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Russia-U.S. Relations

Speaker: Vladimir Yakunin, President, Russian Railways, former USSR Permanent Representative to the United Nations
May 18, 2010, New York
Council on Foreign Relations

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MODERATOR: I'm told that we've broken a record at the Council on Foreign Relations. This is the longest period a group has waited for an esteemed speaker, so I think that tells us something about our guest today.

So first of all, let me welcome everyone to today's Council on Foreign Relations meeting.

A quick reminder for everyone. Please turn off your cell phones; not just put it on vibrate, but turn it off completely. It will interfere with the sound system. And this meeting is officially on the record.

Today our speaker is Vladimir Yakunin. For those who aren't familiar with him, he is the president of state-run company Russian Railways. So he really is the guy who makes the trains run on time.

VLADIMIR YAKUNIN: Unlike the traffic here. (Laughter.)

MODERATOR: Yeah, that's right. I'm sorry we can't do something about our airline system here.

But he's a former first secretary of the Soviet permanent rep office to the United Nations. He's a former deputy minister of Transportation. He's a close associate of Prime Minister Vladimir Putin's and considered to be one of Russia's really true insiders.

So we will have the opportunity -- we'll have a slightly abbreviated session with Mr. Yakunin. It will be approximately 45 minutes. For those who need to leave, feel free. We understand that the session is longer. But we've asked to have Mr. Yakunin start with a brief five minutes or so of remarks. After that, we'll do a short conversation and then open it up to our members for a Q&A.

Mr. Yakunin, welcome. Sorry about the weather, the traffic, everything else. But glad you made it.

YAKUNIN: I suppose I consume this five minutes just to bring my deepest apologies to you, ladies and gentlemen. And it was not due to my negligence, but due to the factor of weather. Of course, we were stuck in Washington for quite a time, waiting for permission to start. And you know, then the traffic in New York City did not improve since I left the city.

And so, please accept our apology for this delay. I know it is very tough just to wait somebody. But because you waited us, you know, whatever questions you have, we will answer at our best knowledge, of course.

And I am very glad to see my friends here, some of them we met not quite long ago, but it is my first visit to New York City since 19 years ago. Yes, I was in Washington, but, you know, I didn't have any chance or need to come to New York City. So for me, it is kine of reunion with the place I left 19 years ago.

So that is the remarks. And then I would like you to consider me with three fields of interest where I can answer maybe professionally some questions. The first field is, of course, the development of infrastructure and, you know, the development of economy in Russia through the prism of infrastructure projects.

Second field is our public work. And I have here some of my friends who are mostly associated with this work -- executive secretary of World Public Forum "Dialogue of Civilizations" Mr. Kulikov, you know, and a member of the Parliament and very influential party member Mr. Pligin is here, also Mr. Alisov is our close associate, and he is an active figure in our public activities, both World Public Forum and the Foundation of Andrew the First-Called and National Glory. This is public side. And some of, you know, expert in scientific side, because I have small research center dealing with the governance aspect, not only in Russia, but, you know, entirely globally. So that's more or less the fields I can feel myself professional, more or less.

Thank you.

MODERATOR: So why don't we start with a few questions for Mr. Yakunin. First, can you tell us how things look for Russia's economic recovery right now, first from the point of view of Russian Railways as a company; and second, from the economy as a whole?

YAKUNIN: Much better than the weather in New York City and Washington. (Laughter.) Trust me.

Listen, in the spring I visited Brookings University, and my old friend Fiona Hill asked a question, can you tell us what are the roots of the crisis and how to get out of this crisis? And that was (fund analyst ?). Listen, this is your crisis, and you're asking me for prescriptions, so it was friendly remarks.

And telling the truth, since the beginning of the crisis, many officials in Russia, they did not believe that the crisis would hit the economy of Russian Federation. That was strange, but that was fact.

MODERATOR: The famous island of stability.

YAKUNIN: Yeah, yeah, yeah, yeah. And you know, possibly it was my first open remarks that I disagreed with this statement. And it appeared that the crisis hit Russian economy very severely because of the -- (inaudible) -- for the raw material industry, firstly, absence of the diversification of the economy, secondly, and thirdly, you know, with all this disproportions occurred during the period of restructuring, not only political system, but economical system either. You know, everything was not always placed to meet the demand.

