Vladimir Putin’s speech at the conference:

Good afternoon, friends and colleagues,

It is my great pleasure to greet you all here in the Urals. The Urals by right embodies the hinterland and fundamental power of our country, and the huge creative power and energy of our nation. The people of the Urals are not afraid to set themselves grand and ambitious goals and they can achieve results. I am sure that the ambitious plans we will discuss today will be put into practice. In this work we must rely above all on our citizens, on the people, supporting their desire for self-fulfilment professionally, in business and in public activities for the good of the Russian nation.

Colleagues, in working out a plan for the development of the Urals we must make the best of its competitive advantages, but we must clearly identify the problems and the “bottlenecks”, so to speak, that impede the region’s sustained development.

Many of our common, systemic problems manifest themselves in the Urals in the most concentrated form. For example, the regional economy in the Urals is still unfortunately poorly diversified and is anchored to the export of commodities and low value-added goods, which means that it is excessively dependent on all sorts of market fluctuations.

To this one must add the shortage of a modern infrastructure, above all transport, which affects the quality of life and prevents many promising projects from being launched. That is natural and understandable. If there is a road there is life, business and economic activities develop; if there are no roads, everything is at a standstill even if there are, for example, major mineral deposits that can be developed.

We face major imbalances inherited from the past. Plants were built, mineral deposits were developed but unfortunately we forgot… well, there is no point in criticising the past – perhaps at the time we could not afford to do these things, could not think about creating modern conditions for people’s lives and addressing environmental issues. And the legacy of the times when people lived in barracks and make-shift dwellings is dragging us backward.

We have no right to and will not proceed in this way in modern conditions. We cannot and will not seek development at any cost neglecting the interests of the citizens. We should concentrate on several strategic areas.

First, the improvement of the social infrastructure and the creation of comfortable and decent living conditions for our people. People really need it.

Beginning from 2009 the Urals area reported a natural population growth (this is very good news which I would like to share with you, though many of you already know it). Let me stress that we are looking at a natural growth, i.e. the birth rate exceeds the death rate. In 2010 the number of births exceeded the number of deaths by 8.6%.

We should target our industrial and infrastructure policy and develop the region’s economy in such a way as to open up new opportunities for people, to create well-paid jobs and to make sure that industrial projects do not generate environmental risks.

Second, it is necessary to significantly expand the economic base of the Urals Federal District, to ensure its stability by creating promising innovative centres, industrial clusters to support small and medium businesses, developing new sectors, for example, tourism, the nanoindustry, pharmaceutics and the services.

During the interregional conference in Volgograd in May a proposal was made to create a Strategic Initiatives Agency. Already more than 800 projects from practically all the Russian regions have been submitted through the Agency’s website. It is my particular pleasure to note today that the Sverdlovsk Region has provided the largest number of projects, almost a third of the total number (applause).

I will applaud you too, because this is your achievement. I think it would be fair if we set up the Agency’s first regional office here in Yekaterinburg.

The proposed projects are currently the subjects of public discussion and evaluation by experts. Some of the ideas are indeed very promising and interesting, including in the social sphere. For example, organising a regional network of private kindergartens, the production of equipment for the rehabilitation of children with limited abilities.

Incidentally, ten days ago the deadline ran out for accepting applications for the post of the Agency’s director-general and branch directors. About 1,000 applications are being considered. We can already see many bright and talented people with wonderful ideas among the candidates. We will soon review the results of the contest. I am planning to conduct a meeting of the Expert Council that would include the winners of the contest after July 20. During that meeting we could also decide on who will be the head of the Agency and who will be members of the Supervisory Council. The Agency should start work as early as August.

I would like to thank all those who have exhibited interest in the idea of creating that structure and have been willing to test themselves in tough competition. Regardless of the contest’s results each of the applicants will be involved in the Agency’s work and in forming its regional network.

The Innovative Industrial Forum Innoprom-2011 will be held in Yekaterinburg in two weeks’ time. I think it would be right to invite to that forum all those who have taken part in the contest and are planning to work with the Agency. It would provide a good opportunity for them to establish direct contacts, to discuss shared tasks and problems.

I would like to ask the administration of the Sverdlovsk Region to assist with organisational matters. For our part we will render all the necessary support. I have no doubt that projects emanating from the Urals Federal District will be included among the Strategic Initiatives Agency’s early pilot projects.

Third. The effectiveness of the sectors that spearhead the district’s economy must be improved dramatically. These are the fuel and energy sector, metals, engineering and the defence industry. Profound technological modernisation must continue in these sectors to ensure their entry into new markets.

And, fourth, it is necessary to substantially upgrade the district’s infrastructure: transport, the power industry, housing and utilities, road-building and repair. There has been some progress here in recent years. The key federal highways Ural and Baikal, which pass through the territory of the Urals Federal District and link it to the European part of Russia, Siberia and the Far East, are being modernised.   

The Tyumen – Khanty-Mansiysk and Yekaterinburg-Tyumen regional roads are being renovated. Road detours have been built around the cities of Chelyabinsk and Magnitogorsk. Very soon the cities of Yekaterinburg, Tyumen, Kurgan and Kamensk-Uralsky will be out of bounds for trucks and consequently will have no environmental and other related hazards.

We have allocated about 3 billion roubles for 2010-2011 to upgrade the road network in the administrative centres of the Urals Federal District: Yekaterinburg, Kurgan, Chelyabinsk, Tyumen, Salekhard and Khanty-Mansiysk.

We are rendering financial assistance to the regions in building and modernising rural roads. For your information, in 2011 the regions in the Urals Federal District received 261 million roubles in federal subsidies for the construction of roads leading to rural communities. I ask the local administrations and the party structures to keep the road repair and building situation under constant review, involving public organisations in this business. Some of you may have seen my meeting in Pskov with the people who are actively engaged in these matters as volunteers. They put their hearts in this work and are doing very well. One should look for such organisations and such dedicated people and involve them in this kind of work.

At the same time I would like to stress that what we need today is not individual projects, but a steady development of the road network throughout the country, including the Urals.

The amount of road construction in Russia should at least double over the next ten years. In order to concentrate resources on the building and maintenance of roads we have decided to create a federal and regional road funds.

By 2020 the federal and regional funds will accumulate a considerable sum: 8 trillion roubles, of which more than half, 4.6 trillion roubles, will be in regional funds. Regional road funds in the Urals will accumulate at least 750 billion roubles. Massive tasks can be tackled with such resources.

It is important to get the priorities right in this work. I suggest that a significant portion of the regional road funds’ resources be used to build and repair roads in district centres, small towns and rural communities.

And of course we should not tolerate the situation when a good road leads to a regional centre or a village, but inside the village the roads are muddy and potholed so that it is impossible to walk, not to speak of driving on them.

By the same token we must substantially increase the potential of the railway transport in the Urals Federal District. Organising interregional and commuter passenger carriage is a priority. Train stations have already been refurbished in Chelyabinsk, Yaketrinburg and Kurgan. In the future one would like to see high-speed train service between Yekaterinburg and Chelyabinsk. Russian Railways has such plans and we will support them.

By 2013 Yakterinburg’s transport hub will become a major international logistic centre. The project will be financed to the tune of 12.3 billion roubles, of which more than 10 billion roubles will come from off-budget sources.

In this connection I would like to stress that we will attract massive private investments in infrastructure and are ready to create the necessary conditions for that, to use the public-private partnership mechanisms and the potential of the development institutions. That applies to such comprehensive interregional mega-projects as Industrial Urals – Arctic Urals. But I would like to emphasise that we consider it vitally important that such projects are implemented in line with clearly defined categories such as profitability, economic returns, the returns on capital investment so that private investors who say they are ready to join such infrastructure projects should be motivated to strictly abide by their commitments.

As you know, I supported that project from the start when the previous presidential envoy was only beginning to work in this area. And I must say that a great deal has been done to implement this truly large-scale project.

At the same time – and we discussed it recently at a government meeting and I can share its ideas – we must be absolutely sure that if the federal centre invests or the regions invest in the infrastructure, say, in railways and roads, we must be absolutely assured that private business which declares that it is ready to work on these projects will contribute its share of resources. We do not want to see what unfortunately sometimes happens: the state invests money while the promised private investments are not delivered and everything is suspended, or the state has to invest more taxpayers’ money. We should work out mechanisms that would guarantee that all the participants in the process meet their obligations.

We are planning to invest considerable sums in the development of airports, with due account for the region’s northern specifics. The Koltsovo Airport in Yekaterinburg is being refurbished to become a major hub for international and domestic air traffic.

Reconstruction of the Balandino Airport in the Chelyabinsk Region, and the airports of Tyumen, Kurgan, Khanty-Mansiysk, Magnitogorsk, Noyabrsk, Salekhard, Novy Urengoi, Yamburg, Nizhnevartovsk, Uray, Nefteyugansk and several other cities is due to begin in the near future. We will pay particular attention to the development of socially sensitive air carriage in difficult-of-access areas beyond the Arctic Circle where apart form airplanes, the only mode of transport is the deer.

I would like to stress that Russia is determined to expand its presence in the Arctic. We are open for dialogue with our foreign partners, with all the neighbours in the Arctic Region, but of course we will be firm and consistent in upholding our geopolitical interests. We will develop a modern border infrastructure, meteorological stations and a system of monitoring the environment and bioresources in the region.

We are to carry out a massive cleanup operation in the Arctic: dispose of all the waste, the drums with fuel and lubricants which have been piling up around stations, military bases and northern villages for decades. I was there last year and I was horrified by what I saw. Everything has been dumped in quantities that are simply mind-boggling. Just dumped. In many places the drums have rusted and are leaking. You can imagine, many of those present here know this first hand, how vulnerable the Arctic environment is. Unless we start tomorrow the consequences of continued mismanagement may become irreversible.

We have no right to forget about the need to treat with care the traditions and economic ways of the indigenous peoples of the North for whom the Yamal tundra, the Yugra taiga and the Urals north of the Arctic Circle are their ancestral homes. Their culture and way of life must be taken into account in the development of the social sphere, the education and healthcare systems and in creating the information environment.

I would add one more thing. Not a single industrial project in the Russian Arctic will be implemented without compliance with the most rigorous environmental standards. That fully applies to the programme of comprehensive development of the Yamal Peninsula and the proposed offshore development in the Kara Sea.

We are going to set additional requirements for the companies operating offshore there. They should not only have proper technology and specialists, but sufficient financial resources at their disposal that in the event of a force majeure could be used to clean up the accidents and repair the damage to the environment.

On Yamal, as part of the liquefied natural gas project, we will build a new Arctic port at Sabetta. The base for the production of LNG will be the Yuzhno-Tambeiskoye gas field. It will get a modern LNG plant and the necessary transport infrastructure.

The project is being implemented by one of our oil and gas companies together with foreign partners. The state for its part will finance the development of the port. The total volume of investments is 900 billion, around a trillion, and perhaps even more, considering all the required infrastructure. It is a vast project not only for the Urals Federal District, but for the country as a whole.

The first LNG tankers should start being loaded at Sabetta terminals as early as 2018. We will be able to break into promising markets and greatly diversify exports and export routes, without being tied exclusively to pipelines.

In perspective, the construction of the new Yamal port is part of the massive work to revive the Northern Sea Route. A draft law currently pending will regulate all the issues of navigation along the Northern Sea Route, and we are planning to create a special structure responsible for the development and operation of that strategic transport corridor.

Modern terminals, including those fitted to handle “river-sea” vessels, are to be built on the Ob and other rivers. That will help us to integrate internal waterways with the Northern Sea Route. We will need tankers, gas carriers and icebreakers. It is a comprehensive project that would require the participation of enterprises from various industries.

Russia is a great Arctic power. We cannot do without a strong fleet of icebreakers. We will certainly replenish our fleet of icebreaker vessels. At least three of the new generation of nuclear powered icebreakers, as well as a series of icebreakers with conventional engines, will be built from 2012 to 2020. The commissioning of these vessels will ensure the stability of year-round navigation in the Arctic, ships safe pilotage from the Pacific to the Atlantic Ocean. This is a major undertaking that is very important for the country.

The issue of priority development of infrastructure is crucial for the development of new oil and gas production centres and modern industry clusters. In particular, we should get rid of the old, inefficient generation, while simultaneously increasing the capacity of the Urals energy system by at least one-third. This means that in the next ten years we will need to build new power plants with an aggregate capacity of some 10 GW. Moreover, 2.3 GW of capacity will be commissioned at the Surgutskaya-2 and Sredneuralskaya district hydro-electric power plants, and the Kurganskaya thermal power plant in 2011.

I can tell you for the sake of comparison, for those who don’t know – power generation specialists are familiar with these figures – that the current aggregate capacity of the Urals energy system is 27.7 GW. It is 27.7 GW now and we plan to build 10 GW of additional capacity within a decade. The scale of our work is understandable, is it not?

Last year Russia became the global leader in oil production, with over 500 million metric tonnes. We took over the first position, overtaking all other oil producing countries. I'd like to congratulate our oil industry for this result – 500 million tonnes of oil is exactly the quantity that we need to meet both domestic and export requirements, and we should maintain production at this level in the coming years.

As for the disrupted supply of refined oil products to the domestic market, this was not due to insufficient oil production. We produce enough, and should now focus on developing more refining facilities and improving regulations to stimulate oil and refining companies to supply the necessary quantity of petrochemicals to the domestic market.

The bulk of Russian crude oil – over 300 million out of 500 million metric tonnes – was produced in the Urals Federal District. However, the West Siberian oil province has been developed for decades and we need modern technology to maintain production there at the current level. We must also prevent companies from skimming off profits and leaving.

We need to invest heavily in exploration, in improving oil recovery and in subsequent reclamation of production areas. We expect considerable revenues from developing small deposits and utilising low-yield wells, especially since many of them are located in areas with developed infrastructures, so their development will not be expensive. Our task is therefore to create maximally favourable conditions for the development of small and mid-sized businesses in the oil industry.

These companies can additionally commission hundreds of oil fields, and we should therefore provide clear procedures for them to access and connect to pipelines. This is a clear goal and we must achieve it at any cost. We built a pipeline from Purpe to Samotlor to connect promising deposits in the Yamalo-Nenets area and in the north of the Krasnoyarsk Territory to the unified system of pipelines. This project was implemented ahead of schedule. The decision to build the pipeline came in April 2010, and the last seam of the 430 km pipeline was welded in May 2011. This is excellent work. The pipeline will be commissioned this winter. Its capacity of 25 million metric tonnes per year can be increased to 50 million. It will also be used to transport oil to the Pacific coast. By 2015, the pipeline will be further extended by 490 kilometres, completing the route from the Polar region to Samotlor via Purpe. I have no doubt that we will accomplish this.

As for gas, its production in the area should be increased by 150 billion cubic metres by 2020. In 2010, gas production in the Urals Federal District reached 571 billion cu m. Our next goal is to increase it to 725 billion cu m by 2020, an increase of 16%. This is a challenging but quite realistic task. 

The key project here is to develop the unique Bovanenkovskoye deposit in the Yamal Peninsula. A railway has been built from Obskoye to Bovanenkovo in the very difficult climate and geological conditions of the Polar region. To preserve the fragile ecosystem of the tundra, we have constructed the longest bridge even built in the Polar region – nearly 4 km – across the Yuribei River’s flood channel. Student teams from the Urals and other Russian universities worked very well on that project. They did very well for themselves, and I’d like to express my gratitude to them.

Gazprom is now developing the Bovanenkovskoye deposit and is building a system of gas pipelines from Bovanenkovo to Ukhta. A supply of gas from the deposit will begin in the third quarter of 2012. By 2016, the new pipeline will transport up to 115 billion cubic metres of gas from the Yamal deposits. This will be a substantial contribution to the natural gas output of Russia: about one-sixth of gas produced in the country. In 2010, Russian companies produced 650.8 billion cu m of gas.

Six hundred fifty billion cu m in Russia for the year, but the Bovanenkovskoye deposit alone has an estimated 4.9 trillion cu m of prospective reserves. This is a huge global inventory.

You surely understand that following the Fukushima tragedy, the role of hydrocarbons and above all natural gas in the world will grow, including in Europe and Russia. Hydrocarbons are a vital factor, and a national wealth for us. The government used a range of tax incentives to help oil and gas companies develop new deposits, including a zero mineral tax for oil and LNG projects in Yamal.

The oil and gas industry accounts for a considerable part of federal budget revenues, which is why we are working to ensure sustainable budget revenues, to protect the interests of oil companies’ clients and to guarantee them sufficient reserves for development. We are planning on very large investments in the Russian fuel and energy sector.

The figures are truly breathtaking. Oil companies are expected to invest about 8.6 trillion roubles by 2020, and I am confident that they will do so. Of that amount, some 940 billion roubles will be invested in exploration and resource replenishment, 5.9 trillion in field development, 812 billion in transportation, and 780 billion roubles in modernisation of refineries. And lastly, 350 billion roubles will be spent on resolving the problem of utilisation of associated petroleum gas.

Do you see my point? It concerns not only the drilling of oil and gas wells, but also large industrial contracts, including in the Urals region, for the production of equipment, including for power generation, as well as pipes and materials. This is a large range of tasks, and a colossal market. What we must do in these circumstances is ensure that these funds are transferred to Russian contractors and enterprises, provided they supply competitive goods in terms of quality and price.

I have mentioned associated petroleum gas (APG) and our plans to invest around 340 billion roubles in its utilisation. Gas flares at oil fields have become a symbol of an inefficient and obsolete approach to our natural resources. The level of APG utilisation was 73% in 2004, and now our companies have increased it to 80%. The target figure for 2012 is 95%. Furthermore, we must use APG not only as fuel for power plants, but we also need to use this valuable raw material for the production of motor fuel. A former Gazprom leader once told me that this raw material is so valuable that it is a shame to use it as power plant fuel. I asked him why, and he replied that it amounted to squandering it, and that he would do anything to prevent it being used at power plants. And he is right, because by using APG for material production, the increase in the product's added value would be enormous.

Overall, we must create a powerful system for refining hydrocarbons in the region, so that additional tax deductions would be made to local budgets for creating new jobs and solving the region’s social problems.

So far, barely 2% of oil produced in the Urals Federal District is refined here. This situation needs to change. We will work with our oil companies and provide government assistance to the regions, but I hope that the local and regional authorities will also draw their attention to this issue. A lot depends on the regional authorities, on the conditions they offer for building gas and oil refining facilities, on the land plots they provide and on the level of their efforts to achieve these goals.

