Visits within Russia

4 june, 2009 18:00

Vladimir Putin conducted a meeting on the situation at the plants in Pikalyovo, Boksitogorsk District, Leningrad Region

Transcript of the meeting:

Vladimir Putin: Good afternoon,

At the meeting with leaders of trade union organisations in Moscow's Columned Hall of the House of the Unions on May 26, I received a note with a request to explain my position on the situation in Pikalyovo. It was written by Vladimir Derbin. Are you here? Was it your note? If you remember, I said then that I was not ready to answer because I did not know the situation well enough, but I also added that I would reply to it. Is this correct?

Vladimir Derbin: Absolutely.

Vladimir Putin: On the whole it is clear what is taking place there, and what should be done to ease tensions. Nevertheless, since you have actually initiated our meeting, I would like to start with you, and to ask you to give your account of the problem, and of the situation there. Please, go ahead.

Vladimir Derbin: Mr Putin, I did indeed write this note in order to understand the position of the Prime Minister.

On November 8, the first rally on this problem was held in Pikalyovo. I attended it and took the floor. Since then we have pursued every legal opportunity available in the Russian Federation. In other words, we have addressed every possibility. We have engaged all agencies, and have gone through all legal stages by now.

Then there was a second rally in Pikalyovo, followed by a rally in St Petersburg in support of the local trade unions. In spite of this, the three owners involved could not reach a settlement. All of us came to the conclusion that the Pikalyovo problem does not stem from the economic crisis. It is rooted in the relations between the three owners who refuse to come to terms.

Therefore, the local workers and the other residents of the town agree that the three owners can be brought to agreement only by some cardinal measures. After completing its review, the commission of the Federal Anti-Monopoly Service made a decision, which suited practically everyone and should have been carried out. But instead of carrying it out, the side against which these proceedings were started, went to court and everything was again bogged down. Needless to say, this problem was tackled slowly and over a long period of time.

Officials of the Leningrad Region, and the Governor herself made a big contribution to resolving the problem. A working group was set up. All measures which were supposed to be funded from the regional and municipal budgets were taken. Furthermore, people were offered jobs outside Pikalyovo - in Kirishi and Tikhvin - but they declined because they have roots in Pikalyovo. In general, Russians tend not to move very much.

Therefore, after you read my note and promised to respond, we were confident that this issue would be dealt with. Regrettably, there was a setback yesterday, but not through any fault of ours. It goes without saying that tensions are running high.

Today, people were told that they would receive wages for March and April and that the money would be transferred to their debit cards. We are waiting for the resolution to this problem - either the Federal Anti-Monopoly Service should make a decision, or some other solution should be found. In any case, all the employees hope that their plants will again work at full capacity.

Mr Shmakov, Mr Isayev, and Chairman of the Mining and Metallurgical Trade Union Mikhail Tarasenko visited the region and also met workers at the local plants. People are in the mood to work. They all want to work but at their own plants. That's it. Thank you for your attention.

Vladimir Putin: Thank you. After I received this note we held a number of meetings in Moscow, and discussed the issue at different levels. On June 1, Monday, I met with a few owners, and with the administrations concerned. I said then that I would visit Pikalyovo.

Violating the law was the worst thing which could have been done to prevent me from coming here. I believe this was done in collaboration with those who didn't want me to come or maybe it was done for the money of those who did not want me to come here.

Because we cannot encourage violations of the law regardless of who violates it or what their excuse is.

At the meeting, I spoke about the responsibility of trade unions in this respect. I think I made it clear enough. Today, we will talk again about the responsibility of the owners and of the administration. Mr Derbin explained the gist of the conflict, although partly, it is rooted in economic problems. Let us start with the owners, and listen to what they have to say.

Oleg Deripaska: I will not talk about the reasons for the division of the amalgamated enterprise. RUSAL received the plant after the division. We managed alumina production. The following are approximate volumes and prices. There are three production lines - alumina, cement, soda and potash. We are the main processing complex, and have the most personnel - 2,400 people. We account for 15% of the revenues.

In late 2007, external market conditions started changing. Here on the second page I have approximate prices for the product before the complex was shut down.
Based on these prices, our losses per unit of production reached 3,000 roubles per tonne, and even more than that. Furthermore, we could not acquire sufficient alumina because of a decline in aluminum production at north-western plants and the Volgograd Aluminum Plant.