So from the angle of the railway -- (inaudible) -- I can tell you that from the beginning we were focused on the needs to improve infrastructure situation in Russia. And we were not alone. Look, you know, China spent more than $500 billion to improve infrastructure. They began the second-biggest infrastructure railway company in the world, so they overcome us. We have 85,300 kilometers; they have now 10,000 kilometers more than us.

Okay. Nevertheless, during the period of 2003 up to 2008, the economy was developing quite good in Russia. You know the figures. But of course, the crisis, you know, decreased -- decreased -- the development of the economy greatly. That was the position of Mr. Putin as the prime minister, that the infrastructure projects would and should persist.

So the government decided to support the infrastructure development in Russia, but they decided to keep the rise of the tariffs. It was the first time in the history of Russian economy -- of modern time, that the government decided to subsidize infrastructure projects of Russian Railways, first time through all the period.

And it was not known in, say, Europe. They have this mechanism in Russian Railway. So that reflects the attitude on the part of the government towards the development of infrastructure, which is absolutely essential to develop the economy as a whole.

Secondly, the social aspect. From the beginning, you know, the government targeted to keep the social security of the people in Russia at the level they promised. Economically speaking, I don't think that it is economically wise to have proven an attempt. But socially speaking, it was absolutely necessary.

Due to this, we came through this crisis, at least up to now, you know, more or less stable, more or less. Why? Because in Kaliningrad we had some disturbances in -- (and fires ?), we had some -- but that cannot be compared with the disturbances Greece, not of the scale at all. So this is very essential.

And you know, being the head of a railway company which employs 1.2 million employs, you know, I was summoned one day to the White House in Moscow, and there was a discussion what would happen. And I said, listen, due to the economical situation, I should fire one-thousand-seventy-something-hundred personnel. And the answer was, please, Mr. Yakunin, can you do anything but to keep people on work? We don't need people ousted to the streets.

And then, you know, we addressed about the trade union. We addressed the employees directly. I invited the representatives to come to Moscow. And it was decided that people agreed to go on part-time job instead of being fired at all. And we came through this crisis without any disturbances in a big company, 1.2 million personnel. You can understand what does it mean.

So that is the brief answer and brief overview of the past. What we are having now, you know, judging by the balances of Russian Railways, compared to the last year, we have the rise above, you know, like 15 percent. But compared to 2008, we still under, you know, the figure 16 percent. So you can judge. We lost nearly 30 percent of the operations during the crisis of 2009.

It was nearly same in Europe, and recovery in Russia is going maybe better. Why? Because we have the cargo, we are producing the cargo. And because of that, we are getting a little bit maybe better. But we do not have that kind of support on the part of the government, and that was another problem.

MODERATOR: Now, the Russian Rails has been known as a company that's always operated through world wars, through the revolution. It's an institution that's one of the unique institutions. It's weathered the crisis quite well. But Russia as a whole, among all the brick countries, you know, was the only country that had a severe drop in GDP.

You've been critical about some of the actions that were taken during the beginning of the crisis. What would you have done differently now in hindsight? And what at the time did you think should have been done?

YAKUNIN: Absolutely correct. Among brick countries, we are the only country with a negative balanced. We lost 7.9 percent of the GDP, you know, and even Brazil has some positive result through the crisis.

In my opinion, and I was constantly trying to reach the government and to explain, I was of the opinion that in such periods, we need to concentrate to invest rather heavily into development of infrastructure. Because without infrastructure, all words about diversification of the economy wouldn't be proved true.

Unfortunately -- unfortunately -- I succeeded only partially. On one side, we got the support from the government, we were subsidized. We are getting monies to develop Olympic objects in Sochi. We are doing quite well. But at the same time, we lost 30 percent -- 40 percent -- of the investment budget compared to 2008. And this is not good.

You know, it is difficult to say if I were, because you are who you are, but I insisted and I insist now, instead of buying, you know, some (goals ?) of the American government, we'd better, you know, investment into development of our own infrastructure like it was done, say, in China, for example, or in Italy or in Spain, everywhere in the world.

