Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon,

First let us exchange current information. The CIS Expert Council met on June 20. It approved the draft agreement on combating counterfeit drugs. What is the outlook for further work?

Tatyana Golikova: It is a very practical decision. We have agreed at the expert level that the CIS member states will inform each other about seizures and the spread and destruction of counterfeit medicines.

This work is within the same context as our internal work to introduce amendments to the Law on Medicines, which we discussed at the conference in Kursk. We believe that after the decision of the CIS Economic Council, the agreement will be put before the Council of the CIS Heads of State, and it will be approved. Then all the matters pertaining to export and import and all the matters I have mentioned will be regulated by mutual agreement among all parties.

Vladimir Putin: Good. Mr Gordeyev, winter crop harvesting is coming to an end. What are the results?

Alexei Gordeyev: As we predicted, last week farmers in the south started the summer harvest. First of all, several thousand hectares of winter barley crops have been threshed in the Krasnodar Territory. It is heartening that our forecast has come true and the yield is about 50 centners per hectare. Considering that winter crops in the south account for the biggest share of grain crops, one can say with confidence that the harvest will be good.

Vladimir Putin: The governor told me yesterday that they are very pleased with the prospects of the harvesting season.

Alexei Gordeyev: Yes, the Rostov Region is another bread basket. You remember that last year we had to help them. They had a drought. Now it is clear that their grain harvest will be about double that of the previous year, perhaps even more than double. The interagency headquarters has switched to an intense operational mode. In general, over the next three months we are committed to ensuring a well-organised harvest.

Vladimir Putin: The peak of the harvesting season in the south is around the beginning of July, am I right?

Alexei Gordeyev: Yes. In fact the Krasnodar Territory sums up the results in late July-early August. By that time obviously all the main harvests will be in.

Vladimir Putin: There was a conference on agriculture in the Belgorod Region on June 21. What was the discussion about?

Elvira Nabiullina: I was in the Belgorod Region on a working trip. First I visited some effective agricultural enterprises, then I held a meeting with farm managers, the leaders of associations and representatives of the Agriculture Ministry.

The main task was to identify specific problems that face highly effective entities, which have already invested in new technologies and are servicing loans. The labour productivity rate at these farms is at least as high as world standards. But they are facing the imbalance in our market between selling their products and the investment cost of feed and machinery, etc.

We looked in detail at the situation in every market, the market for every type of product and we will now, jointly with the Agriculture Ministry, consider additional measures that are needed. Among these measures I will single out that the managers of the best farms have indicated the need for a predictable government policy. There must be predictability not only in terms of duties but in terms of other measures, for example, government intervention in agriculture. Our producers must know what they can count on even before the season begins. Perhaps we should use mortgage loans more actively instead of interventions, which is the current practice.

Also, the managers pointed out the problem of distributing government support measures. They should be concentrated at the enterprises which are high productivity targets, i.e. highly efficient businesses. So perhaps we should see how to reorient government programmes towards the companies that use high technologies and report a high rate of growth.

We have also considered measures to be taken to balance production and processing capacities, because that is a bottleneck. We also discussed technical regulations and other similar issues. I think we will propose additional measures for concrete markets very soon.

Vladimir Putin: (to Viktor Zubkov) I ask you, Mr Zubkov, to keep all this work under control. That is extremely important.

Victor Zubkov: Yes, of course, Mr Prime Minister.

Vladimir Putin: We constantly revisit this issue. We know what happens in the world food market and in our country. The main recipe for solving all these problems, including those of a social character, is to develop our own industry. It must be a constant object of attention. I think the approach is correct: we must support successful enterprises. That is absolutely correct.

Elvira Nabiullina: It was really pleasant to look at these farms. They create very good labour conditions for their workers: they use advanced technologies and labour safety is very good. It is really highly productive labour. Such agriculture has good prospects for growth.

Vladimir Putin: All right. Mr Kudrin, has the performance of the diamond industry been assessed?

