Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, Colleagues!

As usual, let us begin by sharing important updates. As you know, a bill has been adopted raising the pay for the military and Interior Ministry servicemen. Apart from financial resources, which are certainly required to increase these allowances, we need to ensure federal revenues – which we have – and to adopt some 30 regulatory acts. Mr Siluanov (acting Finance Minister Anton Siluanov), will you report on the progress and tell us if these acts will take effect on time?

Anton Siluanov: Mr Putin, all of the resources required to enforce the newly adopted bills have been allocated for 2012 and 2013. I must say that we have allocated an additional 1 trillion roubles in the 2012 and 2013 federal budgets to increase the pay for military services and pensions for retired servicemen. We have allocated more than 1 trillion roubles for two years.

As for the compensations received by the Defence Ministry and Interior Ministry servicemen, the necessary regulatory acts are in the works. Indeed, about 34 such acts are needed to ensure that the decisions made are implemented. As of today, 23 acts have been prepared or sent to the government and agreed upon with the Finance Ministry, as well as with the other agencies concerned.

The Finance Ministry has coordinated all of the regulatory acts with the agencies and reached an agreement on the size of the new compensations and bonuses depending on rank, in compliance with existing legislation. The next step is for the Defence Ministry and the Interior Ministry – including its interior troops, which will begin reforms in 2012 – to adopt regulatory acts allowing them to increase their servicemen’s pay from January 1.

Mr Putin, there is one more question concerning the regions. There is a small problem concerning this year’s one-off benefits for servicemen in military units that are currently financed by regional governments but will be financed by the federal government in the future. The usual practice is to pay these benefits after the year’s end.

As a matter of fact, not all Russian regions have provisions in place for the advance payment of this lump sum compensation, and compensation that was due in 2011 will not be paid until 2012. We have allocated federal funds this year for these payments, but not all regions have followed through in their respective budgets. In order to avoid arrears with regard to the payments due this year, we have already sent the appropriate messages to the regions clearly instructing the governors to pay in full the Interior Ministry officers who are getting paid from the regional budgets, and we will monitor this issue closely. 

As for pensions, we will raise pensions for all former military servicemen  beginning in 2012. We are expecting the security service, the Defence and Interior Ministries to submit to the government proposed regulations governing salaries according to each military position, as well as official salaries, and to adopt all requisite departmental acts to ensure that all retired servicemen receive their pensions next year. In addition, we have already set aside the necessary funds in the 2011 budget in order to be able to pay the increased pensions for January in late December. We have funds to do this. We require only that the security service, the Defence and Interior Ministries adopt their respective regulations and departmental acts. This issue is already on our agenda, and we must implement this decision in full by the end of 2011.

Vladimir Putin: But this concerns retired military personnel and former employees of the Interior Ministry and security services?

Anton Siluanov: Yes.

Vladimir Putin: What other questions do you have to these ministries and services concerning regulations that they should adopt? Departmental acts? The ministers of the interior and defence are present here. Tell them, what else do they need to do?

Anton Siluanov: The government is following an approved schedule for the adoption of regulations. So far, there are no questions to our colleagues from the ministries of the interior and defence, because we are agreeing only on the decisions that need to be adopted at the government level. We are asking our colleagues, not only those from these two ministries, but others as well, to adopt all regulations at the level of their respective departments.

Vladimir Putin: Mr Siluanov, today is November 14. A month and a half remain before the end of the year. We know that it is unrealistic to expect any concrete results in the last few days of December, let alone adopt any kind of regulations. Therefore, everything needs to be done as soon as possible, so please have the financial units of the respective ministries do what they need to do now, so that there is no unfinished business at the year end. There are no unresolved questions today, and I hope this will remain the case until the end of the year.

Anton Siluanov: All right, Mr Putin.

Vladimir Putin: Thank you Mr Zubkov (addressing Viktor Zubkov). Certain issues have been raised with respect to the massive size of the harvest (and thank God the harvest is so big this year), that have to do with farm produce prices and transportation of the harvest, and crops in particular. I gave instructions to make arrangements with the railway carriers, with the involvement of the Russian Railways management; you worked through this issue with the Minister of Agriculture. So, what is the current status with this? This is the first question. The second question concerns our capabilities in purchasing grain for the intervention fund. We agreed that the crops purchased for this fund would be available for farmers to buy back if the market climate improves. A government resolution regarding the intervention fund was signed today. I would like to hear your comments on how the fund actually works and on the railway transportation of farm products. Please go ahead.

Viktor Zubkov: Thank you. Mr Putin, the Government discussed the transportation of farming produce twice in October due to the increased production volumes. There are 97 million tonnes of grains (bunker weight) and 48 million tonnes of white beet. This is the first time we have reaped such a big harvest…

Vladimir Putin: Forty-eight million tonnes?

