Transcript of the beginning of the meeting:

Vladimir Putin: Mr Shmatko (addressing Sergei Shmatko, Energy Minister), I have discussed with our Ukrainian colleagues our future energy cooperation. Please join me at my office after the meeting to report on the latest contacts and our current progress status in dealing with the problems we discussed earlier.

Let us begin by sharing updates. Please, Mr Shmatko, would you report on the preparations for the winter? How is the work progressing? I have asked you to focus your attention on winter readiness certificates. Go ahead, please.

Sergei Shmatko: Mr Putin, colleagues. Yesterday I chaired a nationwide videoconference with energy companies on the results of inspections of their readiness for the heating season. I have to report that we have inspected 536 utility companies – nearly all of them, in fact. Following the inspection, we decided to issue readiness certificates to 533 energy companies including 58 utility companies.

We especially concentrated on grid companies such as IDGC, the Federal Grid Company and the Far Eastern Distribution Grid Company. The main goals have been achieved. The improvements we required following last year's inspection have been made and higher standards have been met. I am referring to such assignments as making clearances in the woods, installing additional diesel generators and buying special equipment. Mr Putin, all of our grid companies (I mean state companies) have been certified without any exceptions or issues.

Three power generation companies failed to obtain their winter readiness certificates on time (before November 15): TGK-14, the Ulan-Ude Heat and Power Station No. 1 (part of TGK-14) and the South Kuzbass Regional Power Station.

The main problem with TGK-14 is the Ulan-Ude power station's not being ready to supply heat. We already reported the problem in October. I must say that, although the company has resolved most of them, we refrained from issuing the readiness certificate until the company completes the overhaul of its Boiler No. 7, which is not going to happen until December 25...

They are monitoring this work on a daily basis. Just one week ago, we reported this situation to Mr Sechin at a meeting of the Government Commission on the Development of the Electric Power Industry, and invited the general director and share holders to the commission. In general, we view this situation as an emergency. Mr Putin, in February of 2008 there was a big fire at this station, as a result of which seven turbines switched off and two turbo- generators were destroyed. For three days, local residents remained without any heat in -40 degree weather. We think this case is very telling, and it is simply unacceptable to allow a repeat of this, or even a threat of it at this station. Therefore, I’d like to emphasise once again that the daily monitoring of this situation is the responsibility of both the owners and the management – they swore that everything would be okay. Nevertheless, we made the relevant conclusions.

We believe that in general, responsibility in such cases should rest not only with the management but also with the owners. In any event, the owners have to provide sufficient financial resources, despite the current problems with regulating electricity and heat tariffs in Buryatia. They must allocate enough funds for the winter preparations. We will visit this station, and will regularly analyse its performance. We hope that all work will be completed by December 25.

Mr Putin, I’d like to report to you that the winter preparations and the issue of readiness certificates proceeded smoothly. You told us to make sure that these certificates are not simply pieces of paper to be placed on a shelf. In our opinion they are credentials that represent the right to run and own generation facilities. If companies and their owners fail to cope with this task, we must consider restricting their management rights and introducing external control. We are preparing proposals to enhance this responsibility.

Feedback is an important element of the winter preparations. All companies of the grid complex have hot lines. The Energy Ministry has had a hot line since October. We pay a lot of attention to our work with the people, our energy consumers.

I am finished with my report, Mr Putin.

Vladimir Putin: Who are the owners? TGK 14?

Sergei Shmatko: Russian Railways and the ECN Group.

Vladimir Putin: What group?

Sergei Shmatko: ECN.

Vladimir Putin: ECN?

Sergei Shmatko: Yes.

Vladimir Putin: What is that?

Sergei Shmatko: It’s run by Mr Beryozkin.

Vladimir Putin: Beryozkin?

Sergei Shmatko: Yes.

Vladimir Putin: Send for him and have him work with you right here. Let the ministry come here.

Sergei Shmatko: We...

Vladimir Putin: What else needs to be done there?

Sergei Shmatko: Mr Putin, the facility is very old and has been neglected for a long time. They told us that the boilers are worn out. I should say that they did more this year than last year. But we still believe that it’s not enough. Tough requirements regarding the preparation of the facility for the winter are not a matter of relative improvements as compared with last year, they are about providing an absolute level of reliability and preparedness for the winter.

Vladimir Putin: How much time do they need to bring it up to standard?

