Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon.

Let us begin with sharing the latest information. Mr Kudrin, we'd like to hear the estimates on the performance of the consolidated budget in the Russian regions.

Alexei Kudrin: Mr Putin, ladies and gentlemen. I can provide the budget figures for five months. In January to May 2010, the regions' revenues totaled 2.67 trillion roubles, up 16%, or 370 billion roubles, from the same period last year. This means their earnings are growing. Profit tax revenues rose 53% after the slump in January-May 2009. Profit tax revenues alone rose by 240 million roubles, to 694 billion roubles in the first five months of the year.

Revenues from individual income taxes rose 7%, excise tax - 32%, and from corporate property tax by 12%. In fact, all of the traditional sources of government income in the regions have shown growth.

The federal government also supported the regions, providing 596 billion roubles worth of subsidies, up 10% from the same period last year. This helped the poorer regions meet their social commitments and continue the most important government programmes.

Budget expenditures were covered by a total of 2.16 billion roubles, 5% more than in the first five months of 2009. However, part of the regional revenues... well, their revenues were not entirely used to cover expenditures, therefore, this resulted in a budget surplus in some regions. Only two of the Russian regions were running a budget deficit.

This doesn't mean they didn't borrow anything. This means that they repaid more than what was borrowed in the same period; for example, they took out 170 billion roubles worth of new loans to refinance their debt, while repaying 201 billion roubles. A region takes advantage of favourable economic circumstances to lower its debt leverage, repaying more than borrowing.

That is why their balance of accounts was higher as of June 1; they will certainly use the surplus in the second half of the year. The current balance is 765 billion roubles, which is a lot. But let me repeat, I am sure they will use it later on.

Wages are being paid on time. Therefore, at this stage, we believe that the regional budgets are secure and that we are in control.

Vladimir Putin: Good. Mr Kudrin, please tell us about the EurAsEC anti-crisis fund. How was it formed? What are the shares contributed by Russia and the other partners?

Alexei Kudrin: The presidents of Russia and Kazakhstan have announced that they aim to eventually set up a $10 billion fund. As of today, the countries that have stated their readiness to join it have made a contribution of a total of $8.55 billion. Of this, Russia has contributed $7.5 billion, Kazakhstan has given $1 billion, Belarus - $10 million, and countries such as Kyrgyzstan, Tajikistan and Armenia have given $1 million each. However, even symbolic contribution allows a country to be a member of the fund's council and take part in its discussions. Each country's share of votes depends on the contribution made. Obviously, the controlling interest here belongs to Russia. Kazakhstan also has some strong influence on it. We are trying to make decisions on the basis of professional assessment of each proposal.

Vladimir Putin: Tajikistan, for one, has asked for $70 million. What decision was made?

Alexei Kudrin: At present, we are considering several applications. The fund may grant financial loans and investment loans to the government; it can also lend money to major companies if it is for a specific investment project. Tajikistan's application was for $90 million. After analysing Tajikistan's solvency, macro-economics and budget for three years ahead, the council decided at its meeting during the St Petersburg Economic Forum to allocate $70 million to Tajikistan now; another $50 million will be given during the next two years - on the condition of it carrying out a special programme that provides for structural reforms, the preservation of financial solvency and reduction in the budget deficit.

We have also taken into account the natural disasters and earthquakes that hit Tajikistan in May. This is why we have increased our expectation of what the loan would be to $70 million. We will transfer this loan to Tajikistan in the near future and we believe that we will guarantee the implementation of social programmes in that country under the agreement that will be signed at the government level. It strictly specifies the support for programmes in education, healthcare and infrastructural construction.

Vladimir Putin: Mr Sechin, I'd like you to consider helping Tajikistan with oil and oil products. Please, report to me separately on what you will do in this respect.

Igor Sechin: We have already been instructed to work jointly with the Federal Customs Service (FTS) and will report to you in the near future.

Vladimir Putin: Okay. We have made a decision on the additional adjustment of social pensions and increasing this figure starting on July 1, 2010. In general, social pensions should grow by 12.5% during this year. Ms Golikova, could you please comment on this decision?

