Transcript of the beginning of the meeting:

Vladimir Putin: Mr Kudrin, the Finance Ministry has placed Eurobonds in roubles for the first time in recent economic history. This is an important step towards creating a financial centre in Russia and promoting our national currency on international markets, and in general a positive signal for the economy. What is your opinion of this step, and what amount has been placed and on which terms?

Alexei Kudrin: Mr Putin, the Russian Federation has placed rouble-denominated Eurobonds on the London Stock Exchange. These are securities with a seven-year maturity and have yields even lower than similar securities in the Russian Federation. This means we have got investor confidence in international securities traded across the world in roubles. This also means that the choice in favour of a rouble instrument is becoming more regular.  In fact, this is the first placement with which we are opening an era of issuing securities in rouble denomination. It is one of the signs of the rouble as a reserve currency. Of course, the lower yield compared with the Russian market – quite sensible in conditions of an as yet unstable market – indicates that our private companies, too, will be able to borrow on international markets at more favourable terms.

I can also say that the make-up of the placement is good as well. UK funds and companies account for 47%, other countries for 22% and US companies and funds for 26%. Even Russian companies have taken part in the placement, at about 4%. Other regions of the world account for a small proportion. Main participants are investment funds (57%) and ordinary banks (18%). The others are insurance companies and state agencies, which keep their reserves. This is a good placement structure, showing trust in Russia and its new instrument. I think this is only the first of issues, and in the next few years we will continue this practice and thus create a new segment of the world market – rouble-denominated Eurobonds.

Vladimir Putin: What amount has been issued?

Alexei Kudrin: The amount placed is 40 billion roubles. In US dollar terms, it is roughly 1.36 billion but I reiterate it is 40 billion because its denomination is in roubles.

Vladimir Putin: Mr Kudrin, budget revenues have become considerable. What is more – we have already discussed that – we expected to spend the government’s reserve fund in full this year, but far from spending it, we will let it grow. It may increase solidly and most likely will reach 1.45 trillion roubles. In this context why does the ministry consider it possible and wise to issue Eurobonds? 

Alexei Kudrin: This year we were going to spend the last of our reserve fund. But since the oil prices look good, we, first, will not tap the reserve fund at all, and second, offset some of the borrowings, which remain high, with additional revenues, or in other words, reduce borrowings. We will confirm once again that we do not need heavy borrowings. We are keeping things under control. But given the situation on the domestic market and the need to prevent an excessive growth in money (even from oil), we will maintain some of the borrowings and the deficit will remain all the same. Perhaps, the amount involved will be at or under two percentage points, but we still need to meet part of our deficit with borrowings. Some of the reserve may even grow with revenues from oil. We expect the reserve fund to increase to about 1.45 trillion roubles. This is the first time since the crisis that we are returning to building up the reserve, which is very important, because world market risks persist and today’s oil price is at a very high point – in effect, one of all-time highs in history.  We must therefore be ready for a contingency that if the oil price drops we will need a provision to cover all social spending.

Vladimir Putin: Is it a kind of manoeuvre to combat inflation, with the reserve fund growing and the Finance Ministry attracting funds from the market?

Alexei Kudrin: It is to combat inflation and keep the necessary reserve in case high oil prices fail to remain steady.

Vladimir Putin: Good.