Transcript of the beginning of the meeting:

Vladimir Putin: Mr Yakunin, yesterday I signed an executive order, which will be issued today, extending your term as head of the company Russian Railways.

Vladimir Yakunin: Thank you, Mr Putin!

Vladimir Putin: You're welcome.

Vladimir Yakunin: Thank you for the trust!

Vladimir Putin: This decision was based on the company's positive indicators and good performance despite the difficult economic time during the economic crisis.

Today, we will talk about the future – investment plans, the participation of Russian Railways in various engineering projects, primarily transport engineering, of course. We'll talk about what you reported to me in our previous meetings. The work of an infrastructure company such as yours affects the entire Russian economy, in almost all sectors, and not only economic sectors; it has an important social component as well.

Summer has now started, a time when many people go on holiday, and it is very important to the public how Russian Railways will serve the public, how it will provide services and what prices it will charge for transport. Let's talk about this.

Vladimir Yakunin: First of all, Mr Putin, let me thank the government for its trust in me!

Believe me, in recent months, we have not only worked hard, we have also learned much, including through the systematic work that the ministers, the major ministers, have done with respect to Russian Railways. I can tell you that for us it was extremely important that we have come to a decision that will identify the so-called economically justified level of pricing. This resolution, which the government has adopted, allows us now to objectively assess the needs of industry and the needs of the economy, because we realise that not everything that the state and society are counting on in terms of their macroeconomic interests is possible to implement in full. We understand the decision to limit price increases, and we hope that as a result of the work we've done and by demonstrating the need for further infrastructure development, we can get support not from price increases but from subsidies.

It is primarily about the tasks that were formulated for the development of infrastructure for the 2014 Olympic Games, the FIFA World Cup 2018 and now the upcoming Universiade. But it's not done for specific projects, although it is clear that they initiate such associations.

I remember that you once called late at night, en route to the Far East, and said that today's demand for transport between the regions of Russia is so high that exaggerating the geopolitical significance of railways in Russia is impossible. After that, we worked extensively with the relevant institutions and ministries. We are now ready to release a concept for high-speed rail in Russia. We clearly remember the instructions associated with the acceleration of the train from Moscow-Adler and Rostov-Krasnodar trains, as well as trains that will link sites for the World Cup.

Vladimir Putin: How long will the Moscow-Adler train take to complete its journey after the tracks are renovated?

Vladimir Yakunin: We are counting on this train being able to travel the entire distance in somewhere around 18 hours. This is quite reasonable, because, for example, travellers need to get on the train in the evening and arrive by noon, because this is, as you know, check-in time at hotels, rest homes and sanatoriums. We believe that this will be justified, because to set up high-speed rail from scratch for stretches of more than 1,100 km is too costly, and the result is that speed is likely not really needed here yet.

Another thing is that, for example, such remote areas that are currently undergoing difficulties, having no direct air links to the capital, should have access to central Russia and the central Russia should have access to them. Because I've met with some governors – and I've heard it from you repeatedly – in order to fly from city to city in Siberia, you need to fly all the way to Moscow to get on another plane and fly to a city, which is located a mere 500 km from the point of departure.

From the perspective of how we rate them, we have very high hopes for the programme, which started after your resolution on the note that I prepared. This entails development of transport engineering in terms of diesel engineering. We then held major consultations with our nuclear engineers, automakers and marine equipment manufacturers. We found that we have, in fact, exhausted the limit of modernisation of the diesel engine that we currently have.

Just buying them abroad, as they say, will sometimes be more expensive. Thanks to your support, the company Transmashholding has held comprehensive negotiations with us. These talks involved representatives of different departments of different companies. I think that in the near future, this negotiation process will finish with the signing of an agreement on large-scale production of diesel engines in Russia. We also have very high hopes for this. We need diesel.

By the way, Mr Putin, I want to tell you that based on the report to you via videolink, for example from the Trans-Baikal Road, I personally went to make sure everything is done properly there, and I was present at the launch of the first electric train. This is the route to Zabaikalsk, the route that facilitates export-import operations with our Chinese counterparts.

The builders assured me that this site is almost on a scale that can be recorded in Guinness World Records. They excavated 4.5 million cubic meters of soil.

“This has not happened in recent memory,” they said.

If we can electrify the entire line – in two stages – it radically changes the situation with throughput capacity on this route.

Vladimir Putin: We need to think about the Baikal Amur Mainline.

Vladimir Yakunin:  Mr Putin, we made a proposal. Moreover, today there is an association, which consists of our Duma deputies, civil society organisations and industry, and we truly believe that the BAM's creation is not only justified, it is now sorely needed. If we did not have the BAM today, we would have been unable to transport cargo to ports in the Far East. For all intents and purposes, we must build a second line of the BAM. I assure you that not only the railway workers but also industrialists, owners of mineral deposits, and governors all support this decision. In order to implement it, we of course need to once more carefully examine the company's investment proposals. In this regard, we need to determine the sources for the investment programme.

Vladimir Putin: Which routes besides the BAM do you see as promising? And what do you think will be most important in our investment programme?