Sergei Shmatko: The ultimate deadline for the completion of this work is set for December 25. We have this work under control.

Vladimir Putin: Are they working?

Sergei Shmatko: Yes, they are.

Vladimir Putin: All right then, report to me later.

Sergei Shmatko: I will.

Vladimir Putin: Thank you.

Mr Trutnev (addressing Yury Trutnev, Minister of Natural Resources and Environment), tell us about the mineral resource renewal efforts in 2011.

Yury Trutnev: Mr Putin, colleagues, the reports are still coming in, and they will keep coming in until the end of the year. However, I am already able to report today that we are witnessing an expanded renewal of essential mineral resources for the sixth straight year, after adopting the government programme on the renewal of mineral resources in 2005. We will have over 600 million metric tonnes of liquid hydrocarbons and over 1 trillion cubic metres of gas. Forty-four new fields have been discovered, of which two are large ones (consisting of about 50 million metric tonnes), and the rest are medium and small fields.

Vladimir Putin: How many oil …

Yury Trutnev: 44.

Vladimir Putin: Oil fields?

Yury Trutnev: 44.

Vladimir Putin: Since when has the mineral resource base started growing?

Yury Trutnev: Mr Putin, we reported a mineral resources reproduction programme to you in 2005. Since 2006, we have had expanded the production of oil, gas, coal, iron, nickel, gold and a number of other mineral resources. It was updated in 2008, and has been implemented steadily since then. Each year we discover more than we produce.

Vladimir Putin: You raised the question about increased financing of geological prospecting and exploration on several occasions. How are things today?

Yury Trutnev: Mr Putin, unfortunately, today’s numbers are below the ones laid out in the reproduction programme. That’s why we reported this to you earlier, and we hope that the amount of financing will be restored in 2012 (based on your instructions) in accordance with the programme – 43 billion roubles – as compared with today’s 20 billion. We are paying about 50 billion roubles to the budget in user’s fees alone. Of course, revenue from field development and sales is much higher.

Vladimir Putin: We will need to see how things work out for us in the first quarter and evaluate the situation, keeping other priorities in mind.

Yury Trutnev: This is extremely important, Mr Putin.

Vladimir Putin: You have mentioned selling production licenses. I looked at the materials recently, and I’m sure you’ve seen them as well. After a license has been sold, companies significantly increase their volume of production. If we did this ourselves in a timely manner, we could see even more money flowing into the budget from the sale of production licenses.

Yury Trutnev: Mr Putin, we can conduct additional explorations until we attain the desired results. We have submitted proposals for full exploration at the expense of the federal budget, but to do so we will need to increase financing for geological exploration 20 times over. In fact, all countries are heading down the same path that we currently are. Of course, we can increase the amount of fees by conducting extra exploration at the expense of the state and the price of a field. But if we sell user rights, and companies carry out exploration at their expense, we will receive much more after a field becomes operational.

Vladimir Putin: What if we strike an optimal balance between the selling price and future taxes? They don’t start producing hydrocarbons right away on many fields, so saying that we should give fields out cheaply in order to collect more money later on just doesn’t always work in this case. Please take a closer look at exploration and the money allocated for it next year together with the Finance Ministry.

Mr Shchegolev (addressing Igor Shchegolev, Minister of Communications and Mass Media), did you open a postal office in Krasnaya Polyana? How do you plan to go about organising work there? Please, say a few words about broadband Internet access as well.  

Igor Shchyologev: Krasnaya Polyana may not be a major facility, as it occupies just 500 square metres. However, this is the first Olympic facility that was commissioned as part of our programme. In a year’s time it would have been 100 years old. It was made of wood and heated by stoves. Now we have a very modern building, with two front offices. During the Olympic Games, 30 members of staff will be employed there, and a full range of services will be offered…

Vladimir Putin: When would it have been 100 years old?

Igor Shchegolev: In 2012.

Vladimir Putin: What have you done with it? Closed it?

Igor Shchegolev: We rebuilt it.

Remark: It should have been made into a museum …

Vladimir Putin: Indeed, it should have become a museum …

Igor Shchegolev: It was in very bad repair, it was made of planking, not logs.

Vladimir Putin: What does that matter? Anywhere can become a museum. It just needs certain investment.

Igor Shchegolev: There is a very good communications museum in St Petersburg, with quite remarkable exhibits.

Vladimir Putin: In St Petersburg. But not everyone can go to St. Petersburg.