We discussed the plant's transfer to the construction group so that cement could be used for internal purposes, and made a decision on the group's partial conversion to cement production. However, we failed to reach agreement among all participants on the new financial terms. Here, on the third page, I show our proposals. We believe that it will provide equal revenue to all the participants in the chain.

Today, we have come to terms with the main supplier - Fosagro, and are conducting further negotiations with its managers. We tried more than once to set up a joint venture with them because they and Basel Cement are the primary parties interested. Fosagro also uses hydrate. RUSAL is the main consumer of Fosagro's product - fluoride aluminum. There is an opportunity to reach a long-term agreement.

The terms which we offered have not been agreed upon yet. However, we hope to find a solution soon.

Filaret Galchev: Mr Putin, we became shareholders of this plant in 2005. This problem existed before, but when we arrived...

Vladimir Putin: In 2005 or 2004?

Filaret Galchev: In 2005. We took control of the plant some time in May. Before, it had been part of SUAL, its secondary unit. All of the plants problems continued to exist. When we came, we agreed with the Federal Anti-Monopoly Service and all participants in the process - SUAL and Fosagro - on a plan of production. We signed a long-term contract which was observed.

During this time, our company invested about $100 million into cement production. After SUAL merged with RUSAL, all participants in the process were offered a chance to buy out the plant.

Such negotiations were held.

After that, RUSAL determined to retain the property, and production continued though in an atmosphere of uncertainty. In 2007, we were offered to sell the Pikalyovo Cement plant, but we refused.

Vladimir Putin: You were offered, you say? Who made such an offer?

Filaret Galchev: The head of Basic Element made an offer to our manager. We turned it down, and raw material supply problems started soon after that-as early as the beginning of 2008. I have preserved the correspondence on the controversy. We have won two or three cases on this dispute.

Supplies to our company stopped abruptly in August, without any explanation, under the pretext that cement production was re-profiled. We started to upgrade the plant-what else could we do? We quickly drew up a relevant contract, and made blueprints. We have spent 800 million roubles so far-in particular, to build a quarry. We have opened up raw material reserves-we have 500,000 tonnes. Equipment will be brought in in June, and it will be fully assembled by September. The plant will be able to work independently by mid-September.

We have decided to bring clinker brick from our other plants, and so retain at least a part of the personnel. We are reprocessing the brick now, and using a mere 30% of our total capacities-but we hope to restart full-scale production after September.

We have signed a general contract with Russian Railways for clinker shipments from the Maltsovo Works. It is a long way, however, and such transportation does not pay.

Despite all this, we are coping. We have always paid wages on time. The average monthly wage is 18,000 roubles. As for social welfare, personnel are entitled to free meals and health services. 15% of the staff receive free seaside holiday accommodations every year.

However, the current situation does not suit us or our employees. Because of long-term contracts, we were not prepared for the sudden stop, but this is what happened.

If we switch production to the traditional pattern, which all cement plants follow, the alumina refinery will fall into a dramatic situation. A conversion to cement production is planned-but then, forecasts for this year's cement consumption in the Leningrad Region estimate it will be 2 million tonnes, as opposed to 3.85 million tonnes in 2008.

On the average, total cement output in the Leningrad Region and St Petersburg is approximately 5 million tonnes, and if new production is launched, the region will have 5-6 million tonnes more than it can consume. That is unlikely, however-a technical analysis says there is little chance for such huge output. So I think production should be launched-but the production pattern should be amended.

Vladimir Putin: Just think, we used to import cement from China! Cement went at exorbitant prices quite recently-but we coped. Everything functioned smoothly.

Mr Uteshsky has the floor.

Alexander Utevsky: We managed the entire production complex before the company merged with SUAL in 2003, and SUAL started shedding non-core assets. The cement plant was sold the first. Then, when they shifted to the one share arrangement, SUAL refused to incorporate the chemical works of the Volkhov Aluminium Plant, though the chemical works accounts for 85% of its total production-aluminium output is down to a miserly 22,000 tonnes a year. The Pikalyovo chemical works was also turned down.

In short, the chemical works has stayed in our company. We have launched an independent production line and started cement production in Volkhov, which promises a million tonnes. We have a strong market position there.

