Working Day

26 february, 2009 15:00

Prime Minister Vladimir Putin conducted a Government meeting

Prime Minister Vladimir Putin conducted a Government meeting
"What we need to do is remove the reasons for the monopolisation of particular commodities and service markets. The competition development programme aims at settling just such structural problems."
Vladimir Putin
Government meeting

Transcript of the start of the meeting:

Vladimir Putin: Good afternoon.

As usual, let's first exchange information on current issues. I'd like to ask Mr Sechin to start. He made business trips to the People's Republic of China and the Republic of Korea, and also to a region in Tyumen, where he resolved a number of major issues as well. Please, tell us about them in more detail.

Igir Sechin: Here's my report. On your instructions I visited the south of the Tymen Region, where TNK-BP is developing 21 deposits. Sixteen of these deposits were discovered between 2004 and 2008. These are small and medium deposits, and their earlier development was impossible for lack of the required technologies and investment.

By now the company has built 264 km of the pipeline, as well as tank oil terminals and pumping stations, which made it possible to build inter-deposit infrastructure and create the conditions for developing this deposit, or rather a set of deposits. In effect, this is tantamount to the opening of a new oil-and-gas province in the south of the Tyumen Region.

Vladimir Putin: Have these deposits always been considered difficult to access?

Igor Sechin: Yes, they have. It was impossible to achieve balanced oil recovery before.

Vladimir Putin: Did the company use some modern recovery methods?

Igor Sechin: Yes. It used British Petroleum technologies, among others. It is important to balance out deposits. As a result, they got a very good deposit. This province has geological reserves of more than a billion tonnes of liquid hydrocarbons. Experts believe that it will produce 200 million tonnes of oil in the first stage.

Vladimir Putin: How much are they investing in this project?

Igor Sechin: It has not been fully carried out yet. The company has already invested six billion dollars in its development in the south of the Tyumen Region.

Vladimir Putin: That's good. What about China and South Korea?

Igor Sechin: After Tyumen, I went on your instructions to Beijing to take part in the third round of energy dialogues in the framework of the Intergovernmental Commission on Trade and Economic Cooperation as a follow-up to the October events that took place under your guidance here in Moscow.

We specified and promoted our agreement, the memo on developing cooperation in the oil sphere. As a result of the talks, we have signed contracts on oil supplies to the People's Republic of China, construction of the transportation network, and Chinese loans for this work. The total sum of loans is 25 billion dollars for a term of 20 years. Hydrocarbon supplies are also tailored to the same period. Now our task is to coordinate some details and to report to you about the project's implementation.

Vladimir Putin: Are economic operators drawing on loans for specific programmes?

Igor Sechin: Exactly, Mr Putin.

Vladimir Putin: The total sum of loans is $25 billion, right?

Igor Sechin: Yes, $25 billion. Oil will be supplied at a market price formula. The interest rates suit our companies as well.

Vladimir Putin: Okay. What about Korea?

Igor Sechin: During my stay in South Korea on your instructions, I told the Korean side about the replacement of the operator on the geological prospecting project in the shelf of western Kamchatka. This is Gazprom now. It has established contact with its Korean partner, the Korean National Oil Company.

During my stay, Sovkomflot received a new ice-class tanker, the third in a series, which was ordered as part of our project for oil transit from the northern deposits of the Nenets Autonomous Region to Murmansk for storage. This is a unique tanker. It is equipped with a diesel-electrical power plant of 20 megawatts, and has two cockpits that allow it to move both snout and stern first. It can break ice up to 1.5 meters thick.

Vladimir Putin: Our companies are already beginning to build such ships. We should gradually transfer contracts to Russian companies.

Igor Sechin: We have availed ourselves of this opportunity. The President of the United Ship-Building Corporation was there with us and signed a memo on cooperation with shipyards. This is a very good avenue of cooperation. In addition to that, Rossiyskiye Tekhnologii discussed an opportunity of setting up a joint venture with Hyundai Heavy Industries Group to build a new heavy engine that will use gas as motor fuel at the Yaroslavl Tractor Plant. This is another very promising avenue. We have a number of regions that have very good opportunities for developing gas programmes, but for the time being we have to supply them with liquid fuel.

In addition to that, a joint project to produce heavy road and construction equipment at the Novosibirsk-based Selkhozmashinostroyenie Plant together with a South Korean partner was discussed, as well as cooperation with Samsung Electronics in the production of new means of communication.

