Interview to Dmitry Kiselev part 1
Dmitry Kiselev: It seems to me that they are embezzling because they have no hypersonic [weapons], nothing… What is it?
Vladimir Putin: I'll explain what it is. The issue is that significant portions of their funds are allocated towards maintenance, not just salaries, but also towards maintaining bases worldwide. It's difficult to track where all the money goes, as it seems to disappear into a black hole. This is where the majority of the embezzlement occurs. Although significant amounts of money which are difficult to evaluate are also spent on producing means of destruction, weapons in general.
If we calculate the cost of their well-known anti-missile defence system and one of our main means to overcome missile defence systems – the ”Avangard“ intercontinental missile with a glide vehicle of intercontinental range, the values are simply incomparable. Essentially, we nullified all their efforts and contributions to the missile defence system. This is the appropriate course of action.
Additionally, it is imperative that our Armed Forces' economy aligns with current demands.
Dmitry Kiselev: The word ”justice“ is a magical word for the Russian language. You use it very carefully, but once you pronounced it in your Address and it sounded like thunder. You said that the distribution of the tax burden should become more equitable in Russia and suggested that the Government should think about it. In which direction should it think?
Vladimir Putin: Truly, the distribution of the tax burden should be fair in the sense that corporations, legal entities, and individuals who earn more should contribute more to the national treasury, towards addressing nationwide problems, primarily towards fight against poverty.
Dmitry Kiselev: A progressive tax?
Vladimir Putin: Yes, essentially a progressive tax.
I would not like to go into details now, as we need to work more on this. We need to build a system that really yields greater returns for solving primarily social issues and challenges facing the state in this area.
We plan to reduce the tax burden, for example, for large families, and take further steps in this direction. I believe that society will perceive this as normal. This is the first thing.
Secondly. What does business ask of us? It asks us to determine the taxation system, and not to change it further, so that it remains stable. This is the most important request and requirement from the business.
The Government is to address this issue as soon as possible and work together with the State Duma deputies to present proposals.
Dmitry Kiselev: A progressive tax – won't we scare someone away? We used to be afraid of scaring someone away with this progressive tax.
Vladimir Putin: No, I don't think so. In principle, we have this system in place. Even those who were ardent supporters of the flat scale, the authors of the flat scale, now believe that on the whole we are ripe for a much more selective approach.
Dmitry Kiselev: During your Address, you thanked ”colleagues from the Government“ – that was the wording. Does this mean that Mr Mishustin's government – if you win – will remain in place?
Vladimir Putin: We should talk about this after the election, after the votes have been counted. It seems to me that now it is simply incorrect. But on the whole, as we can see, the Government is working well – the results are obvious, and that is objective data.
Dmitry Kiselev: You mentioned reducing the tax burden on large families. Children and the demographic situation – these topics were very extensive in your Address. Indeed, the issue is quite painful, because demographically Russia is melting away. Last year was an anti-record of birth rate.
Vladimir Putin: I think the birth rate was 1.31 or 1.39….
Dmitry Kiselev: It’s 1.39 children per woman capable of child-bearing.
Vladimir Putin: Of childbearing age.
Dmitry Kiselev: Perhaps ideally we should double it – [to a ratio of] three. Because this is literally a disaster for society.
You have proposed a fairly large-scale programme to support motherhood and demographic stimulation. Is there any confidence that these measures will reverse the downward trajectory to an upward one?
Vladimir Putin: On the whole, there are plans to spend, through various channels, up to 14 trillion rubles on all measures to support families with children over the six-year period. It is an enormous amount of money.
There are numerous areas of support for families with children – from general social support, such as building or renovating kindergartens, building new schools and renovating old ones, modernising them in accordance with the present-day needs, to supporting women from pregnancy till the child turns 18. Allowance is currently paid to nearly 400,000 women, which is almost every third pregnant woman. Over ten million children receive child benefit. This is a serious thing.
