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Russia gave Ukraine $80 billion in discounts as a gift — Medvedev

December 10, 2014, 12:01 UTC+3
In case problems with Ukraine's payment for the Russian gas remain, there is a possibility to meet in Stockholm court, prime minister Dmitry Medvedev said in an interview to Russia's main TV channels
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Russia's Prime Minister Dmitry Medvedev

Russia's Prime Minister Dmitry Medvedev

© Dmitry Astakhov/Russian government's press service/TASS

Infographics Gas agreement signed by Russia, Ukraine and the EU Gas agreement signed by Russia, Ukraine and the EU
Gas agreement signed by Russia, Ukraine and the EU On October 31 Russia, Ukraine and the EU signed an agreement on gas supplies. Infographics by TASS

Russian Prime Minister Dmitry Medvedev hopes that Ukraine will pay the outstanding share of the gas debt by the end of the year. He is sure that a settlement can be negotiated if problems arise, but at the same time he does not rule out a litigation.

“We have agreed that Ukraine must pay the debt. It has repaid part of it already, and it is to settle the other part by the end of the year,” he told five television channels in an interview. “I do hope they will pay.”

Medvedev said Russia had always sought negotiated solutions with the Ukrainian partners.

“We have been doing our utmost to conclude amicable deals with the Ukrainian counterparts,” he said.

“Over the past years we have given Ukraine $80 billion in discounts as a gift — during the 1990s and early this century,” Medvedev said. He complained that quite often Kiev conducted bargaining that smacked of blackmail and gas supplies were accompanied by “plain theft from the pipelines.” As a result Russia shifted to prepayments for gas.

The discounts “did no good” and Ukraine accrued a huge debt. The two sides agreed its volume and a settlement pattern; besides, Russia set very lax terms.

“We established another discount to prevent the Ukrainian economy from choking. We are not indifferent to what will happen to Ukraine and to Ukrainian citizens,” Medvedev said.

At the moment Ukraine has started paying for gas.

“We shall be trading on a very pragmatic basis — if they pay the money, they get the gas, if not, no gas is supplied,” he said.

Medvedev called upon the European partners to extend assistance to Ukraine, the way Russia did by giving a loan to Kiev.

They have been paying so far, and I hope they will be paying further on,” he added.

“That’s the current state of affairs. It remains to be seen how the situation will unfold,” Medvedev stated. In case of problems “an agreement is always possible.”

“The opportunity to come to the negotiating table is always there. Otherwise, there are several law suits in the Stockholm court. We shall meet there,” he concluded.

On Russia's budget

The Russian government may revise the 2015 budget amid unfavorable external and internal economic developments, Prime Minister Dmitry Medvedev said in an interview with Russian TV channels on Wednesday.

“If economic conditions change significantly, we’ll have to revise the scenarios (for the country’s social and economic development) and finally have to make a decision on the budget,” Medvedev said.

“But we are not doing this so far,” the premier said.

The federal budget is based on a particular scenario, which may change, the premier said.

On falling oil prices

‘We’re watching together with you the developments on the oil market,” the premier said. Late last year, world oil prices stayed at $110-115 per barrel whereas now the price is $65-70, he said.

Therefore, the price has halved, he said.

This factor “has caused a whole number of significant consequences, primarily those related to the ruble exchange rate,” Medvedev said.

Russian prime minister is confident that Russia must in the long run get off the oil needle, although revenues accumulated by Russia from oil exports let it survive the current situation.

In an interview with five Russian TV channels, he said there were some positive aspects in economy’s oil dependence.

“When oil prices grow, it gives us a possibility to lay in a store, and over the recent years we have formed rather sizable gold and foreign currency reserves that let us survive the crisis,” the prime minister said.

“If we had not done this, we would most likely have faced a very difficult situation now,” he added.

According to Dmitry Medvedev, oil prices and sanctions against Russia in connection with the situation in Ukraine affect the ruble.

On consequences of sanctions

The Russian prime minister went on to say that Western sanctions imposed against Russia caused the Russian economy several billions of dollars in losses, while the European economy lost €40 billion (almost $50 billion) this year and is likely to lose €50 billion euros ($62 billon) next year.

“No one ever underestimated damages caused by the sanctions,” Medvedev said in an interview with leading Russian television channels. “Their cost for the economy totals billions of dollars.”

“Our (Russian) economy probably lost tens of billions of dollars,” Medvedev said. “The European economy, according to experts, fell short of €40 billion this year and is likely to fall short of €50 billion next year.”

“Therefore, sanctions are not beneficial for anyone, they are not necessary and would lead to nothing,” the Russian premier added.

Medvedev said that sanctions were not something new for Russia as other sets of sanctions were earlier in force against the country and the Soviet Union as well.

The premier recalled in particular the Jackson-Vanik amendment, passed by the United States against the USSR in 1974, that “hit hard not only our country, but backfired the United States and their satellites as well.”

“On the whole, we lived in the 20th century under conditions of permanently imposed sanctions,” Medvedev said. “Who benefited from it? No one! The development of countries (hit by sanctions) continued in line with earlier stated plans.”

“This is a lesson we must learn from the current situation,” Medvedev said adding that the lesson must be first of all learnt by “our partners as it was not us (Russia), who introduced the sanctions and it is not us, who must abolish them.”

“We were all well aware that the sanctions, which, by the way, were imposed by foreign states contradictory to the international law, will be detrimental to our economy as well as to the economy of those (states) imposing them,” Medvedev said adding that decisions on sanctions were always of the “double-edged nature.”

“The sanctions turned into an occasion for us (Russia) to think about the import substitution, and not the import substitution alone, but about the development of qualitative and competitive products,” he said. “This is the challenge, which we must be up to.”

He went on to say that Russia will be able to provide oneself with its own foodstuffs in several years and foreign products will be unnecessary.

