JUNE 2007

CAMPAIGNERS IN COUNTY MAYO WILL SURELY READ THIS PART OF PRESIDENT PUTIN'S RECENT PRESS CONFERENCE VERY CAREFULLY

PRESIDENT PUTIN:Shell. I would like to clarify the issue. What are you interested in with respect to Shell and BP? Shell in Sakhalin, is that right?

THE TIMES: Yes, it is a question about Sakhalin, about BP's permit. Will it be necessary to renounce the permit or they may still expect to keep it?

VLADIMIR PUTIN: Have you seen the original agreement? Have you ever read it?

THE TIMES: Yes.

VLADIMIR PUTIN: Did you like what was written? You know, that is a colonial treaty that has absolutely nothing to do with the interests of the Russian Federation. I can only regret that in the early 1990s the Russian officials allowed such incidents to take place, incidents for which they should have been put in prison. Implementing this treaty resulted in a situation in which, for a long period of time, Russia allowed its natural resources to be exploited and received nothing in return. Almost nothing at all. But if our partners had been fulfilling their obligations correctly then we certainly would have had no chance to rectify the situation. But they are guilty of violating environmental laws and this is a generally accepted fact that is supported with objective data. And I must say that our partners do not even deny it. Environmental experts have corroborated this evidence. Incidentally, Gazprom has received various proposals from its partners to join the project even earlier, before any environmental scandal, but refused to do so. But after the environmental problems arose and there was the threat of fines, I believe that Gazprom's entry quite simply saved the project.

And, finally, one last point. Gazprom did not simply act as a result of our pressure and take something away, Gazprom paid a huge sum of money to enter the project - 8 billion USD. That is a market price. And, as far as I understood, the partners working on the project were satisfied because all the terms and conditions of the treaty are being met and no one is questioning this treaty's purpose. Our foreign partners are receiving all the resources that they had planned to receive from this project. And I think that this is a good example of cooperation and our responsibility even in the face of situations that arose in the early 1990s, situations that were clearly beyond the pale of law.

As to BP, you know that every country has certain rules about working in the subsoil. These rules exist in Russia as well. If anyone believes that they do not need to observe such rules in Russia, they are mistaken. And this does not only concern BP. If you are referring to the Kovyktinskoye deposit - and you evidently have this in mind - in addition to BP there are also Russian companies participating in the project. And this does not only affect BP but also about Mr Wechselberg's company and Mr Potanin's company. They are all Russian economic residents. And for that reason the affair is not limited to BP, to a foreign partner, but to all shareholders that have committed to developing this deposit and, unfortunately, have failed to comply with the terms of their permit. They have not yet started to develop it. According to the permit's conditions they should have already begun extraction last year. And not simply begun but also extracted a certain amount of gas. Unfortunately, they have not done so.

And one can find a huge number of reasons for this, including that it was necessary to be part of a pipeline system. But they already knew this when they applied for a permit. They knew about these problems and potential limitations. And they nevertheless went ahead and got a permit. I am not even going to talk about how they obtained this permit. We will let it rest in the conscience of those who did this at the beginning of the 1990s.

But I would like to draw your attention to the fact that the gas reserves in the field amount to some 3 trillion cubic metres. To understand the volume and importance for Russia, one might say that this is equivalent to almost all of Canada's reserves. But if the participants in this consortium are not doing anything to use their permit, how long should we wait?

Obviously the Ministry of Natural Resources raised the issue of withdrawing the permit. Even though, as you can see, negotiations are going on and I don't know what they will end with. I don't know what decision the Natural Resources Ministry and the company shareholders will make. I deliberately say company shareholders because if you talk about the company BP, and not simply about the Russian part of the corporation that was preparing to develop the Kovyktinskoye deposit, then to a large or a significant degree its deposits in the world are increasing at Russia's expense. And if you talk with the past or present BP leadership they will confirm this.

Moreover, 25 percent of BP's revenues come from its activities in the Russian Federation. We welcome the company's participation in the Russian economy and will continue to support and help companies but we want their activities to be executed within existing legislation.