Vladimir Putin answers questions from Russian journalists while driving a Lada Kalina car down the new Amur motorway
Question: Can you assess the damages from the fires caused by the abnormal heat and drought? Some experts put the damages at 1.5 trillion roubles.
Vladimir Putin: It is too early to give a precise number for the damages from the fires. The figures are not available yet because, unfortunately, the work (connected with fires) is not finished yet. The damages can only be assessed after all this work is completed.
Question: Some blame officials from the Moscow Region for failing to prevent peat bog fires, but don't you think that the problem lies much deeper? It goes back to the time when the Soviet Union carried out a "successful campaign" of draining the bogs, an ill-considered campaign. They dried the bogs and they got dry fire-prone peatland.
Vladimir Putin: Yes, that is one of the reasons, probably the main reason why we have the peat problem. There was a deliberate drive to drain the bogs. They were dried and this resulted in peatland that started burning.
There is a second known reason: peat used to be produced in the Moscow Region as fuel for thermal power stations. The thermal stations later switched to gas, which is environmentally cleaner and cheaper. There was no need for peat anymore. In fact, the use of peat had become economically unprofitable and impractical. The enterprises that worked there abandoned everything and left. And because these peat bogs were neglected, they started to burn. When they were being maintained by the mining companies, relevant work was promptly performed and fires were quickly extinguished whenever peat bogs started burning. But then all that was abandoned.
Question: Will the Moscow Region get funding to deal with the peat problem?
Vladimir Putin: The Moscow Region initially asked for 20-25 billion roubles, but then changed its position. I have instructed the Emergencies Ministry and officials in the region to take another hard look and make another count. They are calculating very thoroughly at the moment, but it is already clear that the amount of money will be less than what they initially asked for.
Question: Would it be true to say that officials from the region changed their minds after an exchange of opinions with the prime minister?
Vladimir Putin: I am not inclined to suspect anyone of trying to get something extra from the government. They are now just carefully calculating the amount of resources required jointly with the Emergencies Ministry.
Question: What do you think about the talk of grain shortages and a massive rise of grain prices in the aftermath of the drought and the harvest shortfall?
Vladimir Putin: The government of any country, including Russia, can react to price changes in several ways. First, by conducting a thorough analysis of what is happening in the economy. If there is an economic need for producers to raise their prices or rates, that is one thing, but if prices are raised without any economic necessity, that is something else entirely, and then the antimonopoly agencies should step in.
This is what is happening: The harvest is less than expected because of the drought. That is a natural factor. There is nothing one can do about it. Even considering that we have substantially improved the technological standard of agriculture in recent years. No one can say that not enough has been done for agriculture in recent years. Indeed, agriculture has developed faster than even industry. This is a natural factor.
But, regarding the crop failure, the question naturally arises: Are there really any supply shortages in agriculture? Well, there are no supply shortages because, first, we have large stocks and reserves of grain accumulated last year and the year before last, a total of 9.5 million metric tons of grain. Of that amount, 3 million tons is fodder grain, intended to feed livestock. In addition, importantly, we had built up a so-called carry-over balance of 21 million tons of grain. That amount is at the disposal of the businesses. The 9.5 million tons we have mentioned are at the disposal of the state and 21 million tons are owned and controlled by the businesses. But that amount is inside the country.
If we produce about 60 million tons, plus 9.5 million tons of state reserves, that already makes almost 70 million, plus 21 million tons remaining from last year. It adds up to a little more than 90 million tons. The domestic need is 77-78 million tons.
Technically, the export potential is still there. But why did I decide to suspend grain exports? Because we do not know what will happen to the winter crops next year.
This year the winter crops will shrink dramatically because of the drought, as the soil is dry and some crops have been lost in the regions. Perhaps not enough area will be sown with winter crops. All in all, that means we will smoothly move into next year, but we do not know what will happen in 2011 and what the harvest will be like, and we do not know what will happen to the carry-over amount. Twenty-one million tons is more than we need, but the minimum we must have is 15 million tons. So I think it would be a mistake to allow grain to be exported now. So, there are no objective reasons for a sharp rise of prices.
