Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, ladies and gentlemen. First of all, I’d like to tell you about some good news concerning the gas transportation system that has been dubbed Nord Stream. Work on the offshore portion of the pipeline has been completed. It went on for less than 1.5 years with the use of the latest technology and the involvement of a large group of highly skilled specialists from many countries. As we promised, not a single environmental problem occurred during the construction and everything was carried out at the highest level. The preliminary expert evaluations and the work as such were organised very well.

The first pipeline that has been completed will have a capacity of 27.5 billion cubic metres of gas. The second one with a capacity of 55 billion cubic metres will be built next year. This is not yet a “window” but “a ventilation pane” to Europe for one of our export commodities.

This line will supply gas to practically all of the north-west of Europe – Germany, France, Belgium, Denmark and Britain. The company’s shareholders include two German companies, Gaz de France, one Dutch company and last but not the least, its leading shareholder Gazprom. This is a large international company.

The first pipeline is completed, but work on the second one will continue. We will also carry out some other infrastructure projects. Now let’s share the other latest information. Mr Kudrin, I’d like you to tell us about the position of the Finance Ministry on Article 217 of the Tax Code that has made a stir. Please, tell us what is really happening there.

Alexei Kudrin: Mr Putin, recently the government submitted to the State Duma a new version of item 1 of this article. It determines what entities, allowances and compensations are exempt from taxes. In its current version, taxes are not levied on unemployment and maternity benefits. The new version makes the following payments exempt from taxes: state allowances to citizens with children, monthly payments to persons taking care of a child before the age of three, unemployment benefits, funeral allowances or reimbursement for funeral services.

Some publications questioned how this new version would affect pregnancy benefits. In this context, we made it clear yesterday that the current law (there is a law on state benefits for people with children) determines all the types of allowances that are exempt from taxes, such as maternity benefits, lump-sum allowances to women who register in medical institutions during early pregnancy, lump-sum allowances for childbirth and childcare, monthly child benefits, lump-sum foster care placement allowances, lump-sum allowances for the pregnant wives of conscripted servicemen and monthly benefits for their children. This law clearly determines all the tax-free allowances, including the pregnancy benefits.

There are no disagreements on this new version. But if experts have questions (those who read the article), we can clarify this version by making a distinct reference to the law that regulates tax-free benefits. But we thought that the new version was clear enough legally. Thank you.

Vladimir Putin: In other words, the law does not provide for the taxation of these allowances?

Alexei Kudrin: It never has.

Vladimir Putin: What has caused this misinterpretation?

Alexei Kudrin: A number of journalists read the new version and misunderstood it because they were unaware of the interpretation of this particular article and other laws.

Vladimir Putin: Mr Kudrin, either you are not a good writer or they are not good readers. You must keep the public fully informed about your ministry’s plans.

Alexei Kudrin: Yes, Mr Putin.

Vladimir Putin: Thank you. Mr Sechin, what is happening on the petrol market?

Igor Sechin: Mr Putin, you instructed us to stabilise the domestic market of petroleum products and guarantee the smooth operation of the fuel and energy sector, including utility networks. In line with these instructions and the approaches you set forth a week ago, today we held a meeting of the government commission on the development of the fuel and energy sector with the participation of major problematic regions: the Altai Territory, the Belgorod, Voronezh, Kemerovo, Tomsk, Kostroma, and Ryazan Regions and about 35 representatives of oil refineries – both members of the vertically integrated and independent companies.

At the meeting we discussed the current state of affairs on the domestic market. Let me report to you on the work done during these days. The Altai Territory has created reserves for 20 days, so all major problems have been resolved. Supplies to the Belgorod Region have also been stabilised. There was a risk of fuel shortages in the Ryazan Region because of emergency repairs of a refinery, but this was resolved with supplies from other regions and some supplies from other TNK-BP plants. There is some tension in the Kemerovo and Tomsk Regions, which have large proportions of independent networks. Rosneft has four petrol stations in the Kemerovo Region, for one.

At the same time, to prevent a shortage of oil products the Energy Ministry has been instructed to continuously monitor the repairs of oil refineries. Oil companies have agreed to reserve oil products for the periods of planned repairs. They will swap oil products to meet the fuel requirements in the regions where they work.

There are some problems with exchange trade. As I’ve already said, of the 30 major companies and plants trading oil products on the market, only 8 supply fuel for stock market trading on a regular basis. The shortage of oil products on the stock exchange results in a groundless growth of prices.

Vladimir Putin: There is no shortage! The case is not about a shortage, but about collusion. They make an agreement amongst themselves, then provide a small amount and buy everything up in no time, and that’s it. This doesn’t make any sense.