In reality, the Pikalyovo facilities are quite small, employing 270. The company produces soda, half of which is taken to Volkhov for its basic production, and potash. There is no demand for top quality potash in Russia, so it is exported to the West, while inferior product is processed into potassium sulphate fertiliser in Volkhov.

I think Mr Deripasko's subordinates have not yet told him that we have signed price agreements for carbonated lye. I have raised its purchase price by 61% because we have improved its quality in the past five years after investing $12 million in this small-scale production. Our profits have grown spectacularly, and it really matters to us, with all our current problems.

We worked at full production in the first quarter of 2008, and used only a half of our capacity in the second and third quarters. Things became even worse in the fourth quarter and through January-only one of six furnaces in the alumina refinery was functioning. I paid Fosagro for nepheline concentrate out of my own pocket the last month to keep production afloat-and we were barely coping.

The company has been at a standstill since February but we have paid wages in full for 8 months. The trade union will confirm that it has no grudges against us. 250 workers out of the 270 had been warned about dismissal, and I was to dismiss them on June 2, though I put it off until June 12,when we learned that the federal Government was delving into the problem and we saw a light at the end of the tunnel. If I have it right, the plants will restart production today, and there is no need to sack anyone.

Vladimir Putin: One of the problems concerns necessary materials to be obtained from Fosagro. We have discussed it in Moscow. Mr Volkov, please tell us what resulted.

Mikhail Volkov: Mr Putin, we are not representing the site proprietor. Fosagro-to be precise, its Apatit arm-supplies nepheline concentrate, one of the basic raw materials. We carefully complied with the contract whose term began April 1, 2006, and expired in March 2009.

The contract envisaged nepheline concentrate supplies at a fixed price. It was 1111 roubles at that time, and was adjusted every year according to the industrial inflation index.

I do not know why nepheline concentrate consumption declined by half since March 2008. We have inquired on many occasions about the current situation and future nepheline concentrate supplies but we have never received an explicit answer. The only news came from the press. That was how we learned about the plan to convert the works to cement production-which means nepheline concentrate will no longer be in need.

Despite all that, we began supplying nepheline concentrate in conformity with applications from Basel Cement Pikalyovo. As the result, our production for 2008 was only a half of the contract amount-540,000 tonnes. Respectively, the net cost of supplied nepheline was 1,340 roubles a tonne in 2008, so Apatit Co had 5-6% negative profitability in this part of its activity in 2008.

Consumption had been shrinking even quicker since November 2008, and the last batch of concentrate, 8,000 tonnes, was dispatched in February 2009. In January, we supplied 6,000 tonnes-14 times less than the nominal consumption volume. This disastrous production slump bloated nepheline concentrate net cost to 2,717 roubles a tonne in February.

A meeting chaired by Mr Igor Sechin made several decisions. We have accurately followed each one. The Federal Agency for State Property Management sent us an instruction this morning. The Agency has approved the contract terms agreed upon yesterday. The supply price has been appointed at 750 roubles for three months-that is, until the ad hoc team determines further the price structure or, to be more precise, the principles on which it should rest to keep Apatit afloat. If Apatit works at a loss, it will be a disaster to its 14,000 personnel and to the 90,000 people of two towns-Apatity and Kirovsk, which depend on the company for survival. Employment will shrink several-fold there.

So a circumspect decision is necessary. We will do everything we can. Our depots contain 8,000 tonnes of nepheline concentrate ready for distribution. We will start loading at once if we get the wagons.

Vladimir Putin: Have you signed the contract?

Mikhail Volkov: Yes

Vladimir Putin: Did Mr Deripaska sign the document? I do not see your signature. Come over here. Sign it. The document is over here.

Oleg Deripaska: Just give me a pen.

Vladimir Putin: Excellent. I heard what you said and hope that the agreement that has been reached and finally signed will be fulfilled. As far as further developments, we will discuss them separately. If assistance is required, we will deal with it separately.

To ensure that raw materials are supplied here, they need to be transported, and the transportation tariffs should be reasonable to ensure profitable functioning of the enterprises. Mr Yakunin, go ahead, please .

Vladimir Yakunin: Mr Putin, colleagues, we started to deal with the problems at this manufacturing complex following a letter from the Governor of the Leningrad Region of March 11 addressed to the President. We immediately prepared appropriate measures and submitted them to the Leningrad Region Governor's office.