Question: What do you mean by a sharp rise of prices?
Vladimir Putin: In general, there are no preconditions for an increase in prices. If price escalation is connected with a natural process such as inflation, rising gas and power prices and some monetary depreciation, this is understandable, but if price escalation is speculative in character then the relevant services, above all the Federal Antimonopoly Service, must react in a robust manner. I have issued such instructions and I hope that the FAS will work actively in all the regions.
Question: The question that is being discussed all over the world is whether or not the crisis is over. What is your opinion on this issue as the head of the Russian government?
Vladimir Putin: Yes, indeed, this issue has been discussed all over the world, but to this day no one can answer the simple question: How did the crisis come about? What caused it and, consequently, when it will end.
Most analysts believe that it will take a long time for the crisis to be over. And experience confirms this. Unemployment is still considerable in leading economies, in the United States and in European Union countries. These latter countries are our main trade and economic partners. This means that the productive powers of labour have not yet bounced back to the pre-crisis level. We see fluctuations in world markets and in stock exchanges. That too indicates that the economy has not yet fully overcome the impacts of recession.
This also affects us here because we are part of the world economy. It is hard to say whether this is good or bad, but I am convinced that there are more pluses than minuses. Just like the whole world economy, the Russian economy is gradually emerging from the crisis. But this process is not going to happen quickly in this country, that is why it is very important to determine whether we are out of the crisis or not.
Why is it important for us to answer that question? Certain practical conclusions must follow in line with how the question is answered. If we think that we have moved past the crisis, then we should suspend various anti-crisis programmes, for example, the programme supporting the auto industry, including the programme of exchanging used cars. This programme of scrapping junk cars, among other things, helps people buy new cars, and it is intended to a large extent to shore up the Russian auto industry. That is just one example. If we feel that the market has not yet recovered, and the public's purchasing power has not yet recovered, we should continue these support measures.
We believe that these programmes should continue.
Question: How would you assess the government's performance during and after the crisis?
Vladimir Putin: As satisfactory. Some things could perhaps have been done more quickly and more effectively; for instance, we have been talking about government guarantees to the real sector of the economy, but decision-making is mired in red tape and so that measure proved to be ineffective at the first stage. But on the whole, talking about the whole range of measures, the government's response to the crisis has been well-timed and has produced tangible results.
Question: We all understand that the country will be directed out of the crisis through "manual control," so to speak. This means that the head of government controls absolutely everything and all the proposals and decisions have been made by him and under his strict control.
In Western countries, prime ministers of course have taken an active part in organising anti-crisis measures. But they have anti-crisis mechanisms in place, whereas in this country the mechanism was actually the head of government. Of course, if you think back to the first crisis of 1998, there was a virtual absence of leadership during the crisis and the economy and the financial system simply collapsed. Now we have managed to avoid that due to "manual control".
Are you thinking of creating an economic management mechanism that could be utilised during crisis situations without the head of government having to solve particular questions and instead only dealing with strategic matters?
Vladimir Putin: In answer to your question, I would like to note that such important issues of economic development are not solved in an automatic mode.
If you look at the debates in the British Parliament, you will see that these debates during the crisis, or, better say, those taking part in these debates repeated almost word for word the discussions that were held in our State Duma. Almost word for word, it is all the same. They had similar bitter discussions regarding what measures to take and even regarding the content of the measures taken. For example, over whether money should be funneled into the economy or not. And if the answer to this is yes, then in what amount. Absolutely the same things were said about the inability of the banking sector to issue loans to the real sector of the economy. If you translated the debates in the British Parliament from English, you would sometimes have a difficult time telling whether the debates were going on in the British Parliament or in our State Duma. This means that there are similar processes going on there.
But of course one has to admit that these issues have been resolved more easily there. Why? Because the market economy there has been taking shape for centuries and there is a stable regulatory and legal framework in place. It has been developed down to the minutest details. We do not have this here. That is one issue.
Another point is that we are an emerging market economy. Our market structures are in a rudimentary state. For example, the securities markets.