“We’re able to fully give up unnecessary import in the mid-term,” Medvedev said.

“Nobody has ever said we’ll reorient our agriculture towards Russian producers in six months. But the positive sign is that shops’ shelves were filled with Russian goods,” he said.

On weakening ruble

World oil prices and western sanctions against Russia are affecting the ruble exchange rate, Prime Minister Dmitry Medvedev said.

“It is obvious that the ruble exchange rate is affected by a whole number of factors,” Medvedev said. “First of all, this refers to oil prices,” he added.

World oil prices have almost halved and this could not but affect the ruble, the premier said.

Western sanctions imposed against Russia are the second factor affecting the national currency, the premier said.

“Sanctions of this kind all the same create certain expectations, as financiers say, and these expectations affect the sentiments of both companies and citizens and this factor exerts pressure on the ruble in one way or another,” the premier said.

Dmitry Medvedev went on to say that a dramatically weakening rouble was unprofitable for Russian economy in the long-term prospect.

“In the long-term prospect I would say that obviously a considerably falling ruble rate is unprofitable for our economy. Moreover, most economists and analysts share the view that at the present moment the ruble is weakened too much, so, it is understated,” the prime minister said.

According to him, this is the result of the oil prices and negative expectations. “In this sense it’s obvious that some reevaluation will take place,” Medvedev said. “I don’t know if this will happen this month or in a month, but in any case a certain balance will be reached.”

The prime minister said that the devaluation of the ruble is strategically disadvantageous for the state.

However, he urged the Russians to be patient and act similar to 2008 when ruble rate firmed after fall.

Dmitry Medvedev advised Russian citizens in the crisis conditions not to make hasty decisions, including on the exchange of their ruble savings for foreign currency. “This often results in the loss of money,” he said in an interview to five Russian TV channels.

“When such economic problems arise the main thing is not to make hasty decisions, it is necessary to calmly follow the developments and plan the priorities with taking into account what you have,” he said. “If a person has some savings, he has the right to act as he pleases,” the prime minister said. “But the experience of the previous crisis — and people rarely use it, such is human psychology, has shown that the attempt to transfer the savings into foreign currency often results in the loss of the money.”

That is why the prime minister himself, he said, keeps his savings in the national currency. “I, naturally, keep my money in roubles and get my salary in roubles,” he said. “The rouble rate fluctuation or weakening also affects the assets I receive, the same as the assets of all our citizens.” “We are all in the same boat in this sense,” Medvedev said.

The Russian government is going to adjust pensions and salaries of state employees, Medvedev added.

On economic prospects of 2015

This year’s results for the Russian economic development are controversial, but the main thing is that the budget system is balanced, Russian premier said.

The 2008 financial crisis has still not ended both for global and Russian economy, the premier said.

“Nevertheless, we have managed to come to a positive result,” he said. “We will have a GDP growth this year. It is important, particularly if to compare with other countries,” he added.

Some indices will be lower than planned. The inflation rate will exceed 9%, though other levels were expected, Medvedev said.

This year’s results have been achieved "not at a low cost", he noted. “We had to give up some programs.”

Dmitry Medvedev is convinced that “the absolute majority of initiatives put forward by the government are liberal from economic viewpoint.”

“Economic ideas outlined in the recent presidential state of the nation address to the Federal Assembly are liberal with the aim to step up business freedom and protect private property,” the prime minister said in an interview with leading Russian TV channels.

On Crimea

Russian Prime Minister Dmitry Medvedev said we should not talk about Crimea only in economic terms, stressing the need to integrate the peninsula into Russia’s legal and economic systems as soon as possible.

“Crimea is not an economic issue,” he said in an interview with Russia’s leading television channels, asked whether the government had gauged the effects of Crimea’s reunification with Russia in mid-March.

“When we speak about Crimea, we realise that it is our history, our destiny and sometimes our pain too and that there is a great number of our people (living there), who have voted this year to return to the Russian Federation,” Medvedev said.

“Our task today is to integrate Crimea into Russia’s legal and economic systems,” he added.

Dmitry Medvedev finds Crimea’s development and bringing the region up to general Russian level as one of top priorities.

However, this will be done not at the expense of other regions, but through a special governmental program, he said.

“I believe that we should put Crimea in order, but not at the expense of other regions,” he noted. Medvedev recalled that a special program totalling 680 billion rubles or $12.5 billion and designed until 2020 had been drafted for this purpose. “We did not pick up this money at the expense of other regions, this is not some monetary funds which we had raised from everywhere, but this is exactly special money which was allocated for Crimea,” he noted.

On relations with the US

Dmitry Medvedev described his relations with Obama as good, but acknowledged that the inadequacy and unpredictability of the US Administration are a problem.

“My relations with the US president are not bad, that’s true. Historically we did quite a few useful things together at a certain point, or at least tried to do,” Medvedev said. “But the question is not about our personal relations. These remain normal. The question is about the adequacy and predictability of partners. From that standpoint the current US administration is inadequate and unpredictable.”

According to Medvedev, the ball is in the American court in Russia-US relations.

“What the Americans are doing? They impose sanctions on us, they are also trying to form an unfriendly front against our country. Such actions cannot be called friendly, can they?" he said. “So, as the saying goes, the ball is in their court.”

“As soon as they want to return to normal relations’ path, we are absolutely ready for this,” Medvedev said.

Russia, the orime minister said, has not quarrelled with anyone, it is not its choice, but some partners have been trying to attain their narrow selfish aims at the expense of aggravating relations with Moscow.

“We have not quarrelled with anyone and have not declared wars on anyone,” he said. “Asking us to get back onto the peace track makes no sense. We have not made quarrels with anybody. It’s others who have been trying to have rifts with us.”

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