I welcome the opportunity to speak to the 10th annual Russian Economic Forum at this time of unparalleled economic success.

Let me start by giving my condolences on the death yesterday of Russia’s former president, Boris Yeltsin.  He presided over Russia during a key point in its economic transition during the 1990s.  While this period was by no means easy for Russia, Boris Yeltsin played a key role in laying the foundations for economic reform and liberalisation that have since developed, and which are contributing to Russia’s effective integration into the global economy.

Trade and investment relations between our two countries have never been stronger.

This is the 6th successive year of bilateral trade growth – with increases averaging 20% per year.

UK Investment in Russia in 2006 was more than $5.5 billion - making UK the largest foreign investor.

In turn London is the financial centre of choice for Russian business and we want to build on that. It makes sense for both our countries.

Because Russia is one of the most dynamic emerging economies in the world. Since 2000 Russia integration into the global economy has grown rapidly. This has brought considerable prosperity to Russia.
As I was able to see for myself when I visited in February this year with a CBI delegation of senior British businessmen.  We need to build on that.

As both our countries know, long-term high-quality growth and prosperity can only grow further if we meet the challenges of globalisation. And also embrace its tremendous opportunities.

The truth is that Russia needs us and we, in turn, need Russia. We welcome Russian investment. We want to invest in Russia.

And this strong and enduring relationship needs to be built on trade and strong business links.

Increased trade creates jobs and wealth. It can be a powerful force for development. It brings access to cheaper goods and can increase prosperity across the world.

So promoting open and liberalised markets are in both our and Russia’s business interests.

We are committed to breaking down trade barriers.

Around the world we are seeing an increasing trend towards protectionism, putting up barriers to trade that will make us all poorer. We are seeing the growth of economic nationalism. It won’t work.  Protectionism dressed up as patriotism is still protectionism. 

It leads to less trade which will undermine all our economies.

It is not in our interest to close our markets at the very time they should be expanding.

The WTO talks are now reaching a crucial stage. We will do everything we can to ensure they succeed. For while rewards of success are immense, the price of failure would be disastrous.

And WTO membership also remains a vital step in diversifying the Russian economy and attracting new trade and investment.

It is a contract which creates legal obligations to openness and a commitment to transparent and proportionate regulation of trade.

Russia is not just the largest economy outside of the WTO, it is the only large economy still outside of the WTO.

Every other major emerging economy has chosen the economic benefits that come with WTO membership, and cast aside autonomy for the advantages of co-operation and understanding.

Russia’s quest to become a member of the WTO has lasted for 14 years. So, this is the very time to press ahead with reform and more collaboration, which we strongly support.

WTO membership for Russia is not about pleasing international opinion, or achieving membership of a prestigious international “club” but should be in pursuit of Russia’s own economic interests.

WTO membership would give Russia an important framework for controlling the politicisation of trade disputes and avoiding the recent and current frictions which we have seen in EU - Russia trade issues.

Now, the business relationship between the UK and Russia is a robust one. But it is one that needs clear rules openness and understanding on both sides. Where there are disagreements, we should talk about them and get them sorted out.

We want a grown up commercial relationship backed by political cooperation.

Commercial considerations should be the beginning, middle and end of businesses relations.

Yes, there are occasional difficulties and tensions. But we are the largest investor in Russia and trade has trebled over the last five years.

It is a strong relationship built up over time. To keep it that way both sides needs openness and frankness.

And we need legal certainty, embedded in the rule of law, to ensure investors have the confidence to invest for the long-term. Legal certainty is a vital ingredient in ensuring a positive investment climate.

In February I met with my Russian counterpart in Moscow and we agreed to re-launch the Russia-UK Intergovernmental Steering Committee on trade and investment.

The Committee will :

• review progress in the development of trade and investment relations;
• consider obstacles and barriers to trade and propose solutions to them, and
• discuss any specific trade and investment issues or challenges and propose ways of meeting them.

In the Financial Services Sector, particularly, this new cooperation will focus on financial and associated professional services, with business expertise from both countries, moving towards dramatically improving the links in the financial sector and associated professions.