Alexei Kudrin: Yes, Mr Prime Minister. The company Alrosa held a meeting of shareholders in Yakutia on Saturday. I can report today that your instructions to bring that company and its shares in the authorised capital in line with current legislation have been carried out. Shares were issued and the government stake is now 50% plus one share.

Vladimir Putin: When did the government lose its controlling stake?

Alexei Kudrin: The early 1990s, when property was divided between the republic and the Federal Property Fund. Subsequently the courts found mistakes in these decisions. As a result of court hearings and an amicable settlement, we restored the right of the Russian Federation to its stake.

Vladimir Putin: I remember the difficult discussion with all the parties in this process and we agreed that the rights of the republic should not be infringed upon and that the republic should receive adequate compensation. Have you achieved that result?

Alexei Kudrin: Yes, Prime Minister. Two sets of measures have been taken. First, the republic's stake in the company until recently was 40%. I mean the republic and its districts on whose territory the diamond fields are located. And second, after reorganisation of that stake, the republic and the districts have preserved 40%. The republic has retained its rights within the company by making an additional property contribution.

Vladimir Putin: In other words, the position of the republic as a constituent entity of the Federation has not worsened?

Alexei Kudrin: In terms of proceeds from the lease of the property by the company Alrosa in the republic we carried out a number of measures, some of which involved the budget of the Russian Federation. The republic's budget revenues have not decreased as a result of the operation.

I would also like to say that although Alrosa is now working in more difficult terrain, in the permafrost zone, the output has not diminished either in terms of cost or in terms of carats.

The company's share in world diamond production is about a quarter. It is one of the biggest companies producing high-quality diamonds in the world, and at some periods it even moves to the top place. Demand for diamonds in the world is growing. Because all the main fields are already being developed the company has increased prospecting by several times to a level that exceeds that of the Soviet period.

Vladimir Putin: Have the relations with the partners been settled?

Alexei Kudrin: All the relations with the partners have been settled by now.

Vladimir Putin: On the basis of long-term contracts?

Alexei Kudrin: Yes, we had a long-term contract with De Beers. It has been updated in terms of phasing down sales to that company. In its contracts, De Beers has always guaranteed prices for Russia, but at this point we believe that the market trends and De Beers' ability to control world prices have changed significantly. That is why Alrosa is expanding its own sales and creating its own distribution network in the world. Even now, in the first year, it has increased sales in terms of dollars.

Vladimir Putin: Good. Thank you. Igor Sechin, you are going to Yakutia soon. Are you going to Talakan?

Igor Sechin: Yes, Prime Minister Putin. You have endorsed my trip to Yakutia. Yes, I will go to eastern and southern Yakutia to visit the Talakan oil and gas field. During my trip I expect to see some industrial and social facilities in the Talakan field and look at the progress of construction on the Eastern Siberia-Pacific Ocean pipeline. The Talakan field will be part of the resource base that will fill the long-distance pipeline.

Vladimir Putin: Good. On June 25 we are holding a major international event, an international exhibition and congress on nuclear energy.

Sergei Ivanov: Yes, Mr Putin, the first international exhibition of its kind in Russian history, Atomcom, will open at ExpoCentre in Moscow. Concurrently an international congress on this topic will be held. The main task of the exhibition and the congress is to demonstrate the innovative potential, the prospects for the development of nuclear energy, nuclear technologies and the design and building of civilian nuclear power plants.

Taking part in the exhibition will be about 500 leading world nuclear companies. The exposition and the congress will be held under the auspices of the government corporation Rosatom.

In addition to the exhibition, there will be a congress devoted to the main themes. Above all it is the development of nuclear power machines, engineering and project management in creating new-generation nuclear power plants, effective use of uranium, and the use of new information and navigation technologies in the nuclear power industry. In our opinion and in the opinion of the Rosatom management, the international congress and exhibition will help to promote the interaction among all the participants in the world market, the nuclear community and civil society because along with strictly technical and professional problems, environmental issues connected with nuclear activities will be discussed.