We have kept the system of maternity capital. We have continued with the payments of 450,000 rubles for mortgage repayment to families where a third child is born – the relevant decisions are underway. We have preserved mortgage benefits for families with children. In other words, there is a whole package of very diverse family support measures.
Of course, as you have already mentioned, this is also about fighting poverty, because, obviously, families with children face way more difficulties than childless families, which is no surprise as the expenses are huge. Nevertheless, we have achieved considerable progress in this area.
Thus, 20 years ago we had, I think, 29 percent of the population, or 42 million people, living below the poverty line. Today, according to the latest reports, we have 9.3 percent, which is still 13.5 million people. A very large number, indeed. We need to do everything possible to bring it down to at least seven percent. As for families with many children, the figures are more modest, but they also need to be improved.
What are we referring to when speaking of poor birth rates? I have already said many times, and experts say this, – these are objective things – that we have had two dramatic declines in the birth rates. One was in 1943‑1944, during the Great Patriotic War. A comparable decline followed immediately after the collapse of the Soviet Union, a very similar one, with the same decline in the birth rate.
The reason is clear: the breakdown of the social support system. No matter how weak it was in the USSR, it was there anyway, but after the collapse of the Soviet Union it basically ceased to exist, leading to widespread poverty. There is no need to explain. Anyway, the planning horizon of a family shrank; the birth rate went down to that of the war years. Then we had a rebound. And now we have quite a large number of children, young people who will reach adulthood and childbearing age in a few years, and we assume that the rates will go up.
What you have mentioned is a worldwide trend. There are only a few developed countries that have positive demographic dynamics, while in the rest of the developed world everything is on the decline. This is a complex problem, which has to do with the economy, as well as life priorities of women. It is better not to interfere right now, let the demographers deal with it and come up with a solution.
But you know what is encouraging? The public sentiment. In Russia, 70 percent of men and 72 percent of women would like to have two or more children, and the state should support them in that regard. We are working on an extensive package of support measures which need to be implemented, and we will do that.
Dmitry Kiselev: However, there is still no certainty that those measures will turn the situation around.
In the late 1990s – it is a well-known story which you have spoken of yourself – you saved your children from fire: you went into the burning building, to the second floor. It was not until later that you remembered about the money left in the house. The money burnt. This shows your priorities: children first, then money.
Maybe the same approach should be adopted on a nationwide scale? Not just 14 [trillion], but to go all in – to launch such a programme that would guarantee a turn of the tide?
Vladimir Putin: You know, you have to, as they say, follow the developments. In the early 2000s, we introduced a number of demographic initiatives, including maternity capital, and a number of other measures, which have produced tangible positive results. This means we are capable of achieving desired goals.
Dmitry Kiselev: So we already have the relevant experience?
Vladimir Putin: We have the experience, for sure. Using this experience and other best practices, we should ultimately aim to achieve the goals we set for ourselves. As the situation changes, we will adjust the existing measures or supplement them with something else.
For instance, we have declared the year 2024 the Year of the Family. We have launched a new national project entitled ”Family.“ It includes elements that we have never used before. For example, there are plans to allocate 75 billion [rubles] to regions where birth rates are lower than the national average. These are mostly the central regions of Russia and the country's northwest. 75 billion is a decent amount of money. It is just that they need to be used wisely.
Elderly care is another aspect. There are other support measures as well. By raising the birth rate and increasing life expectancy, we will be able to stabilise the country’s population. This is the main overall indicator that will either demonstrate our success or, possibly, highlight the need for greater attention to the relevant work from all administrative and government bodies.
Dmitry Kiselev: Mr President, when delivering your Address [to the Federal Assembly], you were figuratively pulling trillion by trillion out of your sleeve. As a matter of fact, you proposed an absolutely astonishing plan of the country’s development, truly astonishing. That will be a different Russia, with a completely new infrastructure and social system – nothing short of a dreamland.
But it makes me feel like asking you your favourite question quoting Vladimir Vysotsky, ”Where is the money, Zina?“ Have we earned it or not?