The demand is there: HSBC have announced their interest in acquiring Russian retail banking capacity.

Shares in Vneshtorgbank, Russia’s second largest bank, have gone on sale as the business prepares for its £4bn listing in London and Moscow early next month.

It will be the first foreign listing by a Russian bank.

The UK is now recognised as the world leader in international financial services. Its scale, scope and internationalism are unparalleled and we want to encourage more business.

As Europe’s leading financial centre, London also acts as Europe’s gateway to global financial markets.

And Russian companies know that, Gazprom and Rosneft already listed on the London Stock Exchange for example.

It’s not just in the financial services sector that we’ve seen growth, Russia has long been enjoying the benefits of globalisation in the energy sector.

And Russia, like us, face two big energy challenges: how to combat climate changes and at the same time ensure security of energy supplies.

Maintaining the security of our energy supplies is of increasing importance to us here in the UK. We are moving from enjoying an era of self-sufficiency because of the North Sea oil and gas to being an importer of oil and gas.

A key part of our approach is to promote open, competitive markets which encourage investment and deliver secure and competitive prices.

The UK will work with the international community through working closely with the European Union.

The UK has long argued for Europe’s energy markets to be opened up to the sort of fair competition that we take for granted here in the UK.

We especially welcome the proposals by the European Commission earlier this year on unbundling of network businesses from other activities, regulatory powers and transparency. This is the key to promoting competition and investment in the sector.

The EU’s regulatory framework to protect European consumers is robust. It will defend customers’ interests. So we welcome new investors keen to benefit from the commercial opportunities of these open markets. But, again, commercial considerations must be paramount: oil and gas companies should not be used to exert political pressure.

Russia is the world’s largest energy producer, with potentially vast untapped hydrocarbon reserves in Eastern Siberia and the Arctic, Russia stands to benefit from continued growth in energy trade. 

But there is a challenge, for Russia to continue to enjoy these benefits, massive investment is needed. 

First Deputy Prime Minister Dmitry Medvedev said at the World Economic Forum in Davos this January that Russia’s energy sector needed $300 bn of investment, both to modernise the power sector and exploit fossil fuel reserves in new and challenging greenfield sites.

Gazprom recently announced it would need $420 bn in investment by 2030. Overseas companies have the potential to contribute much of this investment. 

But they can only do so if they can be certain that if they strike a commercial deal that it sticks. That it won’t be re-opened. Legal and commercial certainty

Openness to joint ventures, combined with a flexible licensing regime, has enabled us to maximise the potential of our indigenous resources and maintain oil & gas income to our Treasury.

As a result we issued record numbers of oil and gas licences for this year, and latest figures show that 2006 was a significant year for discovering oil and gas - the best since 2001. 

We’ve seen similar results in our own domestic market, where stable and clear regulatory frameworks have led to £10 bn of investment by the private sector in new gas infrastructure over the next few years.

So we are firm believers in the principles agreed under President Putin’s chairmanship at the St Petersburg summit last year, of open, efficient and competitive energy markets.  Supported by transparent, equitable, stable and effective legal and regulatory frameworks. 

And we need to cooperate too in combating climate change and to become more energy efficient.

Increasing emissions of green house gasses are causing dangerous and destabilizing Climate Change. Without urgent action, at home and abroad, we face a damaging rise in temperature bringing with it a huge threat to our planet.

We need to create global frameworks for tackling climate change including international agreements to cut emissions.

Our aim must be to create a global price for greenhouse gases to ensure that emissions reductions are achieved cost effectively.

And we need to collaborate on low carbon technologies to speed up their development and deployment.

Russia can achieve long-term high-quality growth by fully embracing the challenge of globalisation.

This means we should continue to be open to further international trade and investment, even as Russian companies become increasingly global by floating and buying assets abroad.

Our own experience in the UK shows that such openness needs to be supported by a flexible, forward-thinking approach to economic management.

By doing this we all benefit.

For international business, Russia is an environment in which success requires persistence, effort and skill. But the rewards are considerable.

For both our countries, deepening global integration offers access to technology and management, as well as financing. 

We all benefit. And the deeper our economic relations develop, the greater these benefits will be.

Thank you.