Igor Shchegolev: In any case, a full range of services will be provided, complete with: postal deliveries, money transfers, internet access, and international public telephone services. Before, during and after the Olympic Games, postal services will be available for the local population, too, with pensions or postal order-related services among those provided. We are planning to invite you to visit this postal office during one of your next visits to Krasnaya Polyana. The postal office will be fully staffed and operational by that time.

Concerning broadband internet, the good news from the International Forum (a professional association of high-speed internet operators) is that this year Russia joined the top ten countries in terms of this indicator. We rank first in terms of growth rate: 20% a year – the number of broadband access lines that became operational here is eight percentage points above the global average. There are two million more lines every year, with the total figure as of this year being 40 million. According to the government’s strategic plans, this will rise to 60 million by 2015. And we are on course to hit that target.

This is also down to market growth. Today, at a meeting with Sergei Ivanov, we discussed the state of the market: our colleagues agree that it looks very positive. In addition, we recently adopted a series of decisions which, when implemented, will further boost development. In particular, at the radio frequency commission, we decided to develop a new generation of LTE communications networks. Consequently, we will have six operators in our country. By global standards, these are good market competition indicators. We also have an ambitious project to develop satellite access to the internet. The commission also saw the following issue discussed: a number of satellites will be built to provide access to the internet where other forms of communications are lacking. It will be like satellite TV reception dishes, and at more affordable rates than currently seen in places where this access is expensive or just unavailable.

Vladimir Putin: This is important for our country given its vast size. Good.

Sergei Ivanov: We need to build four satellites by 2015 and launch them into space. They will cover the full expanse of Russia’s territory, providing both mobile and broadband high-speed internet services.

Vladimir Putin: One more has recently been sent into orbit under the GLONASS programme – we now have a total of 30 satellites in orbit.

Sergei Ivanov: Yes, about 30, with 24 in operation.

Vladimir Putin: Yes, 24 are in operation. They directly fulfil GLONASS programme objectives. This makes our GLONASS system truly global: it now spans the entire planet. Twenty-four in operation means six are on standby or undergoing maintenance. The same ratio as our American counterparts’. One to one.

Sergei Ivanov: We have met our target, and now have only to upgrade them.  

Vladimir Putin: This is a good event – something we have worked towards for a considerable time. Now we must not lose sight of the ground-based and business components of the project, promptly sending additional ones into orbit to replace those that are taken out of orbit. That is a big undertaking. We decided to make it a priority and we have stuck to that. This is now one of the significant, serious high tech areas. We set this challenge and rose to it. I would like to thank everyone involved, and congratulate them on this, but I repeat there is still a good deal to be done. The system is far from perfect and still requires great efforts. This is mainly due to the ground-based component: mapping, ground-based equipment, and smaller devices for users in the various sectors of the economy and daily life. It should all be accessible, affordable, and available. Once again, I draw the attention of our departmental and ministerial heads, especially of our transport organisations, to the need to use the GLONASS system, especially since it is a dual system – GLONASS/GPS. But we should opt for GLONASS and use the national facility.

Ms Golikova (addressing Minister of Healthcare and Social Development), this year we have allocated additional funds for disabled people and those in need of health resort treatment and medicines. Almost 8 billion (7.9 billion roubles) in additional funding is allocated to rehabilitation facilities, 3.1 billion for health resort treatment and 2.3 billion for medicines. How are things going? And also, what about prices for essential medicines?

Tatyana Golikova: Mr Putin, we have just signed a law to amend the 2011-2013 federal budget law, and all amendments, including those you just mentioned, were incorporated. We promptly issued subordinate legislation as per your earlier instructions. The resulting picture is as follows. First, I would like to focus on particular care items. During one Popular Front meeting, you instructed us, jointly with the regions, to ensure we have eliminated the waiting list for these items by the end of the first three months of 2012. To these ends, we added 7.9 billion roubles to the amount previously allotted in the budget. This money is managed by the Social Insurance Fund. We are currently running experiments in 21 regions which have all taken on the enactment of these powers, supported by our resources. As a result, we will have an additional 4.1 billion roubles for the Fund to provide to those regions that did not take on these powers and 3.8 billion roubles for those regions that have assumed these powers. The implementation of this directive will impact 550,000 disabled people, of which 380,000 are currently on regional waiting lists.