And thirdly and lastly, although Western countries have a regulatory and legal framework and have longer history as market economies, their systems have turned out to be lacking in many respects. For example, some European countries tax the banking sector. Why is this done? In order to create the necessary reserves to be used when difficult financial and banking crises arise. And I would like to remind you that we have already built up such reserves. We have taken care of this in advance.
Question: This problem was the target of sharp criticism in the past. People wondered why such funds needed to be accumulated. Now we see that the government had been doing the right thing after all, is that right?
Vladimir Putin: Yes, the government's tactics proved right. But I would not throw stones at those who criticised the government at the time for being stingy and putting aside everything for a rainy day. I understand that at the time many felt, with good reason, that the upsurge of the world economy and the high demand for our traditional exports - metal, gas, oil, chemicals - would continue forever. So they felt that it made no sense to put so much money aside and that the money should be invested in developing the country.
Take the road we are driving on. Even though it has been under construction for many years, we see that it still requires much more work to give it a modern look. I hope it will be different when we reach the next stretch. Where we are driving now, this section of the road was built in the mid- and late 1990s. The road was built according to old technology. Of course it is a hard surface road. But in my opinion it is short of being a modern road.
Remark: Surely it's not an autobahn...
Vladimir Putin: Not an autobahn and not a highway. It is just a good solid country road, a modern country road, not a highway and not an autobahn. We have more than enough such roads into which money needs to be invested.
I repeat, I hold nothing against those who criticised the government at the time. Everybody wants the country to develop quickly and rapidly. But of course the government proved right because in spite of the universal wish to see rapid development and to see more money invested in various sectors of the economy, the existence of reserves has not come amiss. The existence of these reserves has enabled us to weather the peak of the crisis rather smoothly, although there have been some losses and there has been unemployment. We have continued to ride it out and even more, to solve major social problems, to support national projects, to raise pensions, to build housing for military personnel, etc, etc.
There was another thing to keep in mind. It may be described as purely theoretical, but it has practical significance. This is the amount of money in the economy. The government agencies in charge of the economy were having a running dispute with the opposition, arguing that when we invest more money in the economy than we earn - and the fact that we sell oil and gas at high prices in the external market is not the same as really earning that money - these are windfall, God-given profits... But if we spend as much as we earn in the real sector of the economy, which should be our aim, then we should have spent even less in the previous years. And then the crisis would have been less severe for us.
I would like you to draw attention to this in your reports. Why is it necessary? Because if we rely entirely on the situation in the external market - for example, if the world market needs more raw materials, more metal and coal, then our business begins investing money in these sectors. And then the world market shrinks and the capacity that the world economy has built up to produce coal and steel is no longer needed. We do not need such amounts for internal consumption and there is no demand in the external market. The volumes and the prices plummet and the Russian economy suffers a double blow.
When we say that we did the right thing in building up the reserves, perhaps we should have built them up even more, because this is not only about the amount of accumulated reserves, but about the somewhat reckless way in which we were building up our production capacity with an eye exclusively to the foreign market. When the foreign market shrank our exports shrank. The Ministry of Economic Development and the Central Bank, among others, did not take the necessary measures to limit these activities. Of course, they were under intense pressure, including from the opposition, which kept criticising the government's economic policy and accused it of being reluctant to develop the real sector of the economy.
I am convinced that in dealing with such issues one should be guided not by emotions, but by cold calculation.
Question: I think that another long-standing problem is the demolition of decrepit housing. This is not a new problem. In all the places that we have visited together with you - from Kamchatka to the Amur Region - this is a very pressing problem. You raised this issue when you were president. After your visit, a solution to the problem of getting rid of decrepit housing was set in motion in Kamchatka, but it took the prime minister's visit to keep up the momentum. Will the prime minister continue to travel the highways and byways of the country giving instructions on solving the problem of decrepit housing? This is not right. That is "manual control" again. Don't you believe that a solid mechanism has to be created to deal with this problem? Perhaps a new organisation should be established and vested with broad powers?
Vladimir Putin: We have such an organisation. It is the Housing and Utilities Fund. It distributes the resources needed to solve the problem of moving people out of decrepit housing. It should monitor the progress of this work. But they are not in a position to make the local authorities fulfil the tasks that they face, even the tasks for which the federal budget has allocated money.
