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Prime Minister Vladimir Putin chaired a meeting of the Government Presidium

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Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon,

Let us begin with a briefing on some of our contacts with foreign partners. What is happening to energy supplies to the Czech Republic?

Igor Sechin: At the previous meeting of the Presidium you asked me to look into the situation with the supply of energy to the Czech Republic. Russia supplies crude oil in that direction under contracts between the Czech consumers and the Russian supplier companies signed through intermediary firms, most of which are registered in offshore zones.

The overwhelming majority of Russian production companies have no direct long-term contracts with Czech consumers. According to the Energy Ministry, Transneft and some other oil companies applied for the transportation of 260,000 tons of oil to the Czech Republic in July this year. The reserved transportation capacity in that direction was 442,000 tons. If such amounts are brought to the market Transneft guarantees their delivery.

Clearly, the current procedure of purchasing Russian crude for Czech refineries through middlemen - a number of small companies contracting Bashneft and Tatneft - does not guarantee adherence to the export schedule.

Besides, the intention of the Ukrainian side to pump oil this year in the reverse mode via the Odessa-Brody pipeline gives cause for concern to Russian companies which supply crude to Central and Eastern Europe and makes them look for more stable schemes of oil delivery.

Vladimir Putin: That would be not a reverse, but an averse mode.

Igor Sechin: Our companies have been looking more closely at the routes via Novorossiisk and Primorsk, which would ensure more stable operation and effective supplies.

In fact, the Czech side has put its complaints at the wrong door. The Energy Ministry has sent a note to the Czech Ambassador to Russia, Mr Miroslav Kostelka.

Besides, during the past three years, proposals were made repeatedly at the Intergovernmental Commission to sign a memorandum on the terms of the supply of Russian crude to the Czech Republic, to have a mechanism of monitoring these supplies and compliance with contract obligations. A reluctance to formalize mutual commitments that guarantee the participation of Russian oil suppliers has apparently prevented the Czech side from approving the said memorandum.

Vladimir Putin: In other words, supplies do not go direct from our producers, but through offshore outfits.

Igor Sechin: Through middleman firms.

Vladimir Putin: And you believe that to be the main problem?

Igor Sechin: It is one of the problems. The other problem, as I have said, is stable operation of the transport system and the intention of the Ukrainian side to change deliveries, which forces our companies to look for other routes, specifically Novorossiisk and Primorsk.

Vladimir Putin: I understand and I agree. I believe that this has nothing to do with Russian suppliers. Still I want you to pay more attention to this issue and work with all the partners to ensure their interaction.

Igor Sechin: Yes, Mr Putin.

Vladimir Putin: Mr Ivanov, you chaired a meeting of the Intergovernmental Commission with the Uzbek partners. It was on July 18, wasn't it?

Sergei Ivanov: Yes, I chaired the meeting of the Russian part of the Intergovernmental Commission. After the Commission's meeting in November last year in Tashkent we reviewed the fulfillment of the agreements reached then and during your meetings at the Kremlin with President Karimov.

We discussed a range of fuel and energy issues. Trade is growing and Russian companies - especially Gazprom, LUKoil and Stroitransgaz - are fairly active in the Uzbek market.

We have looked at the issues of industrial cooperation, including in the field of aviation in terms of compliance with the agreement between you and President Karimov on the integration of the Chkalov Aviation Production Association in Tashkent into the United Aircraft Building Corporation.

Overall trade increased by about 10% in the last five months, in other words, the trade dynamic is positive. We also discussed some complicated issues connected with mutual registration of property, our property in Uzbekistan and Uzbekistan's property in the Russian Federation. As a follow-up to this discussion I plan to invite the Uzbekistan Prime Minister, a co-chairman of the Commission, to a working meeting in Moscow.

In addition, as far as I know, your visit to Uzbekistan and a full-scale meeting of the Intergovernmental Commission are scheduled before this year is out. I keep the matter under constant review.

Vladimir Putin: When do you plan to hold full-scale consultations?

Sergei Ivanov: In November.

Vladimir Putin: That is, after my visit?

Sergei Ivanov: Yes.

Vladimir Putin: All right.

Mr Kudrin, one of the leading agencies has made the next step in upgrading Russia's rating. Can you comment on that, please?