A large oil and gas refining cluster is being developed in Tobolsk. Such projects implemented jointly by the government, business and scientists are aimed at launching a new stage of industrialisation. The Urals, which is the mining, metals and engineering centre of Russia, should become a driving force behind this undertaking.

I know that we need to radically simplify the procedure for issuing permits for the construction of industrial facilities. We must also accelerate the transition to modern standards and regulations in industrial construction so as to cut ineffective spending and money wasting, and shorten the distance from a business idea and a business plan to production, which sometimes takes years. This is one of Russia’s perennial problems; I think it has always been this way, and it still is in many cases. We must get rid of these practices without delay.

We will support the creation of new enterprises, and the modernisation of existing enterprises at a fundamentally higher technological level. There are examples of these enterprises, even here in the Urals region. Steel smelters from Chelyabinsk, with whom I met last July, spoke very convincingly about the technical upgrade of their enterprises. They said that ferrous metallurgy, called “black” in Russian, has become white. Indeed, they are now employing modern technology and a new labour philosophy. As you know, I visit enterprises almost every day. But when I went to their plant I was truly surprised at its high technological level. I am quite grateful to those who implement such projects – they are building the future of our economy.

The Chelyabinsk Tube Rolling Plant (ChelPipe) has commissioned a new pipe rolling mill, Vysota 239, and has launched the production of large-diameter pipes. We can now satisfy nearly 100% of the Russian market’s requirements for these products. In the past, during the Soviet period, we bought them abroad or supplied gas in return for such pipes. When we started building large pipelines to Europe, in particular Germany, they formulated the contract to say that they would deliver pipes in return for our gas.

Now we don’t need to exchange anything. We make everything we need for the production of these pipes at home, and their quality is very high.

ChelPipe invested 21 billion roubles in that project, with the government providing guarantees for the 10 billion roubles that the plant borrowed. This created over 1,400 modern jobs. I once said that we must create 25 million jobs. This is a challenging goal. It does not mean that we should create completely new jobs. We should also modernise existing jobs. Such projects as the one implemented at ChelPipe help us achieve this goal and this new level.

The Magnitogorsk Iron & Steel Works (MMK) will commission a new cold rolling mill in a few days, Mill 2000, in which it invested more than 53 billion roubles. Incidentally, I often visit the MMK plant. They are acting wisely also by investing money and efforts in environmental protection. Considering the plant’s reduced atmospheric emissions, its environmental project is a success – emissions have been cut dramatically.

Mill 2000 was built specifically for cold rolling of high and super high resistance steel. We can now supply high quality body sheets for our automobile industry and stop importing them. You know, it was difficult to achieve this goal and I am glad that this project’s organisers have found a solution. Take modern Russian-made cars, which seem to be good, although there are some shortcomings in their electronic and other systems, but they are generally good. But we were using body sheets which the leading global automakers stopped using long ago. This is a very important car component. We now have new-generation technology for the production of better body sheets.

We did not produce such body sheets in the past. We could not make modern cars in Russia, we could not localise production because we did not have modern steel. Now we have it.

Overall, the key steel enterprises in the Urals invest about 200 billion roubles in development projects. The Urals enterprises are approaching global standards regarding the share of modern equipment, production efficiency and labour productivity. They are certainly ready for competition in the domestic and global markets. This is a visible embodiment of the new industrialisation in Russia.

To prove my point, so that you won't think my claims of competitiveness are unsubstantiated, here are some figures. The depreciation level of equipment in the steel industry is less than 43%. Is this a lot or a little? I think it is still too much. But it is a good indicator compared even to the leading European and global economies. And the share of such obsolete equipment keeps falling.

We must ensure that the goods stamped “Made in Russia” win global recognition and are used in high-tech industries.

A relevant example is the project to create a special economic zone, Titanium Valley, in the Sverdlovsk Region, where components and materials for new-generation Russian airplanes and for the leading global aircraft manufacturing companies will be made. The project has been launched. Investment in its infrastructure has reached approximately 50 billion roubles. The bulk of these funds, 40 billion, are private investments and money provided by companies that are residents of Titanium Valley.

I often meet with our foreign partners. I have met with one of them just recently. They are willingly investing in this production.

The foundation of this industry was laid back in Soviet times but its current development meets modern requirements and I think that those that started it would be pleased with the work of their successors.

At the recent Congress of Machine-Builders, we spoke about the prospects of this vital industry. We believe that Russia needs powerful machine-building. This industry largely defines the status of any state and any national economy. Uraltrac is now implementing our project on a model line of domestic diesel engines. The Sinara Group enterprises are developing new electric and diesel locomotives. A programme for modernising the Urals Heavy Machine Building Plant (Uralmash) has been launched. During the economic crisis we supported many domestic enterprises, including those in the Urals. At times, the government had to deal with the problems of specific enterprises. We can discuss the advantages and disadvantages of micromanagement, but we cannot just sit by when a special predicament occurs. We must not allow bankruptcy, nor throw people onto the street. From 2008-2009 Uralvagonzavod was facing serious problems. I’m sure everyone here knows about this. This plant is a flagship of our engineering and the defence industry. The number of civilian contracts took a sharp dive, and losses grew. We transferred 14.4 billion roubles to replenish its charter capital, granted almost 10 billion roubles in state guarantees and helped with orders from the Defence Ministry. Transneft also signed a large fuel tanks contract with them, for shipments towards the Pacific.

Uralvagonzavod finished last year with a profit of 6.2 billion roubles. Average wages increased by 45% compared to 2009. The production of carriages grew almost ten fold – from 2,000 in 2009 to 19,500 in 2010. The plant manufactured more than 10,500 carriages in the five months of this year. This is the highest level of production during the plant’s entire history, including during Soviet times.

Now experts are working out a comprehensive programme for the plant’s modernisation worth about 55 billion roubles. It should be adopted at the end of this year. The plant and its work collective have received clear prospects for the future, and now have confidence in tomorrow, as we used to say. This was the goal of decisions made during the crisis.

I think it would be correct to emphasise once again here in the Urals, where many defence enterprises are located, that in the massive re-equipment of our army and navy we will primarily rely on our defence industry. I’m sure our enterprises and design bureaus will be able to meet this task.

It is also very important to provide civil and defence industries with highly skilled personnel and scientific expertise. This is why we will pay special attention to backing your leading universities and the scientific and educational community in general. These include the Urals Federal University and also South Urals University, which won a contest in the selection of programmes for national research universities. I’d like to add that we have provided federal budget support for Tyumen State University, which is introducing educational programmes in innovation. These higher educational institutions are a major link in innovation infrastructure and are instrumental in developing small and mid-size high tech companies.

I’d like to note that in general, the number of small and mid-size private companies increased by 27,000 in the Urals Federal District. This shows that regional authorities are paying due attention to this issue.

All of the region’s districts have taken advantage of their right to reduce the tax burden on small business, working under a simplified tax scheme. Such an intelligent and far-sighted approach has produced and will produce results. I’d like to thank the leaders of the region for their decisions.

I have talked about the production sphere, but there are also good prospects for small and mid-size business in tourism. The region can develop practically all types of recreation and tourism – from cultural and educational to extreme.

There is so much to see – the ancient Tobol Kremlin, the historic and cultural reserve Arkaim and the Ural Mountains. I’ve been here myself many times for skiing. You have truly amazing, world-class resorts. Your potential is huge but largely underrated. But as they say, water does not flow under a stone lying still. It is necessary to upgrade the level of service, train personnel and create a civilized and comfortable environment for the travel industry.

There already exist very interesting projects on developing tourism on Yamal, in the Chelyabinsk and Sverdlovsk Regions and Tyumen. It is important to carry out an effective campaign to promote the tourist potential of the Urals in Russia and abroad.

It is no accident that we are striving to host national and international competitions in diverse areas and in as many Russian cities as we can. This means new business connections and new investments, and it will help us promote the image of a new Russia and its regions abroad.

In Yekaterinburg we are planning to host part of the 2018 FIFA World Cup, so I think your sports fans will be pleased.

As you know we are now working on the Popular Front programme. I believe that its central, cross-cutting priority should be based on projects that can be generally described as concerning quality of life.

There are also other aspects that we must pay attention to – we must improve our political system, expand the foundation of democracy, guarantee security in the broadest sense of the word and achieve justice in resolving all issues of our current life at municipal, regional and federal levels. This is the purpose behind the formation of the Front. We must work towards the comprehensive resolution of all problems that concern every person, and that determine the everyday life of our families and children. This applies to housing and high-quality utilities at updated, reasonable rates; comfortable courtyards and normal roads in cities and villages; kindergartens without long waiting lists; good schools and hospitals with all necessary equipment; as well as libraries and a developed network of cultural and entertainment facilities.

All levels of government must concentrate their efforts on addressing these tasks. They should make people feel real change for the better.

In the next 10 years housing construction in the Urals should more than triple. The region will need to commission around 16 million square metres of housing per year. Incidentally, during the five months of this year all of the region’s districts have registered growth in the quantity of commissioned housing – up 18% as compared to last year. This is a good result.

We have been carrying out programmes of the Housing and Utilities Reform Fund on relocating people from hazardous dwellings. More than 17,000 people have been relocated in the Urals Federal District. Apartment buildings housing more than 1.6 million people have been repaired. Many of the dwellings that have undergone overhauls had not been repaired for decades. I’m sure that people don’t even believe that this can be done.

We will be actively using the potential of the Housing Construction Development Fund. It is currently working on 11 plots of land in the Tyumen and Chelyabinsk Regions of the district. The development of this land will make it possible to commission an additional 1.5 million square metres of housing, including low-rise buildings.

Affordable housing for people must be the main criterion of the effectiveness of our efforts. People must have an opportunity to resolve their housing problems. We must promote the construction of modern economy class housing and expand programmes for discounted mortgages for doctors, teachers, young families and young specialists. Of course, we will continue programmes designed to provide housing for northerners.

All veterans of the Great Patriotic War that registered before March 1, 2005 have received flats in the Urals Federal District. I’d like to emphasise that all of them received new flats – 1,439 people all in all. As you know we have extended this programme and removed all formal restrictions. Another 13,000 in the Urals alone have asked us to help them with housing. Here are the figures. We have provided housing for 1,439 people – those who registered on the waiting list before March 1, 2005. When restrictions were lifted, another 13,000 have addressed us with the same request and almost 9,000 of them have already received housing. We are doing all we can for those on the waiting list to receive new housing.

We have invested more than 54 billion roubles into the healthcare system of the Urals Federal District. Some of this money was used to open two high-tech medical centres in Chelyabinsk and Tyumen. They specialise in cardio- and neurosurgery. In December 2010, a new prenatal centre was put into operation here in Yekaterinburg. More than 1,500 babies have already been born there.

I’d like to congratulate its specialists for making such a good start, and also young families, especially young mothers. I hope they liked the new centre. A similar centre will be opened in Kurgan before the end of this year.

Our efforts in this direction, the construction of new prenatal centres and support for mothers, are producing results. This does not apply to the birth rate alone. Last year the infant mortality rate decreased by 4.2% in the Urals Federal District.

Relying on the experience of the national project, we are now launching regional programmes for upgrading healthcare. The regions of the Urals Federal District will receive an additional 50 billion roubles in 2011-2012 for their implementation, in particular for the repairs of hospitals and clinics, the purchase of new equipment and the introduction of modern medical standards.

It is essential to support primary healthcare centres, especially in the countryside. One of the goals of the regional healthcare modernisation programmes is to increase the salaries of doctors and medical support staff. We aim at increasing the medical salary fund by about 30%-35% in two years. This will depend on the introduction of new standards of medical aid. This is a complicated process because these standards affect the cost of services and the salaries of medical pesonnel.

Different standards will be introduced in different regions. We cannot introduce all of them at once – this is too expensive and is technically unfeasible.

I’m talking about this in such detail because people, especially medical workers, should know what is going on. They should know what is behind the introduction of certain standards on cardio-vascular diseases in one region and on cancer in another.  I’d like to ask United Russia regional organisations to closely monitor these developments. This issue has an important professional and social dimension. In turn, the regions must be more active in consolidating the potential of medical personnel, including help with housing and the introduction of special bonuses to doctors and nurses.

The salary fund for school teachers must also grow by an average of 30% with the start of the new academic year. We should be clear what we mean – not the salary of each teacher but the salary fund. But obviously this growth will increase individual salaries - of medical workers in the former case and of teachers in the latter.

In two years the salaries of teachers must reach the average salary for a particular region. We will resolve this task by implementing our project on support for our schools. Let me recall that before August 1, all regions must sign an agreement with the Ministry of Education and Science on clear-cut standards of efficiency and targets for school development programmes. I’d like to ask our regional governors and our party agencies to monitor this issue perpetually.

We are planning to allocate 60 billion roubles per year from the federal budget to the regions in the next two academic years. These funds are for the purchase of equipment, school cafeterias, for dealing with the problems of small rural schools, training and upgrading teachers’ skills and, of course, on equipment for school gymnasiums.

We will continue building affordable facilities for large-scale sports and recreation aactivities – open stadiums, swimming pools, sports and fitness centres. An ice rink has been opened in Kurgan, for example. A trampoline complex will be opened in Nizhny Tagil next year. There are no such trampolines in this country at all. The only ones will be here. Our athletes in this sport have had to train abroad.

A universal game hall is under construction in Tyumen, and an ice palace is being built in Surgut. Regions of the Urals Federal District have opened 23 health and fitness centres and five football fields with artificial turf under the United Russia party project.

Separately, I’d like to say a few words today about a very sensitive issue that I’ve already mentioned in my speech. I’m referring to waiting lists for kindergartens.

There were 1.7 million children on these waiting lists at the beginning of last year in Russia, and their number has increased to more than 1.8 million in January 2011 despite the fact that more than 100,000 places were introduced in kindergartens during the past year. Thank God the birth rate is going up, but the shortage of places in kindergartens is quite bad.

In preparing for this conference I specifically studied the statistics on all regions. Regrettably, not all of them resolve this problem with the same efficiency. Hence, not all regions consider it a priority. I will quote some figures that are not related to your district but to the country in general. Last year not a single kindergarten was opened in the Tula Region. The same is true of the Kabardino-Balkarian Republic, the Bryansk, Novgorod and Volgograd Regions. Some regions plan to eliminate waiting lists in 15 and even 17 years. During this time today's children will be old enough to enter university, or to graduate from it.

Now I’d like to say a few words about the Urals Federal District. The Tyumen and Chelyabinsk Regions are planning to resolve this issue in two years, the Sverdlovsk Region and the Khanty-Mansiysk Autonomous Area in five years, and the Kurgan Region and the Yamal-Nenetsk Autonomous Area in 10 years. The Kurgan Region has a small budget and their difficulty is understandable, but what prevents the Yamalo-Nenetsk Autonomous Area from resolving this issue? I simply don’t understand it, or maybe this information is inaccurate. Let the governors of these regions tell me what they are planning to do.

And here’s another bit of very interesting information – the cost of creating a single new place in a pre-school institution. In Tatarstan, for example (again I am giving you a perspective across the country), the cost per child is 455,000 roubles, while in the neighbouring Samara Region it costs 1,421,000 roubles. I wonder what sort of facilities those are, a five-star hotel of some sort?

One should look closely at how these figures are made up. A village kindergarten in the Smolensk Region costs 376,000 roubles per child, that’s a regional kindergarten; in the rural parts of the Tambov Region nearby the cost is a million roubles. See the difference! Of course, regional characteristics may lead to some adjustments but such a big spread looks strange indeed. We should take stock of every region and every specific project. I think the solution of the problem must be accelerated dramatically. We cannot have families with children waiting eternally, sometimes in vain. We also understand that it is hampering the demographic programme. If a woman knows that she has no chance of getting back into employment soon, if she realises that she will lose her qualification, that is a natural constraint on the demographic programme. We must act resolutely and do everything we can to eliminate all the restrictions. We will therefore support all the Russian regions that come to grips with the problem of preschool education; we have discussed it with colleagues and we propose to allocate an additional 9 billion roubles out of the federal resources for these purposes.

We will begin disbursing the money from the beginning of 2012. We have included it in the budget: one billion roubles directly from the federal budget and 8 billion roubles as a very soft three-year loan to the regions.

That will make it possible to create more than 20,000 new places at kindergartens. According to these strange construction estimates the costs there are 3-4 times higher. We will think twice before investing money there. I hope that all the regions and municipalities regard the development of preschool education as a budgeting priority. This is also one of your tasks, colleagues. United Russia holds the majority or a controlling stake in all the Russian regions. I ask you to pay close attention to the problem in shaping regional budgets.

At an interregional party conference in Volgograd last May I already said that we had proposed the initiative of Russian Popular Front. I would like to thank the people of the Urals for their active support of the idea. Many non-governmental organisations in the Urals Region, work collectives and individuals citizens have joined the work on proposals. I am sure that this new organisation, new social movement can rely on the Urals.

I would like to stress that the task of this association is not confined to participation in the elections for the State Duma or the regional parliaments, important though it is. Above all the Front is a political organisation, a broad public movement that consolidates society’s forces and people in tackling strategic problems facing Russia as a whole and individual regions.

We are against people being dragooned into the Front and against working in accordance with bureaucratic, “command” rules, against artificial buildup of party ranks and so-called participation. It can merely discredit the idea. The people themselves must be willing and their will should be expressed at the meetings of work collectives and in residential communities. We see that there are many people who seek to share these goals, who make a conscious choice rather than following directives from above. The Popular Front must help broaden the social base for decision-making at all levels of government, municipal, regional and federal. Open discussion of key national and regional issues must become the norm for the Popular Front. That will undoubtedly help us to make more sound decisions.

You know that the Popular Front is taking part in the debate on the federal budget for the following year. It would be proper if the constituent entities of the Russian Federation also had in-depth public hearings on the issue of regional budgets. I ask the local coordinating councils to organise this work. You know how actively the legislation on healthcare is being discussed. The minister is present here. Just yesterday we had a discussion late into the night with the participants in this process who are members of the Front but not members of United Russia, we discussed these problems very actively. With all the hiccoughs, and nothing happens without a hitch, the positive results far outweigh the negative. I see real discussion, a committed discussion involving a broad circle of people, non-governmental organisations contributing to the provisions of that important draft law. We should act similarly in other areas.

