ARCHIVE OF THE OFFICIAL SITE OF THE 2008-2012 PRIME MINISTER OF THE RUSSIAN FEDERATION VLADIMIR PUTIN

Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, colleagues,

Let's share some updates and then turn to our agenda.

Mr Shmatko, would you tell us about the power plant that began operating in Bushehr in Iran. How did it go? It will operate at 50% capacity at the initial stage, correct? What are the immediate plans? How do Russian nuclear power engineers who were building the plant assess their own results? What is your assessment of their work? What is our partners' assessment?

Sergei Shmatko: Mr Putin, the first generating unit went on stream in Bushehr yesterday in a high-profile ceremony. It was first connected to the Iranian power grid on Sept. 2 and accelerated to 60 MW, while its installed capacity is 1,000 MW. This is a truly unique project. Let me remind you that Germany broke ground with its nuclear power plant in the Gulf 37 years ago. The project was suspended for various reasons, including revolutions and the Iran-Iraq war. When Russia took over 13 years ago, 12,000 tonnes of the original German equipment was examined and integrated into the Russian project.

Both Russian and Iranian engineers estimate that the Bushehr project fully meets high safety standards. The plant's construction was constantly supervised by the IAEA (International Atomic Energy Agency), which never issued a single criticism.

We estimate that experimental and start-up works will take up the next three or four months. Judging from practical experience, the unit will be ready to reach its full capacity in about a year. We also assume that our cooperation will continue and Russia will participate in operating the plant. We signed the respective protocols yesterday.

I would like to add that the day before the start-up, I co-chaired the ninth meeting of the Iran-Russia joint economic commission. The meeting went on in an enthusiastic and constructive atmosphere. The Iranian members mentioned a new window of opportunity to develop Russian-Iranian cooperation based on the trust that they felt had just emerged. The commission has put forth several interesting initiatives and proposals for cooperation in transport, power generation, oil and gas. We will present these proposals to you as soon as possible.

Vladimir Putin: Good. I expect the plant to run at 70% of its generating capacity by next spring, correct?

Sergei Shmatko: Mr Putin, we believe that… but this will depend on how the unit will behave. We have always told our Iranian counterparts that nuclear safety comes first and therefore there should be no strict deadlines imposed on startup operations.

Vladimir Putin: Will our engineers remain there to oversee the process?

Sergei Shmatko: Yes, Mr Putin. We have set up a joint venture to operate the unit and signed all the documents yesterday. We believe this would be a responsible step on our part.

Vladimir Putin: How many Russian engineers are working there now?

Sergei Shmatko: Around 1,500 people, most of whom are involved in various startup tasks. Several hundred people – depending on our agreement with Iran – will be engaged in operating the plant.

Vladimir Putin: Good. Thank you. Please give my congratulations to everyone who worked on this project. This is truly a good result, considering that the plant was essentially built from scratch. It was also a challenge, as Mr Shmatko has mentioned, to adjust and integrate the existing components under the new conditions of the project and with new technology, because we started out with technology that had been designed over thirty years ago. What had been considered advanced technology at that time naturally became obsolete, and it is always harder to rebuild something than to start fresh. Now the work has been completed, and at a very high level, too. Congratulations!

Sergei Shmatko: In this case, please allow me to nominate certain Iranian nuclear engineers for state awards, as we talked about, and perhaps some Russian engineers as well.

Vladimir Putin: All right. Mr Artemyev, you have a separate topic on today’s agenda, but before you begin, let me ask you an unrelated question. The Federal Anti-monopoly Service (FAS) that you head has approved a merger between two major Russian stock markets, the MICEX and RTS. The upside of this deal is that it will create a large and powerful European trading platform. But there is a downside as well: will this situation not create a monopoly that dictates the prices for stock trading services?

Igor Artemyev: Exactly so, Mr Putin. Ladies and gentlemen, on September 9, the FAS indeed approved a request by the Moscow Interbank Currency Exchange to take over RTS. In fact the main problem was that, despite the numerous positive effects, there was the danger of rising prices of servicing stock market transactions, as well as depository services. To avoid this, after consulting the MICEX and other market operators, the FAS issued a requirement that any price hikes would be possible only with the approval of the so-called users’ committees. In other words, the key operators on the securities market that account for the bulk of the transactions will set up these committees at the united exchange. As a result, the management of that exchange will not be able to raise depository fees or other services without the approval of a relevant committee, which means the approval of the market operators. The committee needs to pass the decision by at least a two-thirds vote.