Also, Inter RAO UES agreed with KEPCO, South Korea's leading energy company, on cooperation in electrical engineering. The Mechel Corporation reached an agreement on supplying up to 300,000 tons of coking coal to South Korean iron-and-steel companies.

Vladimir Putin: Good. These contracts will support our miners. Thank you.

We have set up two government commissions to support strategic companies. In the military-industrial complex, these companies are supervised directly by the Ministry of Finance. Mr Kudrin, what can you say about the work of these commissions?

Alexei Kudrin: Mr Putin, the interdepartmental commission on support of strategic companies and organizations of the military-industrial complex reviewed the position of 68 companies. Together with banks, we decided to give them 56 billion roubles in loans.

Vladimir Putin: 56 billion?

Alexei Kudrin: 56 billion roubles worth of credits to all companies discussed put together. The banks have already started working.

Vladimir Putin: One moment, Mr Kudrin. Which banks are taking part in this work?

Alexei Kudrin: Sberbank, VTB, Vnesheconombank, and Gazprombank. Sometimes, those banks where companies keep the money also issue loans. These leading banks provide lines of credit. We decided to increase capitalization of four companies by 30 billion roubles, and established mechanisms for subsidizing interest rates for 22 companies. The total sum of subsidies is six billion roubles. Six companies require state loan guarantees, and they are being issued for 12 billion roubles. As a result of these measures, the situation has been stabilized in 68 companies. The interdepartmental commission continues its work.

Vladimir Putin: You have mentioned additional capitalization. What mechanism is used for it?

Alexei Kudrin: As a rule, these are state-owned defence companies. In this case the government resorts to additional emission and makes direct investment into their capital. One of these companies is MiG, another is the Chernyshov Moscow Mechanical Engineering Production Enterprise, the third is the Khrunichev State Research and Production Space Center, and finally, the Gorbunov Kazan Aircraft Production Association (KAPO). Such are the companies.

Vladimir Putin: Thank you. Please pay the utmost attention to the job as you go along. (To Igor Shchegolev) Mr Shchegolev, a decision was made recently on developing high-tech parks. What about them?

Igor Shchegolev: Right, the work on the programme has been ongoing for three years now. It is a joint federal/regional project. We intended co-funding of sites to concentrate intellectual and organisation resources. We think the project can offer many jobs now.

As our contacts with foreign partners show, they are still interested in investing and in transfers of their own technologies. We are inspecting the job. Its scope differs from region to region. The programme will finish a year from now. We will summarise it in recommendations on how to best concentrate resources and eliminate redundant ones. We find the programme very advantageous, and we think it should continue.

Vladimir Putin: What are the allocations on it?

Igor Shchegolev: Three billion a year, roughly-which means that federal allocations to regions as they establish science parks amount to several hundred million.

Vladimir Putin: Is the trend continuing despite budget corrections?

Igor Shchegolev: Yes, in the regions where the job is underway.

Vladimir Putin: All right, thank you. (To Igor Levitin) Mr Levitin, as we have prearranged, the direct ferry line between Russia's Caucasus seaport and the Bulgarian Varna is opening on Saturday. It has long been discussed. Now, at long last, the ferry will start on February 28. Are you ready?

Igor Levitin: Programme Black Sea Ring will give Russia direct highway and maritime links with the Black Sea countries.

We have such routes to Ukraine and Georgia, the Russian-Bulgarian route is now opening, and an agreement with Turkey will be signed in March. We will thus have direct links with those countries to largely unload highways. Meanwhile, routes to those countries cross two or three other countries, creating great problems.

Vladimir Putin: They cannot get even a pack of camels to a destination! [Trained camels could not reach Bulgaria via Ukraine for three weeks, and arrived at a veterinary clinic instead of a circus-Ed.]

Igor Levitin: The line will cope with 150,000 tonne-cargoes at first, and eventually 500,000 tonne-cargoes. We have an additional agreement with Bulgaria on the issue. Line servicing will employ 150, so we will have extra jobs. The first cargo, fuel for Bulgaria, is en route now.

Vladimir Putin: Are the quays ready?

Igor Levitin: Yes, Bulgaria says it is ready to meet the ferry. We expect it to reach Varna on March 3.

Vladimir Putin: It is departing on February 28, right?

Igor Levitin: Yes.

Vladimir Putin: What is the ferry like?