In the localities, at the regional United Russia conferences the people’s election programme, which is now being shaped with your participation, will be discussed. As I have said, the programme will contain an extensive section devoted to the regions, the activities in every constituent entity of the Russian Federation with the indication of the problems that are of concern to the people there and with substantive proposals on how to go about solving these problems. That is why it is of fundamental importance for us to see that the discussion of this document is active, very open and informal so that all the worthwhile ideas are taken into account. It is necessary to ensure effective feedback and identify the problems and sore spots. We need a truly people’s programme developed with the direct participation of civil society. Only then can we – I mean United Russia – really rely on it and defend all its provisions upfront. We will be confident that the document has emerged from a broad discussion and really meets the aspirations of the people. I am convinced that we will be able to successfully implement our ambitious plans, to modernise the economic and social sphere only if we lean on broad public support and work for people and in the name of the people.

Colleagues, the creation of the Popular Front is a step towards rejuvenating the Party. United Russia, as a party in power, which commands majorities at the federal and regional levels, bears the full responsibility for what is happening in the country. United Russia is undoubtedly the main consolidating force in our society which has to its credit key projects and initiatives in the social and economic spheres and in regional development. Without exaggeration – and I mean what I say – it is thanks to the party and its political position and organisational resources that so much has been accomplished in the country over the past ten years. That is an obvious fact.

What is particularly important and critical is that we have managed to work effectively in the context of the crisis. I am sure that but for such a consolidated force we would not have weathered the crisis with minimum losses. Of course there were some negative factors during the crisis, wages sagged and unemployment grew, but then, as the State Duma deputies know, decisions were taken very quickly and we acted as effectively as possible. Without such a consolidation of power the consequences of the crisis would have been much more serious.

Unemployment would have been higher, there would have been no effective support of the labour market, we would have been unable to make decisions on a whole range of issues aimed at supporting specific industries. All these decisions had to be passed through parliament, all these massive injections in the financial sector – in the automobile industry, in engineering – all that had to get parliamentary approval. Without such an effective mechanism things would have dragged on and fallen to pieces. Therefore, any political force that is in power bears the burden of responsibility for all the problems, one has to learn to live with it and one has to take it seriously and without any bad blood. But I repeat, without such an instrument the situation would have been much more complicated.

As I said, in any country the ruling party inevitably gets used to being in power and becomes less sensitive to the problems of the citizens, the interests of the individual. Prolonged predominance, let us face it, diminishes the enthusiasm. One gets used to leadership as something given from above once and for all. That is not the case. One has to confirm one’s leadership by effective day-to-day work, so we should not be afraid of anything while working within the framework of the Front. On the contrary, if we want United Russia to be an effective political instrument that meets the challenges of the times it must be open to new faces and new ideas. I assure you, there is nothing to be afraid of. And this is in fact the main task of the Popular Front.

The main idea is to use the opportunities of the Front and its openness in order to attract energetic and competent people with interesting “out-of-the-box” views, and to enable professionals and true public opinion leaders to implement their ideas and fulfil their potential using United Russia as a platform.

United Russia must welcome the appearance of new interesting people. It should be glad because it will strengthen this political structure, broaden its base, enable the professionals to implement their ideas through United Russia and through its channels. On the whole I believe that it is a positive impetus for the development of party political life in Russia, the strengthening of civil society and upgrading of the quality and effectiveness of the authorities at all levels.

Of course in this connection our intra-party mechanisms and procedures must change. I am convinced that the more democracy and competition there is within the party, the stronger will its positions be in society as a whole. We will have more discussion on this. We will revisit that issue.

Colleagues,

The history of the Urals is truly a unique history behind which is the colossal labour of millions of people and many generations of our fellow countrymen. In the 17^th century the Urals was the springboard for opening up Siberia and the Far East. It is from here that the Cossacks moved further to the east. In the 18^th-19^th centuries the Urals craftsmen turned Russia into an industrial power and during World War II the Urals was the main arsenal for Victory. In the 1950s-1980s it emerged as an energy centre on a global scale.

Today the country faces major challenges. We need a new industrialisation and millions of modern jobs, a technological breakthrough and a growth of economic efficiency, rapid development of the social sphere, improvement of Russian people’s living standards as the ultimate result and the main goal that we must work for. Improving the well-being of Russian families. I am sure that the Urals and the people of this wonderful and industrious region will make a spectacular and significant contribution to the solution of these tasks, to our national success. I am sure that if we work in a concerted and consolidated manner we will succeed.

Thank you very much for your attention.

Let us continue. We have a certain tradition in organising this kind of interregional conferences. We hear interesting contributions from our colleagues, interesting projects and use them as a take-off point for a free discussion on the problems of the development of the district as a whole.

Let us hear from Alexander Petrov, representing the Urals Pharmaceutical Cluster, the project called The Urals Pharmaceutical Cluster – the People’s Project. Alexander Petrov.

Alexander Petrov: Mr Putin, comrades. I am a former village teacher from a large dynasty of teachers, but the new Russia has totally changed my career, and now I have been working in the pharmaceutical industry for 20 years. What are the most important facts? We would like to show you a video clip to give you an idea of what our team has accomplished before discussing the following projects.

(video clip is screened)

 We have already a large team made up of ordinary Urals people, and each of us is creating a small or medium-sized enterprise. We are growing slowly but steadily. We have formed ourselves into a cluster to coordinate our actions in order to survive together. The economic downturn has shown that we can survive a crisis. We had a hard time, but we have survived. We are developing steadily. We have written a programme of the regional development of the pharmaceutical industry in the Urals Federal District. The Tyumen and Chelyabinsk regions have joined our cluster. They propose that these pharmaceutical industries coordinate their work.

We have written a comprehensive plan for the modernisation of old enterprises – which was important because historically the Urals has pharmaceutical enterprises that produce antibiotics – and the building of new ones. We have launched a two-pronged attack: modernisation of old enterprises and developing breakthrough technologies in which we would be the best in the world, rather than catching up with foreigners.

As an example, I can say that infusion solutions appeared because we had to learn something new. It was “year one” but even in that “year one” we immediately set a very high quality standard, the GMP standard. The standard will be mandatory for everyone starting from 2014. Several enterprises already have that European certificate.

Of course, we have to bring in foreign specialists to do this serious work.

Naturally, we had to involve foreign specialists in this serious work but we don’t regret this – the quality of these infusion solutions is known throughout Russia. By 2012, every second infusion package used in Russia will be produced in the Urals region. I’m referring to insulin. We have been producing Russian insulin for two years, in cartridges and in bottles.

Vladimir Putin: Who is your partner?

Alexander Petrov: We are currently producing infusion solutions from French substances, and buy the powder abroad. We are producing convenient cartridges. We also plan to start producing disposable syringes in sets so that patients do not have to reuse insulin syringes. We once received negative feedback along the lines that we produced poor-quality insulin. We asked them to be more specific. They told us that after using a 5ml bottle for 55 days they noticed some sediment in the insulin. That means they were using that bottle for 55 days. This is why we decided to switch to cartridges. We currently produce four different insulin products.

Moreover, we realise the need to set up a comprehensive system, rather than only developing through the import of foreign substances. We are currently working on a large project with a huge investment of 2.6 billion roubles to establish full-scale production from our own patented producer strain. By the end of the year we intend to present you with the first substance produced here, in the Urals region. Our objective is to produce 400 kilogrammes of this substance, thereby ensuring our pharmaceutical security.

Vladimir Putin: So you will be producing the substance yourself?

Alexander Petrov: Yes, we want to produce the substance ourselves. This will be a revival of the Urals biotechnology school, and a boost for science in the Urals region. We have made agreements with the Pushchino Research & Development Centre outside Moscow and a special institute in St Petersburg…

Vladimir Putin: I am very familiar with this situation. It will be hard to win a market share. And we will be supporting you. This is a very complicated area. We have been deprived of our own market. It will be hard to develop a market of our own. I'm sorry to say that this field is highly criminalised. But we will be helping you.

Alexander Petrov: You have touched a very sore point. During the past 20 years the monopoly that foreign companies enjoyed has resulted in a certain mentality in the Russian market, even among doctors.

Vladimir Putin: I don’t mean to offend anyone, but this is not just about a mentality. Western companies are very active, including in the medical community, working to promote their products using a lot of market tools. I am aware of this and I will be glad – and I consider it my duty – to assist you.

Alexander Petrov: We are moving in this direction. Some governors support us, such as the Chelyabinsk Region governor, who I believe displayed courage when he said, “We will be promoting Russian-made insulin on the market.” This was a serious decision.

More and more regions are joining in. We are already supplying insulin to 14 regions, but unfortunately we sometimes fail to meet bid inquiry specifications. We have received notices from 41 regions saying we fail to meet specifications. What is this about? How is that possible? If we’re talking about genetically-engineered human insulin, then we have to meet specifications for generic medicines.

Vladimir Putin: Excuse me, but this seems to be connected with some requirements resulting from a comprehensive (procurement) package, correct?

Alexander Petrov: Yes, there are several variants.

Vladimir Putin: For those who are not aware of the situation, the bid inquiry terms and conditions provide for larger batches of over 500 million roubles. Only major companies offering a wide range of products can hope to win the bid. Companies that cannot offer such a wide range, such as Russian companies, for example, are automatically excluded from the bid. We need to amend this situation. I ask the government staff and ministries to look into this issue.

Alexander Petrov: We also have several other breakthrough technologies. For example, we collect Russian pharmaceutical developments like a vacuum cleaner, in order to produce them at our facilities. And we have a success story. We have passed the second stage of clinical tests of an anti-viral medicine. I hope that the academician Chupakhin, the author of this idea, is here, because I remember him crying with happiness and saying that he couldn’t believe that his idea was applied in production.

Vladimir Putin: Where is this academician? Please, where are you? How long did you work on this medication?

Oleg Chupakhin: It usually takes a long while to develop a medication. Abroad, it takes at least a decade. We worked for 18 years.

Vladimir Putin: My congratulations!

Alexander Petrov: Moreover, we all know that unique production facilities need to be set up in Russia. And we – I will now show you a picture – decided to buy an old glass factory. It was almost completely destroyed. How do you like the picture?

We bought it. Next year we will commission a factory to produce the first hydrolytic class, pharmaceutical glass with a capacity of 1 billion items in the 5,500-resident village of Ufimkovsky. There are currently no jobs in the village, and the factory will offer 800 jobs. This is an example of how the efficiency can be attained that will help us form the middle class – there are only four or five factories like this in the world.

Vladimir Putin: You will be using the glass for surgical spirit?

Alexander Petrov: No. This is medical glass. And these are examples of high-tech jobs. We want to help establish a middle class based on this example. Workers should get the same salary as the middle classes. But this should not be artificial; it will grow naturally, because of labour productivity.

This example is solid evidence that the pharmaceutical sector is an innovative industry. This is an example of how it really is possible to form a whole middle-class stratum in a sector.

We are now implementing a comprehensive programme; we have 32 projects. Under one such project, we want to reach sales of 100 billion roubles. This is a very serious infrastructure project for the entire Urals Federal District. We have political support, we have private capital, and we have international partners. In the past ten years, we have matured to such an extent and quality that we are able to implement this project. We are ready to follow through on this undertaking.

Thank you for your attention.

Vladimir Putin: Perhaps you’ll go back to school?

Alexander Petrov: I have a good idea. Let’s set up a Skolkovo-type research centre here. As a headmaster, I am also involved in science. I think maybe I’ll do it when I retire, and now it’s strategy …

Vladimir Putin: Let’s not wait until you retire. You are building this enterprise today. You will need people there. And I’m not yet talking about your core activities, that is, the production of medicines, which obviously needs top specialists.

Technically speaking, we are now actively discussing this project so that professional education – technical schools and lyceums and universities – merge into a single complex to train specialists for the sector. Please have a look at how you can join this programme to utilise your experience as an educator and your production experience while simultaneously tackling essential human-resources issues. Please have a look at it.

The Urals Federal District with its wonderful scientific and educational experience is an appropriate platform for joint efforts.

Alexander Petrov: That’s what we think, too, and we have international support. A number of international corporations are ready to help implement the research centre project. The Skolkovo Foundation has proposed …

Vladimir Putin: Research and educational.

Alexander Petrov: Undoubtedly, but these are hard-applied disciplines, specialised education, we need these combined professions – at the interface between a chemist, a process engineer, and a pharmaceutical chemist; even between different sectors that haven’t had much overlap – geology and metallurgy, however strange that seems. The Physics of Metals Institute and, for example, biologists have invented a new nano-metal medication carrier, and we need such sectors very much. We have already received 20 certificates for young scientists and co-finance them with the help of private capital. We plan to raise this to 100 young scientists for applied research who will be engaged in development and in bringing their developments into industrial application. This is our main goal.

Vladimir Putin: Great. We’d welcome that.

Alexander Petrov: Mr Putin, can we get an autograph for our patients?

Vladimir Putin: Good. This is not a prescription, I hope.

Alexander Petrov: No, it’s not.

Vladimir Putin: There you are. Any more comments on this project? Thank you.

Vladimir Putin: I now give the floor to Alexander Iltyakov, with the Veles Meat Processing Company project, from the Kurgan Region. Go ahead.

Alexander Iltyakov: Mr Putin, respected members of this conference. I will tell you about our meat processing enterprise, which was conceived in the “roaring 1990s” when the Russian economy was still in its infancy. And I will start by showing you this film.

(The video plays) Sixteen years ago, three young men set out to get involved in the production business. We are from the countryside, and so long as our country’s rural areas thrive, Russia will thrive too: there is no alternative. But if we are just a source of the raw materials, then this will have a corrosive effect. Russia will only be a truly developed country once it is engaged in the production and sale of finished products. That was what we had in mind when we headed off to that most remote corner of the Kurgan Region, 200 kilometres north east from where we lived. We rented a workshop at a district consumer cooperative that was falling apart at the time. As mentioned, the workshop was about 250 square metres in size. There was no heating, no water supply and no sewer system. But, most importantly, we had an idea, and we were enthused by that idea. It was tough, it was hard. But that doesn’t matter so long as you have that vision of your goal, what you’re striving for.

Vladimir Putin: How many of you set out on that journey?

Alexander Iltyakov: Back then, on September 18, 1995, there were seven of us, including the workers.

Vladimir Putin: Where did the money come from?

Alexander Iltyakov: We had absolutely no money at all. We literally had 300 roubles. I borrowed 300 roubles from my mother for the petrol.

Vladimir Putin: Your mother again.

Alexander Iltyakov: What other option was there? If your parents won’t help you – who will?

Vladimir Putin: Mothers are always there to help out.

Alexander Iltyakov: That’s where we got the money to start with. We got meat from farmers, on the understanding that when we sold it they’d get paid, made salami, sold it, earned our money and settled up with the farmers. There were payment delays, no one’s denying that, but nonetheless we were moving towards our goal.

At first, we hit a major obstacle, namely, high-handed officials. They acted like they thought it was really odd and out of place that some private businessmen would operate there. I only kept saying one thing to them – that they should wait, that we were expanding production, and that production had a future.

Then there were also rolling blackouts, two hours in the daytime and two hours in the evening. We have seen it all. The rural areas had to go through all these sorts of things. The population there dwindled rapidly. We needed to find workers somewhere. Finally, in the late 1990s, we saw the light at the end of the tunnel when you took over, Mr Putin. I don’t hold back from saying that. I’m saying it how it is.

It was then that these words were finally said: “Stop humiliating these business people. Stop humiliating small businesses and stop throwing roadblocks in their way.” Bureaucrats really stopped coming over for endless inspections to many business people. This produced wonderful results. I personally felt what this means. It turned out that we were in high demand, and that we had made the right choice in terms of production methods. This is exactly what Russia needs. This made us even more enthusiastic.

As a result of such enthusiasm, we are posting high production figures. For instance, we now make 800-1,300 tonnes of quality products monthly, as compared to a meagre two tonnes in 1995. By now, our enterprise has built production facilities with a total area of more than 8,000 square metres. Certainly, we purchased the most advanced equipment that we saw abroad. In 2001, we attended an IFA exhibition for the first time, and we wanted to buy some things there. However, it didn’t really matter what we wanted – those things were out of reach for us. We didn’t have the money and the banks we went to wouldn’t lend us any because we had no collateral. Back then we used to make smoked salami on open fire with our own hands. If you dropped me on an uninhabited island, I’d still be able to make any kind of salami you like.

Time marched on. We now have a clear understanding of the fact that time is the most precious thing. And then there is that Russian character, as described by Dostoevsky, when people want everything here and now. We moved towards having a business of our own step by step, but the thing was we knew what we wanted. Although we have accomplished something today, much remains to be done.

The human resources problem became particularly serious in 2005, because the villagers had started leaving one by one due to the lack of infrastructure. It was just impossible to teach children at the local school for two months in winter because of all those windows, holes and the rest. The conditions were terrible. At the time, we were forced to take action because we knew that our production facility and our existence were at stake. So, we renovated the school. We invested 20 million roubles’ worth of our own assets. No federal allocations were available. We installed 255 windows in the school building. We completed the main school entrance. This is good because the children had to use the service entrance for 39 years.

We built an ideal canteen and a language laboratory. We managed to retain our teachers. They didn’t go anywhere else. I remember calling the headmaster over the phone in 2006 when I was on a business trip to Austria...

Vladimir Putin: You know, I’m listening to you and thinking: “It’s never too late to do things the right way.” The regions have lately done a lot in order to support their networks of schools. We are now discussing an ambitious federal programme to support the school education system in general and certain networks of schools. When you said that we should have done this and that, I immediately recalled that famous fairy tale about a boy who told his friends that they must hold their positions against the enemy forces for one day and one night. As you can see, help is on the way. Hopefully, all this will prove even more effective.

Alexander Iltyakov: Mr Putin, we have really managed to stay afloat. Today, we can see that the state addresses education issues and builds daycare centres. They are building a daycare centre in our village under a federal programme. And we have almost finished repairing another daycare centre and have invested 15 million roubles of our private assets in it because we want our kids to be healthy.

The children are our future. When we get old, they will behave the way we taught them and arrange our life for us in that way. Children are our nation’s future. We know it all too well.

We also see that we should develop not only production and rural infrastructure but also housing. We have commissioned more than 1,200 sq m of housing for our personnel in Chastoozerye today.

I would like to say something else. You said that birth rates in the Urals exceeded the death rates for the first time in 2009. However, our region was Russia’s first to start the same trend the year before – certainly due to benefits. The people see it all and believe that life has really taken a turn for the better.