At the meeting convened day before yesterday by your deputy, Mr Sechin, it was determined that there were no critical problems as far as transportation is concerned. We have enough carriages to transport materials. As for the clinker, we have already signed an agreement; the transportation will be implemented under tariff 1001. We are ready to provide the First Freight Company carriages for the purpose. As far as nepheline, the proposals currently on the table will result in RZhD losses in the amount of 56 million roubles. As far as I understand, instructions have been given to compensate these losses in accordance with the law. These instructions are ready to be signed.

I would like to stress once again that there are no problems whatsoever as far as the company is concerned and the technological aspects of transportation; the participants of the meeting do not have any concerns either.

Vladimir Putin: We have also agreed that the compensation will be made out of the regional budget. They receive the revenues from the transportation...

Vladimir Yakunin: Mr Putin, this is beyond our prerogative...

Vladimir Putin: True. I would just like to ask the Governor if there is such an agreement.

Valery Serdyukov: Mr Putin, we have fulfilled all our commitments to the Russian Railways as far as subsidised passenger transportation is concerned. The losses incurred by the Oktyabrskaya Railway... Passenger transportation and commuter transportation depend on the established tariffs. The Oktyabrskaya Railway informed us that 14 roubles was a justified tariff for 2009 and we accepted it. Therefore, we have not accepted any debts related to the losses. Had we established a lower tariff than the one proposed by the RZhD (they proposed a 14 roubles tariff, and we established it at 14 roubles), then we would have been responsible for the losses.

Vladimir Putin: What are RZhD's shortfalls in revenues?

Vladimir Yakunin: The problem is that the existing system does not register any debts on the balance sheet of a constituent entity of the Russian Federation. These calculations are made by our agency. According to our estimates, which, however, will need to be coordinated, the shortfall in revenues are in excess of 100. Currently, none of the regions cover the passenger transportation losses.

As for tariffs, according to the law, RZhD does not set commuter transportation tariffs. In fact, RZhD does not set any tariffs. Tariffs are established by the constituent entities of the Russian Federation and freight tariffs - by the Federal Tariff Service.

Vladimir Putin: Mr Novak (Alexander Novak - Deputy Finance Minister), please make all financial calculations and report to me. As for the sources, we will decide on them.

Now let us address the infrastructure issue of the complex. What are the problems there? Why is it not possible for the complex to work as a single unit? I mean joint use of the infrastructure.

Filaret Galchev: I would like to address this issue.

Vladimir Putin: Please.

Filaret Galchev: First of all, when the site was divided, I have the lay-out here, the main railways supplying our cement enterprises became the property of BaselCement. We have had many complaints and lawsuits on the issue. When they stopped delivering raw materials to us, we launched our own deliveries. Of course, we had periodic problems - a locomotive would break down or reconstruction would be required, there is always something. Therefore, neither BaselCement nor anyone else really needs the railway tracks located in the territory of our enterprise, except us.

Vladimir Putin: Yesterday, an agreement was reached between the parties concerned. Are there any objections to the scheme that was proposed for -Basic Element and the Piskalyevo Cement Plant?

Dmitry Savenkov: Yesterday we signed an agreement with Evrocement on unimpeded cargo transportation using our railways. Therefore, I believe that the issue has been resolved.

Vladimir Putin: Very good. I would like to see Mr Deripaska's signature. Could you pass it to him? Please sign the document.

Now, let us discuss the future. We will resolve the current situation. That is good. I will say a little later what methods and resources we are going to use. The question is what we are going to undertake in the future.

Denis Manturov: Mr Putin, I don't think we should go into a detailed discussion of the issues that arose in 2004. The issue has been analysed thoroughly. Even without a detailed analysis it is obvious that the divided management structure of the complex has unfortunately proved ineffective. However, I believe that we should not make any hasty decisions regarding the corporate structures at this point. At yesterday's meeting, Mr Sechin instructed our ministry together with the Ministry of Finance to prepare proposals on the future structure of the enterprise to ensure its efficient functioning. I believe that on top of the priority measures that you have already mentioned today, an agreement has to be reached on supplying nepheline. The solution to this issue lies with the joint use of the infrastructure.