So my opinion is still my opinion. Who is the right person? You know, the history will show it.

MODERATOR: President Medvedev has talked a lot about the innovation economy and diversifying Russia away from natural resources as the anchor of the economy. How realistic is that? And how long do you think it will take to achieve that goal?

YAKUNIN: On one hand, it is absolutely realistic, because Mr. Medvedev was not the one who invented the formula for modernization. In Washington, I was told that the first words of modernization were pronounced by Mr. Brezhnev, to tell the truth, you know. But in Russia, this sentiment, this feeling and that target of modernization was always among the most critical targets that any government had. Maybe Mr. Medvedev is the only one in U.S. history of Russia who declared it so completely and made this his basis for further political development of his platform.

But it is realistic, because it is absolutely essential and necessary, you know, to shift. It is difficult to achieve, because we are in crisis, and because, you know, the previous period destroyed a lot of such kind of institutions like science and technology research. You know, destroyed, you know, once best-in-the-world educational system. Destroyed health-care system. Many things were destroyed in the course of what you name Perestroika and we name the Perestroika.

And you know, to restore this, that is difficult. It is impossible, you know, just invent something and then to find the place how to implement this idea into the real economical, scientifical products, because the technology appeared to be absolute -- absolute. And you know, to restore the level of the technology to accept these innovative problems, we need to do a lot.

With education, with professionalism of the people, we need to do a lot, you know, to return our scientists who are working everywhere. You know, I visited Singapore, you know, Russian scientists, there are rising Singapore research centers everywhere.

You know, we were talking with my friend. And he said, listen, Russians all over the places. You know, when I was young, I never saw that many Russians.

MODERATOR: There are more than 30,000 Russian-speaking professionals working in Silicon Valley.

YAKUNIN: Yes. But you know, in, say, in London, we have 250,000 Russians. So you know, we need to --

MODERATOR: They're not engineers, though, that are in London.

YAKUNIN: No, not all of them.

MODERATOR: They make more money. (Laughs.)

YAKUNIN: Not all of them, of course. So that is the challenge.

And of course, you know, only if the society is united, united around this idea, it can be shifted.

MODERATOR: What's the view from Russia on pushing the reset button with the perezagruzka, with the United States?

YAKUNIN: Listen, sometimes we say this is a slip of the tongue by freight, if you know what I mean, because they first they said, don't, you know -- they used reset instead of other word, yes. So I suppose on both sides, there's a great deal of political will to restore the relations, normal relations. You know, to stop looking at each other with only one purpose -- if it is good for you, it should be blocked because it will be bad for me, and vice-versa.

In Washington, I was asked the question, listen, to be the partners, you know, two sides should value the same human values, only then they can be partners. Do you think that Russia will achieve the level to be the partner to the United States?

And I answered, listen, business-speaking language means, if we are partners, we have the common targets, mutually accepted. It doesn't mean that we should be alike. But if we are talking about real friendship, Russian understanding or English-language understanding, this is another story. And then we should consider, you know, both ways traffic, where the Russians are, you know, mature enough to value the same things, like Americans or Brits or, you know, Chinese or whatsoever.

We are different, but if we are different, that does not mean that we are enemies. And that is the paradigm of World Public Forum "Dialogue of Civilization." So that is the answer.

MODERATOR: How about Russia-EU relations? The events in Greece, new government in U.K., local election upset with Angela Merkel's party, how does this affect Russian's interests in Europe?

YAKUNIN: You know, last year, I was invited to participate in a global business council, summoned by -- (inaudible) -- company, possibly you know this. And there was a question about the global competitiveness of Europe. And then I asked a question, when you are talking about global competitiveness, you need to answer the question, against whom, and for what?

And there was a moment of silence, and then I continued. The only real competitor of the EU economy isn't Russia. It is even not China. Of course, not Africa, Latin America. Then who? You know, they are competing with your economy. That is only, you know, objectively speaking, the only economy to compare.