Tatyana Golikova: The adjustment you've mentioned is envisaged by the pension legislation and is made when the growth rate of the subsistence level of a pensioner for the previous year exceeds the consumer price index. This increase will reach 3.9 million pensioners, out of which 2.8 million receive social pensions.

The Pension Fund will provide 4.2 billion roubles for this purpose this year. The additional adjustment of social pensions is accompanied by the increase of the pension for military conscripts and members of their families, the pension for WWII veterans, the pension for victims of emergencies and natural disasters, and the pension and benefits for cosmonauts and a variety of pilots.
This is a planned increase. As I've said, we will make it in the context of the approved parameters of the Pension Fund's budget.

Vladimir Putin: The resolution supporting the labour market in the Kirov Region - here I'm talking about the Molot Engineering Plant - involves 171 million roubles, or even a little bit more. Please.

Tatiana Golikova: In accordance with your instructions, we have approved this resolution, along with our colleagues in the government and, naturally, the leadership of the Kirov Region. The measures it entails are similar to the resolution we issued last year with regard to AvtoVAZ. Of course, in this case the resolution would reassign fewer personnel to the subsidiary organisation: 1,760 people. The resolution also provides for wage reimbursement, compensation for the cost of professional training, logistical support for jobs and financial assistance for opening one's own business.

We expect that immediately after the government resolution is issued - we have information that the government of the Kirov Region is ready to adopt a similar resolution in the near future amending its regional programme - we will launch this mechanism, and this will enable us to resolve the employment issues that have arisen at this production facility.

Vladimir Putin: Mr Kudrin, have you and the governor discussed this in detail?

Alexei Kudrin: Yes.

Igor Shuvalov: We have reviewed the employment programme for this production facility together with the Russian Technologies state corporation. There are difficulties with some of the plans because the Defence Ministry has retired some weapons. At present, the plan cannot be fully implemented, but on the whole we understand what we need to do.

Elvira Nabiullina: There will be a short transition period during which they'll be able to modernise to handle new contracts...

Alexei Kudrin: The estimates, including for restructuring tax liabilities and granting deferments...

Vladimir Putin: Yes, yes, yes. Here a comprehensive approach is exactly what is needed.

Igor Shuvalov: Exactly.

Vladimir Putin: Alright. A resolution allocating five billion roubles in subsidies to the regions of the Russian Federation in support of small and medium-sized businesses has also been signed. Please, Ms Nabiullina, a few words.

Elvira Nabiullina: Eleven billion roubles have already been allocated this year to support small and medium-sized businesses, and the Ministry of Economic Development has distributed this money in the regions according to the programmes. Another five billion will go to small businesses, which will be applied in three areas: two billion roubles for innovation companies, another two billion roubles for entrepreneurship in single-industry cities and one billion roubles for entrepreneurship in the North Caucasus Federal District.

This is very important: we have talked at length about how the amount of support for small businesses is not the only important factor for us; the quality and where it is applied also matter. Therefore, support for innovation companies means that the grants and microloans will specifically go to small innovation companies. Part of the money will go towards encouraging leasing practices - supporting leasing development. Small business owners will be eligible for targeted grants of up to one million roubles for buying equipment on a lease-to-buy plan, which will allow them to pay off the down payment and subsidise interest rates for lease payments.

In addition, we expect that the programmes will also involve centres for technology sharing and centres that will allow small business that cannot afford specific equipment to use it on a collective basis.

The second area is single-industry cities. Money from the federal budget will be provided to support municipal programmes. These programmes are currently in place in 27 single-industry cities, and depending on the population, these programmes will receive between 50 million to 200 million roubles. And it is very important that these measures have a minimal co-financing requirement: only up to 95% of the money can come from the federal budget, depending on the situation in the single-industry cities, specifically those cities that we mentioned during our discussion of the previous issue.