Viktor Zubkov: That's right.

Vladimir Putin: The preliminary figure was 45 million tonnes.

Viktor Zubkov: Yes, it was 40-41 million tonnes, but this has increased to 48 million tonnes, and the harvesting season has not yet ended. I should tell you that last year, we harvested 19.9 million tonnes of white beet.

This means this year we will most likely not need to import any raw sugar. The amount of sugar that will be produced will be enough to last until the next harvesting season.

I held a teleconference on the transportation of farming produce today. I should tell you that the situation is quite stable. As instructed, the cargo carriers reduced the railway transport expenses of white beet by 15% to 26%. This had a positive impact on the shipping times. The daily volumes make up 125% of the planned shipment amounts. The transported potato harvest amounts to 107% of the planned amount, which is quite good. We have heard reports from many regions today and there are no problems with the transportation of crops in the majority of the regions. However, there are problems in some of them. This is due to unnecessary delays of bulk grain carriers. With 6,679 wagons of crops planned for departure in the first week of November, only 5,111 wagons departed, while 3,294 wagons were waiting much longer than required to be downloaded and uploaded. We have calculated that timely shipment would prevent a shortage of bulk grain carriers. Heads of the regions, governors and farm producers have all received instructions on the strict compliance with download/upload deadlines.

I have heard reports from the Kurgan Region and all Siberian regions. As you know, a resolution was signed recently on discount…

Vladimir Putin: … transportation.

Viktor Zubkov: … rates, export rates. The carriers that participated in each teleconference assured me today that the volumes that… The Kurgan, Tymen, Omsk, Orenburg regions and other regions of Siberia reported that they are ready to ensure timely transportation in November and December. We have drawn the attention of Russian Railways and other carriers to the shipping of ready-made products, particularly sugar. Now, our plants are starting to stock sugar and we have the opportunity to export about 140,000-150,000 tonnes of sugar. I have spoken with the carriers and they promised to ship sugar exports.

Vladimir Putin: Do they have contracts for this?

Viktor Zubkov: Yes, they do. A number of departments monitoring shipments – especially for export, such as Rospotrebnadzor, the trade and sanitary inspection authority, Rosselkhoznadzor, the Federal Service for Veterinary and Phytosanitary Surveillance, and the Federal Customs Service – do not fully guarantee the work of their services on weekends and holidays in some regions. On average, we ship 1,200 carriages per day, whereas on weekends the number falls to 400 in some regions. I have instructed these services to have their employees on duty during all holidays and weekends, so we can ship 1,200-1,300 carriages per day. In general, things are improving and everything is under control. We will continue monitoring the situation and having such teleconferences.

Vladimir Putin: What about interventions?

Viktor Zubkov: We are carrying out interventions in line with your instructions on discounted shipments. The regions are trying to export surplus grain and the prices are rather high now – $253 per tonne. Nevertheless, we will have to buy a certain amount of grain – most probably, 1.4-1.5 million tons – for the intervention fund. We have the required resources for this. Moreover, in line with the instructions that you signed today, agricultural producers will have the opportunity to buy this grain and dispose of it as they see fit in the first half of 2012 if the selling price is lower this year – which is most likely – and higher next year. This is the first time that we have introduced this procedure and the regions have welcomed it. Now, we’ll simply have to see it in action.

Vladimir Putin: What about grain storage?

Viktor Zubkov: We will look into opportunities for storing grain for this purpose.

Vladimir Putin: Will we take grain from them?

Viktor Zubkov: We will use different methods. In some cases, we will take their grain. In others, we will probably store it locally. But we have this mechanism of collateral.

Vladimir Putin: But we must be clear on one issue – if we store grain in our elevators…

Viktor Zubkov: Minus storage and insurance expenses. We will have to include them in our costs and make a clear provision on this score in our instructions.

Vladimir Putin: Sure, but agricultural producers must know and understand this.

Viktor Zubkov: These are small sums, Mr Putin.

Viktor Zubkov: Storage is not inexpensive.

Viktor Zubkov: It costs 60 roubles per tonne.

Vladimir Putin: So what?

Viktor Zubkov: Anyway, if the price is higher, they will gain more if they take the grain back and sell it. We must simply look at this issue.

Vladimir Putin: How much did we spend on storage last year?

Viktor Zubkov: 800 million roubles per month.

Vladimir Putin: This is expensive!

Viktor Zubkov: But we had a lot of grain – about 9 million tonnes. This is a lot.

Remark: More than a billion.

Viktor Zubkov: Nine million tonnes and this time we have 1.4-1.5 million.

Vladimir Putin: Okay. Ms Skrynnik (addressing Yelena Skrynnik), the year is ending. This year, we allocated 5 billion roubles to farms to maintain their cattle population.