So if we are talking about EU interests, at the same time not forgetting about Russian interests, I suppose that more close cooperation, if not integration, between Russia and EU can bring a very serious actor economical-wise, you know, socially wise and political-wise, not to fight with other economies or other political systems.

But I'm answering the question, what are the relations between Russia and EU? This is my personal opinion, that greater cooperation between Russia and EU can bring much more positive effect than all this, you know, talks about, you know, strategic influence with Russia due to the fact of energy resources or whatsoever.

MODERATOR: Let me go back to the reset. U.S.-Russia cooperation on transit to Afghanistan, what is the effect of the recent events and upheaval in Kyrgyzstan on the transit route into Afghanistan, given the important role that Russian Railways plays?

YAKUNIN: Just for the record, when firstly the idea occurred about the supply of the troops in Afghanistan, we were persistent to state that that is a good way to show actual restart of the relations between Russia and the United States of America and European countries.

You know, we considered differently the situation in Afghanistan just might -- that the narcotic traffic rise during this period in Afghanistan 44 times. You know, we have nothing to be happy about this, not in America, not in Russia, anywhere.

But still, we continue this operation. And even the turmoil in Kyrgyzstan did not stop the traffic. You know, besides my position as a president of Russian Railways, I am a chairman of the railways union of six countries, Baltic Republic, et cetera. So this is our strategy. Whatever is happening on the political level, the transit operations of railways should not be disturbed.

And you know, you see we've tried to keep this like real live operations.

MODERATOR: There was a lot of anger recently about the elections in Moscow.

YAKUNIN: (Laughs.)

MODERATOR: You've been very critical about it. Can you tell us your thoughts on that? Also, do you believe the political system in Russia fundamentally needs to be changed or liberalized?

YAKUNIN: I have an expert here, he is sitting right on the right side, you know, and you can, you know, tackle him a little bit later. Very strongly, he can explain everything about the political system, because he is practitional or a practicing politician. I'm not.

But speaking about the development of new political system, this is the right word -- new political system. Ladies and gentlemen, just imagine, 20 years ago, there was Soviet Union which its system which was developing for 70 years. You know, people were brought up in this system. I was brought up in this system. My sons, they were brought up in this system.

So it was a complete collapse of all the values then, you know, our society had. And to introduce new system, no institutional reforms, both political, legal, et cetera, it needs time.

Yes, we were angry with everything which occurred in Moscow. And you know, that's possibly were the first time when the president of Russian Federation met with oppositional leaders to express his own opinion about that.

And when, you know, Mr. Medvedev, he's talking about legal society, law enforcement instruments, he is talking openly, and he is talking frankly. So that is true.

Yes, we need time to change the system, to improve the society. But you know, the most difficult part in all reforms that are the reforms in the heads, in the brains of the people, not in the railways, not in the political institutions, in the brains.

MODERATOR: Russian democracy. What, in your opinion, is the state of democracy in Russia?

YAKUNIN: Listen, this is always questionable, because when we're using the same words, sometimes we understand differently the meaning of the words.

The brilliant example is the word "friendship" meaning in Russian and "friendship" meaning in English. The same can be applied to the understanding of the state of democracy.

Listen, say, it was 1978 when a special lecturer from the original -- (inaudible) -- discussed with the young people the matters of social-political status in then-Soviet Union. And he told the audience -- I remember his words very well. If the party and the government would not take the efforts, in 10 years, Soviet Union would face a major political and socioeconomical crisis. We need to change social-political system. That was a representative of the party talking to young people.

At that time, all the fighters for the freedom in the Soviet Union, they just didn't know even the words of this type. So could it be named "democracy" at that time? Possibly, yes. But at that time, the understanding of democracy was completely different.

Nowadays, I suppose the situation in Russia changed greatly. You, who visited Moscow, who visited St. Petersburg, you can observe it with your own eyes. But can we say that the society is happy? I don't think so. I don't think so. Because in every society, the understanding of democracy is going along with the understanding of the self-esteem of the people, if you know what I mean.

If they don't have food to feed their kids, they don't care about, you know, the human values, because they need to people. And trust me, in Russia, we can find those kind of villages, not even just the families, villages we can find.

At the same time, the development of the Parliament, the development of the electoral system, the development of communications between the government and society, between the government and business, those are the features of a democratic society.