Homes are not built overnight. Many people spend their time looking for what is going wrong. It takes time to make improvements, but we see that village living standards are rising. We have put an end to red tape and unemployment. I called the unemployment bureau the other day to ask how things were going. They said: “We’re up to our ears in work, with 200 clients on the waiting list.” I said: “I’ll take them all on.” “Wha-a-at? All of them?” “Yes, for official employment. I hope they’ll never be forced to return to your bureau.”   

We are improving the village. We have built new fences for all low-income war veterans, cleaned every street and footpath in the village, and begun road construction. More than 4.5 kilometres of road has been paved. The village looks prosperous. That’s how things are today.

Vladimir Putin: You might find my question off point, but I’ll ask it anyway. What are you doing to fight alcohol abuse?

Alexander Iltyakov: That’s an interesting question. When we were developing the company, we coaxed some and were quite tough on others. Now people see that sobriety is a must. In the old days, a worker would occasionally miss a shift. When I met him the next morning, I’d ask, “What was wrong?” and he would unabashedly reply, “Look, boss, it was the morning after.” That was considered a reasonable excuse.

It was a shock to me. I came to an ordnance factory as a mere boy from vocational school and saw proper discipline there. I took that discipline for granted before I came to my new job – a factory in utter disorder, with every possible excuse.

Incidentally, in 2007, our accountant was awarded a gold medal at a Moscow competition for his university thesis on the treatment of the personnel. That’s motivation for you! (Applause)

Vladimir Putin: I asked you about drinking because we know our problems, and this is one of the most formidable. A priest I know took a farm manager’s appointment outside Moscow and encountered the same problem – alcohol abuse. When he was supervising a house under construction, local men came up and asked: “Are you building a church, Father?” He examined them from head to foot and snapped: “No. It will be a prison.” When he was recounting it to me, I warned him not to violate the law. They coped with the problem in the long run, but it was a hard job.

Alexander Iltyakov:  It’s very hard, I know. We have no absenteeism any longer, but we still need entrance checks with a breathaliser. One is not admitted with a BAC reading of more than 0.02. We have to enforce it because we want to produce quality foodstuffs. We have banned smoking on the floor, as well – we’re food manufacturers.

We have really done something. Our awards at IFA exhibitions in Frankfurt am Main in 2004, 2007, and 2010 were possibly our greatest achievements, especially last year’s. It coincided with a day sacred to every Russian, the 65^th anniversary of Victory in the Great Patriotic War, so we were exhibiting 65 items. Indicatively, the products were randomly chosen – and all 65 won awards: 53 gold, 11 silver and a bronze, plus two honours for raw and cooked smoked sausages. We also won the Grand Prix for the greatest number of exhibits.

BVVF President Wolfgang Luz paid us a return visit the same year for the 15^th company anniversary. It was a great day. You’d see us putting a sausage on the table that was 15 metres long, made just for the occasion.

Vladimir Putin: Did you eat it all?

Alexander Iltyakov: Of course.

Vladimir Putin: I knew you would.

Alexander Iltyakov: We are aware of the meat market problem, which is what matters most. It’s an open secret that imports make up half of Russian meat sales. We talked about it at the section meeting yesterday. One girl said we were good competitors. Some competitors, really! Russia, with a population of 140 million, has 220,000 pigs. By way of comparison, Denmark has five pigs per capita. Multiply 140 million by 5, and you’ll see how much pork we’d need to be competitive. What can we do about it?

In fact, we can make great strides now that rural people are up and going, so we launched a project prompted by the 2009 crisis. We give out piglets for fattening to private farmers and supply them with fodder to get fattened pigs back, then deduce our outlays from the price. Farmers make 1,000 to 5,000 roubles per head. 

The programme was tremendously popular. It was a tripartite project involving farmers, the company backing the business, and the state as an administrative regulator. That was the only really efficient arrangement in this situation.

A statesman arranged for us to buy piglets from an excellent stock breeder. We gave them out for fattening, and our 16 million rouble investment in the project was reimbursed down to the last kopeck within a year’s time. The piglets reached 100 kg within six months. So, we had a supply of quality pork.

We decided to pursue the same arrangement the next year but had nowhere to buy piglets. That’s our main problem now.

Vladimir Putin: Did you buy imported stock?

Alexander Iltyakov: No, from a farm in our Kurgan Region. But now we have no pedigree piglets. We looked into the problem and discovered that the progress of Russian genetic research is next to nothing.

During yesterday’s section meeting, a young man told me that Danish farmers charge 4 euros for mating, while a sow should be mated two or three times a year. So we pay foreigners 9.2 euros for a sow on a ruinous contract because Russia has no genetic material to speak of. That’s our greatest problem. We will depend on foreign partners as long as we have no pedigree livestock.

Denmark, the Netherlands, and Canada are known for pedigree stock today. Canadian is considered the best. The Urals Federal District urgently needs a genetic centre. Some might eventually appear in other parts of Russia, too. True, we can import pedigree animals now, but we should start our own pedigree breeding all the same, even if it takes time.

Later on, we will involve researchers in the business because science is what makes farming tick. We are nothing without science. We will have no crops tomorrow if we don’t fertilise our soil today. God might give us rain, but what’s the use of rain on alkaline soil that has become barren of our own fault? We also need mineral fertilisers. That’s one of the problems we need to address before we build a genetic centre. I think it should be in the Kurgan Region because it’s a farming area. We have no oil and gas deposits, no heavy engineering – nothing but our fertile soil.

The Trans-Urals is between the Urals and Siberia. It’s a unique land. We have always made the best butter. It was once known far and wide. I have never tasted better butter than what I ate as a child. Why should we have all those margarines that contain 50-80% palm oil? I know it’s all for a healthy diet, but where’s the inimitable taste of real butter? We will make it again in the future – we can’t live without it. We should develop agricultural research and practical farming. (Applause) Thank you very much.

Vladimir Putin: One can immediately recognise an experienced manager! Look how quick he is to respond to his audience.

You know, I’ve enjoyed listening to you. How many of your Magnificent Seven, with whom you started the business, are working with you still?

Alexander Iltyakov: Five. Galina Basha and Galina Sevovolova quit the job, the latter due to failing health. The two who have the longest work records are with us to this day. The three of us, who were there at the company’s cradle, are fast friends. We were successful because we trusted each other. There was loyalty and integrity, and not a drop of pettiness.

Many are now asking for help. As for me, I liked what you said to a foreigner at a conference abroad: “Why should you help us? Are we disabled, or something?”

What we need is partnership – not help. We’ll manage on our own once we have equal economic conditions for success and clear rules of the game.

Vladimir Putin: I would first like to say how glad I am that you won awards in Germany. I know what their sausages are like. I have many friends in Germany, and I call them “sausage folk” in jest. They bear no grudges. On the contrary, they are proud of it. It’s amazing to win gold for sausages in a famous sausage-making country. Congratulations!

Alexander Iltyakov: That’s what I mean. It’s good that you appreciate it.  

Vladimir Putin: As for animal selection and the gene pool, on the whole, Russia has good traditions and a good basis for genetic diversity. However, we need the best samples and techniques from our Western partners, and we do borrow them as actively as we can. The agricultural development programme for this year allocates more than 3 billion roubles for these purposes. Moreover, I am pleased to tell you that we are planning to establish a national genetic centre.

The minister of agriculture is here. I would like to tell her that the idea of regional genetic centres is very well founded. I don’t know where you are going to set up the first national centre. Be that as it may, the Urals do need such centres, especially the Kurgan Region, with its preponderance of agricultural enterprises. I will certainly support the idea.

Alexander Iltyakov: Thank you very much, Mr Putin.

Vladimir Putin: Thank you.

Irina Redikh has the floor. She is a national alpine skiing champion and general director of the Golden Beach tourist and athletic centre. Ms Redikh will speak about the development of the tourist industry in the South Urals.

Irina Redikh: Good afternoon.

Vladimir Putin: Good afternoon.

Irina Redikh: We traditionally regard the South Urals as a stable industrial area, a pillar of Russia with its steel combines and pipe rolling plants. I want to show you something quite different.

(Shows a video clip)

I would like to say in a few words why the development of the tourist industry in the South Urals matters so much to me.

I was born in the South Urals and first took to alpine skiing there. I was a professional athlete for 15 years, Master of Sports, and two-time national champion.

I’ve seen many ski resorts, especially abroad, and I always wondered why we Russians were overlooking our tourist potential while other countries based their entire economies on tourism.

I have a university degree in tourism management. When I took up a job with a travel agency, I saw that 90% of my clients and those of similar agencies vacation abroad because Russia cannot offer them appropriate recreational activities.

Later on, I got an invitation to work at the Turgoyak national sport and terrain park. I snatched up the opportunity because I saw at once what a good business I could establish there. Now I see that our region’s future depends on the development of the tourism industry.

I am proud to say that we not only have great expectations – we are implementing practical projects. Suffice it to name the Sun Valley Ski Resort. We have invested about 800 million roubles into it since 2001, with sizable support from the regional government. We built a large electric substation, a gas pipeline, and a disposal facility – in a word, we have installed the basic recreational infrastructure.

We work on key projects. For instance, we host a third of local schools’ physical education classes through a child-oriented project. Perhaps two classes are held in stuffy school gyms or cross-country ski racing, but one class is at a ski resort. We taught 15,000 children to ski this year alone.

Vladimir Putin: Is the school far from the ski slopes?

Irina Redikh: One is right at the resort. There are also several schools in the regional centre, and we transport the children by bus over a 100 km distance. We also have children from schools in nearby towns, 10-15 km away. What matters most is the village schoolchildren’s involvement.

We began it five years ago. We taught alpine skiing to 3,000 children in the very first year, and now it’s at 15,000. As I said, the number grew five times within five years! I think it’s wonderful, and the children like it. That’s what matters most.

Foreign investors saw that it was a viable and promising project. A major Italian ski resort is our partner now. You must have heard of it – it’s Dolomiti Superski.

Vladimir Putin: I don’t know it.

Irina Redikh: But it’s really a major resort.

We have elaborated a joint development plan up to 2020. It envisages a 4 billion rouble investment to build new skiing runs, additional chairlifts and a village for 3,000 residents. After the resort is upgraded, we will build an ice palace to promote hockey and figure skating. Incidentally, there are no ice palaces within a 120 km radius, so the Chelyabinsk regional government supports the project.

Vladimir Putin: How does it support it? Who is investing in all of these projects?

Irina Redikh: We intend to build the ice palace through a co-funding programme.

Vladimir Putin: You mean partly on private investments and partly on regional grants?

Irina Redikh: Yes.

Vladimir Putin: How much will it cost?

Irina Redikh: I think it will be a mere 2.5 billion roubles out of a total 4 billion. 

We have two problems that I would like to ask your help with. First, as you know, all state-of-the-art Russian ski resorts have foreign equipment because retracks, chairlifts and injured skier removal apparatuses are not manufactured in this country, so reduced import duties would help us to make sweeping progress.

Second, the Trans-Siberian Railway, which crosses Russia longitudinally and connects all of its regions, passes close by our resort, with a 5 km long branch reaching us. The track has been laid and everything is ready, but there is no electric supply yet. We would like to bring more vacationers, especially children and young people from the regional centre, and we will do so as soon as the railway is functioning. We think we will accommodate about 100,000 people when the line is ready. It will enhance traffic safety spectacularly. Meanwhile, the federal motorway by which tourists arrive now is desperately overloaded. Vacationers from Samara, Ufa, Tyumen and other parts of Russia will reach us easily by rail.

So I think that the project will greatly contribute to tourism development in the South Urals. Please, stand by us and support our initiatives. Thank you.

Vladimir Putin: I really said from this platform that the industry has tremendous potential. I saw it with my own eyes and skied down the steel combine’s runs. It was sheer pleasure! They made a fine job of it, and I know that the second stage has opened. I wish I could visit it, too. They keep inviting me, and I hope to go next year.

Is your business a private-public partnership?

Irina Redikh: Yes, of course.

Vladimir Putin: This is a promising pattern. I’ll see what I can do for you.

As for equipment imports, Russia really does not manufacture many things necessary for a good modern ski resort. Incidentally, import duties on many items not manufactured in Russia have already been reduced or even abolished. We’ll see if we can extend the arrangement. But please, make these proposals public, possibly through United Russia channels, through organisers or the governor, which might be the best option. I hope that he is hearing this. I will make relevant orders to the Industry Ministry and the Economic Development Ministry. I am sure that we can help you. Russian industries are already manufacturing a number of items. Here, we need the utmost circumspection so as not to strangle domestic manufacturers. Some equipment items, for that matter, are even better than their foreign analogues. We should help you to purchase lifts and other things that are necessary for your tourist centre. Let us see what we can do about it.

As for the railway electric supply, I must say that not all railways are electric either in Russia or abroad. Only a half of the railways are electric in this country. Diesel locomotives are sometimes even more convenient. I don’t know whether this is true of your project, but I firmly promise that I will instruct Russian Railways, our principle railway company, to see what can be done to improve services along that stretch to guarantee you the necessary tourist inflow to keep your service market going. We will see what we can do.

I reiterate that the Urals, especially South Urals, is a tourist paradise. Regrettably, few know it even in Russia. We should build and upgrade the infrastructure. I’ll enjoy doing it with you.

Irina Redikh: Thank you.

Vladimir Putin: You’re welcome.

Vladimir Kizerov: Mr Putin, I am the head of the Mokrousovo District, Kurgan Region.

When you have a delicious sausage from Veles Co, you would like some water to wash it down with, and only then you would like to do some sports. However, the people of our region, just as in many other parts of Russia, have health problems because of the drinking water. The liquid that runs from the tap sometimes has a bizarre colour and smell, and hardly deserves the name of potable water. Something is being done to improve the situation in our region. In our municipality, for instance, we have built an ozone station at which all water is cleaned of iron admixtures. I should say that clean water even improves the demographic situation.

The birth rate in our district exceeded the death rate in 2009 for the first time in 17 years, and we had the lowest-ever death rate a year later. But what we do is not enough. We need federal support. We would also like to know what the government intends to do for supplying the population with clean potable water.

Vladimir Putin: It is really a critical issue for the entire country, especially for the Urals, with their many environmentally unfriendly areas. Things are improving as we can see from the fact that there are fewer deaths and more births – not only because family planning is making progress, although this is an essential factor, but also because environmental problems are gradually addressed.

Water is a critical matter. We can only regret that even some major cities had no water piping until quite recently – none were built in the Soviet years. It is a critical issue for your region, as well.

Mr Gryzlov, who sits on your left, is steadily pushing through the Clean Water programme. All of this will certainly be done as part of that programme and others equal to it in status.

I won’t now cite figures concerning their funding. Anyway, indices have been set and we will address the problem, and grant those programmes federal support. However, we also expect the active involvement of the regional authorities. This is a topical problem, and we will address it all together.

Vladimir Kizerov: Thank you.

Alexander Izuvakin: I would like to raise another question topical nationwide. I mean electricity price hikes. I think that it’s a painful issue for many residents of the Sverdlovsk Region, as well as of the rest of Russia.

Many people address our society asking us to see just why electricity tariffs are growing. As we look into the matter, we see that, first, managing companies often send in bills twice for the same amount of energy, or use totally unjustified tariffs. When we ask to explain why they charge so much, they don’t have anything to substantiate their point. There is a third option, when a managing company says that it’s the energy producers who are to blame for the overcharges.

As far as I remember, you ordered the United Russia party not to allow energy prices to grow by more than 15% this year.

Vladimir Putin: That’s right.

Alexander Izuvakin: Do you think United Russia has changed the situation through monitoring? And another question – will any measures be taken against managing companies that unblushingly violate citizens’ rights? Thank you.

Vladimir Putin: It is really a topical issue, one of the critical issues of our economy. We have not elaborated to this day effective market instruments. We liberalised the energy market proceeding from the main target, to attract potential investors to electricity production and eventually make them power grid stockholders.

This fundamental problem of promoting investment into the construction of new thermal, hydro, nuclear and other power plants cannot be solved overnight, but we are addressing it. We have really attracted billions of dollars. When we were attracting them, we said to investors that we would guarantee tariffs enabling them to reimburse their investments and make a profit. No one would be dealing with the industry otherwise. That is the first factor of tariff growth.

It is evident that we must develop energy production and grids. When wires were torn in last winter’s disastrous weather, we at once began estimating the underfunding of electric production and grids, and we found that the underfunding made trillions of roubles. Trillions! It would be a bad blunder to postpone the development of these industries now.

However, work in this sphere demands precision and accuracy, without increasing the load on consumers. What have we done to ease the transition to the pure market price and tariff formation?

First, we have made a number of government decisions to reduce expenditures on the services of the Federal Grid Company, to use redundant capacities, and so on. Comprehensive decisions were made to reduce tariffs to a reasonable level, which we appointed at 15%, and no more, as the national average. There are naturally greater rises in places where electric production and grids were in neglect, but we will not tolerate 70%, 50% and even 40% increases. We would put up with a small difference – say, 17-18%.

Did we hit the target? We did in many instances, but not everywhere. Tariffs have been reduced to 15% and below in 40 regions – forty! Another 15 will do it quite soon.

There is, however, a problem with energy distributors. It requires more resolute attitudes on behalf of antimonopoly agencies, and in some instances by law enforcement bodies, including the prosecutor’s office. We will continue the job as actively as we can.

Norms and regulations also leave ample room for improvement. I fully agree with the way the question is posed. The Economic Development and Energy Ministries have received relevant assignments. We will certainly work together with the business community to meet the interests of electricity consumers and not only producers. Incidentally, Mr Shokhin, the leader of our principle big business league, is here in this audience.

Speak out please.

N. Kunishvili: What will you do the first thing after March 11, 2012?

Vladimir Putin: You mean my first step?

N. Kunishvili: Yes.

Vladimir Putin: I'll start by washing my face.

N. Kunishvili: I mean your political step.

Vladimir Putin: I mean it both in the hygienic and the political sense. After all the campaigns that we will need to get through, we will have to thoroughly clean house, and I'm convinced that, unfortunately, that’s the way it is. But it is an inevitable process. As you know, Churchill said that democracy is the worst form of government except all the others that have been tried.

Speak out please.

Remark: Mr Prime Minister, colleagues, I come from Slovakia. We have been working for more than three years here in the Urals, and have prepared several projects. We are especially interested in nuclear medicine and radio pharmaceutics. I have heard much about how businesses are working in the Russian market. I want to say that they work like this only here, so I would like to put forward several proposals that might come from my group.

