personally if not for perestroika would not be well educated I wouldn't have been sent to study at a american university perhaps my career wouldn't have been so wonderful and I wouldn't have been so rich of course perhaps not but the price the price was high and I realized what the price was only in 2011 I read a book that a friend of mine gave me perhaps mr the graph or maybe was christensky it's a book about a politician who built up a nation and we look at the authority of this politician and he has a huge authority in the world and he is many many questions are put to him about democracy amongst other things okay I'll be short I'll be short so he said not a single serious politician has the right to rule the country if he hasn't been elected I was sent to to elections far away from Moscow a former governor from primaries here mr that's can you understand that this patient people have a different agenda that they want to be free from property for instance they can't forgive the humiliation where their daughters were forced to become prostitutes when their sons were forced to become bandits and they can't forgive us they can't forgive Gorbachev because their generation had to live through this I won I received advantages and you did but millions millions didn't I'm just saying that what happened was happened in a very cruel way could it have happened differently maybe maybe a Gorbachev couldn't but maybe somebody else could have done a bit earlier so I stand by my words I think that they're simply fight understanding of the realities of the Soviet Union and their their understanding of their freedom and how that would affect the Soviet Union was erroneous and of course freedom as such is great and I have nothing against freedom freedom is wonderful well we're almost out of time and we have one very very quick question hi my name is Peter Feldman editor-in-chief of the Swedish business daily just what is in your opinion the biggest obstacle to find a solution in Ukraine in two minutes and that is international diplomacy our answer even quicker the biggest obstacle is the wish to put Russia in a place where western leaders think they want to see Russia until that changes no medicine will be found for this problem Russia has its own historical understanding its own historical responsibility for the world or one or some of its parts and one all the time Russia will be shown its place all the time Russia will be told please don't hope that you're an equal partner it just exploded in the Ukraine it just so happened and could have exploded anywhere but there is a lot that stands behind this that lots of history behind it so the main obstacle is if the west and Russia don't talk don't start talking to each other as equals and start looking for solutions but if Russia is told go to that corner sit there quietly and we will teach you through our sanctions nothing will be solved and it'll be a bleeding wound for decades literally 30 seconds okay one last question or comment quickly 10 seconds finally wouldn't be complete if I didn't have my opportunity Igor this is my fifth year 10 seconds 10 seconds 230 million dollars was stolen from the Russian government by officials in the Magnitsky case Magnitsky was murdered nobody's ever been charged with a crime why why why you're fighting for money right now well first of all i'm glad to see you because i don't have the opportunity to see you in the russian federation because you are persona non grata there last year i didn't have time to come to davos but i have to go to russia outlook i have to meet dr mr broder can't tell you in detail why money was stolen and nobody was charged but if there are people who are guilty and they were not charged and they were not punished that is very bad that's preposterous you didn't just simply died he wasn't helped he wasn't given medical help etc people should be charged should people should be put behind bars punished etc i don't know why this didn't happen i'm not dealing with the case i have no information but as for who stole what now we have very severe approach in russia to this and unlike mr midwiz if putin is not kind of um vocal on this um agenda all the time putin acts more than talks and he acts quite severely against various officials who use who use various mechanisms to take part in less than legal operations the time will pass and i as far as i understand the president he aims long and aims at a long-term target the system will change our taxation system is changing and the matters that mr magnitsky row raised when he said that the tax inspection inspection inspector it was linked with the gangsters now we have changed that system we've changed that system and it's changing very quickly and i admit i'm very sorry for magnitsky on a human level i think it's a mistake that people guilty in the case had not been charged i can't i don't even know if anybody has been imprisoned or not maybe somebody was charged and punished i don't know nevertheless i'm glad to see you sadly out of time i think we probably go to carry on for another hour at least discussing economics and philosophy and history um that just remains me say thank you i've learned a lot in this session um it's clear that discussing russian economy it's really about discussing russian politics and emotion and the soul and i wish you the best of luck in trying to steer a good course so thank you very much indeed