So the answer is complex and difficult. You know, I cannot say. You Americans, you come to Russia, you will see it, a completely, you know, refurbished democratic society. That won't be true. But at the same time, I would say, if you come to Russia, you see a new society with new people who are reaching to achieve better life, who are wishing to achieve better status. And for Russians, it's very essential that they would like to see the state also, you know, a respect for state. This is very essential.

We still have these kind of sentiments. Doesn't matter. You know, elderly persons or young persons, if they think, they would feel the same.

MODERATOR: Thank you.

We have time to take questions now from the floor. So I'd ask if you could state your name and your affiliation. A microphone will be coming your way if you raise your hand.

In the back.

QUESTIONER: Hi. Thank you. My name is Riva Froymovich. I'm a reporter for Dow Jones. I want to ask you about capital-raising plans.

YAKUNIN: About?

QUESTIONER: Capital-raising plans --

MODERATOR: Capital.

QUESTIONER: -- for Russian Railways. I know that you recently issued a bond. I believe there are plans to issue more this year, and there are plans for IPO. Just wondering about the timing and the size.

YAKUNIN: I see. Listen, we are quite new company in this field. But I'm proud to state that our debut issue of the bonds in London was quite successful. And we got the demand 50 percent higher in terms of monies than we were planned to do.

So we agreed with the board of directors even the raise additional $500 million of the bond. And we got very, very good interest rate for that.

Previously, we were taking credits from financial institution in the West because we have, you know, investment rating equal to the sovereign status. And that is just the reflection of the status of the reformation of Russian Railways.

As far as IPOs are concerned, we are not planning to go to privatize Russian Railways as the holding. But we have 150 (daughter ?) companies, and we already have a partially privatized company, TransContainer.

We are going to go public with first freight company, cargo company. We are going to introduce to the market some other (daughter ?) companies, and that will be our way of getting additional funds from the market, I suppose, for the period of coming two years.

Our idea is that we are going to get from the market, get from the private sources, quite a substantial sum of monies to develop infrastructure projects of Russian Railways.

As far as IPOs for -- (inaudible) -- as it is, I suppose it is a little bit premature to talk about this because of the crisis. We postponed the entire development of reforms a little bit. We need the restoration of the markets. I'm not going to sell cheap what is actually valuable assets. And that is our attitude. Thank you.

MODERATOR: Peter.

QUESTIONER: The development of the United States in 19th century, particularly the west, was really a function of the development of the railroads. The Russian far east, undeveloped. What are your plans over the next five years to develop the Russian far east?

YAKUNIN: We were the first company to introduce strategic plan for development of Russian Railways up to 2030. We were the only and the first organization in Russia recently to introduce this plan, and this plan was accepted by the government and became the governmental document, if you know what I mean.

Now you hardly can find any institution in Russia that doesn't have a plan at least for five or 20 years. So our plan to develop far east consists of -- in terms of Russian Railways, of course -- consists of the need to develop infrastructure just to give access to the distant areas where the major raw material sites are existing.

Secondly, we should develop the passenger operations, because now some of the regions of Russia we have no any means of transport communication at all. So recently, the prime minister called me, and he advised me to reconsider the plan to address the need of development of high-speed programs for Far East region and Siberia region.

So it will be our plan to develop this communication means of transportation between major cities of Siberia and far east. That is first.

Secondly, we are going to develop so-called project of Ural Industrial-Ural Polar. And several days ago, we had a session with the presidential representative Mr. Vinnichenko, discussing this matter together with some major companies in the field of oil production and coal production, et cetera. So that will be the biggest -- the biggest -- enterprise, the biggest program, in my mind, for the last, you know, 25 years, total. So that will be the second.

We need to improve communication in the areas of Yakutia. You know, that is a very severe area where the temperature can drop below 40, 50 degrees. And still, Russian Railways, they are operating at these temperatures. So that will be the third.

And then, we also have to develop not only Russian Railways, but we have investment fund, and through this investment fund we are going to invest into development of some infrastructure projects which are interested from the point of view of the development of raw material industries and with the period of return much longer than, say, 15 years.