On Sunday, we met in Prague with the dean of our university pharmacy department. That was why we also met with the medical academy rector yesterday. We are ready to teach 40-50 Russian students per term in Slovakia, and we promise that we will return all of them after graduation.

We have read your programme on nuclear medicine development, and we highly appreciate it especially due to your interest in physical treatment. Importantly, the programme promises not only medical treatment, but also economic benefits to the country.

Here is an example. A chemotherapy course costs about 100,000 euros. So we are speaking about those centres, especially where early diagnostics of cancer and other dangerous diseases are concerned.

So I am asking a question. The answer is clear, I think. We might use this technology not only for diagnostics because we have tested some medicines to great success. Compare 100,000 euros and 1,500 euros for a diagnosis, and you will see that this is economical enough to check the effect of all of those medicines.

So we would like to offer you guidelines for diagnostics and therapy. Western Europe has such guidelines, and they work. They were elaborated here, so doctors would follow certain rules after making a diagnosis, and drug companies would not benefit from the absence of rules and selling useless medicine. We want it all really to pay.

We have also heard about problems regarding, let's say, the relationships between pharmaceutical companies and doctors.

We are currently developing a new law regulating the sale of medications that will specify the terms on which companies will be able to work in the market and communicate with doctors.

Therefore, we are ready to involve specialists from our company, and not only from Slovakia. We also collaborate with our colleagues in Western Europe. If the issue is of interest to you, we are ready to work on it.

And finally, as the dean of our university pharmacy department said, we are expecting the signing of a memorandum to set up a research centre. I should mention there are three parties involved, the world’s largest industrial company, the Urals and Slovakia. I'm sure that this centre in Yekaterinburg will start working very soon and provide new developments.

Vladimir Putin: Let’s greet our Slovaks from the Urals.

Of course, we will collaborate with our colleagues from Europe and all over the world within the scope of our training and higher education teaching programmes. We also have special student exchange programmes that we will support and develop in every possible way.

The number of our students getting their qualifications abroad as well as the number of foreign students studying at our universities is constantly growing. We can offer excellent and competitive courses.

Regretfully, I should add that our professionals are successfully being recruited in the European labour market, which means that their qualifications meet international demands. This speaks well about our education system but it is not a good sign that the best of our workforce often find their place abroad. This situation must change and, I should add, it must not happen by force, but by creating better working conditions at Russian enterprises.

Another issue you mentioned concerns cancer treatment. It is one of the most important issues for our country and for all humankind. Cancer occupies the number one position in the scale of disease rates. Cardiovascular diseases are at the top of the list for mortality rates, while cancer is most frequent in terms of prevalence.

We are expanding the number of oncology clinics and cancer detection centres in tens of Russian regions. If I am not mistaken, new oncology units have been opened in over 40 regions. The number of professionals in this area is growing.

You have probably heard that a new children’s hematology-oncology centre was opened recently in Moscow, which is the largest not only in Russia and Europe, but the largest and most advanced clinic of this kind in the world. This is not an empty claim, it is actually the case, in terms of capacity, technology and attracting specialists. Indeed, there is an international team of world-class experts who are moving to work in Moscow.

I am proud of our professionals who are achieving unique results. Some 20 or 25 years ago, only 7% of patients suffering from this serious disease survived. Today it is 80%. Now that this centre has been opened, 95-97% of patients will survive and live a normal life.

However, we cannot resolve all the problems by opening this centre and a network of oncology clinics. Your direction and involvement is very important. I very much hope that… Yes, and by the way, we are going to develop nuclear medicine as well. We will be developing it according to existing plans.

Your collaboration with Russian colleagues is essential. We will definitely support it. Of course, this support must be provided on a fair and equal basis and in accordance with Russian laws.

You know, we will surely return to the questions that are not directly related to the project presentation. I suggest we stick to the proposed plan and discuss other issues later. All right?

Thank you.

I suggest we pass the stage to Mikhail Karisalov, Sibur Vice President and Head of the Hydrocarbon Feedstock Business Unit. The project he is presenting is Tobolsk, History and Present Time. Please.

Mikhail Karisalov: Before I start the presentation, I would like to share my relationship with the Tobolsk lands through this video. Please.

(Video clip)

Mr Putin, I moved to Tobolsk from the city that is historically said to be the “window to Europe,” and what I saw in Tobolsk was the “the ancient gate” to the real Siberia, a place where Siberia takes its roots, the way I see it. It is true that Tobolsk is a place where centuries of history are intertwined with a vibrant modern life.

Let me show you how the city has developed since 2003 up until now.

You saw what the city looked like in 2003. Trust me, it has changed a lot. Renovation of the Tobolsk Kremlin is almost complete. We have hosted national and international tourism conferences. Europe’s largest petrochemical complex is under construction.

Sibur is actively engaged in the development of the city and the region, and we are proud of this. Let me repeat that Tobolsk Polymer is the largest investment complex and petrochemical project in Russia and Europe. It is among the world’s top three polymer producers. This means 500,000 tonnes of polypropylene, 65 billion roubles of capital investment in modern technology and 20 billion roubles in taxes in the first ten years. It provides thousands of jobs. It is an opportunity for Russia to be totally independent from polypropylene imports.

What is polypropylene for us? It is plastic pipes, films, car components. And it will all be fully functioning within 18 months.

Mr Putin, I remember you recommended that I speed up construction eleven months ago when it had just started. You were attending the Russian National Meeting on Petrochemistry and I was reporting to you in a video conference format. It was already dark and snowing. You saw that construction was in progress. Let me repeat that in 18 months it will be complete.

With regard to how the whole Tobolsk industrial cluster is developing…

Vladimir Putin: What is the investment fund again?

Mikhail Karisalov: 65 billion roubles.

By 2014, we are going to double our gas rectification capacity from 3.5 million tonnes to over 6 million tonnes of processed liquefied hydrocarbons. By 2015, we will finish the construction of a modern high-tech pipeline to deliver supplies from North-Western Siberia to Tobolsk.

By 2016-2017, we will construct a state-of-the-art pyrolysis line, and the project will be in strict accordance with the petrochemical clusters plan that you and the Russian government spoke about. Of course, we cannot leave it without a resource supply, which is also part of our agenda and will be realised mostly through the advanced processing of associated petroleum gas.

In past few years Sibur has increased its associated petroleum gas processing capacity by 25%, reaching 18 billion cubic metres per year. We are modernising our capacities and are making serious efforts to achieve a deeper extraction of liquids from the associated petroleum gas, which is exactly what you were talking about today. It is the most valuable petrochemical material that we can use. Within the last five years we have gone very far in propane and butane extraction, with a rise from 78% to 89-90% and even 99% at a number of gas processing plants, for instance, at the Bukhtinsky plant in Yamal, the Yamalo-Nenets Autonomous Area. We are trying to achieve the same results with the other gas processing plants. This is a global level of gas processing.

These projects are based, as you have confirmed today, on the 2007 government resolution that was a turning point in the issue of associated petroleum gas and, obviously, was beneficial for the Russian petrochemical industry. It was indeed a turning point for the industry.

Getting back to the project, I should mention that after its launch, Tobolsk Polymer will require nearly 500 highly proficient experts with the most advanced knowledge and skills.

The first graduates of the Tobolsk Industrial Institute and the Tyumen Oil and Gas University will get jobs at the plant. We are trying to look ahead and raise professionals starting from schools and universities. We enroll students in specialised Chemistry courses in Tobolsk schools. We agreed that the top graduates would be sponsored for their studies at the country’s leading universities. Our partners are the Mendeleev Moscow Chemistry and Technology Institute and the Tyumen Oil and Gas University. We are currently forming specialised departments to teach high-molecular-weight synthesis.

Vladimir Putin: How many people will be employed at the plant?

Mikhail Karisalov: Mr Putin, the complex itself is highly automated so we’ll need 700 people at the most. But there are associated industries such as large-scale production and polypropylene processing. As we have agreed with the authorities of the Tyumen Region and Tobolsk, there will be up to 3,000 jobs in advanced processing – that is, polypropylene granulation, disposable tableware, preforms, utility pipes. There should be up to 3,000 jobs in the next couple of years after the project is launched, which means in the fourth quarter of 2012. We believe everything will go according to the schedule.

Vladimir Putin: In a year and a half then?

Mikhail Karisalov: Yes, 18 months.

Vladimir Putin: What is the average salary in the company?

Mikhail Karisalov: Up to 30,000 roubles. In our region, in Western Siberia, it is a bit higher.

Vladimir Putin: How much?

Mikhail Karisalov: Manual workers earn around 36,000 roubles and specialists earn between 60,000 and 80,000 roubles in Western Siberia.

Vladimir Putin: Between 60,000 and 80,000 roubles. And blue-collar workers?

Mikhail Karisalov: Thirty six thousand roubles in Western Siberia. Sibur employs 7,000 people in Western Siberia for gas processing, gas supply and petroleum chemistry in Tobolsk.

Of course, nothing has been easy. Outdated construction standards are still a problem. There are issues related to (I don’t know how to say this correctly) downgraded construction and especially industrial construction.

We have had some disagreements among the teaching staff in the regions. It was difficult to bring everything together. But we can count on the support of the ministries. There is actually daily support from the Tyumen regional authorities that we can get as soon as we need it. We try to work together towards our social objects. And we rely on reason and common sense in our activities.

Here is an example from last year. The company's president allocated certain funds and I contacted the Tyumen regional government. The governor took time to think and see what was needed. Within two weeks he and the mayor identified the projects that required funding. They were an art school, a kindergarten, low-cost housing construction and a theatre reconstruction. These are the projects we are involved in.

Perhaps you know that the project is funded by Sibur as well as by Vnesheconombank, the state institute of development. In May, 2010, as head of the Supervisory Council, you approved the funding scheme. Mr Dmitriyev visited us recently to see with his own eyes where his money went. Honestly, everything is going well.

Mr Putin, in the presence of your subordinates, I would like to ask you to help us implement our plans to develop Tobolsk and the Tyumen Region, and to make great strides to depart from regional dependence on raw materials production. We believe establishing a special economic zone could be one of the ways.

It seems to me that your instructions could be a powerful incentive for the development of petroleum chemistry and advanced processing.

Thank you.

Vladimir Putin: Mr Karisalov, you are saying that we helped with the funding.

How much did Vnesheconombank allocate?

Mikhail Karisalov: A sum equivalent to 1.4 billion dollars.

Vladimir Putin: Vnesheconombank allocated nearly $1.5 billion for this project, can you imagine that?

Mikhail Karisalov: It is for thirteen years, part of the money for nine years.

Vladimir Putin: What is the interest rate?

Mikhail Karisalov: It is very small, Mr Putin, very small.

Vladimir Putin: Now you are saying that we should establish a special economic zone, which means even more benefits.

Mikhail Karisalov: Benefits for the sake of further development.

Vladimir Putin: I see.

There is some sense in that.  We should think about that.

What special circumstances do you think would be beneficial? What would you like to get?

Mikhail Karisalov: If we're talking about pyrolysis, it is clear that not today, not even in ten years will there be pyrolysis ovens for the fully-equipped production of various polyethylenes in Russia. Therefore, what we need to do, and what we are doing today, is to develop the industry. But this could mean falling behind other countries.

Vladimir Putin: So what you need is tariff-free imported equipment?

Mikhail Karisalov: Exactly.

There are resolutions and they are in effect. However, the timeframe is still unclear. If we can create a special economic zone we can get some sort of guarantee on this issue.

Another benefit we ask for is a partial release from the profit tax and land property tax.

Vladimir Putin: Profit tax. This is an issue for the region…

Mikhail Karisalov: Yes. And the Tyumen regional government supports us.

Vladimir Putin: You should remember we have cut the profit tax from 24 to 20%.

Is there anybody here from the Tyumen regional officials?

Mikhail Karisalov: The governor is here.

Vladimir Putin: Mr Yakushev?

Vladimir Yakushev: We have already exempted the project from every tax that we could under federal laws and within the power we hold in the region.

Mikhail Karisalov: It was done very quickly, all necessary local regulations were adopted within four months.

Vladimir Yakushev: Everything has been legally formalised. Now we are preparing for next year’s budgeting. Obviously, we will take this into account. This project can rely on our full support.

Vladimir Putin: My namesake is a forward-thinking governor. Thank you very much.

I am asking because I want to understand what else is needed.

Valery Yakushev: Mr Putin, the good will of my namesake certainly means a lot. Perhaps, it will even level the playing field and the guarantees that the government provides to tenants of the special economic zone. However, going from good will to law…

Vladimir Putin: But they are including these decisions in the budget. Please understand that I am not doing this to make things hard for you. I am really trying to understand what you want on top of what you already have. You have been accorded special treatment at the regional level, and we have provided financing.

Mikhail Karisalov: Yes.

Vladimir Putin: We can talk about importing the equipment that is not manufactured in Russia, based on my instructions which I am about to issue right now to the Ministry of Industry and the Ministry of Economic Development. We will work on this. But this is not enough. I am just trying to understand what else you would like to see us do for you and what the free economic zone can do for you. I am not opposing it. I am simply trying to understand.

Mikhail Karisalov: Perhaps, a special economic zone is a time frame for everything you have mentioned that is set forth in the guarantees provided by the state.

Vladimir Putin: In other words, you want things that are already in progress and things that could yet be added from what I just mentioned to be put in writing?

Mikhail Karisalov: Yes.

Vladimir Putin: So that they don’t simply disappear? Let’s look into that.

Mikhail Karisalov: Thank you, Mr Putin.

I just can’t help saying it… I have lived in Tobolsk for several years now. I’m concerned about the instruction you issued in 2003 about developing the tourism industry in Tobolsk. We do not have an airport. Could you please look into that? You have mentioned many cities today and then concluded with “and other cities”. May we hope that Tobolsk is one of these “other cities”?

Vladimir Putin: Tobolsk is really a very beautiful city. I have been there, visited the spectacularly beautiful monastery standing on the high river bank. The view is breathtaking. I strongly recommend seeing it for those who haven’t already. You will enjoy it; it’s a beautiful place. The manufacturing industry is developing. It is a chemical cluster, and production is as high-tech as it gets. The environment is very well taken care of. I am confident that the environmental balance has never been disrupted there. Please forgive me for saying it, but the companies shouldn’t emit a stink, either. The city industries really don’t damage the environment. Of course, these things should be monitored. That is exactly why I believe that we should support your proposal regarding the use of the latest available equipment. We will absolutely work on this. I wish you success. Overall, the company is making good progress and the project is very good. One can only be pleased with it. Thank you.

Any questions or comments on this issue, please?

Please go ahead.

Marina Bakulina: Good afternoon, Mr Putin. I have a question. There are businesses that can hardly be referred to as businesses in the proper sense of the word because of their small profit margins. Regrettably, they do not appeal to private investors for exactly this reason, and they cannot receive government support without financing or other arrangements. However, they define our country’s social policy. They are related to education, healthcare, culture and, certainly, they need government support.

What do you think about adopting a law on social entrepreneurship?

Vladimir Putin: We have already spoken about the importance of this. We prioritised this area when we discussed tax issues, all the more since it relates to social funds. We decided to schedule a favourable tax status to this area and there is no way you can be unaware of this.

That’s the least we can do. However, I do believe that the direct support, which should come from lawmakers, the State Duma and the Russian government, is not enough. Therefore, today I have for the first time announced here that the federal budget will provide direct financial support to this sphere.

As I mentioned earlier, we will offer 9 billion roubles to our colleagues in 2012, including 1 billion in direct financing and 8 billion in the form of subsidised loans. However, we also count on the regions, and Tyumen is a region with high…

Marina Bakulina: It’s a progressive region.

Vladimir Putin: This goes without saying, it is progressive.

However, it is also a region that enjoys ample support from the budget, therefore, it is in a position to bolster this essential area, namely, economic activity. It is still a business, and if you organise the work properly and use regional government support, then it will become profitable. For example, when you open a private kindergarten, it is based on the market…

Marina Bakulina: It should be able to cover its costs.

Vladimir Putin: There must be a balance between supply and demand, capabilities, and the solvent demand on behalf of those who use these services. Of course, this work should be supported. Most importantly, you have all you need in your region to receive this support. We, on the federal level, will also help. I have mentioned the specific support measures.

Marina Bakulina: Thank you.

Vladimir Putin: Speaking about private kindergartens. I believe this is very important. I would like to draw the attention of my colleagues from the regions to this issue. We will develop state, regional and municipal preschool institutions. However, it would be good if we could come up with some tools to support private initiatives in this area. First, their services are not in any way inferior to the ones provided by state kindergartens, and can even improve on them, and second, and this is very important, private kindergartens will be really helpful in building the requisite number of preschool facilities. Please go ahead.

Yekaterina Belotserkovskaya: Good afternoon, Mr Putin and guests.

I am an elementary school teacher. We have 157 children in our school. I am also a fifth-generation teacher.

So far, I have no plans to leave the school. I realise that education is evolving in Russia. Today’s children want us to discuss issues that are beyond what is age-appropriate for them. I also have an unrelated question for you. Friends of mine have a son who is a drug addict. He stole everything from the home and ended up in prison. The worst part is that his mother is really happy that he ended up in prison.

I believe we are now being watched by all of Russia, including six million mums who are waiting for an answer from you. Here is my question: what do you think about making a law about compulsory treatment for people afflicted by this addiction.

Thank you.

Vladimir Putin: This is very serious problem for our country. You just mentioned your friends. One of my good friends’ sons succumbed to narcotics. He was a handsome and smart young man. We all understand the nature of this problem. Sometimes, you can even get the impression that some sort of a drug invasion is underway.

Unfortunately, after collapse of the Soviet Union, our borders, particularly the southern ones, became totally unprotected. For example, we do not share a border with Afghanistan. Other states are supposed to protect their borders. However, they find it difficult to do so due to financial constraints and the on-going restructuring of permanent border guard units. In its turn, Russia doesn’t have borders with these countries. That’s how we ended up with gaps in the border. It took us several years and tens of billions of roubles to properly fit out the border in the North Caucasus. We had to do it, because the terrorist threat there was huge, and it’s an important issue. Russia has the world’s longest borders, and we will need even more time and financial resources in order to build proper border controls along the entire length, which goes from Kazakhstan and further east and is thousands of kilometres long.

We are negotiating the outer border strengthening issues with our Customs Union, single economic space partners. Our partners, including Kazakhstan, should be given credit for their understanding of these common issues, all the more so since they are confronted with them, too.