As for the third area, the North Caucasus Federal District is also included in the programme to develop entrepreneurship. We hope that these programmes will be combined with significant private investment programmes, which will allow small businesses to get involved in major projects. We expect to increase funding by one billion roubles, to a total of 1.5 billion roubles; in other words, we are increasing support for small business.

Vladimir Putin: Good, thank you very much.

Mr Sechin, please tell us a bit about the situation regarding natural gas exports to Belarus.

Igor Sechin: Mr Putin, in line with your instructions and the memorandum on the early warning mechanism in the Russia-EU energy dialogue, I notified EU Commissioner for Energy Günter Ettinger on June 19 about the possibility of an emergency beginning on June 21, associated with transit deliveries of Russian natural gas to the EU countries via Belarus.

In turn, Gazprom promptly informed its foreign partners about the alarming situation that arose because of the systematic failure of the Belarusian company Beltransgaz to pay for the Gazprom-supplied gas over four months of this year. Now, this company owes Gazprom $190 million, not including fines.

Moreover, on June 25, Belarus is supposed to make another regular payment of about $270 million. However, Belarus has not yet responded to the repeated requests to pay its debts. Therefore, starting at 10 a.m. on June 21, Gazprom has imposed restrictions on the supply of natural gas to Belarus.

Although the transit agreement on gas deliveries to the European Union (EU) is not linked with the contract for the supply of gas to Belarus for its domestic consumption, we cannot guarantee that Beltransgaz will not siphon gas from what is sent by transit to EU customers. This is how the matters stand...

Vladimir Putin: Our Belarusian partners have not paid properly for more than five months now - since January of this year.

On March 31, Gazprom sent them the first notification demanding full payment for the delivered gas under the contract. Since then, three letters were sent to Belarus but remained unanswered.

Gazprom's actions are absolutely justified and stipulated by the contract.

Strictly speaking, under this contract, Gazprom can reduce its gas supplies by 85% or more. However, it has not done this in view of our special relations with the Belarusian consumers and in order to give our Belarusian colleagues and partners an opportunity to finally respond to their Russian partners' demands, improve their financial discipline and fulfil all requirements under the contract.

As for the threat of gas being siphoned from the Yamal-Europe gas pipeline on Belarusian territory, it is technically feasible. Today, we pump about 33 billion cubic metres of gas per year, or about 65.5 million cubic metres per day. And 65.5 million cubic metres per day is what our Western European consumers have requested.

These streams can be reoriented, if need be, to other routes, through Ukraine's Gas Transportation System (GTS), for instance. Now we pump about 105 billion cubic metres of gas per year through it, but its capabilities are much higher. We used to pump 120 and 130 billion cubic metres through it and we can even manage a little more. I hope that it won't come to this.

At the same time, I'd like to draw your attention to the construction of a new underground gas storage facility in the Kaliningrad Region and to speed up the completion of this project together with Gazprom.

This facility was expected to be commissioned in late 2011-early 2012. Please, look into its schedule with your colleagues, paying attention to its projected storage capacity and commissioning deadline. We must put it into operation ahead of schedule.

Let's turn to the agenda.

Tomorrow is the anniversary of the beginning of the Great Patriotic War. We are observing it as a day of memory and mourning. On this day we always remember our veterans and wish them good health and long lives. This is my reminder to the officials of the government, ministers and deputy prime ministers about our commitments to the war veterans.

Since 2008, we've allocated 89 billion roubles for programmes to provide housing for veterans, allotting 34.5 billion roubles this year alone. However, to meet all commitments to the people that were put on a waiting list after March 1, 2005, we'll need to allocate an additional 81.2 billion roubles for these purposes by the end of this year. I repeat, a total of 89 billion roubles has been allocated for this programme since 2008, 34.5 billion roubles have already gone to it this year, and 81.2 billion roubles will be provided by the end of the year. It's quite a large amount, and much will need to be done. Please don't put this issue on the back burner; everything needs to be finished in a timely manner.