So that's more or less, you know, the answer to your question, because it needs much more time. Thank you.

QUESTIONER: (Off mike.) Question with regard to China and Russia and exploration of possible areas of cooperation, collaboration, economic development, economic infrastructure development, investment between the two. And related to that, your concerns about the debt crisis in Europe as well as the United States issues related to both.

YAKUNIN: Yeah, very interesting question. And I have so many things to answer. But I'll just concentrate on one thing.

Firstly, the cooperation between Russia and China doesn't mean the cooperation against somebody. That is finished.

In '70s when the Soviet Union was fighting in Afghanistan, your friend was organizing the delivery of the Chinese weaponry to Afghanistan to fight with the Soviet troops. Those years, they've passed. But on the other hand, that is possibly another angle of the view of the issue.

Recently, I considered the focus for the development of the economies up to 2050. And the first three economies, they were arranged like this -- China, United States, India, a little bit with a big drop, then Russia, then Brazil, United Kingdom, et cetera.

The question is, are the industrial elite of the United States of America and Europe will stand idle, waiting until the Chinese economy will go higher? Because the higher economy, the more politically influential is the state.

So the answer for this forecast is not obvious. If everything will develop like that, that will be true. But then suddenly, you know, volcano erupted somewhere, and the entire world, you know, appeared to be too frail. So I don't believe that the industrialized countries, the Big Eight, will just still wait. What is going on in China, and when the China will have upper hand above the economies of entire world?

So speaking about cooperation between Russia and China, we are in the same position. I don't think we just should wait until China became the most powerful economical state. We need to develop that kind of cooperation which can increase the ability of the Russian economy to develop at the same time like China's economy.

I'm not, you know, leveling the economies of two countries, but I suppose that can be the attitude.

MODERATOR: Thank you.

Ted.

QUESTIONER: The issue of corruption and the Russian economy continues to be of great concern to the international investment community. Most recently, there was a lot of concern expressed, not only about the two major wireless licenses that have been handed out, one to Yodo (ph), which seemed to have been done surreptitiously, and then the second, there was supposed to be an open tender, and yet Rostelkom and Svyazinvest wind up with 100 percent of the licensing that was granted. And the latter seemed to violate some of the very rules of the tender.

So that simply underscores the continued concern, that the elites continue to gather the key assets for themselves and erode the ability of third parties to come in and compete. And I'm wondering what your observations are on these and why it is, if at all, people should think more positively about the investment climate there.

YAKUNIN: Oh, not easy answer for this question. You know, the history of corruption did not start in Russia and possibly will not finish in Russia. And in different aspects, we observe this reflection of human being nature in many countries, in the United States either. All these scandals concerning the derivatives, which are, you know, boiling out now in the professional society in the West just shows that also is the case.

But when we are talking about the corruption as a whole in Russia, of course, we need to understand that where is the shortage of something, there is some ways how to overcome this. This is not the mental problem of the society. This is not the problem of the civil servant only. That is the problem; this is the, you know, society disease, if you wish.

And when the foreign investor is seeking the possibility to work in some countries, my personal advice is firstly, find a proper partner.

You know, when I advised my grown-up kids -- I have two boys -- you know, sometimes I joked, if you would like to know who will be your wife in 20 years, make acquaintance with the prospective mother-in-law. Same with the business. If you would like to see what will be your business, firstly to find and get acquainted with a proper partner in the country.

This is not easy question, but that is a question which is openly stated in the society and in the government. It is stated by the president of Russian Federation. And I suppose that the society should get rid of this disease.

You know, I know many entrepreneurs from the West. Some of them started operations in Russia at the beginning of Perestroika, 1991. They came through two major crises. They will never leave country. Why? Because they are successful, they are quite profitable, and they don't want to change places. They are living in the environment of Russian Federation.

And when Pepsi-Cola was sued for the bribes in Russia many years ago, that was Pepsi-Cola who bribed the authorities of the Soviet Union.

When, you know, the head of the biggest company, Simmons, stepped down, that was not due to the fact that he was bad, but because the, you know, American auditors in the amount of (500 ?), they were digging through the, you know, materials, through the balance sheet of this company, finding where they were bribing authorities somewhere in different countries.