Igor Sechin: Mr Putin, this is also an element of price growth. Today, we drew the attention of both the head of the stock exchange and the heads of oil companies to the ban on carrying out transactions with affiliated structures through the stock exchange. For companies stock trading operations can be referential, without reducing volumes. The volumes must be traded by independent networks. This kind of work is being conducted, Mr Putin. The Ministry of Energy will monitor this every day, we will also go on monitoring the situation, influencing it, and we will examine the issue with the government every week. We will report on the situation until it is stabilised.

Vladimir Putin: Are export duties high enough to fully satisfy the domestic demand?

Igor Sechin: Due to the decisions you made, the situation with petrol is beginning to stabilise. If this is not enough, we will suggest new mechanisms, Mr Putin, and we will report to you on it as well.

Vladimir Putin: You must have complete information on the entire country. Complete information! I’d like you to monitor the situation with the Federal Antimonopoly Service as actively as possible and respond to everything promptly. Promptly!

What about agriculture?

Yelena Skrynnik: Mr Putin, this year the volume of discounted fuel stands at 2.5 million tonnes. This  is 15% more than last year. The supply volumes were formed on the basis of the region’s applications, and the majority of these applications have been fulfilled.

To avoid shortages during spring sowing, the monthly limits for our regions, for agricultural producers have been removed. That’s why the regions can increase their quotas of discounted fuel. The regions have already applied for an additional 420,000 tonnes of fuel for spring sowing.

We keep this situation under control, and together with the Ministry of Energy, our joint working group will work on relevant decisions, if we have your support, Mr Putin.

Vladimir Putin: You can rest assured of my support. But what about the fuel situation? Look, people are writing from the Volgograd Region and from the Saratov Region. The people from Volgograd write that only 30% of the total volume has been made available at discounted prices (17,800 [roubles] per tonne).

Yelena Skrynnik: I have made an objective analysis of the situation…

Vladimir Putin: And now it is 24,900.

Yelena Skrynnik: They allocated 88,000 tonnes for the Volgograd Region; the request was for 131,000 tonnes, but we settled on the volumes of last year plus 15%. Once again, if they are short of fuel they can draw from future periods, for example, from the June quota, and then additional volumes will be approved.

Vladimir Putin: Along with the Energy Ministry, you should look at what is happening in real life, and not only what is on paper.

Yelena Skrynnik: Yes, we are analysing everything.

Vladimir Putin: The same goes for the Saratov Region.  

Yelena Skrynnik: I can comment on that too.

Vladimir Putin: The man here writes that all the equipment is standing idle.

Yelena Skrynnik: Mr Putin, 55,000 tonnes were allocated, they got the entire quota, the vice governor reports that everything is fine.

Vladimir Putin: The vice governor reports that everything is fine, and people write that they have no diesel fuel.

Yelena Skrynnik: We are going over the whole list little by little.

Vladimir Putin: I need you to look into the situation on the ground, OK?

Yelena Skrynnik: Very well, thank you.

Vladimir Putin: Do it today or tomorrow. Send your people to see what the situation is like in practice and report back to me.

Yelena Skrynnik: Yes, of course.

Vladimir Putin: The annual “Night of Museums” will take place in Moscow on May 14 and in St Petersburg on May 21. Mr Avdeyev, how will it happen and what is it about? Please fill us in on that.

Alexander Avdeyev: Admission to museums, exhibition halls and galleries will be free. In most museums the halls will be open to the public until midnight, and in some places until 10 p.m. In Moscow they settled for May 18 as the main date, and in St Petersburg on May 25, which is more convenient for the museums. The main thing is that we expect that half a million people will enjoy these events this year (they’ll come to the museums at night). Last year the figure was about 400,000.

Some interesting exhibitions, guided tours and concerts are planned. Even the metro will host some events, there will be a concert at the Kropotkinskaya metro station on May 14 and 15, that is, people will emerge from the Pushkin Museum of Fine Arts and then attend the concert at Kropotkinskaya.

Some cities, including Moscow, introduce special bus routes and extra sightseeing buses, so for city hall this fifth ”Night of Mueums” is a serious challenge. And of course it makes voters happy. People, especially young people…

Vladimir Putin: This is an international event, which Russia joined in 2007.

Alexander Avdeyev: That is correct. And young people flock to the museums.

The Hermitage and the Tretyakov Gallery will launch some interesting programmes. They will open up the storerooms and on that night people will be able to see what they have never seen before and most likely will never see again, because at the Hermitage, for example, there will be “The Old Village” exhibition. Major exhibitions will be held at Tsaritsyno, Kuskovo, the State History Museum and at practically every St Petersburg museum.