Vladimir Yakunin: Mr Putin, we, of course, need to work not only on the BAM, but also the Trans-Siberian.

Vladimir Putin: Show me.

Vladimir Yakunin: Mr Putin, our entire investment programme is constructed in terms of cargo delivery. We need to deliver goods from the Kuzbass to the Northwest and from the Kuzbass to the Far East.

Vladimir Putin: There will also be a route to Murmansk, yes?

Vladimir Yakunin: The route to Murmansk will be a separate project, and we also are working on the  premise that throughput capacity to the ports of Leningrad Region and the port of St Petersburg is rather limited.

Vladimir Putin: Will we build in Murmansk, on the other side of the bay?

Vladimir Yakunin: Yes. More than that, we work in constant contact with our colleagues who provide a freight base – these are primarily coal miners and steelworkers. Interest is very high, and I believe that today, it is absolutely necessary to resolve the issues related to strengthening the so-called northern route.

This means St Petersburg, Moscow and the Moscow Region – the Northern Route.

Vladimir Putin: This is the Oktyabrskaya Railway?

Vladimir Yakunin: Yes, it's the Oktyabrskaya, and the Northern Route – the very one that provides the supply of goods via the Oktyabrskaya railway to Murmansk. The infrastructure there, unfortunately, requires a fairly major upgrade, just as the construction of port services requires upgrading of this entire route. The government has already spent over 100 billion roubles in development of the infrastructure. Of course, we want to ensure complete removal of goods that are currently used for services.

Vladimir Putin: What else is important in the European part of Russia?

Vladimir Yakunin: If we talk about the European part, we should certainly solve the problem of the Moscow railway. We also have a large cargo flow here, and we need to improve the whole system of so-called yards, in other words, this entire system of stations where cargo is loaded and unloaded.

Vladimir Putin: And this plan, associated with an additional ring for rail transport of passengers?

Vladimir Yakunin: This is our rail ring. Sergei Sobyanin and I have held several consultations, and we agreed that, together primarily with Moscow, and also as part of the Russian Railways investment programme – besides this was the resolution of the Government Presidium, which also set the task of determining the investment sources for developing this infrastructure – this is a serious project, which will largely, though not definitively, I should say, allows us to solve the problem of traffic congestion on the streets of Moscow.

Vladimir Putin: It will significantly relieve congestion. What is the time-frame for this project?

Vladimir Yakunin: Much, of course, depends on the sources, but we planned to complete the first part of the project in two years, because we already have intermodal transportation to Moscow's airports. We may be able to connect all the airports by rail via this ring.

Vladimir Putin: Somebody is working on implementing this?

Vladimir Yakunin: Yes, definitely. We are developing the project and working on it. We have established a joint group with the mayor of Moscow, and this group is now determining the client. Most likely we will use the positive experience associated with the operations of the Aeroexpress so that those who have already obtained the skills working on that project are involved here.

Vladimir Putin: Good. And what about southern routes? What specifically are you planning?

Vladimir Yakunin: For the south, we plan, as was already mentioned, to first accelerate service so that passengers can get to Adler.

Vladimir Putin: But they can get to Adler now.

Vladimir Yakunin: But the trip currently takes 24-26 hours.

Vladimir Putin: And what do you need to do so that you can get there in 18 hours?

Vladimir Yakunin: We need to make investments, we need to develop additional features. We may have to go the Kursk route.

Vladimir Putin: Which route?

Vladimir Yakunin: The Kursk route. We have options going through Voronezh and there is an option on the Kursk route.

Vladimir Putin: So you need to build something else there?

Vladimir Yakunin: No, we need to upgrade the railway infrastructure there.

Vladimir Putin: The line itself?

Vladimir Yakunin: Yes. It needs to be built. Next, we have, of course, the port of Taman – which is what we reported to you on in Novorossiisk. It also requires us to reinforce the line and build a new station. For example, a special logistics centre is to be built at the 9-km mark. The Transport Ministry is now implementing this project.

Vladimir Putin: It will come here?

Vladimir Yakunin: Yes.

Vladimir Putin: From Krasnodar, yes?

Vladimir Yakunin: Yes, via Krasnodar. The big issue today is the bypassing of Krasnodar. The governor raised this issue. We are ready to do everything, but we cannot rely solely on depreciation. This is new construction, new development.

Vladimir Putin: Only no tears, okay?

Vladimir Yakunin: No, no.

Vladimir Putin: And when will we leave the Black Sea coast for the road? How realistic is that?

Vladimir Yakunin: Mr Putin, this requires very serious thought, and I'll explain why. The fact is, for example, having been in Sicily, I was convinced that a train going along the coast does not bother anybody.

Vladimir Putin: They don't go along the coast in France.

Vladimir Yakunin: The entire transport infrastructure in this region depends on the railways. So-called elevated routes follow the railways – these are road traffic routes.

Vladimir Putin: Well, that's clear. You're not planning this at this time?

Vladimir Yakunin: At this time, we are not planning it.

Vladimir Putin: Well, alright. What about the Urals Region?