So I suppose all of us, we need to be honest to answer the question whether we are doing everything to fight the corruption. But the major question is correctly directed to Russians, because that is our country, and we are responsible for everything which is going on there.

If you need partner, come.

MODERATOR: We have time for one or two more questions before a hard stop at 8:00.

QUESTIONER: Hi. It's Mahmoud Mamdani from Morgan Stanley.

I'm curious. You talked about the innovation economy as being a critical thing to get right to help get the Russian economy and the people onto the right track in terms of economic development. That sounds a lot like the U.S. plan, you know, we need to do the same thing as all our manufacturing jobs have shifted away. So do you see some areas of cooperation where we can work together since innovation is something that's quite a hallmark in the U.S. and how we might cooperate to help each other get through this in a similar model?

YAKUNIN: I suppose the cooperation between two societies, two governments, Russian and America, has a very, very great opportunity. Firstly, mentally and naturally, we are very much alike. You are multinational country, we are multinational country. You have all the possible religions in your country, we have the same. You are big, and we are big. And besides, the scientific schools, they were developing alongside, competing with each other.

You know, not only observing, but getting from the other side a lot like Americans from Russians and like Russians from Americans. So even now, for example, in my field already, a new plant was constructed in the Leningrad District in the city of Tikhvin, and this is 100 percent American technology to be brought to the Russian soil to produce (rolling stocks ?) in Russia. First time, I suppose, since the beginning of the Soviet era.

We have a lot, you know, in common to cooperate in the airspace field. Mr. Atakov (ph), my deputy, he is an astronaut. He spent eight months in the outer space. He knows it quite better than myself. And he can explain this.

And besides, I suppose the fact that we have found absolutely essential to be together, to control the distribution of weapons of mass destruction, to control nuclear energy production and to find new sources of not only energy, but otherwise I suppose that is a great platform to cooperate.

And by the way, Morgan Stanley is well aware about the possibilities in Russia. And I suppose we are going along.

MODERATOR: One last question.

QUESTIONER: (Off mike) -- our president went for the first time to the 9th of May to Russia. And suddenly, there is a warming about Estonia and Russia, Latvia, Lithuania and Russia. A few years ago, Estonia was one of the enemies of Russia. Do you think there is a difference now with the neighbors of Russia? You said the railway system will continue developing despite everything.

YAKUNIN: Yes, I'll answer. But may I ask you a question as Estonian to Estonian? Do you speak Russian or not? Are you a native?

QUESTIONER: (In Russian.)

YAKUNIN: Okay. Listen, it is not true to say that Estonians were enemies of Russians. But there are some touchy points which we need to understand. Just imagine, in the United States of America, somebody insulted, kidnapped the citizen of the United States of America, the entire 6th Fleet will go to the place.

And I suppose this is right. This is right. The state should defend the interests of the citizens of this country. We were.

At the beginning of the ceremonies of the great victory, now the 65th anniversary, and before that it was one year younger. At that period of time, the prime minister of Estonia declared that the monument to the soldiers killed during the World War II should be demolished and replaced. The result was absolutely, absolutely obvious. And they got what they planned to get.

There is no enemies like Russians and Estonians. Our mutual enemies are fools, and even more if they are political fools, it's even more dangerous. And you know, the fact that the relations between Russia and the Baltic republics is getting better, that is not only that the president visited Moscow during the (parade ?). He visited our railway conference two months prior to these things. And I was surprised. The president, you know, came to the regional conference of railways, and he stated quite obvious signals, and those signals were delivered to Russia. With the, say, Lithuanians, we have a lot to work together. In Latvia, we also have a common interest.

So you know, that was due to the political miscalculations that we were getting apart, maybe with some outside influence. But you know, the fact is, you know, we have all the possibilities of improvement of the relations. And the Baltic republics, they're more greatly tied to the Russian economy than even other republics of the former Soviet Union.

MODERATOR: On that note, thank you, Mr. Yakunin, very much. (Applause.)

YAKUNIN: Thank you. Okay, thank you very much, ladies and gentlemen.

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