What can you say about the programme’s implementation this year? It’s probably time to sum up the results, correct?

Yelena Skrynnik: Yes, we are ready to sum up the results. According to Rosstat, these measures have made it possible to increase the cattle population in the first nine months of this year – that is, the breeder flock. Mr Putin, for the first time in the past 20 years, we have grown this population by 55,000 cows. This was the first time. Previously, we usually had a reduction in the breeder flock.

We have also increased the pedigree cattle population. Dairy cattle growth has hit 12.4%, which is an improvement over the past. The aforementioned measures have also made it possible to stabilise milk production at 31.5 million tonnes and we hope to increase the figure in the future.

Vladimir Putin: So, farms are getting this money, aren't they?

Yelena Skrynnik: Yes. To start off, agricultural producers have already received this money. Thirty-two regions have received these funds. The number of head of cattle has grown, especially in the Samara, Astrakhan, Rostov and Tomsk regions and in Kabardino-Balkaria.  

Vladimir Putin: The important thing is that money should not only be in the regions, but that it should reach the farms.

Yelena Skrynnik: The agricultural producer.

Vladimir Putin: That’s right.

Yelena Skrynnik: That’s what we have done: we have tracked the money down and have transferred it to the agricultural producers.

Vladimir Putin: Good. Thank you. Mr Zhukov, you and I were recently in Kaliningrad and we looked into a very sensitive issue connected with the carriage of air passengers from Kaliningrad and back and we looked at the programme of subsidised flights. One has to admit that it didn’t turn out to be very popular: in any case it is not operating as effectively as, for example, from the Far East and some other cities that have joined the programme. I think the reason is the timing and the age of the people eligible for this benefit. We have agreed that we will make this benefit available to all the people of Kaliningrad regardless of their age, but only at peak periods. I have asked you to draft proposals on this matter.

Alexander Zhukov: Yes, the draft government resolution on the issue is ready. We do have an ongoing programme of subsidised air tickets on routes from Kaliningrad to Moscow and St Petersburg in the European part of Russia. A special rate of 3,600 roubles has been fixed for Moscow and of 3,300 roubles for St Petersburg, which is roughly the cost of traveling by express train. Indeed, this year the programme was available only to people under 23 and over 60. Unfortunately, not many people took advantage of the programme, and so we propose to extend this programme to cover all ages, which is extremely important for the Kaliningrad Region because it is separated from the mainland, and we have decided to limit the period to May 15–September 15 because this covers the summer holidays, when fares go up. It is important that every person should be able to use the subsidy precisely at that period.  

Another important change has been introduced: while previously the fare was fixed, i.e. 3,600 roubles and 3,300 roubles, from now on it will be considered to be the maximum price. Airlines will compete for passengers and further cut the price of air tickets in order to get more passengers and be eligible for the subsidy. This is the mechanism we are proposing: we expect that about 200,000 Kaliningrad residents will avail themselves of this scheme.

Vladimir Putin: Let’s give it a try. Let’s do it, but we need a draft document.  

Alexander Zhukov: It will be on your desk for signing today.

Vladimir Putin: Good. Mr Savelyev [Deputy Minister of Economic Development], how is the free economic zone doing? Judging from the documents that I have, the volume of investments in that sector is growing gradually. How do you assess the situation?

Oleg Savelyev: You are absolutely right. The government’s planned and consistent efforts to develop special economic zones is yielding results. In the ten months of 2011, 52 residents have been attracted who declared more than 80 billion roubles of investments.  By comparison, investments during the whole of last year, which was also a good year, amounted to just 73 billion roubles. Another 19 applications are pending before the Board of Experts.

Among the residents approved I would like to single out such flagship companies as Frerus (production of state-of-the-art hemodialysis equipment, resident in the Dubna special economic zone); Plastic Logic (a joint project with RUSNANO, modern production and design of flexible screens, including potentially for electronic newspapers); Ford Sollers Yelabuga (it was registered as a resident in the Tatarstan special economic zone this year as part of the industrial assembly project). Another company registered in Tatarstan as a resident is Kristall, which produces polycrystalline silicon. The groundbreaking ceremony took place in St Petersburg on June 16 for the new research centre of Novartis, a world leader in the pharmaceutical industry. In the Ulyanovsk special economic zone, and this is particularly important for us, three residents have been admitted, two of which manufacture and service aircraft, including the most extensive and labour-consuming elements of service which up until now our air companies have obtained abroad. Another resident is planning to organise the production of small aircraft for regional aviation, which is urgently needed today. Of the earlier admitted residents production of equipment for refrigerators (by the Italian company Luve) was launched in Lipetsk in 2011. A good cluster for the production of household appliances is emerging in Lipetsk. For the first time in the last 50 years the production of Civil Ammunition was organised in the Lipetsk special economic zone. They are producing metal plastic cartridges for civilian and hunting weapons. In the first quarter of 2012 Yokohama, a major Japanese investor, is opening a plant to produce a complete range of tyres, some of the best in the world. The output volume will be up to 4 million tyres.