In other words, if a price increase is truly justified then the market operators, most of which are private businesses, will agree to it, will agree that it is justified, and only then will an increase be possible. This approach became possible upon completing an analysis of international stock markets and comparing the corresponding fees at exchanges in Germany, the United States and Britain. We came to the conclusion that the current fees charged by Russian exchanges are enough to sustain the operation of a merged exchange. Therefore, there will be no price increases.

Vladimir Putin: Good. But you need to keep a close eye on this process.

Ms Nabiullina, we have allocated a substantial amount in this year’s federal budget, 880 million roubles, to support non-profit social enterprises. With regional financing, these enterprises will receive even greater support -- over 9 billion roubles. How are things going with this work?

Elvira Nabiullina: In fact, this year was the first time that the federal government allocated money to support non-profit social enterprises. Just a few days ago, I signed an order to implement the government resolution you signed in late August, which stated the main policies of support for non-profit social enterprises. The bulk of the approved federal financing, 600 million out of 880 million roubles, will be transferred to the region to be used as co-financing for their programmes that support social non-profits, which are selected through a competition. It is important that the order we issued reflects the same priorities contained in the government resolution, which are especially relevant this year. That is, support will primarily be given to social enterprises that focus on problems with orphans, motherhood and childhood, supporting the elderly and social adaptation of people with disabilities.

These are the main areas we are going to support. This is the first one.

Secondly, we have allocated 132 million roubles to support large socially oriented non-profit organisations of federal importance in the same priority areas. The funds will be awarded on a competitive basis. The competition procedure is outlined in the approved order. We will also establish a coordinating council to make the competition clear and transparent. The representatives of other agencies, the Public Chamber, experts and representatives of non-profit organisations will be council members.

We had begun preparations before the resolution was approved. Specifically, we have developed methodological recommendations for the regional programmes. The regions are supposed to work out the programmes. In early June, we sent those recommendations to the regional authorities. Seventeen regions are now entering the final stage, according to a preliminary survey. Some of the most enthusiastic are the Tomsk Region, the Republic of Tatarstan, the Republic of Sakha (Yakutia), and the Altai and Krasnoyask territories. They have been working hard and they have already set aside funds in their budgets to support socially oriented non-profit organisations. We will definitely monitor them as the programmes go ahead. This monitoring will not, however, focus on the money spent or received by the non-profits but on their results and indicators like the number of foster families that adopted children, the number of former residents of children’s homes who received support of any kind, the number of the disabled people who got employment assistance. These indicators show tangible effects of the programmes carried out by the non-profits. I hope all regions actively participate.

Vladimir Putin: Alright. What is the current situation with the funding?

Elvira Nabiullina: We have allocated the funds and the resolution authorises us to now spend…

Vladimir Putin: I understand the money has been allocated. But are they receiving it?

Elvira Nabiullina: We have approved the competition procedure. The competition will be held, and by the end of the year we must…

Vladimir Putin: So no one is receiving money yet.

Elvira Nabiullina: No, first we must hold the competition.

Vladimir Putin: It is almost October. The money is for this year.

Elvira Nabiullina: They will be allocated as subsidies. It can be done quickly. These are not construction projects, so we can do it rather quickly.

Vladimir Putin: It’s late. We are approaching the end of the year. We should discuss the government programmes in details today.

Elvira Nabiullina: The order was ready only two weeks after the resolution, and so…

Vladimir Putin: OK. What about… Shall we hear from anyone from the Ministry of Healthcare?

Mr Safonov (Alexander Safonov, Deputy Minister of Healthcare and Social Development), one of the problems we have aimed to resolve concerns counterfeit medications and the quality of medications. Since 2009, we have set aside 900 million roubles for the construction of several labs. Another one has been opened very recently. So how is it going on?

Alexander Safonov: Mr Putin, as you noted, a great deal of work is being done to establish laboratories in the federal districts as part of our efforts to prevent counterfeiting medication. Specifically, in 2011 several laboratories in the North Caucasus, Siberian and Southern federal districts were accredited by the Federal Agency for Technical Regulation and Metrology for technical competence and independent activity. In particular, on September 14, we are opening a laboratory in Rostov-on-Don. This laboratory has operated in test mode since April. In the fourth quarter of 2011, we are opening laboratories in Khabarovsk and St Petersburg. At the same time, one of our goals is also the development of this complex. In 2012, we expect to open laboratories charged with the same task in Moscow and Tatarstan. We have already discussed it with the government of Tatarstan and an office of this kind will be opened as part of the Centre for Medication Quality Control and Certification of the Republic of Tatarstan. We have allocated a total of 350 million roubles for a laboratory complex in Rostov-on-Don. This will help us be consistent in our work to ensure the quality of the medications circulating in the industry.