Alexei Kudrin: Moody's awarded a new rating to Russia on sovereign loans in foreign currency lifting it from BAA2 to BAA1. Thus, all the three leading world rating agencies that assess country risks, including Standard & Poor's and Fitch, have given relatively high and approximately similar grades to the Russian economy.

Russia is 7 steps away from the top rating the majority of developed countries have. In the last 9 years we have moved 9 steps up, showing an improvement of the country's financial situation.

Moody's notes in its statement that the decision has been prompted by the favourable debt indicators and the continuity of President Medvedev's policy in the framework of all the earlier decisions.

I would like to note that not only the world rating agencies but the market itself gives relatively high marks to the Russian Federation. One can see it from the amount and yield of currency bonds of the Russian Federation, and we can compare that indicator with those of other countries. The Russian hard currency bond, that is the Spread, is larger than the Spread of the most reliable securities in the world, US Treasury bonds. The Spread has changed over the past year from 130 to 200 points, and has now again dropped to about 150 points. To put it another way, it is between 1.3% and 2% in additional yields on securities. That indicator characterizes the difference or the risk of the Russian Federation on its obligations from the risks of the top and most reliable borrowers, such as the US. It is approximately on a par with the rating of our bonds with regard to other countries.

In assessing the rating it is understood that the US, for example, even during periods of crises and wars, has always fulfilled its government obligations. Russia does not yet have such a long record. But every year we overcome these risks, we diminish the risks of the Russian Federation. That would lead to private companies raising their ratings thus reducing interest rates on all the bonds or with regard to all their obligations. As a rule, interest rates do not exceed the country rating.

As a result our securities in the world market will become more attractive and the capitalization of Russian companies will increase.

Vladimir Putin: Capitalization will increase and obtaining loans from various financial institutions, including those with world standing, will become easier and cheaper.

Alexei Kudrin: Yes.

Vladimir Putin: Thank you very much.

Mr Zhukov, we have said that we have to determine the venue of the 2009 Eurovision song contest.

Alexander Zhukov: Pursuant to your instructions we have tentatively studied the issue of preparation for the contest. It is one of the most representative annual events held by the European Broadcasting Union. Forty-three countries are expected to take part. We expect more than 2000 foreign journalists to cover the event. And, from the experience of previous years, the audience may be more than 100 million people.

We will have to host guests for a week. Because first there will be semifinals and then, a week later, the final. The final will be on Saturday, May 16. Several cities have filed applications. But, by tradition, such events are hosted by the capitals of the states that have been awarded this right.

Vladimir Putin: What cities have applied?

Alexander Zhukov: The main cities are of course St Petersburg and Moscow. From the technical point of view - as pointed out by the TV people who will organize the contest - the facilities of the Olympic Sport Complex are the most suitable. Its technical parameters - it holds 25,000 spectators - enable the complex to provide all the areas needed for the contest under the same roof, including the press center and much else. That would reduce the need for participants to move about the city. But we must make the final decision today.

Vladimir Putin: I see. Considering the state of preparedness of the facilities in Moscow, the availability of the infrastructure and the chance to minimize the cost of preparing that major event we will hold the Eurovision-2009 contest in Moscow. Please submit the plan of preparation for the event.

Alexander Zhukov: Yes, we believe that an organizing committee should be set up to prepare the event to assist above all with the issues of security, transport and many other things. The ministries have already submitted the relevant proposals.

Vladimir Putin: Good. Ms Golikova, a decision has been made on the new procedure of the use of Mandatory Medical Insurance Fund assets in 2008. Please comment on this issue.

Tatyana Golikova: Before speaking about the procedure, a couple of words about the State Guarantee Programme whose results we reviewed in July and duly reported.

The State Guarantee Programme for 2007 has been financed to the tune of 897 billion roubles ($36.54 billion, or €24.72 billion). Last year the figure was 690 billion rubles ($28.11 billion, or €19.01 billion). The programme's share of GDP increased from 2.6% in 2006 to 2.9% in 2007. Unfortunately, 60 Russian regions still report a programme shortage of about 65 billion roubles. And not all Russian regions meet the per capita standards of providing corresponding services to the population.