We should improve regulations and step up activities by law enforcement agencies in our country, too. At some point in time, we decided to eliminate the tax police and establish a drug enforcement agency instead. In fact, I spearheaded the idea and was involved in this work. We have re-oriented the entire system with its 40,000 employees to tackle drug problems. We will continue to expand this agency. By the way, we have seen the results of this work already.

However, we are not going to stop here. This is a comprehensive problem and it needs all-encompassing solutions, including the promotion of a healthy lifestyle in addition to taking anti-drug measures. I think today Yekaterinburg is having a big concert dedicated to this subject. Next come healthcare services, including the establishment of rehab clinics; public organisations and mass media and, as I said before, border guard services. We should mobilise all our resources to fight this scourge.

Of course, we also need to improve regulations, but make sure we do not violate human rights in doing so. We have already adopted, in the first reading, amendments to existing legislation with regard to schools. They are deciding on the appropriateness of conducting anonymous polls at schools and testing children for drug use. I believe this is the right thing to do. Let me reiterate, we should do this without violating basic human rights, but we need to protect people from this millstone in agreement with parents and their associations. We should do this work at schools, because this is where dealers come to do their business.

Speaking about compulsory treatment, we can discuss it. But you know, compulsory treatment of alcoholics and drug addicts does not really make much sense. You first need to convince them to change their mindset, bring out their inner motivation for overcoming this dependency. Importantly, no one should feel left out. It’s important for an addicted person to understand that once he or she becomes addicted, they are not left alone with the affliction. They should know that they will get help from their loved ones and friends, parents and relatives, schools or colleagues at work and the government.

All of that taken together will lead us to success.

I suggest that we move on. We need to finish the presentation part, and then we will talk some more.

Please go ahead.

Remark: Mr Putin, I will be brief. Whenever they speak about oil and gas, for some reason the issue is always about major projects and big investors.

Vladimir Putin: I was referring to the small ones in my speech.

Remark: Yes. I want to thank you for that, because I was excited when you assigned objectives to small and medium-sized oil companies in the Urals. These goals can be applied anywhere, to each oil and gas-bearing province.

Mr Putin, this sector has been underutilised. We produce as little as 4% of Russia’s output. The output has dropped by half in our sector over the past 10 years. In the United States, small independent companies account for 40% of the total production volume.

Big water for big ships, I mean large projects for major operators. Let the small companies deal with smaller and more challenging fields.

I have spent 16 years of my life dealing with this subject, and I have talked to governments at all levels. This is my first time speaking with you; therefore I’ll speak from my heart. The government doesn’t seem to understand the specifics involved in our business. We are a small operation in a heavily monopolised industry. In April, companies of all forms of ownership submitted to the government a draft law on small fields. The Federation Council suggested a great amendment.

Come April. The first reading is passed. Come July. Nothing.

In 2009, in Khanty-Mansiisk, United Russia put forward an initiative regarding a special law on small oil companies. They discussed the idea in Khanty-Mansiisk and decided to introduce provisions covering small oil companies in the law on oil production. Small producers know nothing about it. Nothing happens.

I have a huge favour to ask of you. The issue is about some serious wealth in our country. It’s not an “oil needle” or something, it’s our competitive edge. Please take a look at this specific type of small business. Perhaps, this will get us off to a good start today.

Thank you.

Vladimir Putin: You have heard my position.

Everybody knows that this issue gives rise to complicated debates. The oil and gas industry is quite profitable and does not need special tax incentives, meaning that tax breaks are already available in certain remote areas in Eastern Siberia.

I spoke about the Yamal Peninsula. The export customs duty has been cancelled there altogether; it’s zero now. However, the fields you are talking about and the ones I mentioned here are located in areas with good infrastructural engineering facilities.

Look at where it led us. This is happening at a time when we need to secure a balanced budget immediately. I will be candid, and I am not making things up. Imagine you are sitting at a government session and listening to the debates. Now that the budget is not balanced (but we will definitely balance it) the fiscal agencies, primarily the Finance Ministry, object to tax cuts or the introduction of any subsidised loans for the oil businesses. Moreover, the oil and gas sector will have to bear a heavier load.

For example, we decided to increase the tax burden on gas production. Gazprom will be hit by such decisions first. The budget will receive an additional 150 billion roubles that will be taken from the industry.

You said: “Big water for big ships.” Unfortunately, certain officials believe that it should read “big torpedoes for big ships” and “small torpedoes for small ships”. It’s hard to dispute this, and it’s hard to oppose it also because we need to balance the budget and address social challenges. We need to raise salaries of teachers, servicemen, interior officers; we need to fund the pension provision system. Unfortunately, so far we have not seen much success with funding the pension fund.

When you start crunching numbers, you can’t identify many real sources that can be used to fill budget gaps. You just can’t bring yourself to cut taxes on oil production, even for smaller companies. However, it was not accidental when I said that I shared your stance. Let us do it as follows: I will instruct the Ministry of Economic Development, the Ministry of Energy and the Ministry of Finance to give another look at the profit margins at small fields. Based on the facts, we will then be able to develop at least a medium-term outlook for such enterprises. If we cannot do so right away, then let them tell us when this will become feasible. Considering such realities, it is important to establish a midterm plan for businesses such as this. If it is not possible to achieve now, it must be demonstrated once it becomes possible. You will then be able to plan your work, your budget gains and spending, mid- and long-term. We will come back to this topic. This was not mentioned accidently.

Irina Shumanskaya: Good evening, Mr Putin. One of my objectives as a teacher is to educate students about environmental issues. Approximately seven years ago, missile silos in our district were being destroyed.  After the explosions, residents started to experience serious health problems. In our investigation and research of valeological issues, we noted a 100% increase in cancer cases. Cases of leukaemia were even observed in animals and pets, especially in cows. The problems of our regions are also close to my heart. I know that Chelyabinsk is one of the most polluted cities in the country. For the most part, this is due to heavy industries in the region. There are also radioactive depositories, for example, the Mayak plant. Local residents cannot breathe because of the emissions. Mr Putin, do your party and the government plan to solve our regions’ environmental problems?

Vladimir Putin: Yes. Presently, we have two functioning government programs. But they will expire in 2015. We plan to extend these programs. These programs have a number of objectives. Their first objective is to medically examine the people who live in these districts and regions. The examination must include not only adults, but also their children and grandchildren. Second, we must continue to develop our healthcare system further. Specialised institutions exist in those regions and you may know about them, but we will develop them further and continue to support them.  Funds to meet these objectives will be allocated by various agencies. In your region, in Chelyabinsk, 13 billion roubles will be allocated shortly. To my knowledge and I will check once again, projects are being completed and completed successfully. The water table at a nearby body of water has been lowered by 90%. In addition, the walls of the Techensk hydropower cascade have been reinforced. Other projects to reanimate the environment are also underway. 

I must add that the emissions released during the accident in 1957 were significantly lower than those at Fukushima. We have not increased the maximum permissible concentrations. In our work, we are adhering to our standards, which are generally lower that their global analogues. We will continue to meet our objectives and constantly monitor the situation. Today, despite the issues you raised, which still remain as a result of the accident, the situation is in accordance with Russia’s legal regulations. I would like to repeat that our levels are lower than in many other countries in the world. Not to mention Japan, which continues increasing its level of maximum permissible concentrations. Nonetheless, problems exist and we will be solving them with the help of federal programs. Once we get close to the expiration date, we will definitely extend these projects.

I propose we continue to listen to the remaining presentations since our colleagues have prepared to speak. We will continue our opinion exchange in an open forum shortly thereafter.

I would like to invite Andrey Nepomnyashchiy, the head of the MONOLIT company, to speak. The project is titled, “Associated Gas Processing.”

Andrey Nepomnyashchiy: Good afternoon! Three years ago, our company participated in the competition for the best environmental project of the year organised by the Natural Resources Ministry. We secured a nomination in a very interesting category, “Environmentally Efficient Economy.” How could we marry the concepts of ecology and economics as part of associated gas processing projects? We have filmed our efforts as we attempted to address pressing issues through our projects (a video is shown).  

This video is two minutes long. For our company, however, these two minutes represent ten years of project development. At this time, we have progressed from tank container transportation of low carbon gases to opening two associated gas processing plants.

I would like to note that the same amount of processing plants was built in Russia in the last 20 years. This is our past and our present. But what is our future? How can we put out all of the fires? Relying on the experience gained in the process of constructing the plants, I would like to say that our regulatory approach must change. The whole concept must be altered, not just one or two select documents issued by a ministry or an agency.

What is the essence of the problem? Our regulatory and legal system primarily deals with the consequences of such accidents. The emphasis, however, should be placed mainly on accident prevention. This approach is commonly used in the world and in Canada in particular. Canada has a similar climate and conditions for oil production. What are the results? Let’s look at an example. Canadian companies today build gas processing plants all over the world. These plants are built in China, in the Amazon, or Northern Canada. The construction of a plant is completed within a year, regardless of its capacity. In our country, we obtain a permit to build within a year. In reality, such projects are completed within 3-4 years.

To seek modern approaches, we do not need to look abroad. We employ them here. In particular, we apply these approaches in our container manufacturing projects.

To better understand the effects of such an outdated approach, let us look at a different example. Let us imagine that our ship-building industry continues to operate reactively rather than preventively. Then, a team that services an oil tanker should accompany it in a separate ship, 500 metres or so away. This ship has an engine, and the team can be left ashore altogether. I think that we have seen this already. It is similar to Repin’s Volga Bargehaulers. So the ideal scenario is a team waiting ashore in case of an accident. But we live in the 21^st century and this approach has become outdated. Perhaps, this example will make you smile, but this is the reality we have faced.  

We purchased leading Canadian gas processing block-modular equipment. We transported it to Russia. Today, the project is almost completed. Its size is 22 hectares, 10 times the size it would be in Canada. This means additional investments, decreased economic effectiveness. This means that we will not be able to address a range of other projects.

Vladimir Putin: What is the reason? Existing regulations?

Andrey Nepomnyashchiy: Regulations, standards, but the objective is much broader and we can speak about it at great length. There is a complex of problems. We believe that in order to integrate new innovative approaches to gas processing, modern standards and regulations are necessary. A more modern approach to the construction of gas processing facilities, to petroleum chemistry and to oil processing is needed.    

I believe that if this problem is solved, we can build a greater number of gas processing facilities and address our 95% associated gas utilisation challenge at a faster pace. But this is only part of the problem. I am certain that we will be able to deal with it. And once it is solved, another problem will arise. We will see the production of liquefied carbon gas – the main product of  associated gas processing -- increase by 100% from 10 million to 20 million in 2020. At the same time, the issue of its disposal must be addressed.    

One approach that is very effective is its use in petrochemistry. Another approach is the use of liquefied carbon gas as automotive fuel. Two weeks ago, I attended the First European Automotive Fuel Conference. I must say that a rather surprising message was conveyed at this conference -- the Russians are coming. It was not about export volumes, but about Russia’s leading positions in the consumption of propane butane as autogas, first in Europe and second in the world. But it is too early for us to rest assured. Our relative share indicators on the global market can be improved. The steps taken by the government are very effective.

I can state that a veto to sell gasoline 80 resulted in long queues at automobile service centres. In other words, today the drivers are for gas, but not for gasoline 92. This is reality and these steps are also real.

Vladimir Putin: Does that please you?

Andrey Nepomnyashchiy: It pleases us, yes. I believe everyone who cares about the environment is pleased.

Vladimir Putin: Indeed, autogas is the most environmentally friendly fuel.

Andrey Nepomnyashchiy: To make this process more dynamic, I believe that it is necessary to pass an autogas law. This law, in my opinion, will establish the rules of the game. Second, it will shatter consumer stereotypes about gasoline, diesel and some other, exotic alternative fuel. This fuel is as good as gasoline or diesel. It is regular fuel.

The rational use of associated gas and automotive fuels is a part of the same environmental problem. In this rare occasion, by solving one part of the problem, both parts can be solved. Thank you.

Vladimir Putin: This problem is very important and very pressing for the country, very pressing. We have sufficient recourses and we can improve our competitiveness by using autogas. You are absolutely correct. The legal framework must be changed. Amendments have already been prepared. Are you familiar with them?

Andrey Nepomnyashchiy: Yes, I am.

Vladimir Putin: Do you approve?

Andrey Nepomnyashiy: Some things could still be improved upon, to be honest.

Vladimir Putin: Make your suggestions. Most of the legwork was done by Gazprom, a company interested in the use of LPG fuel. But our country in general is interested, when we consider the necessity to appropriately utilise associated gas. If in your opinion some things must be added, let us do that. The same applies to regulations. These amendments have also been prepared. The necessary documents in the State Duma have passed the first reading. This process must be expedited. We will need to examine and analyse these amendments.

Your work is important. I would like to wish you new accomplishments. Who are the shareholders in your company?

Andrey Nepomnyashchiy: Private companies, four shareholders.

Vladimir Putin: And did you establish contacts with oil companies working in the regions?

Andrey Nepomnyashchiy: Our company has been on the oil trading market for 20 years. As a result, we already have contacts. And we are putting ideas to work in the real context.

Vladimir Putin: Great! Very good!

I really would like to wish you the utmost success. And once more, I would like to encourage you to examine the situation and determine all that can be done to assure the effectiveness of the regulations and the legal framework. In addition, I would like to speak here to the heads of the regions. To develop gas pumping station networks, we need the support of the heads of the regions and of the legislative bodies to provide funds and land plots to build gas stations on a priority basis.    

A.Tvorzhnitsyna: Mr Putin, we would like to first thank you for the support you have provided to our movement, to all Russia’s student brigades. As a result, Federal Law No. 428 was passed, which establishes the legal status of student brigades and guarantees tax breaks for employers hiring students. We discussed this law on Feb. 26, at a student organisation meeting in Sochi. We have put forth proposals to employ the requirements of Federal Law No. 98 on youth organisations (registered on the regional and federal levels) to prevent corruption. You supported this proposal.

In addition, the ministries that supervise student brigades, i.e. the Sport, Tourism and Youth Policy and Education ministries, have written a joint letter to the Healthcare and Social Development Ministry. Unfortunately, we have not received any clarifications.  

The semester has begun. The All-Russian Student Construction Expo opened today. In light of this, we would like to ask for your support for the student brigades. We would like to request that you help us obtain clarifications about the application of Federal Law No. 98.  

Vladimir Putin: Ms Tatiana Golikova came here today to provide such clarifications. Ms Golikova, when will these clarifications be available?

Tatiana Golikova: I would like to clarify that, yes, there were some legal problems. It is a very delicate subject. But I heard the request today and we would like to expedite the process upon my return.

Vladimir Putin: When will it be competed?

Tatiana Golikova: May we have a one-week extension, Mr Putin?

Vladimir Putin: Yes. Will we grant a week? Yes.

Tatiana Golikova: Thank you.

Vladimir Yakushev: Good afternoon, Mr Putin and esteemed meeting participants. Many times today we talked about chemistry. Perhaps, it is time to speak about railway carts and state defence orders. Esteemed Mr Putin! I worked at the open-hearth furnace at the Ural Railway Cart Factory for 32 years.

Vladimir Putin: Excellent!

Vladimir Yakushev: Two years ago, our country faced a crisis. It affected our enterprise as well. But you came on a working visit, well done!

Vladimir Putin: Thank you.

Vladimir Yakushev: After your visit to our company, which at that time was in jeopardy, we began to recover. Thank you for all your assistance and support.

Vladimir Putin: Thank you for such a positive assessment of our modest performance. 

Vladimir Yakushev: Presently, our company has recovered and even repaid some of the federal loan that we have received from the government.

Vladimir Putin: I have already quoted these numbers.

Vladimir Yakushev: 14 billion.  

Vladimir Putin: 14 billion. Ten billion was earmarked as guarantees. The following year, we allocated ten more billion as part of charter capital. An additional billion of charter capital and credit was provided.

Vladimir Yakushev: Yes. Presently, our employees are anxious to hear when will we receive a state defence order? So much has been said about it, but six months later nothing is clear.

Vladimir Putin: I am aware of that.

Vladimir Yakushev: As of May 10, I have retired. My heart aches for the young steelmakers who were once my students, for the department where I worked. My grandson Kostya works there as a steelmaker and my niece Valeria is a controller. My younger brother Kolya also works there. I would like our factory to continue to operate. The young people, however, do not want to come and work at our factory due to a lack of certainty in the factory operations over the next five years. We care about the factory, and I especially. I bemoan the place that once was my second home. I would therefore like to ask you a question. You partly answered it in your speech when you said that Uralvagonzavod has a future. But you said nothing about the state defence order. I think you have something to tell us. And we would like what you said in your speech to be put into practise as quickly as possible so that the workers should know, we have 28,000 employees at this enterprise… And one more thing. You have touched upon the question of the Front. I think that process should be accelerated. The main thing is that there should be workers’ control bodies, consisting of incorruptible people, and there should be a possibility to lawfully inspect the areas and the organisations to which you allocate billions. Today it is no secret, and you are probably well aware, that all kinds of contracts are signed, and then there are all kinds of kickbacks and as a result half of the cash is diverted. Thank you.

Vladimir Putin: Thank you. First I would like sincerely and without irony to thank you for your kind words. Indeed, we found ourselves in a difficult situation during the crisis period. The situation was difficult and alarming, because we faced many uncertain factors connected with world markets, which were beyond our control. If you think in positive terms about what has been accomplished, that is very heartening for me and my colleagues.

Yes, I visited the factory. But I must tell you that the decisions were the result of the combined efforts of the Russian government, the relevant ministries, agencies and people who are not present here, but who also deserve credit for the proposals that have been implemented properly.

Of course, that is not enough. Citizens need more than the oil drums that Transneft orders. Orders should be of a hi-tech character and rolling stock should be ordered (incidentally, there is a high demand for it). I will not waste time by discussing the investment potential of RZhD and other companies. But companies and factories such as Uralvagonzavod will of course be supported.

Many of you have probably heard that the amount allocated to finance the Defence order is unprecedented, 20 trillion roubles through 2020. This is not because we want to militarise our economy. Many systems that are vital for the country’s life, for our defence capabilities and for defending our interests are reaching the end of their service life and we must replace them with new and modern weapons systems.

According to our calculations, it will cost about 20 trillion roubles until 2020, 2021 and perhaps 2022, but to carry out this massive plan and do it properly we cannot make do with old equipment. In order to solve that task we adopted one more programme, the programme of the development of the defence industry, which added another 3 trillion roubles to the bill. This will be the priority task, as equipment comes first and the use of that equipment for manufacture comes afterwards.