It is also necessary to sign an agreement on supplying nepheline from BaselCement-Pikalyovo to Pikalyevo Cement. The supply of carbonate solution to Metakhim also needs to be ensured. As a result, we will launch the mechanism that will ensure the functioning of all three enterprises comprising the complex. Of course, we should issue loans to BaselCement-Pikalyevo on a priority basis to launch the operation of the complex and start buying the concentrate, which was mentioned above.

We will prepare all necessary proposals in the near future and will coordinate them with you.

Vladimir Putin: Good. Are there any other comments?

Valery Serdyukov: Mr Putin, prior to 2005 there was a unified complex which was working steadily. Under the structure comprising three enterprises it worked well until 2008. In the first six months in 2008, all three enterprises, including BaselCement paid income tax. This means that all three enterprises were profitable. Then the market changed in favour of cement. We considered BaselCement's proposal to fully switch the enterprise to cement production.

Together with specialists working with the Aluminium Institute, we came to the conclusion that it was not feasible, in view of the fact that there were two more BaselCement's enterprises involved. We submitted our conclusion to Basic Element. It responded that there would no negative effects and provided guarantees that none of the three enterprises would suffer. Everything will be fine. The problems began in October and already in November the enterprise stopped working. As of now, some of the employees have been laid off. 568 people have been laid off from my plant. The rest received their salaries, rates of remuneration and two thirds of their wages.

The entire complex was working though two plants had no raw materials and so came to a standstill. Hot water supply stopped on May 15. We investigated the matter, and paid back our debt. Our floating debt was 17 million roubles. We paid 5 million roubles in advance for future supplies. The local thermal power plant paid wages to its personnel out of that money.

Experts think that all four alumina furnaces must be blown in to guarantee normal performance in the future, which would also mean jobs for Metakhim and the cement works.

The other two furnaces will be used for cement-or, maybe, alumina production will resume. That is up to the company. Fosagro, too, will be able to work more or less normally then.

As for the thermal power plant, we are prepared to lease it, and we have a relevant pre-lease agreement already. Now, however, we have been saying increasingly that we are ready to service the plant entirely and provide related services to the town and its three industrial plants-the cement works, BaselCement and Metakhim, which work in close contact with the power plant.

We are ready to shoulder the responsibility-in particular, to service the town. We will do it if it is possible. We have done everything possible to provide for free meals at schools and kindergartens. In summer, we will provide holiday camp accommodations to all children under the age of 14. Naturally, we are discussing all that without industrial plants' participation. We will do our best to ease off the population's social

More than that, 356 applicants have received welfare assistance. We have made the payments out of the budget.

I see you are going to ask me about debts now. We owe 123 million roubles since 2001 for municipal heating and hot water.

The recipient company has gone bankrupt. The Arbitration Court decision says BaselCement can claim its property. No one has any objections, If BaselCement does not want it, another settlement will be necessary. At any rate, we have the court decision. Thank you.

Vladimir Putin: Mr Misharin, please give us more details on tariffs.

Alexander Misharin: Mr Putin, ladies and gentlemen,

In compliance with the decision of the meeting chaired by Mr Igor Sechin, the Federal Tariff Service appointed an emergency tariff for the transportation of nepheline concentrate from Apatit to Pikalyovo-1, proceeding from the transport cost of 300 roubles a tonne.

Relevant documents have been drawn up, and the Federal Tariff Service Board will make a decision at its meeting tomorrow, so the tariff will be valid as of tomorrow, and the 1st Freight Company will be able to work.

To compensate Russian Railways' expenditures-its shortfall in income, to be more precise-we intend to issue an instruction envisaging compensation connected with the establishment of emergency tariffs either during future indexation or in the rectification of passenger transport clearing accounts with the Leningrad Region, or again, in subsidising investment programmes and in allocations to compensate insufficiently adjusted tariffs. We have arranged this pattern with the Ministry of Finance, and it is to be found in the instruction.

Vladimir Putin: Good. Go ahead, please.

Igor Artemyev: Mr Putin, I want to call your attention to the structure of this market. It includes two monopolies-Fosagro and BaselCement. There was a tug of war over prices among all proprietors without exception during the last decades. We have repeatedly brought anti-monopoly suits against Fosagro and the proprietors of the Pikalyovo Cement Works, which belongs to BaselCement presently.

The price formula should be worked out. It is a must. Production must not stop during such tugs of war, and workers must not be laid off. That has always been our principal demand.