President of Russia Vladimir Putin: Yes, of course we did.
What is more, this plan is, first of all, the result of painstaking work by the expert community, experts from the Government and Administration. Everything fits in the budgetary rules and is actually rather conservative given that certain experts believe that the revenues should and will be higher. And, therefore, we should have planned larger expenditures because this should directly impact economic development prospects.
Overall, this is the right thing to do. Back in 2018, we also planned to allocate additional eight trillion rubles to economic and social development, but later on we increased this figure. I believe that it is quite possible, if things work out the way the optimists from the above-mentioned expert community say they will, that we will be able to – we should and we will do that – increase our expenditures in a number of areas.
Dmitry Kiselev: So, we are talking about a six-year period, right?
Vladimir Putin: Exactly. We are talking precisely about a six-year period. At the present moment, we are working on a three-year budget, that is the budget for a three-year planning period. But when we were preparing for the Address – I use the pronoun ”we“ because there was a whole team working on that – we naturally assumed that we should calculate our revenues and expenditures in the areas that we deem crucial and high-priority for a six-year period.
Dmitry Kiselev: But still, some projects are truly mind-blowing. For example, the Dzhubga–Sochi highway: 130 kilometres, of which 90 kilometres are tunnels and the rest must be bridges, judging by the landscape. One and a half billion rubles in the first three years alone, with the highway ideally planned to be ready by 2030. Is this really necessary and will we have enough for our victory?
Vladimir Putin: People need this road. Families with children cannot reach Sochi by car. They all stop somewhere around Gelendzhik or Novorossiysk because the road is too challenging – it's a serpentine.
There exist several construction options. We are going to discuss the issue shortly, in the next few days. Either it will be a road to Dzhubga, or first the road from Dzhubga to Sochi. Some Government members suggest doing it step by step. Others believe that all should be done at once, otherwise there will be a bottleneck from Dzhubga to Sochi.
The first section of the road, if we look at it from Novorossiysk, is quite good, and the quality of the pavement is not bad, but it is very narrow. If we continue like that, like the first section, all the way to Sochi, there could be traffic jams in that small space, and they already are quite numerous there now.
Anyway, we will discuss this – specific ways and stages – with the professionals, but it should be done. It is necessary to determine, of course, the final cost of the project to ensure that everyone remains within the financial plans.
The interests of people are in the first place, but the interests of the economy are also a priority. The development of territories in the south of the country is very important.
Dmitry Kiselev: One would assume that the nation is getting better-off rapidly, since we can afford such large-scale investments, especially in view of the special military operation and almost 15,000 sanctions, which are absolutely horrendous. All the more so as we also want to reduce poverty, including among large families. That's a bold objective, isn't it?
Vladimir Putin: No, it isn't. Here, let me get back to the subject of that highway. When I discussed it with members of the Government – and the Ministry of Finance is always stingy, in a good way, conservative about such spending – the Minister of Finance [Anton Siluanov] told me, and I'm quoting, ”Only those who have never travelled this road are against its construction“.
Dmitry Kiselev: So we have to get all the Government to go there.
Vladimir Putin: Well, he is right, because it's especially important for families with children.
As for the question of whether we are getting richer. The economy is growing, that's a fact, and it's not us who have registered it, but international economic and financial organisations. Russia has got ahead of Germany in terms of purchasing power parity and replaced it as the fifth largest economy in the world.
As far as I know, the German economy shrank by 0.3 percent last year, while Russian economy grew by 3.6 percent. Japan grew by a small percentage. So if the rate of growth remains the same as it is today, there is a good chance that Russia will overtake Japan as the fourth largest economy, and that might happen quite quickly.
And yet, let us be honest and objective, the quality of our economies is not the same. In terms of purchasing power parity, that is the size of the economy, Russia is actually the fifth largest economy in the world and has every chance of overtaking Japan. But the structure of the economy in these two countries has an obvious advantage over that of Russia.