Igor Levitin: A private company has modernised a 45 car ferry bridge, similar to what we have on other transnational lines. After we sign the agreement with Turkey in March, we will have the opportunity for a Black Sea ring served by similar boats, as Russia has signed relevant agreement with all Black Sea countries.

Vladimir Putin: All right, thank you.

Some days ago, I signed several executive orders drawn up and adopted by the Government. One of them sets regulations for the drafting and approval of federal state educational standards. Please comment on it, Mr Fursenko.

Andrei Fursenko: According to the law, it is up to the Government to approve the procedure for drafting and confirming federal state standards of basic education. The new executive order sets this procedure. We will establish a council for federal state educational standards within the next week in compliance with the order.

Vladimir Putin: What will the council be like?

Andrei Fursenko: It will include experts and researchers. It will also necessarily represent teachers, the standard developer team, and the Russian Academy of Education. At the same time, we will approve the expertise procedure and format and appoint independent expert institutions. We will have everything prepared within a week.

Even now, we have drafts of various educational standards. They will go through expertise and public debates for starters. Some of those drafts are accessible on the Internet even now, and lively discussions are taking place. The drafts will not reach the council before expert and public evaluations are made. The council will either pass or reject them following expert conclusions, as the case may be, to start introducing new standards at school gradually on September 1, in keeping with yours and the President's instructions.

Vladimir Putin: Good. We have also approved the patterns of subsidising social and engineering infrastructural development in the Russian regions. Please, Mr Basargin!

Viktor Basargin: Mr Putin, we are planning subsidies to regions at ten billion roubles, roughly, for the year. 65 regions are entitled to them for targeted distribution. Such subsidies were effective enough last year, when we funded approximately 400 projects, and the construction of 270 of them is completed. Social infrastructural projects accounted for 40% of the whole, and engineering accounted for the other 60%.

Why do we refer to them as targeted subsidies? We have summarised last year's job. As the National Project Council Presidium said yesterday, we were not following unfinished social projects closely enough. In fact, we did the accounting job last year, and we know that about a thousand projects funded from the federal budget, partly at least, are unfinished. They alone are entitled to funding from the subsidies.

We will fund approximately 300 projects this year, and we expect the construction of 250 to be completed.

Reserves make up 30% of the subsidies that will go to the areas with the largest employment problems. We expect the aid to create 40,000 new jobs, considering the recently introduced statute of public works, which will concern urban improvement.

Thus, we think the subsidies will bear sufficient fruit in the regions.

Vladimir Putin: Good. A decision has also been made to subsidise farm development loan interest. Please, Mr Zubkov!

Viktor Zubkov: Mr Putin, as the regions have notified us, the Government has been as timely as last year with its response to agro-industrial problems and with relevant decisions.

Such decisions are exemplified by a recent executive order on 17 billion rouble budget allocations to subsidise loan interest for the agro-industrial complex. This is all the more timely as spring sowing is soon to start, and has started in the south already.

This is very encouraging to farmers. They will be able to afford timely interest payments as interest rates are growing and lending resources are becoming more expensive.

12 billion and 100 million roubles have been earmarked on medium- and long-term development loans, respectively, with 2-10 year terms, and 4.9 billion roubles on short-term loans, up to 12 months. According to a previously announced decision, the extent of subsidising will grow to 80% of the Russia Bank refinance rate, and to its 100% for stock breeders. The Government decisions thus guarantee the preservation of the present agro-industrial development pace and even its increase, compared with last year. Thus, we will cope with the federal programme for 2009, which envisages import substitution for meat and milk, and the growth of agricultural output by 4% or more.

Vladimir Putin: Good. Have you agreed with bankers on spring sowing loans?

Viktor Zubkov: Yes, we have reached an agreement with all banks on the amount of loaning. More than that, they are ready to lend 904 billion roubles, as opposed to the 866 billion earmarked previously. We think this is a feasible amount, and all involved banks have once again agreed on it.

Vladimir Putin: Good. Please monitor it.

Viktor Zubkov: Thank you.

Vladimir Putin: Environmental and other public organisations have repeatedly demanded the prohibition of hunting white-coat seals, that is, baby harp seals. I asked the Natural Resources Ministry to delve into the matter. Please, Mr Trutnev.

Yury Trutnev: Thank you. Mr Putin, we have fulfilled your order. Fishing regulations for the North were published yesterday. These regulations ban the hunting of white-coat seals all over the White Sea and the Barents Sea, the latter for this year only. The Ministry and the Federal Fishery Agency are drafting recommendations to ban hunting grey seal pups less than 12 months of age.