The event is becoming popular; it reflects the fact that our people are drawn to our national culture and art. We won’t be able to do it this year, but in future years the event will bring in all the regional, municipal and federal museums to become a great museum festival.

Now it is in its fifth year, and it is clear that the event is a success – and that it’s wonderful.

Vladimir Putin: I understand that you advise everyone to go to a museum that night.

Alexander Avdeyev: I urge everyone to take part in the event. And we have circulated…

Vladimir Putin: Who will go to a museum at night?

Alexei Kudrin: Can one go in the daytime?

Vladimir Putin: In the daytime you must work at the Finance Ministry.

Alexei Kudrin: I mean on Sunday.

Vladimir Putin: Very well.

Let us move on to our agenda. We continue to actively work on our key integration project, which has brought Russia, Belarus, and Kazakhstan into a common customs space and will then bring them into a common economic space.

We plan to discuss a whole group of agreements. Let me remind you that a uniform tariff was introduced and the common Customs Code came into force last year. In fact, 2010 was the year of the birth of the Customs Union of Russia, Belarus and Kazakhstan. The results of our integration are already evident today: trade between the Customs Union countries increased by 28% last year.

The formation of the Common Economic Space is in full swing. Those sitting here understand that citizens should be told that we are talking about reaching a still deeper integration of the three countries.

By 2012, we should create a common market with free movement of goods, services, capital and manpower. The common market will have uniform rules, unified legislation, coordinated tax, monetary and currency and financial policies, common principles that regulate natural monopolies, and a competition policy to ensure the equal, non-discriminatory access of the enterprises of the member states in the common economic space to the markets of goods and services and to state and municipal orders.

The main thing we expect from the integration of Russia, Belarus and Kazakhstan is further rapprochement between the countries, the strengthening of their economic potential and improved living standards for their citizens. I am convinced that this powerful new integration project could dramatically change the geopolitical configuration of the Eurasian space and promote unification processes in all the CIS countries.

I have to stress that the Customs Union and the Common Economic Space (CES) are not an exclusive club. We are open to the accession of other countries, we are ready for closer cooperation with the European Union, including in the format of a constructive dialogue between the Common Economic Space and the EU.

I must say that the creation of the Common Economic Space fits in with the concept of building up a harmonious community of the economies on the Eurasian continent.

I urge all of our colleagues to pay particular attention to promoting integration between these three countries and to adhere scrupulously to the approved plan of actions to create the Common Economic Space.

Another item on our agenda that I would like to single out today is Russia’s participation in financing the international projects of the Arctic Council. We need to make a decision to allocate 10 million euros over the next three years to finance an anti-pollution programme in the Arctic.

I have to say that the Arctic, with its fragile ecosystem and unique natural environment, is one of the most vulnerable parts of the planet. Unfortunately, in the process of its development, environmental issues often took back seat, and Arctic resources were abused. As a result, huge amounts of waste have accumulated around Arctic settlements, mineral deposits, military bases (including former military bases), ports and airfields. We have decided to carry out a general clean-up of Russian Arctic territories, and remove the waste that has piled up over the decades on the tundra, on the islands and in the Arctic Ocean.

At the same time, the number of national parks and reserves will increase. In 2010, we opened a new national park, called The Russian Arctic, on the Novaya Zemlya archipelago. We are working together with the Americans to create Beringia Park in Chukotka and Alaska.

We have several major investment projects going in the Arctic. They include the Shtokman project, the development of the Yamal Peninsula and the areas north of the Krasnoyarsk Territory and Yakutia. I would like to stress that all industrial projects in the Russian Arctic are thoroughly reviewed for their environmental impact. This is our principled position, we will proceed like this in the future, and this fully accords with the Basic Principles of State Policy in the Russian Arctic adopted in 2008. We also seek to strengthen our ties with our neighbours in the Arctic, and we will be active within the Arctic Council. Just recently, when I was in Sweden, we discussed this with our colleagues in some detail.

We also invite our partners to attend the second international forum “The Arctic: Territory of Dialogue” to be held in Archangelsk next September. It will be devoted to the revival of the Northern Sea Route, its development and joint work in this key area of economic cooperation.

Many of you will have heard that the potential of this route is increasing due to a longer navigational season, and in the coming years the amount of cargo carried by this route (thought to be the most economical route for carrying goods from Russia and Europe to the Asia-Pacific region) will grow steadily.

Let’s get down to business.