Vladimir Putin: If there are any other current issues please come forward. If not, let us move on to our agenda.

Today we are to discuss two federal programmes of singular importance. I am referring to the federal target programme "Scientific and Scientific-Pedagogical Personnel in the Innovative Russia" for 2009-2013. And the other programme is the social and economic development of the Chechen Republic in the period to 2011.

I would like to take up the last one first. It is different in a fundamental way from the previous Chechnya programme, which was implemented in 2002 in that the republic had to be rebuilt "from scratch", from ruins. Today the situation, thank God, has changed.

We are now passing to a steady and comprehensive development of the territory. In the next four years, tens of thousands of new jobs are to be created in the region. Industrial output is to double and the social and transportation infrastructure are to be improved greatly. The cost of the programme, agreed at the top, is considerable, over 120 billion roubles for 2008-2011.

The buildings of the Chechen State University, the Grozny Oil Institute, the Chechen Pedagogical Institute, some secondary technical schools and trade schools, a number of district hospitals, TV and radio facilities, the press and the Severny airport are to be restored or built anew.

Now about the programme of training young scientists. We have repeatedly discussed it in various formats, including at the Presidential Council on Science, Education and Technologies.

As a result, the main problem areas have been identified. The programme is designed to help solve these problems.

First, we will introduce targeted financing of scientific research by teams of young scientists. More than 2,500 projects will receive funding every year.

Secondly, additional money will be disbursed for all-Russia and international youth scientific conferences, Olympiads and contests. We have something to be proud of. We have scored successes recently in sports. I would like to congratulate our team on making it to the semi-finals of the European championship. However, as you know, our young people often win top places at international Olympiads and contests, which is especially heartening.

As the saying goes, the new is the well forgotten old, so we are planning to bring back the support system for young people's creative endeavors in the fields of science and technology. Such centres existed in Soviet times, but they gradually disappeared. We are talking about creating new centres, societies, study groups. These are important mechanisms for talent scouting and for bringing young talent into science.

Third. We have plans to buy more unique scientific equipment for Russian higher education institutions to be used for educational and research purposes.

Fourth. The building of halls of residence and guest houses at major Russian higher education institutions. It will enable them to promote academic mobility programmes. It will enable students and young researchers to take part in research projects supervised by leading Russian scientists and it will enable universities to invite top Russian and foreign professors.

The creation of federal universities will undoubtedly help attract young people to science. We will discuss the draft law regulating their status today.

I visited the Moscow Steel and Alloys Institute today. I must say I enjoyed the visit.

The possibility is being considered of creating a new educational centre there. Let us not anticipate that decision. Whether we will call it the Federal Technological University and confer federal status on it or whether we will confer a special research status on a number of higher education institutions - we will have to consider. But that is a technical issue. The important thing is that we have such promising higher education institutions.

I would like to note the thrifty way in which the management of that Institute has been using the funds earlier disbursed under the Education national programme. They have made very competent and judicious use of that money. In fact most of it was used to buy equipment. It is very important, it increases the possibilities for research work and the equipment can be used not only by the Institute, not only to train students and but also for research.

Federal universities will differ from traditional higher education institutions in that they will have a special model of management and financing. They should serve as the nuclei around which industrial parks and venture production facilities will cluster. Their structures will include research organisations, both industrial and academic.

But most important, the education process will in many ways be different. Federal universities will be granted the right to conduct instruction on the basis of new professional education standards. In fact, they will be able to develop these standards themselves.

However, the quality of teaching must be strictly controlled. A procedure for independent rating will be used. By setting the quality bar we should look to the most advanced educational centres in the world.

Also today, we will discuss the draft law on ratification of the protocol to the founding treaty of the Eurasian Economic Community.

That is an important practical step towards creating, within EurAsEC, a customs union uniting Russia, Belarus and Kazakhstan. The common customs space will give a boost to the economies of our countries. It will facilitate the implementation of joint business projects.

Let us get down to work. I give the floor to Mr Fursenko. He will speak on the first item.