Unfortunately, there are huge differences in the amount of medical services rendered: it varies between 1700 roubles ($69.25, or €46.84) and 27000 roubles ($1,100, or €744) per person across the Russian Federation. This is one of the reasons why in 2008 we proposed a fundamental change in the methodology of providing financial assistance out of the Mandatory Medical Insurance Fund. That is a part of the standardised insurance reserve divided into two: the first part is to reduce the budget deficit in regional medical insurance programmes. And the second part is not large, just 10%. Nonetheless we propose that this incentive part be directed to those regions that have the best indicators in terms of mortality, infant mortality and registered disability. Thus, these Russian regions, if they have achieved positive results will be receiving additional financial assistance for the development of public health. Those regions that meet the standards will be granted subsidies to level out the per capita standards of providing services envisaged for 2008.

Vladimir Putin: One of the issues on our agenda is ratification of the treaty between the Russian Federation and the Latvian Republic on cooperation in the field of social security.

Tatyana Golikova: The bill on the ratification of the Treaty with Latvia was prepared on the basis of the treaty signed on December 17, 2007. It regulates the relations with the Latvian Republic over the granting of some allowances, pensions, disability benefits and benefits to mothers. It has been approved by all the federal agencies. The Latvian Republic has already passed the treaty through its parliament in the first reading. It is preparing for the second reading. We hope it will also be passed. That marks substantial progress in the settling of mutual relations in the sphere of social security because it has to do with the ratification of the major issues on which we couldn't agree for a long time, the issues of pensions and social security.

Vladimir Putin: OK. Mr Shoigu, tell us about the issue of housing certificates for the victims of the earthquake of August 2, 2007.

Sergei Shoigu: Most of the work was completed in 2007, regarding the issue of certificates and allocation of money for the building of new houses. It concerns those citizens who were away from their permanent place of residence, above all in Nevelsk. Most of them are fishermen who were somewhere in the Sakhalin area. There are 57 such families. An additional 57 certificates must be issued this year. We have at last come to grips with this problem.

Vladimir Putin: Very well. It is a big problem, a serious one. There are several more issues on the agenda that I consider to be very important.

The main one is the preparation of the housing and utilities complex for the autumn and winter period. It is a routine problem at first glance, but actually it is very important.

It is not by chance that we examine this issue in the middle of July when there is still time to take the necessary decisions.

According to the data of the Regional Development Ministry on the whole preparation for the winter is going ahead normally, indeed, ahead of the schedule of last year. I am not going to give you the figures, they are quite high. But we should not be complacent.

The heads of some Russian regions complain about the rising cost of fuel oil. I have talked with the governors and practically all of them speak about it. We have more than 4000 boiler houses that burn fuel oil.

We should sort out the situation with suppliers, reveal the facts of price collusion and look for alternative supply channels. Most importantly, it is necessary to take energy saving measures, to replace fuel oil with more economical fuels, install modern equipment, we should work on this every day. Some work is being done, but it is extremely slow. The regional and local authorities must speed it up.

The situation in the so-called "big energy" field calls for particular attention. A decision has been taken to set up a federal headquarters to ensure safe energy saving which will monitor the situation and coordinate the activities of the government bodies and business entities in that sphere.

We have completed the process of reorganizing RAO UES (Unified Energy Systems). In this connection, please, pay attention to the following. I have already told the Energy Minister about it: we should watch closely what will happen in this sector, especially during the course of preparations for the autumn and winter period.

As regards alternative fuel for power plants, it has to be delivered on schedule. We have data regarding various types of reserve fuel and the data are encouraging. Everything must be done one hundred per cent on schedule. I instruct the Headquarters to look into the situation and make proposals on increasing liability for improper compliance with these norms and requirements, including severe liability measures. I am not going to specify them. I invite your proposals.

In the first place we must pay attention to the energy systems where the risk of interrupted supply is highest. We have many such regions.

We will also consider the proposal of the Ministry of Regions to set up a commission to assess the performance of regional governments in preparing housing and utilities for the winter. It will work in close coordination with the federal headquarters.

Also on our agenda is the draft law on more severe punishment for causing heavy damage to health or causing the death of people through the fault of drivers under the influence of alcohol. I think it is high time to solve the issue.

For your information, I can give you the data for July 20 this year. On that day there were 707 road accidents that claimed victims. A hundred and twenty two people died and 924 were injured. Of these 84 were children and there were five children among the dead. That's on a single day!

Let us begin with the first item on our agenda.