Vladimir Yakunin: In the Urals Region, we need to give credit to our colleagues who are working on the Urals Industrial – Urals Polar project and above all, I cannot fail to mention Presidential Envoy Nikolai Vinnichenko's proactive attitude. Thanks to his work, this project is now taking specific shape. The problem here is that the funding sources for development are not defined, but there is a plan in stages. We are actively working on this, and I think it will be done. Likewise, again, if I may return...

Vladimir Putin: And here you're floating…

Vladimir Yakunin: This entails a road along the eastern ridge, not on the ridge itself, but east of the Urals Mountains. In fact, there are the big oil-bearing areas here, and therefore cargo owners, particularly cargo owners having difficulties in terms of transporting their products directly through pipelines ...

Vladimir Putin: There's not only oil there, there are other mineral resources there.

Vladimir Yakunin: Yes? But even the owners of these deposits are interested. We can transport liquefied natural gas, because that is a promising endeavour for us.

Vladimir Putin: You're working on this together with your colleagues?

Vladimir Yakunin: Yes, we are.

Vladimir Putin: Let's move into the eastern part.

Vladimir Yakunin: If we go back here again, part of Trans-Baikal railway turned out to be an extremely limiting route for us. I've just been there on a business trip, and we met with the governor of the Chita Region. Incidentally, he asked me to convey warm greetings to you.

Vladimir Putin: Thank you.

Vladimir Yakunin: We have full mutual understanding, and I must give credit for noticeable positive changes. In terms of infrastructure development – the limit station for us was the Karymskaya station – we made ​​a tremendous effort in 2011 to provide additional resources to develop this station. The fact is that I have already reported that for 2010 and 2011, the volume of freight flow in the Far Eastern ports, even when compared with 1988, the most successful year for the railway during the Soviet period, has increased by 23%-32%. And of course, we are faced with the limiter.

Vladimir Putin: And where is our Kuznetsovsky Tunnel? Where is it located?

Vladimir Yakunin: Oh, Mr Putin, I can't even see this map without my glasses. This is the Komsomolsk-on-Amur line, and, therefore, we are making a tunnel in this very direction. But we already understand that even given the construction of the Kuznetsovsky tunnel, we will not be able to transport all of the originating tonnage.

Vladimir Putin: You'll have to build a second one.

Vladimir Yakunin: Yes. We will have to upgrade the existing one…

Vladimir Putin: Here there are developing ports on the border with North Korea.

Vladimir Yakunin: Yes. Therefore, we are talking about Zarubin. We are also working with the owners. By the way, Mr Putin, I was surprised – it turns out that Konstantin Posiet is buried in the Novodevichy Cemetery in St Petersburg. He was an outstanding railwayman, by the way.

Vladimir Putin: Good, but we're getting off subject here. Let's continue.

Vladimir Yakunin: We are developing our infrastructure here. We are working in close contact with cargo owners.

Vladimir Putin: They already don't have enough throughput capacity here.

Vladimir Yakunin: Yes, it is not enough. And it also requires major investments. Moreover, I am quite sure that the idea of ​​building a bridge to Sakhalin looks very different today. Because, on the basis of a worldwide trend, it seems to me that the focus on hydroelectric and thermal power plants would grow by leaps and bounds. This means that there will be a tremendous need for the transportation of coal. Therefore, if, say, five years ago, it seemed quite uneconomical to even consider the question of a crossing, today we recognise that it may be necessary.

Vladimir Putin: Well, alright. You're almost to Yakutsk now, yes?

Vladimir Yakunin: We're almost there.

Vladimir Putin: How many kilometres do you have left?

Vladimir Yakunin: We will need to complete the section which relates to our work, by all appearances, in 2012. But there's a problem – we have creative discussions on whether there should be a bridge or a tunnel. We calculated, or rather we did not calculate, but our experts calculated...

Vladimir Putin: It turns out to be very expensive.

Vladimir Yakunin: But the tunnel turns out to be several times cheaper. On the other hand, the railway tunnel is made, and it is clear that the leadership of constituent entities of the Russian Federation sees that there should also be a road tunnel.

Vladimir Putin: Therefore, the debate is the following – a very expensive section, or a bridge, or a very expensive tunnel. And are there the necessary volumes of traffic to warrant such investments?

Vladimir Yakunin: You know, some of our calculations show that, of course, we can't say that the period of return on investment in this construction will be any less than, say, 18-20 years, but from this point of view, we can refer only to the history of the Trans-Siberian.

Vladimir Putin: The Trans-Siberian was made for wartime conditions.

Vladimir Yakunin: If it did not exist, then today we would have no economy; I mean, in terms of a large-scale nationwide economy. Therefore, I believe that, of course, the experts have to address this issue. Still, it would probably be wrong if the railway was calculated based only on return on investment in its infrastructure. But we are conducting this work.

As you can see, there are major tasks associated with the northwest, south and central Russia, the Urals, Siberia and the Far East. Based on our estimates, all of this requires very serious investment.

Two years ago, in Sochi, I reported to you that we have a serious shortage of funds. This will remain until 2015. I can name the amount – it is 400 billion roubles.

Vladimir Putin: Now let's talk about the rate of price increases.

Vladimir Yakunin: Alright.