The five-year contract of 2000-2005 proceeded from the quotations on the London Metal Exchange. It was tied to aluminium, with alumina tariff adjustment; the same applied to nepheline, out of which alumina are obtained. That was how we worked for five years before another price war broke out. The contract mentioned here proceeded again from the calculation of the prices of commercial elements in every raw material.

The contract worked for three years before it was severed unilaterally. We think BaselCement was to blame. After that, the latest anti-monopoly proceedings were launched. The court decision was either to sell the plant with the present proprietors if they do not want to work with that plant, or to reinstate production in its full scope. The issue has a specific feature as two plants, Evrocement and Metakhim, which depend entirely on alumina production waste. They use as raw materials and will not survive if they do not receive it.

The two monopolies should resolve their conflict in full. Mr Sechin ordered us yesterday to join the ad hoc team led by Mr Denis Manturov, which is elaborating the price formula. Guidelines the federal anti-monopoly agency issued back in 2004 demand a 25 year term for those contracts. They were signed and eventually severed, which was the cause of the current situation. In compliance with the acting legislation, a fine might be imposed on BaselCement amounting to 1-15% of its turnover. The court hearing which our instruction postponed has been appointed for June 11.

Vladimir Putin: Thank you.

Alexey Barantsev: We have had a technical meeting today on re-adjusting the plant for nepheline concentrate procession. A contract has been signed with Mr Maxim Volkov, and routine work is going on. The thermal power plant has received our gas today, and its water circulation system has been switched on. The flow circuit is being cleaned.

The cooling stack was filled before lunch. We are monitoring the water chemical composition. Hot water supply to the town will resume on Tuesday or Wednesday.

So we will be ready for the process flow.

What problems do we have today? It has been said here that wages for May have not been paid. At any rate, the whole sum has been transferred to the plant. As for the process flow-you see, nepheline concentrate costs 2,000 roubles a tonne now. The plant worked normally before, proceeding from the London Metal Exchange, because the principal raw material is alumina, though only a tonne of it is obtained in processing 4.3 tonnes of nepheline concentrate.

The combine formerly employed 3,000, and now, 2,400. The soda and potassium carbonate branch employs 300, and Evrocement 700.

So the 1.4 billion rouble profit comes from the total turnover, with 5.5 billion for cement production and 2.3 billion soda and potassium carbonate-and there are taxes to pay. BaselCement cut a poor figure last year. There were some achievements but plenty of problems, too. Compare-one company has paid 2.5 million roubles to the local budget, and the other 11 million.

Thank you, Mr Putin.

Vladimir Putin: You have the floor now, Mr Kostin.

Andrei Kostin: Mr Putin, the managers of BaselCement addressed us yesterday. We discussed financing with the Ministry of Finance. There are two parts to the job.

The first is necessary to launch production and give the plant working assets. We are ready to do it no later than next Tuesday.

The second implies expenditures on thorough plant reconstruction and repurposing. I think this part depends on the decision to be made by the commission that determines the future of the plant.

The first part should be urgent, while the second, I think, should be discussed after the commission makes its final decision.

Thank you.

Vladimir Putin: I agree. You have the floor now.

Svetlana Antropova: I am the chair of the Cement Works trade union committee. I want to say on the personnel's behalf that all our workers are interlinked and traditionally join the same trade union organisation. They were eager to meet with you and complain about their plight. We have heard the speakers declare their stances-all except BaselCement-because the entire complex was stopped in a savage manner. Its full closure for the economic reasons, to satisfy someone's , ambitions, and for any other reason must be prevented.

They have stopped everything in the complex they can lay their hands on and are even drawing from the municipal and regional budgets, so the town and the region have to patch the holes through welfare to rescue the population and themselves. There is no collective agreement at the plant. We have no holiday accommodations and no health grants. The children's camp is closed, and the clinic's personnel has been laid off. Private security left the job due to wage arrears.

A private outsourcing company supervises the cleaning at the plant. BaselCement has not transferred a kopeck there since January, so its personnel do not get their wages.

When Mr Serdyukov sent us the first million roubles, we said those people should get their wages before BaselCement workers because they were even worse-off.

Wages have not been paid since December. The company did not say even approximately when we would be paid for the past three months, till yesterday. Money has been transferred to workers' accounts only thanks to today's meeting. I don't know whether the money is in their accounts already because I was too busy here to inquire.

