Transcript of the beginning of the meeting:

Vladimir Putin: Mr Khristenko, I'll talk with you about the situation in the auto industry later. Here's what I'd like to discuss with both of you now. AvtoVAZ has resumed operations after a temporary suspension caused by the abnormally hot weather in the Volga region. During the end of the last year and the beginning of this year, we undertook a series of measures to stabilise the situation there. But still, we need a comprehensive programme to develop the company and the region as a whole. The economy of the Samara Region needs to be diversified.

This is what I'd like to focus on today. I also propose that we discuss the systemic measures we've developed and implemented here.

Mr Sechin, please.

Igor Sechin: Mr Prime Minister, in response to falling production at AvtoVAZ, you instructed the government to consult the authorities of the Samara Region and AvtoVAZ shareholders and prepare proposals to reorganise the company and make it more efficient. While understanding that reorganisation would inevitably entail redundancies at AvtoVAZ, you instructed the government to create a special industrial economic zone in the Stavropol District of the Samara Region to employ up to 20,000 people.

While working on this plan, we selected a group of Russian and international investors and entered into 11 deals with them. Investment in these projects will be at least 41 billion roubles. Most of the projects are well underway, and we expect some facilities to begin operations in 2012.

Vladimir Putin: Mr Khristenko, how does your ministry plan to support these projects?

Viktor Khristenko: The first project involving a special industrial economic zone in Yelabuga has proved effective, so we already have some basic experience. As far as the Togliatti hub, it is special in its own way; here, the share of highly qualified people in the workforce is relatively high. We see the manufacture of car parts as the key element of the strategy to develop the auto industry of the Samara Region taking us up to 2020. This will be a new, high-tech industry in the Russian economy. This plan fits into the national strategy for the development of the auto industry and the corporate strategies of the largest groups being formed in the industry now, Renault-AvtoVAZ and Sollers-Fiat. They're currently discussing how to optimise the production of car parts in Samara and Yelabuga.

Vladimir Putin: You and I have toured one of the facilities you've just mentioned, a Sollers plant. We met there with our Italian partners to decide where to locate support facilities for manufacturing car parts. At the time, our partners were deciding between the regions. Have they decided yet?

Viktor Khristenko: This decision will be finalised in September. As of today, production facilities are planned for three territories, or, geographically, two regions, the Yelabuga District and the Samara Region. Yelabuga will house Sollers-Fiat final car assembly plants, and the manufacture of car parts will be divided between the Samara and Yelabuga hubs. The same goes for Renault-AvtoVAZ; they will use all these hubs. This will make operations more efficient due to the scale of production. All top manufacturers of car parts are planning to establish production facilities here, which is great news.

Apart from the manufacture of car parts, the Samara economic zone will house chemical plants, for example those of Pirelli, which is implementing a joint project with Russian Technologies. We hope that the Samara-based manufacturers of gas turbine engines for aircraft will also take advantage of the benefits provided by the special industrial economic zone to build up their capabilities. We're doing our best to support them.

Vladimir Putin: Mr Sechin, what benefits are being offered to companies that choose to work in the special economic zone?

Igor Sechin: There are plans to allot an additional 200 hectares for this zone. The overall area will be 660 hectares. The main benefit for this zone is additional budget funding.

We would like to ask you to approve and sign a government resolution to allot an additional 7.2 billion roubles for this project, which will go toward infrastructure, roads, a power grid and everything else businesses need to operate efficiently.

Vladimir Putin: What tax breaks are planned there?

Igor Sechin: All special economic zones involve tax breaks. The companies that work in the Samara zone are exempted from paying property tax. But the main thing is that this territory will have new infrastructure, which is being built, in part, with federal funds.

Viktor Khristenko: We expect that in addition to the basic infrastructure, like roads, pipes and the power grid, there will be facilities that producers of car parts - a relatively modest-sized industry - will be able to lease. The benefits offered to companies in these territories, primarily tax breaks, are expected to create a favourable investment environment and determine what they will have to pay to have facilities on lease here so that they can begin production as soon as possible.

Mr Sechin has already mentioned the deadline, 2012. We believe that it is critical to start producing car parts in 2012. To localise production in these territories, we must ensure that there is demand for it and develop strong ties between car producers and manufacturers of car parts.

Vladimir Putin: Good.