As a person who has devoted your whole life to this production facility and the people who work there, I can allay your concerns by saying that Uralvagonzavod and similar enterprises will certainly be needed. A state and a people who do not want to support their own army and their own defence industry end up supporting other armies and other countries’ defence industries. This is a well-known thesis.

Regarding the delay with the defence order, I must admit that you are right and I owe you an apology. This is connected with bureaucratic problems at the Defence Ministry. The Defence Minister is not here, he would probably have given an excuse as to why the corresponding orders have not been placed with your enterprise and other enterprises. I think there are objective reasons for that. But the Defence Ministry and some other agencies must expedite the resolution of these issues. We have brought up these problems repeatedly. They are reviewing the range of goods, and their needs. Of course, this should be done more quickly.

Just yesterday I signed a document ordering that these issues be dealt with more quickly. I signed it late last night before flying to Yekaterinburg.  

Vladimir Yakushev: Popovkin says that our tanks’ fire is inaccurate, that the range is not far enough and that we should buy foreign tanks… This is completely out of the question… Our tanks can fire just fine. We are developing a new model of tank, the T-95, which can hold its own against any foreign analogue. We must provide jobs for our workers and we must use our own products to live and to defend the country. And we should give the courage and heroism of Russian fighters and Russian soldiers their due.

Vladimir Putin: First, I fully agree with you. I am saying this not out of politeness, I know about the realities and the practical use of our weapons, including their use in combat action. It is not a coincidence that you have cited the words of former Deputy Defence Minister Popovkin. I know that such pronouncements grate on defence industry people. I have talked with him about it. He understands your concern and to some extent he has retracted his words. He said them in the heat of an argument with manufacturers. The Defence Ministry is the customer and as the customer it wants to have the very best at the cheapest prices. So there is always a “tug-of-war” between the customer, the consumer and the supplier of specialised equipment and armaments.

There is no question that we must provide our army with the most effective weapons systems. What does that mean? It means that their range of fire should be longer and the fire should be more accurate and more powerful than the analogues of our potential enemy. This is a real challenge. But there is an ongoing discussion between those who use this hardware and those who produce it.

So I repeat, those words were uttered in the heat of a debate. But I fully support you in that our military vehicles have proved to be the best in the world. It is not by chance that we are among the most advanced suppliers of weapons systems to the world market. They wouldn’t be buying them if they were not competitive. And we are ahead of many analogues in the world in terms of quality and value. But of course we will follow what is happening in the world and will borrow the best practices. I agree with you, though, that nobody will ever sell us cutting-edge technologies. If we want to be a country that ensures its own defence capability we must develop our own defence industry. We are determined to do so. As I told you, we have allocated 3 trillion for that purpose.   

K.Formanchuk: Our organisation has not yet joined the Popular Front. We are in the midst of a discussion and the biggest fears within our organisation are that not everybody believes that the Popular Front is a serious organisation, that it is an electoral project and once elections are over there will be no progress in that area.

I would like to ask you: does the Popular Front have a concrete plan concerning what it will do after the elections? Because we also have our own legislative initiatives that would make life easier for the automobile industry. The representatives of our federation would like to be involved in legislative initiatives, because very few laws are passed that make the life of the motor industry workers easier. That is my first question.

And the second question. The United Russia Party has a wonderful project called Safe Roads. Its aim is for no deaths in road accidents. Unfortunately, the project is not being implemented in all the regions. Some regions do nothing, and there are regions that are just going through the motions. I would ask you to pay attention to this project because road safety is our common concern.

And a short question from the internet -- people are interested in what will happen to the programme of old car disposal, whether there be a follow-up. Thank you.

Vladimir Putin: Regarding the Russian Popular Front. I would very much like for it not to be just an election project, as I said in my speech, I would like it to continue working after the elections. We have every reason to believe that this will be the case.

I would like to repeat that the main thrust of these proposals is to enliven internal party discussions, to create an atmosphere of competition within the party to enable people who are not limited by any party instructions and party discipline to use the instruments of United Russia to become actively engaged in political life and to propose solutions to existing problems at the federal, regional and local levels so that people can approach the administrations at the local, regional and federal levels. Moreover, I think that as part of the democratisation of internal party life, it is necessary for the members of the Popular Front to be allowed to promote their candidates in the future, on an alternative basis, to top jobs at the Duma and perhaps also in the regions of the Russian Federation. We should think about this, it is entirely possible. In short, it is a long-term platform for our joint work and for involving “the broad masses of the people,” to use a Soviet-era term, in real practical, administrative and political work.

My second point follows from the previous one and it has to do with the problems of the automobile industry. Of course the Popular Front structures can and must be used to promote your proposals. I recently met with the association of transport workers. They too come up with their own ideas, their proposals and they promote their people.

I very much hope that the people who are interested and who are working on the problems you have just mentioned, will be able to enter power structures, including the State Duma and the executive branch. I think it would be difficult to solve these problems without bringing in the people who have initiated these proposals, these ideas, without the people who have professional knowledge of what is happening in the industry.

Now about roads. I have mentioned, and you know about the creation of road funds, the federal road fund and regional road funds. A colossal sum of 8 trillion will be allocated. It is important to have effective public monitoring of how that money is spent, and certainly your organisations will have an important role to play.   

O.Besedina: I have a question. Let me begin by saying that I was born and grew up east of the Urals, but I have lived for about ten years in the Yamalo-Nenetsky Autonomous Area. Several years ago you, Mr Putin, had a live phone-in programme and my son, who was then ten years old, asked you why families on Yamal live better than families in Kurgan. After all, it is one country. It is true that wonderful opportunities are provided for children on Yamal, there are wonderful social institutions and education is being modernised. And this is happening in remote areas, not only in big cities. Just a couple of weeks ago I was on a business trip in the town of Kurtamysh and I visited my former school, the Kurtamysh secondary school, which gets 15,000 roubles a year for repairs and where the conditions for the development and education of children are very different. I could not hold back my tears after visiting that school. I have a question for you on behalf of the community of commissioners for the rights of children. I would like to hope that a national action plan for the children of Russia will be put in place and that there will be a coherent state policy with regard to children. We, children’s rights commissioners, look to you, Mr Putin, with great warmth and hope.

Vladimir Putin: As for schools, we have discussed them at length. I can only add the following. In a planned economy back in Soviet times, there was a centralised distribution of all the money among the regions. There was a system of financing, and according to standards the heads of planning agencies went to Moscow and to “beat out” resources. In general, they knew how much money was needed for how many people. There was always a shortage of something, but still, “the butter was spread fairly evenly over the pie.” In the early 1990s, and later when the powers were separated, all these functions went to the regional and municipal levels, though the budget revenues and the tax base in the regions and municipalities are different. The immediate result was the gap in the quality of social services which we now see and to which you are referring.

In order to rectify the situation the federal government is doing the following. It takes part of the money from successful, well-off regions into the Federal Budget and then redistributes it in the form of subsidies, including to regions that are in dire financial straits. There was one thing that we failed to do. The administrative division of the country is the legacy of the Soviet era. Under the Constitution there were different constituent entities. They had no formal rights because all the decisions were made by the regional party committees.

I know what happened, for example, at the Leningrad Region party committee. The city of Leningrad and the Leningrad Region had one party committee and all the economic management structures were centralised, and when all this was brought in line with the book, we got financially deficient entities of the Russian Federation, and we also got regions like Yamal, where huge amounts of oil and gas are produced and budget revenues are off the charts. It is partly in order to eliminate these imbalances that decisions have been taken to enlarge certain constituent entities of the Russian Federation in order to help them be economically independent. That does not mean, and I would hate you to construe what I have just said as a call for immediate enlargement. The initiative should come from within these territories. The people of these territories should themselves, in accordance with the current laws and the Constitution, decide whether or not they want to merge, whether it makes sense. That is the second way of tackling the problem.   

And the third point is that without waiting for these structural changes, we should do something to maintain and modernise the existing system. This is why we proposed the modernisation programme for Russian schools, a programme for which we will be allocating 60 billion roubles annually each academic year. I hope that the region, and Kurgan in particular, will make sensible use of this money.

Although even here, as my colleague reported, there are good and revealing examples of when a municipal council, a region and a business pool their efforts to address the problems you mentioned. But I am confident that the financing is adequate under the proposed programmes. We have never allocated these amounts before. The situation is changing.

The same thing happened at the primary healthcare level. We handed over the facilities to the municipalities, and the system began degrading. Incidentally, we still subsidise primary level wages with federal budget payments of 10,000 and 5,000 roubles a month. But that is an inevitable measure and I consider it well justified if this system is to be maintained. Now we are going to modernise the healthcare system in the following way: we will allocate 460 billion roubles for this purpose in the next two years. This is an enormous resource. I hope that people will appreciate our efforts in healthcare and education.

Now let us finish the presentation and listen to Grigory Ledkov, chairman of the Tazovsky agricultural production cooperative in the Yamalo-Nenetsky Autonomous Area. Please go ahead, Mr Ledkov.

Grigory Ledkov:  Good afternoon, Mr Putin, colleagues.

I'd like to describe the life of Yamal reindeer breeders through the example of one enterprise. To start, here is a short video. (Video footage shown). Mr Putin, the English say there are three ways to ruin oneself: races, which is the quickest, women, which is the most pleasant, and farming, which is the most dependable. But we are not English, we live in Yamal, which, translated from Nenets, means the “edge of the land”.

Reindeer breeders have been practicing farming for many centuries. They live as their forefathers lived: they move from place to place with the reindeer, they fish and they never ruin themselves. If the entire financial system collapses tomorrow, the breeder will remain self-supportive, because the reindeer, as it was a thousand years ago, provides him with food, clothing, housing and a means of transport.

Vladimir Putin: Why are you trying to scare us again? Mr Ledkov, colleagues, everything is going to be fine.

Grigory Ledkov: I am chairman of the Tazovsky agricultural production cooperative in the Tazovsky District. The district is one of the most remote and difficult to reach areas on Yamal. My three children are growing up there. My wife and I returned there after our studies in St Petersburg. We love that forbidding, but beautiful and generous land.

Our enterprise started functioning in the 1930s, long before geologists and oil and gas workers came to the place. The Nenets, the indigenous population of the North, have always worked there. Enterprises have had variable periods of development, though. It used to be a millionaire state cooperative which experienced decline together with the country: in the 1990s the question of its liquidation was decided. As you can see from the video, the enterprise is now firmly on its feet. Three years ago, reindeer breeders along with us decided to improve living standards. And in the course of these three years we have increased reindeer numbers and the sale of meat. We managed to raise the monthly pay from 7,000 roubles to 30,000 roubles. As we studied demand and attended a show in Germany, we decided to go further and buy equipment to process reindeer meat so that we could start exporting it and earn better profits for our products.

The economics show that with a thrifty approach and the right processing, one reindeer can yield twice as much revenue. If this is done, it will mean an additional 30,000 roubles.

For example, a neighbouring enterprise on Yamal is planning to supply 500 tonnes of reindeer meat for export to Germany, France and Finland this year. According to the economics, this is one-quarter of today’s market, and demand for this specialty product abroad is growing every year.

Production growth makes the lives of reindeer breeders more stable. Breeders purchase snowmobiles and help their children with their studies financially. The children of breeders spend winters in modern boarding schools (this has been practiced for decades) and summers with their parents on the tundra. Most importantly, this has become a tradition – children enjoy working in their enterprise, and reindeer breeding is mainly run by families. This is good prospect for future development.

Now about housing, which is being built for reindeer breeders and cooperative workers. In Tazovsk, for example, a block of 38 flats is under construction, and this in addition to the houses and mobile huts we are building ourselves. But things are not always smooth and easy, and occasional problems occur.

First. There are gas and oil pipes, and every oil and gas company wants to lay one down. They find it profitable, it’s understandable. What we do not understand is why these companies cannot get together and define one corridor so that one pipe, not three, as is planned for the near future, would cross our pastures.

Our ancestors say: “Leave the nature to your descendants the way you saw it when you were a child.” Company people do not understand this – we are speaking different languages today.

Second. We, the Northerners, have nowhere to take our troubles. There are many state departments, but there is no responsibility. The North covers a large area and is beset with many problems. I believe Goskomsever [the State Committee for the Development of the North] should be re-established with all necessary powers so that both an ordinary person and an official could approach it. As there are many problems we would travel there every week.

Third. Under the new laws, a nomad’s tent is the basic housing unit of a reindeer breeder, but it is not qualified as such. Passport services cannot officially register it in the tundra with a stamp, and a tundra dweller cannot join the line for housing or a bank loan. The tundra appears to be a no-man’s land in legal terms.

And fourth and last. What troubles us most in the North, on Yamal in particular, is that the Tazovskaya and Obskaya gulfs have no defined status. In terms of shipping they have always been part of a river, and fishing rules have also been those of the river. But in recent years the Federal Maritime Inspectorate has been pressing for all these powers to be transferred to Moscow. I think it would be…

Vladimir Putin: Does it concern fisheries?

Grigory Ledkov: Yes, fisheries. The inspectorate does not raise the issue of river shipping. So a lot needs to be overhauled because there is a series of laws concerned. After all, there is the Basin Administration.

Vladimir Putin: This is the Obskaya Gulf, is it?

Grigory Ledkov: Yes, and the system of river shipping, which took decades to establish, was closely connected with river fishing. Now the maritime department in Moscow aims to take it all over. For us, this will lead to further difficulties, because we will have to hold bidding and reapply for permits. The best thing would be to leave all powers on Yamal so that quotas could be distributed and fish protection issues decided on the spot.

Unresolved issues abound in many areas. But if at least the problems I mentioned could be addressed, life for an ordinary northerner would be a bit better.

I want to end my remarks with what our ancestors used to say: “A supply left in the tundra is left there for you and for us.” So welcome to Yamal. Thank you for your attention.

Vladimir Putin: You raised several problems at once. The first concerns the development of the northern areas. You mentioned the pipes that are laid there. I often meet with oil and gas officials. And all of them are constantly complaining about the rules we set for them concerning infrastructure development. This is because we have fairly strict rules for the environment and for compensations for cooperatives that use these areas. Above all, of course, for cooperatives that are engaged in traditional pursuits and activities, such as yours. If you believe the existing rules are not enough, let us take another look at them and at a particular area. I am not sure every company wants to have its own pipe. To begin with, it cannot just have its own pipe in some cases at all, because the law puts a cap on the development of gas and oil pipeline systems. These systems have to adjust their efforts and plans and align them with Transneft goals.

We have a large inventory of economic and legal levers to work with. Let us look at them through the prism of your area. If problems really do occur, if companies neglect to pay compensations (which are fairly large according to existing legislation), let us look at the problems once again.

Grigory Ledkov: We have a specific example regarding our pastures: four enterprises and three pipes. 

Vladimir Putin: Let us examine it. Give me the information. Which companies are involved?

Grigory Ledkov: LUKoil, Vankorneft, Transneft and, tentatively, TNK-BP.

Vladimir Putin: If Transneft is involved, it may well integrate all these projects itself. As a rule, joint projects are cheaper. The idea is that the companies should agree among themselves.

We will take up this matter. I promise to raise it before the Energy Ministry. We’ll see what comes of that. We will seek to minimise the negative economic results, reduce them to zero if possible and ensure your economic interests. This was the first issue you raised.

The second one deals with housing registration. You are asking about how to register people who roam across the tundra? 

In the Soviet times, these problems were solved. Registration simply said: such and such tundra and such and such area section. That was it. First, we can reinstate this procedure.

Second, we can copy the experience of some other northern areas in our country, such as Komi, for example. Its administration decided to register those leading a nomadic life in Vorkuta. This solution takes care of benefits and all kinds of registration, including for housing and much else. This option is also possible.

I will formulate this idea at the Ministry of Regional Development and our migration service. Let them consider it and make their suggestions.

Do we need a separate department for this purpose? Remember that we are constantly struggling with the growth of bureaucracy and keep reducing their numbers all the time. Problems abound, and all of them concern specific things. Must we create a separate department for each of them?    

I have just heard reports from appropriate ministries and government departments on how they are dealing with directives to trim federal personnel. You are suggesting that personnel should be increased, or perhaps reshuffled. In general, these are tasks for the Ministry of Regional Development.

True, understanding the specifics, some northern countries, which I am not going to name, have specialised federal agencies concerned with northern development and indigenous peoples. Such a practice exists in the world. Let us make a study of it, but not now, of course. This should be done after the spring of 2012 when we have a new government and a newly elected State Duma. Let us think over it.

Your last question was about the Tazovskaya Gulf. Yes, there is such a problem. I too am concerned about the excessive centralisation of anything and everything. In effect, we are trying to decentralise many functions and pass them on to the regions.

As far as fisheries are concerned, here, if my memory serves me right, the general procedure is as follows. If fishing is done in fresh waters, it is regulated by regional authorities, if it is done in salt waters, the regulating agency is Rosrybolovstvo [Federal Agency for Fishery]. In your region, fresh-water rules apply. We will do everything to keep this order intact.

Thank you.

Go ahead.

A.Andreyev: Mr Putin, conference delegates. A great deal is currently being done to develop and introduce the GLONASS system. With your backing, the work is well underway. More and more ministries and government departments are joining in the effort. And although global navigation satellites (including other space activities) have a practically infinite spectrum of possibilities, GLONASS today is, unfortunately, viewed as nothing more than a transport monitoring tool. New ideas advanced by Roskosmos and other Russian developers are not always taken into account in building the monitoring system.

Vladimir Putin: Not only transport. Sorry to interrupt you. I remember visiting my colleague, Finnish President Tarja Halonen, several years ago. A cat with a GPS aerial was walking about in the park. She said: “I know where she is at any moment in real time.” Applications for such navigation devices vary widely –  transport, cattle grazing in the pastures and much else – not just cats. 

Transport is a typical case. Those city councils that introduce the system and begin to monitor the movement of municipal transport have their petrol costs cut by 25% to 30%. An instant one-third reduction. Imagine the effect!

A.Andreyev: Exactly, Mr Putin. But there are problems. As I watched a TV newscast yesterday, I happened to hear a report from the Sverdlovsk Region, where passenger carriers are required to install so-called tachographs on their vehicles, although there is a government resolution to fit these automobiles with GLONASS. In fact, a GLONASS device incorporates all tachograph functions. Meanwhile, all costs are shifted onto the carriers.  And here is another example. The Commission for Modernisation and Technological Development of Russia's Economy held its meeting three days ago and discussed the creation of systems for monitoring the economic situation from space.