I would like to note the good work of the parliament deputies. As a result of amendments to the law on special economic zones and other parliamentary acts, some important additional instruments have been adopted which make our special economic zones more attractive. A long overdue amendment allows technical innovation activities in industrial production zones, which stimulates the appearance of hi-tech production facilities as part of that project. Those engaged in the introduction of new technology retain all the privileges and benefits that are envisaged for technical innovation zones. Also the service companies that provide innovative infrastructure to residents of technical innovation zones have been granted resident rights with the same range of benefits. I am referring also to laboratories and collective use centres which provide modern equipment to all other residents. The maximum permitted area for industrial production zones has been increased to 40 square km, and the effective term of these zones has been increased to 49 years proceeding from the experience of world leaders.  

Vladimir Putin: What is your own opinion? Do you consider the result to be satisfactory? Is anything missing?

Oleg Savelyev: You see, at this particular stage the key elements – and we constantly monitor the reasons why residents come here or why they refuse to come – the key elements are not even the cost of land and the benefits afforded in special economic zones, but the special administrative regime that we try to maintain, the removal of many administrative barriers, something we are trying to accomplish all over the country. These issues can be addressed on a case-by-case basis, which is very attractive for residents.

Vladimir Putin: So, we are talking not about financial preferences, but about administration, like you said. If so, there is nothing to prevent us from turning the whole country into a free economic zone.

Oleg Savelyev: The Kaluga automobile cluster is an example, and the governor begins every day…

Vladimir Putin: That is why I would like to tell all the colleagues: work harder to remove administrative barriers. We have a whole programme devoted to this, and we should implement it steadfastly.

Let us pass on to our agenda. As you know, last week we held a conference in Severodvinsk on the issues of the state defence order and we made a step forward in that direction. We will discuss it separately today at a special meeting on how to organise the work on the state defenсe order.

In the meantime let us discuss a closely related issue. I am referring to the problems of the old arsenals. Today Defenсe Ministry warehouses and arsenals store about 20 million tons of various types of ammunition and equipment. 50% of them have outlived the warranty period. Preliminary data show that as a result of physical and technological ageing 600 units of strategic and more than 350,000 units of conventional weapons, more than 150 million rounds of ammunition and about 140,000 missiles are to be written off and disposed of by 2020. I would like to draw your attention to this and to note that this is one of the reasons that have prompted our large-scale plans to modernise the Army and Navy. Obsolete military equipment and ammunition have outlived their life spans and even the periods when they can be stored. 

Today we shall discuss the federal targeted programme Industrial Disposal of Weapons and Military Equipment in the period 2011–2015 and until 2020. Over the next ten years more than 39 billion roubles will be allocated from the federal budget to implement that programme. This year, because the FTP has not yet been approved, financing was channelled in the framework of the state defence order and the corresponding programme project in the amount of 3.7 billion. There are some things I would like to draw your attention to. First, we should make the most profitable use of the existing stockpiles because old weapons and ammunition contain rare metals and other valuable raw materials that must be competently used. I would like to cite several figures. As a result of disposal we can obtain more than 3.5 million tons of ferrous metals (that’s just to give you an idea of the scale), about 520,000 tons of non-ferrous metals, 35 tons of precious metals and 114,000 tons of explosives and powders. I must say that during the implementation of the FTP about 10.5 billion roubles are expected to be raised from the sale of the products of disposal: ferrous, non-ferrous and precious metals and explosives. Secondly, and this is particularly important, it is necessary to ensure safe storage and utilisation of old weapons in order to avoid environmental risks, any emergencies, let alone human casualties.

I should add that we spend up to 2 billion roubles from the federal budget every year just to store decommissioned military equipment. That money of course would be much better used if directed towards the development of the Army and Navy.

Our agenda today includes also several important issues. We have to take some decisions on federal assistance to the regions hit by natural disasters such as flooding, torrential rains and earthquakes. We must make a decision on issuing housing certificates to the people who lost their homes as a result of spring flooding, heavy rains, and an earthquake in Yakutia, the Krasnodar Territory and in Kamchatka. I would like to stress that we have always helped and will certainly continue to help all our citizens in distress. But I would like to make it clear to the regions that they share much of the responsibility. Let me repeat that people don’t care which level of government is specifically responsible for this or that issue, so it needs to be addressed in any case by combining the efforts of all the levels of government and management. The main thing is that the task should be tackled and people should feel the result.  

Let us get down to our business.