I would like to take this opportunity to draw your attention to the fact that we have never before earmarked money to solve the problem of worn-out housing. Allocating money for the purpose was considered to be futile because the problem was so daunting that there was simply no point in allocating any money for it. And, in any case, we did not have enough money for this. Now the state allocates more money for this purpose than ever before and hundreds of thousands of people are moving out of decrepit housing.
As for the reason for visiting Kamchatka, as you have mentioned, it is a special case. This is a seismically dangerous area. People should not just be moved out of old housing, but also new earthquake-proof housing should be built. We have allocated, also for the first time, a considerable amount of money for that. Last year we credited Kamchatka to the tune of 2.5 billion roubles. They have hardly made any use of that money. Why?
I hate to talk about this, but I will tell you that this has something to do with the infighting among the so-called regional elites, the struggle over possible bidding procedures for such orders. This has been going on for more than a year. Everyone asks for more - and paradoxically - Kamchatka did not only object but actually hinted that it would not mind if we reduced funding this year. Frankly, I was shocked. At the same time, it is absurd to send money to a place where it will not be used. So, we cut our allocations to them by one billion. At present, the territory has 3.5 billion roubles in its accounts, money that is not being used. So, we had a harsh conversation with them.
Question: Do you mean the conversation that took place with the media present?
Vladimir Putin: No. The most serious part was after the media left. It was severe of course. I hope that the conversation will bring about some positive results. And I hope that it will calm down all the fuss being made by various structures in the territory and they will be guided by the interests of the local people and really get down to work.
That is why I sent a commission of experts from the Finance Ministry and the Ministry of Regional Development to review the financial and economic activities of the regional and municipal authorities, and especially in Petropavlovsk-Kamchatsky. We should see how effectively the local authorities use funds and money from the budget, and how they spend that money in particular. We should not have to finance ineffective management. After that, we will continue financing the region under the programme of demolishing decrepit housing and building earthquake-proof housing, and I think we will disburse additional resources for developing Petropavlovsk-Kamchatsky after a proper check-up.
Question: Why has the fund that is called upon to monitor how money is spent been unable to make them spend that money effectively? If they don't have that power, then they are only half of what they should be. They can allocate the money, but they cannot make sure that the money is used effectively?
Vladimir Putin: I must say that the fund, first, is looking at the prices at which the local authorities propose to build new houses for the residents of decrepit buildings. And it assumes that one square metre of housing should cost no more than 30,000 roubles. It ensures that such housing is built, but it is unable to force the local authorities to act more assertively.
Question: But isn't it the case that in any normal mode of management one should monitor the situation and if the money is not used effectively - it's the same in small businesses, large businesses and in state management - then that money should be taken away.
Vladimir Putin: Quite right. That's what I told the government: unless you put your act together quickly, I will take away the money and hand it over to the Ministry of Regional Development. Before I said this to the governor, I spoke with the minister and I asked him point-blank: If I hand over that money to you, will you be able to quickly organise this work as a ministry? He assured me that the ministry would be able to do this.
Question: In addition to moving people out of decrepit housing, there is another problem that I became aware of while accompanying you on your trip to the Far Eastern Federal District, this is the state of the abandoned military towns. It's a problem not only in the few such compounds that I have seen, but also it seems that it is a problem on the national scale, which goes back to the mid-1990s. Is the government planning to address this problem? Military towns are stagnating, but they are still inhabited by people and this is the problem.
Vladimir Putin: Solving this problem is very costly. There is always the question of whether money should be invested in disposing of what nobody needs or into building what millions of people need today. Even so, the problem must be addressed.
Yes, I think the Defence Ministry should be financed promptly to enable it to dispose of what is unnecessary and to create normal conditions for the people who continue to live in these towns after the Defence Ministry leaves them. Formally, of course, these towns should be handed over to the municipality. But the municipality doesn't have the wherewithal to maintain all these abandoned towns.