I would just like to say that in August 2010, you were briefed on GLONASS issues in Ryazan. At that time, Vyacheslav Bezborodov, the Director General of the Production Corporation REKOD (Space Activity Results), told you about the potential of a similar system. In effect, such a system has already been created and should now be introduced.

Since then, we have made considerable progress in this area. I am particularly happy to note that our colleagues, reserve personnel from the Tyumen Region, co-designed this system.

Mr Putin, I suggest that this entire system be monitored by those entities which can provide customers with ready-made and understandable products. Most importantly, they should provide undistorted and objective online information facilitating the decision-making process of administrators and managers at different levels.

I believe that the emerging space service centre can become such an entity, or more specifically, an entire infrastructure. Such centres have already been set up in Moscow and Kazan and are also being established in Tyumen. Of course, Yamal has accomplished a lot in the Urals Federal District.

I would like to ask you to once again pay attention to this project on the infrastructure creation of space service centres, and to support it. I would also like to ask you to include it in the programme of the Strategic Initiatives Agency. Quite possibly, they have created an area there for utilising space activity results. I am ready to offer candidates from among reserve personnel to work in this area.

Vladimir Putin: Thank you for raising this issue, for your question, or rather, your proposal.

Indeed, I am happy that you have noted this because we had a programme to expand the Global Navigation Satellite System (GLONASS) for people who are not involved in space programmes. I can say that these are the most promising high-tech projects and inventions, which create the future of Russia and its economy.

I think the programme was adopted in 2007. At that time, we had made a decision, and I supported this very actively. Moreover, I had also initiated the rapid funding of the programme. Were it not for this decision to speed up its funding, we would have failed to deploy the system’s 23 spacecraft.

Incidentally, we had proposed working together with our European partners. These extremely costly projects are in high demand and are quite promising. We proposed working together with them five years ago. I don’t know the exact number, but they currently have three or four satellites in orbit, at most. And they are asking us to launch another two or three satellites. This has not yet been accomplished. In effect, we have outraced our European partners in this high-tech field. To be honest, I am very pleased about this. Russia currently operates 23 GLONASS satellites. Five or six new satellites will soon be launched, expanding the entire cluster to 29-30 spacecraft. This will be a unique cluster.

Our US partners have come up with the Global Positioning System (GPS). To the best of my knowledge, the United States currently operates 30 GPS satellites, including several reserve spacecraft. We will expand our own cluster to 29-30 satellites in the next few months. At the same time, I can tell you that we worked on budgetary estimates two or three days ago... We are currently drafting a rather complicated budget, especially after making some decisions concerning the reduced tax burden and revenue shortfalls, but we will absolutely retain these clauses. The problem is that we had initially orbited some rather old satellites with a short service life of three to four years. But we need satellites with a service life of seven to ten years, and so on. We will replace them with new spacecraft, and we will specify the required funding for this purpose. We will not allow the degradation of this cluster.

The main problem for us today, which you identified, is the creation of a ground infrastructure. This is very important. I don’t want your proposal to get lost. Please tell this to our colleagues who are present here, or to Boris Gryzlov or Vyacheslav Volodin. Please pass on these papers, so that they don’t disappear.

Of course, it would be even better if we could launch production of the required ground equipment in Russia. Today, the cheapest equipment is manufactured in China, India and South Korea. It would be fantastic if we were able to make top-quality and cheap ground equipment in Russia.

And, finally, I would like to draw attention to supporting the GLONASS services market. We must control the domestic market and occupy the appropriate global market niche.

We will work together with you and address all problems.

Please.

Remark: Mr Putin, numerous political issues have been discussed here. Much has been said about public organisations. As a person with a dynamic and consistent approach, I don’t fit into either category. The official Yekaterinburg web portal has a forum for people with similar interests. A young woman named Yelena contacted one such forum, asking us to help solve her problem.

The issue is that she has been disabled from childhood and is confined to a wheelchair, and has become a hostage in her own home. She needs at least two big men to help her leave her flat because she and her electric-powered wheelchair weigh just over 120 kilograms.

Initially, she contacted a managing company that serves her apartment building. Officials there initially told her that she could use the stairs but later took pity and made a so-called ramp… 

Vladimir Putin: Those who say this are absolute boors who have no place in institutions of state authority. They need to be dismissed.

Remark: They subsequently assessed the problem and made a removable wooden panel, due to be used as an improvised ramp on staircases.

Vladimir Putin: Let them stay and continue work.

Remark: For several objective reasons, it was impossible to use this ramp because the elevation angle was too high. In effect, the wheelchair could not roll up the ramp. Two big men were needed in order to raise this ramp because it prevented other people from using the flight of stairs.

Yelena contacted our forum and asked us to help resolve this issue. Vyacheslav Podnikemyoburger, one of the oldest visitors to the forum, asked all other visitors for help. They started responding and collecting donations. At the same time, a ramp was also being designed.

Everything seemed simple, at first glance. We thought it would be possible to install two iron rails there, and that everything would be fine. But when we went there and did some measuring, we found out that the situation was not so simple. If we proceed as planned, then other people would be unable to use the entrance.

Professional metal structure designers also became involved in the project. After a complex construction project, we built a sophisticated telescopic structure and assembled it after three months of preparations and coordination. We coordinated this project with fire-fighters, the central epidemic-prevention station and apartment house tenants. It was also brought up to code. We assembled the structure after coordinating the project.

As our work was covered on this same forum, a lot of people, disabled persons with the same problems, started contacting us. We had some money left after the first project, so we made a collective decision to build another ramp. We built a second ramp, and are now moving to build a third one. We collected donations from the entire internet community, designed the ramp, coordinated the project and assembled it all ourselves. We would like to ask you and the Russian Popular Front to help us resolve this issue. 

Vladimir Putin: First of all, I would like to say that the internet community is often criticised, and probably with good reason. It is quite appropriate to scold them in some cases. But the example that you mentioned shows that the internet can and should be used for noble purposes. Your example shows the use of the internet by noble people for noble purposes. I would like to thank you for this. This is the first thing.

Second, this country has millions of disabled persons. We must say openly and honestly that we used to hush up this problem in the past, as though these people did not exist, yet the civilisation of any society can be characterised by its attitude towards disabled persons.

We have now passed the Federal Programme, “Obstacle-Free Environment”. Ms Golikova, what is the deadline for the programme? By 2015. You have now started to deal with a small, specific problem and have immediately noticed that it cannot be solved easily. Just imagine, the entire Soviet and Russian infrastructure was not intended to be used by disabled persons. Nothing like this was created in the past. Of course, in attempting to rebuild all this – you have tried to do this and immediately ran into problems. However, this issue is not complicated if you take small steps and start from scratch.

I have visited the towns that we rebuilt after the summer wildfires of 2010, and I have assessed the situation there. When people have thought of these things in advance, they implement specific decisions, and these issues are resolved in the simplest and cheapest way possible. In the same way, when buildings are constructed, it is easier to build structures into them. Re-equipping them is more difficult. But, of course, we will move in this direction.

I repeat, we will continue to set aside the required funding… On the whole, it is very hard to change everything overnight. But we will tackle this problem, no matter what, in cities and towns. We will do this right away in all places where we are building from scratch. For instance, all Olympic facilities in Sochi without exception will be obstacle-free. This is the first aspect of our activity. 

Second, you have mentioned wheelchair-bound persons and a young woman using a wheelchair. Unfortunately, this country lacks normal Russian-made equipment. We are now launching production at a Russian enterprise. I hope very much that this enterprise will start working.

…Yes, AvtoVAZ does this, but in cooperation with foreign partners. I hope that disabled persons confined to wheelchairs will be able to use Russian-made equipment in the near future.

Remark: In reality, it costs very little to convert an existing apartment building entrance. One wheelchair ramp costs about 25,000 roubles.

Vladimir Putin: Yes. I understand. But I think that you will agree that this is work that cannot be addressed from the White House in Moscow, nor from the Kremlin. The Russian Popular Front is being established in order to convince local governments to tackle such objectives.

E.Abdullin: Good afternoon, Mr Putin.

Vladimir Putin: I’m sorry that the microphone has only just reached you.

E.Abdullin: No, I waited patiently, as you can see the struggle has already begun. I would like to ask you a question about an important and complicated issue which needs to be resolved quickly. This requires state support for socially responsible businesses. Russia has always been renowned for its patrons, philanthropists and benefactors. Numerous enterprises in Russian cities, including Tobolsk, Yalutorovsk, Tyumen and Ishim, continue to aid underprivileged populations after two years of an extremely difficult financial and economic crisis. This means assistance to disabled children and adults requiring urgent surgery, expensive treatment and medications. This concerns retirees, our dear veterans of course, and so on. By the way, many of them have come to attend this conference.

The Tyumen municipal charity foundation has been functioning successfully for the past 12 years with an annual budget of just 20 million roubles. Grants being allocated by Western charitable organisations account for 50% of the foundation’s budget. The rest are grants from Tyumen enterprises. These grants are being used to finance such wonderful projects as a Christmas Tree for Little Tyumen Beggars, the “Week of Kindness” and “Young People Can Do Anything”, and others. All these projects involve a lot of people, have wonderful results in terms of media coverage and are warmly received in the public eye. Of course, everyone likes them, and they benefit everyone.

So, here is my question: When will the state voice its stance on such a seemingly simple but highly important issue as charitable activity, in the form of real documents and actions? When will a law on charity be passed? It would also probably be necessary to formalise existing international accounting standards and to make them mandatory for socially active enterprises.

Third, you and I see wonderful athletes, scientists, journalists and teachers receiving awards each year. It would be appropriate to institute an official state bonus for enterprises annually assuming a socially active and responsible stance. 

Thank you for your reply.

Vladimir Putin: I’ll start with the last aspect. It appears that enterprises doing charity work consider public acclaim to be more important than bonuses. I completely agree with you that we need to pay attention to this. The Russian business community has implemented some positive charitable projects.

Certainly, all this should be presented and shown to the country and the public. The people should know about this. We will think this over and will definitely submit proposals. To be more precise, we will implement your proposal.

As for creating conditions for the business community’s expanded charitable activity, why has not the relevant bill been passed yet? On the whole, this country has legislation regulating charitable projects.

What should be viewed as charity? Does this refer to corporate donations before or after taxation? If donations are before taxation, then this is not entirely charity because these donations are being made at the expense of taxpayers. And if donations are after taxation, then these are a kind of profit deduction and is therefore charity. What breaks are required in case of profit deductions? I don’t mind that we discuss this issue. But it will be impossible to make any prompt decisions.

I want to say once again that all charitable activity should amount to profit deductions. What additional laws do we need? You should merely finance any specific project.

Please.

Remark: We now have the Russian Popular Front. Of course, we will certainly discuss all this.

In reality, we need a law that would primarily formalise partner-like relations between the business community, society and the government, rather than resolve accounting and taxation issues. This is the most important thing.

Vladimir Putin: And what do you think is the key aspect?

Remark: As I see it, the most important thing is that partners and tax agencies should not look askance at enterprises engaged in charitable activities. Notably, tax agencies might think that they have pocketed illegal surplus revenues.

Individuals and organisations not receiving such revenues may also have the wrong view of them or may envy them, etc. We need to clarify this aspect. Clear and understandable rules are essential. I hope it will not be hard to clarify financial aspects.

Vladimir Putin: Thank you very much for raising this rather complicated issue.

As far as law-making activity and legislation are concerned, any country, including Russia, passes laws in order to regulate specific relations, certain economic and financial relations included. The issue that you raised, and even the aspect that you noted, don’t in general actively regulate certain relations. These issues are of a moral and ethical nature. But if you think that there may be some problems with fiscal agencies, then let’s discuss this issue in greater detail, including within the format of the Russian Popular Front.

This is a highly important issue. I agree completely. Let’s do it.

Please.

K.Shilenina: Good afternoon, Mr Putin. 

First of all, I would like to thank you for drafting the Young Family programme, because our family was among the first families in Pervouralsk to take advantage of this programme in 2007. Right now, we live in a flat with all the amenities.

Vladimir Putin: Did you receive a soft loan loan?

K.Shilenina: No, we’ve received a subsidy from the state amounting to 642,000 roubles.

Vladimir Putin: Is this a subsidy to cover the mortgage down payment?

K.Shilenina: That’s right.

Vladimir Putin: Congratulations!

K.Shilenina: Thank you.

My second question has to do with the health sector. I wonder if there are any programmes aimed at attracting medical personnel into primary healthcare. The clinic where I work suffers from a lack of medical personnel. For example, our town has 28 neurologist positions, but just 13 of these are filled. So each of the staffers has to do double work. That is hard, quite frankly.

I’ve got a proposal to make in this regard. Young professionals used to be provided with housing. Why don’t we revive this good old tradition?

Housing could be offered to young staffers after a certain period, if not immediately. So that a person who has worked with a certain medical institution for, say, a decade could hope to get housing for his or her personal use. This would be of great help because with current wages, people just cannot afford to buy property.

Vladimir Putin: I see. Clearly, providing young professionals with housing is one of the most important social challenges we are tackling at present, and not just in the healthcare sector, but also in public education. That is especially true of rural communities.

I think we should further develop subsidised housing programmes like the one you have benefited from. Such programmes, notably the Young Family, are now being pro-actively introduced in many of the Russian regions.

Second, I hope that within the framework of our healthcare modernisation programme, salaries will be raised not just for medical workers and GPs involved in primary healthcare, but also for specialists in various branches of medicine.

But, as I said earlier, this depends on how successfully new standards will be introduced, and the rate and scope of that process will vary from region to region. All those numerous standards will eventually be put into effect, leading to higher wages. And high pay is the primary incentive to encourage the advent of fresh talent into primary healthcare.

The issues we’ve been discussing today are all very exciting. But we’ve got to wind up our meeting in a short while. Go ahead, please.

I.Kalyamina: Mr Putin, I’ll be brief. In your speech today, you put particular emphasis on kindergartens. A lot of new kindergartens are currently constructed to accommodate as many kids as possible. That’s all very nice. But being, as I am, the principal of a kindergarten, I just cannot help worrying about who all those new nursery schools are going to be staffed with.

Admittedly, the lack of new kindergartens has been an increasingly acute problem of late. But in the town where I live, Kogalym, there’s also a shortage of teaching personnel.

I’m not saying that these days young people have little interest in looking after kids or that they aren’t creative enough.  It’s just that there are no economic incentives out there to draw fresh talent. No decent pay, first and foremost.

Mr Putin, you spoke at length today about pay raises for school teachers, and this wasn’t the first time the issue had been raised.  But what about the teaching staffs of kindergartens and nursery schools? In our region, the governor does his best to address the problem. But will any steps be taken at the federal level as well?

Vladimir Putin: As I said earlier, we’re drafting a programme to support the construction of kindergartens; I’ve already cited relevant figures.

Having said that, I’d like to make it clear both to you and to the governors, especially of regions as wealthy as the Khanty Mansi, that this is their responsibility, not ours. We cannot possibly finance all of local and regional authorities’ commitments from the federal budget, you know.

They [the local authorities] must learn to work efficiently and to prioritise. Because all too often, money is spent on things that could be put off until later while urgent problems remain unaddressed. 

Speaking of teachers’ pay, the federal government allocates 60 billion roubles to secondary schools in the regions each academic year; they spend part of that amount on repairs, re-equipment and retraining while the remainder goes to raise the teaching staff’s salaries.

We don’t disburse any allocations specifically for regional pay funds. But we assist the regions in tackling the problem of insufficient pay.  And we make sure they meet their wage obligations.

As for kindergarten teachers’ salary, regions should solve this problem by themselves. 

But there’s no doubt that salaries to teaching staffs must be raised throughout the education sector. 

Well, we’ll return to this topic later on.

A.Misharin: Mr Putin, if I can just come in here, teachers working at kindergartens in the Sverdlovsk Region will have their salaries raised by 30% starting on September 1. Relevant budget amendments have been adopted already.

Vladimir Putin: It seems Governor Misharin is in touch with the imperatives of our times. This particular decision is a step in the right direction. Hopefully, fellow governors in other regions will follow suit.

I.Mikhailov: Mr Putin, I’d like to make a proposal to you as the leader of the Russian Popular Front. Associates have asked me to voice it today and I am very grateful to you for giving me the floor.

We all know that the Urals, as well as the country as a whole, needs reliable protection to be able to make progress. With this in mind, we’ve launched a project in the Chelyabinsk Region in the Urals to promote patriotic education and pre-conscription training. We’ll be working on that in association with the regional government and the leadership of our party’s regional branch. 

Patriotic education programmes exist at the regional and municipal levels. But there’s no federal mechanism to coordinate these efforts nationwide, unfortunately. The project we’ve masterminded operates in the Kurgan Region as well as Chelyabinsk. We also cooperate with border guards in the Altai Region.

Mr Putin, we would like to ask you to support our initiative and to adopt a federal mechanism for promoting patriotic education. This would help us address a whole range of issues, from pre-draft training to army reform, thereby strengthening our region and the entire nation.

Vladimir Putin: I’ve heard you mention the Popular Front. Have you created any related units there? You should set forth your proposal in detail, making it clear how it could be implemented in practice.  But I like the idea in principle, and I’ll be happy to support it. Go ahead, please.

A.Kirpichnikov: Mr Putin, my proposal is to make the system of public control go digital. All of the party’s projects should be posted at the Russian Public Control’s website so that anyone interested could go there and leave a comment.

I suggest breaking the feedback segment into several categories so as to sieve off irrelevant comments and engaging young people in information processing. That should make some work for officials.   

It would work like this: public feedback should be broken up into different categories, so we could see that this is the issue, this is the local person in charge of monitoring it locally, 500 messages have been received and the person in charge got a new summer house or something. If there are 500 messages on a single issue it will get a warning category and a report is forwarded to Moscow. If there are 1000 messages, it gets an alert category, and a report is forwarded to one of the party leaders, and not just the project manager. The results should be published once a month. We could put young people to work and let them…

Vladimir Putin: That’s a good idea to employ modern technology. But, perhaps, we should find some other name for this project because the term “public control” is associated with Soviet-era rhetoric. The idea is a good one, though. We should think it over and find a way to make it technologically viable.

Colleagues, it’s time to call it a day. I’d like to thank you for this rare opportunity to get together and discuss problems currently facing the Urals and the nation as a whole. Indeed, the Urals is part and parcel of Russia; it’s this country’s kernel and powerhouse -- not just in economic terms, but also in terms of culture, natural and human resources. Thank you all.