Transcript of the beginning of the meeting:

Vladimir Putin: Mr Pozgalyov, please speak up. How are things here in the region?

Vyacheslav Pozgalyov: Thank God!

Vladimir Putin: What are the results of the first six months? What regional production expectations do you have for the end of the year? Where are your main social, health, education and housing indicators?

Vyacheslav Pozgalyov: Last year manufacturing increased 11% plus over 2009. This year the figure is 9% over 2010, and we are approaching, by all indicators, the level we had in 2007 before the downturn.

Vladimir Putin: Do you mean this year’s indices?

Vyacheslav Pozgalyov: Yes, this year’s, including most economic indicators. Regional budget revenues are reaching pre-crisis levels. This didn’t happen overnight because world market prices were not what they were in 2007. As prices increase step-by-step, so do budget earnings.

Generally, we are diversifying and we have come to a point where Severstal Steel is down from 80% to 28% in terms of its contribution to the regional budget. It’s not that they are doing badly, it’s just…

Vladimir Putin: Some other sectors are rebounding…

Vyacheslav Pozgalyov: That’s right. Other industries are doing better. You mentioned lumber [sales] earlier today. We have stopped lumber exports altogether. Do you remember you said that exports should be discontinued or that export duties should be imposed? This basically worked. We currently have a number of timber processing companies. In 2006 we felled 3,000,000 [cubic metres] and processed 1,000,000. Last year we felled 11,000,000 and processed 8,000,000. The rest was used for consumer firewood and other needs. But we basically stopped exporting lumber.

In the social sphere, we are meeting all of our commitments, even though there was a financial crisis and we lost almost a half of our budget. We are developing at a slower rate, but we have delivered on every social mandate (wages, allowances); we are building schools and hospitals, we are diversifying. In this way we have sustained the rapid development of our social sphere; the scale of this work is possibly not what it was in 2007, but still…

Moreover, following your decision to increase public-sector employee pay before the end of this year, by the entire 15% rather than 6.5%, we did raise salaries 15% both on June 1 and September 1, thus achieving a 30% jump, which means that our public-sector employees are at 83% of the average pay check across the region. Why not 100%? The other sectors – the industrial sectors in the region– enjoy high earnings. We cannot reach that level at this point, but we hope that before 2013 our public-sector employees will receive wages equal to the average pay in the region.

We also saw an upturn in housing construction. We cannot so far reach the highest 2007 level, but we will commission 490,000 [square metres] of housing before the end of the year. A pleasant fact is that 60% of it is private housing. We could do this because we were selling lumber to the public for the symbolic price of one rouble per 200 cubic metres. They were doubtful at first; then they tried to resell it at a profit, but now they are constructing buildings. Currently, 1,700 houses are being built in rural areas under this arrangement alone. In so doing they also attract additional funds. And this is a positive trend, that people started building houses of their own.

In the cities, the situation is more difficult, because, you know, credit and all that… Even though credit is easier to obtain, but… Here is a very interesting detail for you. Before the crisis the public’s bank deposits amounted to 32 billion roubles; now in the post-crisis period they stand at 54 billion. People have become more tight-fisted but, interestingly, they kept their faith in the banking system. This is very important – I mean the support programme that was put in place.

Vladimir Putin: Earlier they hoarded cash under their mattresses, but today they take it to a bank. We have to say that the main banks where the government has a share are fairly stable. I cannot think of the exact figures, but their profits for the last six months are considerable; practically every bank boasts net profits. This is strengthening the foundations of their activities.

Vyacheslav Pozgalyov: Yes, this is very important; The fact that the public is confident in the financial institutions has helped preserve general economic stability.

Vladimir Putin: Is your construction promotion expanding?

Vyacheslav Pozgalyov: It is. It is expanding by all indicators. It is not social facilities alone – like hospitals, clinics and schools – that we are building. We are building gyms as well. There is a very good Gazprom initiative called “Gazprom for Children” Three super-modern sport complexes have been built. Earlier today, an antidrug agency officer was speaking… In fact, the construction of sports complexes can help pull children off the street and away from drugs and alcohol. This work is proceeding at a reasonable pace.

Vladimir Putin: Good!