Question: Doesn't it seem to you that all the recent developments, beginning from Pikalyovo to Norilsk (Norilsk Nickel), show that big business has again lost a sense of social responsibility? The internal squabbles among the founders of Norilsk Nickel demonstrate that they put their personal interests above those of society.
Vladimir Putin: I am quite critical of the leaders of big business. I am not even talking about what was happening in the 1990s. Even so, the way many big business people behaved at the height of the crisis in 2009 pleased me and even came as a bit of a surprise. It was strange and unexpected for me, but they displayed a sense of responsibility and showed no signs of being greedy or stingy during the crisis period. They were prepared to sacrifice their capital and give freely of their time and actually put their own destinies on the line. Because when someone was on the brink of ruin, and was not afraid of it, but did as we had agreed - developing production, supporting the workforce - and mortgaged almost all their property and put themselves entirely at the mercy of the state in that sense, I was very surprised that many were ready to give everything they had to the state.
On the one hand, and I can understand it, they did not know what the outcome of all this would be and felt it would be better to cash in, as they say in some business circles, getting money from the state and absolve themselves of responsibility. But many behaved as I have just told you, and I found it very heartening.
When the crisis began to recede, the fight for control of the companies began among them. In my opinion, it has more to do with ambitions. Not money, but a clash of ambitions. I don't think that is good. It certainly damages the economy and production.
As for what is happening at Norilsk Nickel, this is a different case than Pikalyovo. The two have nothing in common. The problems in Pikalyovo stemmed not from ambitions and the fight for control of assets, but instead there was a technical reason for the conflict. At the time of privatisation all production was divided into three parts. On the one hand, they seemed to be independent, but on the other hand, they could not exist without one another. That led to the conflict we all know about. That is why I had to step in resolutely.
This is not the case at Norilsk Nickel. It is a healthy enterprise. It is growing and a single production complex has been restored there. It is not divided up among owners, but there is a struggle among the major shareholders inside that joint stock company. This struggle certainly damages the enterprise. Of course, the government is constrained by current law in this case.
Question: I would like to ask you a question in your capacity as the leader of the governing United Russia Party. All the previous reforms are signs of the commitment to reforming or reorganising the entire political and state system in the country. Does the governing party you lead have plans to continue these reforms?
Vladimir Putin: Of course it does. Actually, it is all written down in the programme until 2020, the Strategy of the Development of Russia until 2020. It includes reform and the development of the social sphere, the economy, etc.
Question: I understand, but the last crisis greatly impeded the implementation of your programme.
Vladimir Putin: The crisis of course was an impediment, and I think it's clear why. Our programme is designed to put the economy on the path of high technology. When the crisis hit our traditional extractive sectors - oil, gas, metal - it became clear that the provisions of the country's development doctrine were highly relevant and rather than shirking these tasks, we should speed up the implementation of these plans. In that sense, the crisis helped because it brought about a measure of cohesion in society and consolidated financial and administrative resources. Of course, our resources had to be diverted to fighting the crisis. Money was spent on anti-crisis measures in the social sphere and we had to inject additional funds into the defence industry and in banking. But, most importantly, we prevented a collapse of the banking system, prevented a collapse of the major enterprises.
Question: As the party leader are you satisfied with the party's activities, the party structure, with its cumbersome administrative structure?
Vladimir Putin: No, I cannot say that I am. In general, a person cannot be satisfied all the time, and political activities are part of a delicate sphere involving thousands of people. It is not always the case that people attempt to achieve the goals which they have declared. There are many personal and, unfortunately, sometimes selfish interests that come into play. But, on the whole, the United Russia Party, as a nationwide party, plays a very important, positive role. For all the minuses, and I repeat, there are many minuses, it is a consolidating factor in society and to the best of its ability, above all in parliament, it offers instruments for making decisions quickly and carrying out the solutions, especially in acute crisis situations. If we did not have such consolidation at the Duma today, I think we would have survived the crisis, but with much greater losses. We would not have been able to take anti-crisis measures in the economy, the financial and banking sector and raise pensions at the same time. That would have been unrealistic. It would have taken us much longer to make decisions, and as a result we would have had to do a lot of catching up and spending more money with zero results.