Today, we'll consider the progress in the action plan to improve energy conservation capabilities and increase the energy efficiency of the Russian economy as a whole. It's one of the most important issues on our agenda today. I'd like to remind you that we've committed ourselves to the ambitious challenge of reducing the energy intensity of Russia's GDP by at least 40% by 2020. The law on increasing energy efficiency took effect in November 2009, and it's clear that we're only just beginning this large modernisation project.

However, the law sets very strict deadlines for these arrangements. For example, in the government-funded sector, the energy conservation project is scheduled to begin as early as 2010. All non-residential buildings should be equipped with water, gas, heat and electricity gauges by January 1, 2011. Residential buildings should be equipped with them within two years, by January 2012. Here's what I'd like to highlight with regard to this.

First, we need to pass all regulatory acts and legislation without delay to facilitate the implementation of this law. So far this work cannot be regarded as satisfactory. Virtually all involved ministries and agencies have fallen behind the schedule for drafting legislation and regulatory acts.

Only 16 out of the 40 resolutions and decrees envisioned in the action plan had been adopted by June 1, 2010. What's the problem? That's less than half! What kind of executive discipline is this? What kind of work is this? I'd like you to pay complete attention to this issue and do everything on the action plan promptly.

Second, the regional and municipal authorities should budget funds for energy conservation programmes while drafting their budgets for 2011. These programmes seldom require extra allocations. It's enough to redistribute available resources efficiently, making minor changes to plans for repairs and the purchase of equipment. In addition, such budget revisions will soon pay off, opening up budget funds to improve labour conditions and increase salaries.

Third, the universal use of energy-efficient equipment is impossible without educational programmes that would tell people about modern technologies and the advantages of responsible energy consumption. An energy conservation campaign should be launched to clearly explain this to the masses.

And fourth, I'm asking the Ministry of Economic Development to pay utmost attention to the pilot projects to increase energy efficiency in the housing sector, the public sector and alternative energy.

Such programmes have had a good start. A total of 23 regions are already involved in pilot projects. Our main objective here is to make the solutions used in these projects available in all regions.

The next item on our agenda today is a series of draft laws, from which I'd like to highlight the amendments to the law on charities. This law suggests expanding the concept of charity work through volunteer work in culture, education, healthcare, mass sports, as well as help for children and the support of youth initiatives.

As you know, I regularly meet with representatives of Russian charities and public organisations and cultural figures. I have to admit that they are right when they say that there are still many obstacles in the development of charities - it sometimes comes down to a mere formality or a gap in legislation. It's clear that these barriers must be eliminated.

Charities are becoming the state's equal partner in addressing acute social problems, and the state should certainly support charities in this effort.

There's one more issue I'd like to bring up today. It's the situation in the labour market. This situation is improving steadily. The demand for workforce has resumed, and new jobs are being created. In May 2010, the number of unemployed people totaled 5.6 million, which is 850,000 less than a year before. General unemployment fell from 8.5% to 7.3% of the economically active population.

We anticipate this positive trend in employment to gradually strengthen. The sizeable growth that we have seen in industrial production and investment gives us every reason to assume so.

However, we cannot terminate support programmes for those who haven't found new jobs yet. The measures that we enacted during the recession should be continued. We have discussed one such measure when we spoke about the Molot plant.

At the same time, it's necessary to increase our efforts in addressing the strategic objectives of the development of the labour market. I'm referring primarily to advanced training programmes. People have shown interest in training for new professions. State employment agencies should offer more such opportunities, organising internships for young professionals and helping people with disabilities find jobs.

Also, the government's efforts in assisting people with starting new businesses and increasing the mobility of the workforce will be very relevant.

The rest of the measures proved very effective last year, and we can see their effects, but there's a lot to be done regarding mobility.

And we certainly need to put more effort in stimulating employment in single-industry towns. Ms Nabiullina mentioned this when she spoke about small and medium-sized businesses.

I'd like to remind you that 40.5 billion roubles have been allocated for regional employment programmes in 2010. These programmes are designed to involve 1.3 million people. Let's discuss this issue in more detail.