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Putin, Berlusconi Talk Gas in Sochi

President Vladimir Putin asked Italian Prime Minister Silvio Berlusconi to allow Gazprom greater direct access to Italian gas markets in talks at Putin's Black Sea villa near Sochi on Monday.

When the discussion turned to international issues, the two leaders agreed to differ on Iraq and United Nations Security Council reform.

Berlusconi and his wife, Veronica Lario, arrived at Putin's Bocharov Ruchei residence on Sunday for a three-day visit, which began with a sunset walk along the beach with Putin and his wife, Lyudmila, and Putin showing Berlusconi his new pony.

On Monday, both leaders talked up economic ties between their countries, while Putin asked Berlusconi to let Gazprom invest more heavily in Italy as it prepares to expand in Europe's liberalizing gas markets.

"It is in our interest that our companies, including Gazprom, are allowed to invest extra money in Italy's energy sector, including in the gas distribution network," Putin said, RIA-Novosti reported.

Putin praised Italy as a key trade partner and paid personal tribute to Berlusconi, who has defended Putin against Western accusations of human rights abuses in Chechnya and over the Yukos affair.

"The level of our relations, including personal ones, is such that interstate problems just don't exist," he said.

Gazprom has been actively trying to get direct access to end-consumers in Europe after Putin criticized the state-controlled monopoly for selling its gas to major European partners at one-third of Western retail prices. Italian energy group ENI is Gazprom's biggest single client, but the Russian firm has also been trying to clinch separate deals with other Italian energy companies.

Berlusconi, meanwhile, has lobbied hard for Italian energy companies to win
contracts in Russia. According to Forbes magazine, Berlusconi was Italy's richest man in 2004, with personal assets of $10 billion. He was 30th-richest person in the world, the magazine reported.

Gazprom and ENI jointly own a gas pipeline to Turkey under the Black Sea, known as Blue Stream, and Putin said the two firms should push ahead with a plan to boost throughput to its designed capacity of 16 billion cubic meters per year as well as with a plan to re-export gas from Turkey to other markets.

Berlusconi said Russia and Italy were continuing a dialogue about cooperation in a broad range of economic sectors, including telecommunications, mobile security systems and the aerospace industry.

In a recent aerospace deal, Alenia Aeronautica, Italy's leading aeronautics producer and a major player on the European aerospace market, signed a preliminary agreement on Aug. 18 to buy at least 25 percent of Sukhoi Civil Aircraft, a subsidiary of the Sukhoi aircraft holding, Vedomosti reported.

SCA hopes it will implement at least 15 percent of international orders for the Russian Regional Jet, or RRJ, a passenger plane that is still being designed, the paper said. Alenia, which is designing RRJ in cooperation with Ilyushin and U.S. aircraft giant Boeing, will have the ability to assemble the jets more competitively in the future, Vedomosti said.

The RRJ project aims to produce up to 5,500 jets by 2023, in a market that could be worth as much as $100 billion.

Alenia is an affiliate of Italy's Finmeccanica holding, which manufactures military and civilian aircraft, including ATR turboprop planes.

Finmeccanica also hopes to sell Russia a coded communications system for both military and civilian use. The company's managing director, Pier Francesco Guarguaglini, said last week that Berlusconi would present the system, known as Tetra, to Putin during his Sochi visit, La Stampa reported.

Finmeccanica set up a joint venture in Russia for operating the system, the paper said.

Putin praised Berlusconi for encouraging Italian businesses to set up joint ventures in Russian regions. "We don't have so many and such diverse connections with any other country," Putin said.

Trade with Italy grew by 55 percent over the first half of 2005, compared with the same period last year, Putin said at the meeting. "It's a record for Russia's relations with developed industrial nations."

Berlusconi told Putin that he hoped to boost cooperation further in the future. "We must demonstrate that we can interact, maybe, even better than in the past. A significant impetus in this sense can come from the personally friendly relationship that has formed between us," Berlusconi said, according to a Russian translation of his comments carried by Interfax.

Trade between Russia and Italy was worth $10.6 billion from January to June 2005, an increase of 56 percent over the same period last year, Kremlin aide Sergei Prikhodko said Sunday, Interfax reported.

Italy is aiming to be Russia's second-largest trade partner, Prikhodko said, up from fourth-largest now, behind Germany, Ukraine and Belarus. At the end of 2004, Italian direct investment into Russia was $350 million, Prikhodko said.

On international issues, Putin voiced support for Germany's bid for a permanent seat on the UN Security Council over Italy's, but said Berlusconi was not offended by Russia's stance on the issue.

Putin said that Russia would support Germany's bid if the UN adopted a reform plan acceptable to the majority of its members. Germany, Japan, Brazil and India have suggested that the Security Council include six more permanent members that would not have a veto. Italy has supported a different proposal that would add 10 more non-permanent seats on the Security Council.

Speaking at a joint news conference after the meeting, Putin said that Berlusconi wasn't offended by Russia's support for Germany. "We are not girls. We speak up," he said. Berlusconi told reporters that UN members were unlikely to reach a consensus on the reform.

Putin also said he hoped that Italy would continue supporting Russia's cooperation with the EU and NATO.

On Iraq, Putin warned that the country needed to get the support of the Sunni Arab minority for its proposed new constitution. Berlusconi, a staunch ally of the U.S.-led occupation, said the document contained all the principles of a true democracy.

Putin welcomed approval of Iraq's draft constitution by some of the country's factions but called for terms under which all ethnic and religious groups would endorse the charter.

Iraq's Sunni Arabs have rejected the new constitution, raising fears of more sectarian violence and setting the stage for a bitter political fight ahead of the Oct. 15 referendum on the constitution.

Upon their arrival Sunday evening, the Berlusconis chatted with Putin and his wife, Lyudmila, on the porch, then walked around the seaside residence. It was not immediately clear in what language the four talked, but Putin is a fluent German speaker and Berlusconi has said he is a fan of German poetry.

During the walk, Putin showed off his black Labrador, Connie, and a new pet, a small pony named Vadik, that he was given during Kazan's 1,000th-anniversary celebrations on Saturday.

Afterward, the couples went to a pier to watch the sunset as seagulls flew over them, with Veronica at Putin's side and Lyudmila at Berlusconi's. Two ships, apparently part of Putin's security force, were stationed a short way off the shore.

The walk ended with an open-air working dinner "to the sound of lapping waves" against the shore, Radio Mayak reported.

The two leaders enjoy close ties, and Putin's two daughters vacationed at Berlusconi's villa in Sardinia two years ago.

During Monday's meeting, Putin presented Berlusconi with four volumes of a book on the history of Russian-Italian relations translated into Italian. Putin said the book was a compilation of memoirs by Russian diplomats.

After their news conference, Putin and Berlusconi, wearing dark suits and ties, were shown on television in an enclosure watching Vadik. Putin said the pony was an American breed and that he would take it to the stables in his Novo-Ogaryovo residence outside Moscow to join his other horses. Connie and Vadik get on well, Putin said.

Asked if he had shown Berlusconi the vintage 1956 Volga sedan in which he drove U.S. President George W. Bush around in at Novo-Ogaryovo, Putin said, "No, but thanks for the reminder. I'll make sure to show him it."

(The Moscow Times 30.viii.05)

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