Vladimir Putin: Good.

Let’s say a few words about today’s agenda. Yesterday we focused on the government’s results this year, a draft budget for 2012 and beyond, and discussed the government’s efforts to deal with rate increases by infrastructure monopolies in 2012. As you remember, we talked about capping rate increases on railway fares, gas, heating and power. We proposed a number of measures.

Today we will hear a report from the Ministry of Economic Development on the progress in the current matters and the implementation of the federal programmes in the first six months of 2011, in particular. As you know, there are two state programmes and 54 federal targeted programmes. The federal funds available this year stand at 925 billion roubles, which is nearly a quarter more than in 2010. An additional 349 billion roubles will be provided for the so-called non-programme portion of the government investments.

The 2011 federal targeted investment programme alone is supporting 3,400 major projects. I should highlight that it is the first time we have had such a workload. Unfortunately, I have to bring your attention to old issues again. We have already touched on the topic when we spoke about the non-profit organisations. What I want to say is that the federal targeted programmes are behind schedule. As of the end of August this year, nearly half of the programmes have received only 25% of the intended funding from the budget. Nine of these programmes have received almost nothing at all. The reason is not the lack of funding. The money is available.

Now to get back to the budgeting process. We all know how difficult the work on the budget has been: there has been a lot of shouting, people have gotten to the point of tears at times and almost to the point of literally fighting. Each agency is fighting for its own interests. In fact, I am glad to see that you are so serious about your duties and the area you are responsible for. But when it comes to organising work it appears we cannot be efficient with the projects themselves and sometimes we conclude the state contracts late. I suggest we discuss these problem areas again today and see what can be done in order to find a solution once and for all. I am asking the heads of agencies to be very strict about budget discipline. Unreasonable delays and red tape in closing deals are inadmissible.

Most of the construction projects are scheduled to be completed by the second half of the year. They must be completed on time. We plan to commission 1,408 objects by the end of the year. Moreover, the federal budget for the next three years is entering the final stage of approval. I am asking the ministries and agencies to be conscientious about the new targeted programmes that will commence in this period. I have already described how work is being conducted on the old ones and the new programmes are coming up. If we look into any new areas, we must propose programmes and submit them to the government in a timely manner and in the appropriate form (appropriate means ready for implementation).

I have mentioned that the Federal Antimonopoly Service must report on one of the matters. I believe this is important for any government, including our own. I am talking about the competition in Russia. A competitive environment sets the tone for the country’s economy and shapes the investment climate. It is the main internal incentive for many of the industries. Support of healthy competition in business is an important strategic objective for the government and the country in general.

Unfortunately, there are still many problems areas. They are the oil market, the food market and power distribution. This is where competition is weak or absent and the citizens have to pay the price of monopolism. Of course we cannot solve these problems in one day. Many of them have accumulated for years. But we cannot just dismiss them, and it would not be right to wait any more. We need a well-balanced, logical policy to support competition, with clear targets and a functional system that assesses the competitive environment as well as a system of fair rewards and punishments for those market players that break rules and laws.

I would like to emphasise that any serious decision must be based on the analysis of the real state of the competition in the country. We must not manufacture artificial competition on paper. The purpose of the government is to create the conditions for fair competition and, most importantly, the solution must be consistent and clear for everybody and for businesses first and foremost. First, we must eliminate any superfluous administrative obstacles. We have talked about this before. The endless registration procedures must be pruned down. The unsubstantiated requirements, burdensome duties and limited access to infrastructure hold back the initiative of entrepreneurs and may become an insurmountable obstacle for new companies – and, therefore, new goods and services – entering the market.

Second, you know that the Federal Antimonopoly Service is constantly monitoring the prices set for particular categories of goods and can identify any sudden and often groundless price hikes, which are usually caused by companies that seek take advantage of their dominant position in the market and charge monopoly prices. We must react quickly to such attempts.

At the same time, it is important to make the rules governing the market as transparent as possible. It is particularly important for price mechanisms, especially for essential products. Clearly, commercial enterprises must make a profit, otherwise economic activity is impossible. But what kind of market is it where monopoly-driven windfall profits are made by overpricing and lowering the quality of vital products, which is what happens when companies abuse their position? We must be very principled and thorough about this and return to it again and again. Russian consumers must be able to buy quality products for reasonable prices.

I suggest we start with this.

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