Vladimir Putin: That's good. It's such a cruel form hunting. It should have been banned long ago. Nevertheless, it is a way for local people to earn a living, so prohibition is not enough. What we need is a system of measures to support the local population and compensate the incomes they will lose-otherwise, hunters and their dependents will not be able to afford a normal life. I told you to do it, Mr Zubkov. Have you studied the problem?

Viktor Zubkov: Yes, Mr Putin. The Federal Fishery Agency has drafted and submitted to the Government a three-year employment programme for northern coast-dwellers. It includes the ban on seal pup hunting that you have mentioned. The programme will cost an estimated 48 million roubles over three years, with 15 million roubles for this year. We have studied job opportunities, and will implement the programme.

Vladimir Putin: Thank you. Have you talked the matter over with the Ministry of Finance? Mr Kudrin, please.

Alexei Kudrin: Yes, we have seen the blueprints and are working on them.

Vladimir Putin: Please take thorough stock of it for us as you launch the programme. Let us move over to the agenda now.

We have been making decisions practically every week of late to enhance the quality and effectiveness of our market infrastructure and create a friendly and attractive business environment.

Russia has done much for it these past few years. It is among the top ten economies in the world for business and competition environment improvement rates. Nevertheless, as international experts say, our business environment leaves much to be desired-it falls short of the top standards. In this area, we are still lagging behind the leaders, and there is ample room for progress.

We will discuss the competition development programme today. The Government has submitted a package on streamlining the anti-monopoly legislation to the State Duma. Its approval will provide the Federal Anti-Monopoly Service with more effective tools for fighting illicit business practices and abuse of market monopoly. At the same time, it will free enterprise from excessive control.

Entrepreneurs' unfair acts are not always the reason for competition restraint. Monopolies are often rooted in underdeveloped market relations or inefficient state regulation. Bans and punishments are pointless in such instances.

What we need to do is remove the reasons for the monopolisation of particular commodities and service markets. The competition development programme aims at settling just such structural problems.

There is another step to promote the development of the market infrastructure, and that step is the passing of a bill on financial instrument taxation. It will remove many formidable obstacles to developing open trade in the traditional key Russian exports-mainly oil, its derivative products, and natural gas.

In particular, VAT will be levied on exchange transactions only once, at the time of physical delivery.

What do we expect of the development of Russian exchange trading marketplaces? First, we expect it to provide tools of steadier and more transparent oil and oil product price formation. Second, it should extend the rouble sphere for traditional Russian exports.

I call on you to be just as swift in your work on other decisions aimed at making the Russian exchange more attractive-in particular, the decisions we recently discussed with petroleum experts in Kirishi in the Leningrad Region.

Next on the agenda is the draft federal target programme on enhancing the seismic resistance of housing, essential projects and vital service systems in earthquake-prone areas.

Regrettably, the problem has not received sufficient attention for several decades, and earthquake danger has been badly underestimated.

Several thousand projects in seismic areas have been built proceeding from the wrong, inadmissibly lenient safety standards. The consequences were demonstrated by the unforgettable tragedy of Neftegorsk in Sakhalin.

This dire situation demands thorough work and major investment to ward off the danger to people's lives and health. Key infrastructural projects require a spectacular increase in seismic resistance.

It is, first of all, up to regional and municipal authorities to fund relevant efforts, because they own a greater part of buildings in need of such an increase.

It is evident, however, that they cannot cope with the challenge without federal allocations-the job is too big and too expensive. Besides, the danger has been growing for decades, as I have said. A year will not suffice to remove it-but we must do something.

The draft programme envisages a six billion rouble federal allocation in 2009 for urgent works to enhance project seismic resistance in Kamchatka, Sakhalin, and the Kuril Islands. In that, we need not only to renovate old buildings, but should pay ever greater attention to new housing and social infrastructural projects that are up to the latest standards of seismic resistance and comfort.

As I am finishing my initial address, I want to mention another item on the agenda-the draft law on the ratification of the Russian-Lithuanian agreement on navigation in the Curonian Bay and the Neman River.

It envisages the freedom of Russian vessels to navigate in Lithuanian inland waters and, reciprocally, Lithuanian vessels' freedom in the Kaliningrad Region waterways-a decision that fully complies with Russian national economic interests.

I also think that positive steps to solve practical problems strengthen the basis of our partnership with European countries and the entire European Union.

Let us get down to business.


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