There is still a lot to be done for our country to take a decent position not only in terms of purchasing power parity, but also in terms of [GDP] per capita. That is the first thing. Secondly, it's important that the structure of the economy itself changes, becomes more efficient, more modern and more innovative. This is what we're going to work on.
As far as revenues are concerned, the purchasing power parity is a very important indicator. This is the volume, or the size of the economy. This means that the state receives money to address its strategic priorities through the tax system at all levels. This gives us the opportunity to develop in the way we see fit.
Dmitry Kiselev: Mr President, you have mentioned economic structure, the need for structural change in the economy. This is exactly what you set forth in your Address to the Federal Assembly and the challenge is exactly this: make innovative sectors grow faster than the economy as a whole.
Vladimir Putin: Of course.
As I said, we need to work on the structure. That will determine the future of our economy, the future of labour resources, the efficiency, and labour productivity .
One of the main challenges today is to enhance labour productivity. Given shortage of workers, the only one way to achieve effective development is to enhance labour productivity. This in turn means that we need to inject innovation into our economy and aim for greater robotic process automation. Today, as far as I can remember, there are ten robots for every 10,000 workers, whereas we need at least 1,000 robots for every 10,000 workers. That seems to be the case in Japan now.
Then, people need to be trained to operate these new machines, not only robots but also other advanced production tools. So there is another challenge, the training of skilled workers.
We have identified specific areas, including engineering training, where this is a priority. You may be aware that 30 state‑of‑the‑art engineering schools have been opened in different parts of the country. Another 20 will open this year; there will be 50 in total. Fifty more are in the pipeline for the next few years.
So these areas are the future of our nation. We will explore and develop these areas.
Dmitry Kiselev: Just to make sure we've covered the sanctions. A lot of people have voiced the idea of creating a government body specifically to respond to sanctions, to counter them. Is that being planned or do you think it would be pointless?
Vladimir Putin: There's simply no need. The Government, the Central Bank, the Security Council analyse everything that our foes do. Many things are done not even for political or military reasons, although they are declared, but for reasons of competition.
Dmitry Kiselev: Unscrupulous, unfair competition.
Vladimir Putin: Unfair competition, masked by political or military considerations. This has been the case in the aircraft industry and in many other sectors.
Well, the world is the way it is and we have adapted to its realities. We know who we are dealing with. And so far, as the results of our work show, we have been quite effective.
Dmitry Kiselev: But the West's cunning does not stop there. In your Address to the Federal Assembly, you said, and I quote, “We are also aware of the Western attempts to draw us into an arms race, thereby exhausting us, mirroring the strategy they successfully employed with the Soviet Union in the 1980s.” What is our margin of safety under the conditions of what is effectively an arms race?
Vladimir Putin: We need to ensure maximum return on every ruble invested in defence industry. Indeed, during the Soviet era, no one was concerned about these expenditures, unfortunately, efficiency was not a priority. Defence spending accounted for about 13% of GDP of the country – the Soviet Union.
I will not refer to our statistics – instead, I will cite the Stockholm Institute: last year our defence spending was four percent, and this year it is 6.8 percent, meaning we have grown by 2.8 percentage points. This is a noticeable increase, but not critical at all. In the Soviet Union, it was 13 percent, whereas we are currently at 6.8 percent.
It should be noted that defence spending accelerates the economy, making it more dynamic. However, there are limitations to consider, as we understand. The age-old question remains: what is more beneficial – guns or butter? We have this in mind.
Although, as I mentioned, our modern defence industry is good in that it not only indirectly affects civilian industry sectors but also uses innovations necessary for defence industry to produce civilian goods. This is an extremely important thing.
Of course, our spending is incomparable. How much do they have in the United States? 800…
Dmitry Kiselev: It's already nearly 900.
Vladimir Putin: Nearly 900 – 860 or 870 billion [US dollars]. They are absolutely incomparable to our spending.