The prosecutor's officers and labour inspectors come to the plant one after another. Mass personnel cuts started with New Year. The suspense is awful. Layoffs have been postponed now but the workers are so hunted-down that I don't think there is a better thing to do than voluntary resignation. 10 to 15 people quit every day.

The state must prevent such things in the future. What is going on is inadmissible. Socially responsible people should answer for damage done to the staff and the town.

The plant must restart work and resume development, we must get our wages in full and on schedule, and the labour legislation must be complied with. To achieve all that is our only target.

Vladimir Putin: I have said already that I chaired a meeting in Moscow on Pikalyovo's problems on June 1. It was clear, on the whole, what to do to solve those problems. Possibly, we did not need to come here. The same people could have gathered in Moscow or St Petersburg.

Nevertheless, I chose to hold the meeting here. Not that I wanted to see vacant production areas-it is a sad sight. I wanted the culprits to see it with their own eyes.

This is what I want to say to them: "You have made thousands of people hostages to your bloated ambitions, inefficiency and, possibly, greed. It cannot be tolerated. Where is social responsibility of the business community? We talk about it at every meeting. We never forget it." Besides, I have mentioned trade unions' responsibility during this meeting, too, and I ask you not to forget it.

I also want to say a few words about administrative officers. No one can convince me that the regional and other leaderships have done everything they can to help people. Do you know what the reaction was when I said that I was going to come here? "Don't! Let me show you another plant, built quite recently."

It is good to build new plants. I think that one is a good plant, and you built it in due time and created new jobs. But why all this fuss? Why were they dashing to and fro here, like frightened roaches, just before I arrived? Weren't any competent decision-makers here before, when people could not get their wages for months on end, and the heating was off?

True, the problems of the complex emerged as early as 2006, with the bauxite price slump. The crisis only made things worse. But prerequisites for the present situation appeared long before, when the complex was divided into three parts. The most profitable plant, which produces cement and soda, was separated from it. That was like picking raisins out of a cake. Things became worse immediately. The production cycle was severed. The proprietors were busy bickering and fault-finding with each other instead of organising smooth teamwork. They left each other without raw materials, and destroyed the infrastructure while they should have all together thoroughly modernised the integrated industrial complex-which was the only reasonable thing to do.

That would have allowed the company, if not to prevent this situation, at least to plan restructuring normally, and to think about the personnel.

More than that, the Pikalyovo Alumina Refinery has major social obligations. As everyone in this audience knows, its thermal power plant is alone heating the town with a population of 20,000. When it stops, the town has nowhere to get the heating from. The refinery is maintaining seven blocks of flats with 2,000 tenants.

So here we are troubleshooting urgently, and in the middle of the crisis, which makes the matters even worse.

Everyone said during this meeting what should be done. First, pay all back wages-that is, 41,242,000 roubles-today. The money was transferred yesterday to the company account in the regional Sberbank branch. In fact, even more has been transferred in two tranches-18 million and later 45 million.

A tripartite agreement has been made for so-called easement. To put it in simple terms, it means an opportunity to use the infrastructure.

A contract has been made on the amount and prices of supplied raw materials. Now, I am addressing Evrocement Group, BaselCement, Metakhim and Fosagro. I am aware of your problems now, and we will not forget them.

The thermal power plant must be restarted. One of its units should be leased with a contract between the regional administration and the Cement Pikalyovo works. It was said in Moscow that two units should be leased but if you think one will suffice, let it be one, provided it works. The contract must be made within a day or two.

As for the Ministry of Energy, the situation here has been a lesson to it, as it has been to all of us. Crisis management teams should be set up for energy industry in locations that have only one energy source.

As the Vneshtorgbank CEO has said, social guarantees should be established for crediting industrial companies in case they need reconstruction. I urge the Ministry of Finance and all involved in the process to analyse relevant fiscal arrangements. The issue is complicated as it is, so taxes should not be paid elsewhere, or the municipal budget will run dry.

Last but not least, even if the proprietors cannot come to terms among themselves, the complex will be reunited and restored in some way or other, all the same. I do not mean the traditional legal aspect of the problem but its production and social aspects. If you cannot come to an agreement, an agreement will be reached bypassing you. Thank you. I wish you every success.

In addition, I want the proprietors, trade union representatives and the Governor to meet with the people and tell them about the decisions made today. Thank you.