Today, we have 292 care items on our list. There is most demand for four types of facilities. These are incontinence pads (which you all know well), then prosthetics, orthopaedic footwear and wheelchairs. These are the care items that are in most demand among disabled people.

The funds have already reached the regions, reached the Social Insurance Fund. On November 18, we held a conference call with the regions and local social insurance offices so as to resolve the issue as speedily as possible. Regarding the other two issues – health resort treatment and medicines – let me remind you that these two functions are performed as part of benefits monetised in 2005. We are talking about those who opted for in-kind benefits, either medicines or health resort treatment plus travel expenses, instead of cash benefit payments.

Health resort treatment was our biggest problem, because the current regulation is  not broad enough to cater to all those who would benefit from it. We therefore allocated an additional 3.1 billion roubles on top of the 4.8 billion roubles. You mentioned “3.3 billion roubles” – 0.2 billion was assigned under the 2011 budget, using powers that we share with the Finance Ministry. What does this give us? Here, as in the case of prosthetics and orthopaedics, it is the Social Insurance Fund and the regions that manage this. We have 22 regions here (21 there and 22 here). An additional 3.1 billion roubles is being allocated. Of this 3.1 billion, the regions will get 1.4 billion, and the Fund, 1.7 billion. The support picture here can be seen to have a ratio of 4.8 to 3.1. It virtually doubles the amount available from the budget, so an additional 194,000 benefit recipients who have applied for this kind of treatment will get vouchers.

Turning now to the availability of medicines, the budget law approved earlier without amendments provides for this benefit from two sources – with people themselves making that choice… The standard set for 2011 was 570 roubles to calculate the subvention. We also provided an additional 13.6 billion roubles to ensure there is greater availability in the regions. This way, before the amendments were adopted, we had allocated 43.3 billion roubles for the regions for these purposes. Now the norm is not 570, as I said, but 848 roubles to calculate the subvention. We currently have 2.3 billion roubles set aside. The executive order is now on your desk, waiting to be signed, for the funds to be transferred to the regions in December. They already know the amounts they are to receive expressly for drug purchases, so they can go ahead and get on with it now, rather than leaving it until early January to ensure the New Year holidays do not get in the way.

This has become something of a tradition for us. We usually hold a conference call in December (this year will be no exception) to check how well prepared the regions are in this regard. I do not anticipate any setbacks because the situation is hardly out of the ordinary, and usually the regions are well aware of how to act in such circumstances.

As for medicine prices, we have noted a slight rise – a little over 2% (we only have statistics for the first nine months). I am referring to the list of essential medicines where the prices are government regulated. Things here (even including 2% increase) followed our decision last year to index-link the prices recorded back in 2010.

We currently see a lively discussion underway in the media, and perhaps you have read reports that Russian pharmaceutical companies have gone to you, the Federal Tariff Service and to us, with their request that, although they submit the documents, we do not index-link the prices as we used to – either automatically (as was done last year as set out in law) or according to existing procedures defined by the government decision and joint order issued by the Healthcare and Social Development Ministry and the Federal Tariffs Service. Yesterday we contacted Sergei Novikov (head of the Federal Tariff Service) to bring clarity to the matter. The Federal Tariff Service said it shows no bias when examining company documents. All the documents that are needed to register a new price must be submitted by the companies concerned. These documents will be considered in due course and, if necessary, decisions regarding the index-linking of these prices will be made.

There is one more issue, which is also relevant, which we do not see as a matter of particular concern.

You will shortly sign a resolution on additions to the list of vital and necessary medicines for 2012. The list has received the requisite approvals and has been introduced. It contains some new drugs the prices for which will be regulated next year. The pharmaceutical companies have some concerns as to whether they will be able to register the price before January 1, 2012. I would like to allay their fears: after we agreed to the additions to this list with all the experts and the federal executive agencies, we immediately posted it on the official website of the Ministry of Healthcare and notified the Federal Tariff Service that they could start filing the documents for consideration and subsequent registration of prices. Therefore we can safely say that all the medicines that will be added to the list of vital medicines beginning 1 January 2012 (provided of course documents for price registration are filed because this is done on a voluntary basis by the producers or their official representatives) will be registered under the established procedure. There will be no slip-ups on our part in this matter.  

Vladimir Putin: Make sure there are no slip-ups. Everything must be done in a timely manner. There is no room for bureaucratic red tape here. This cannot be tolerated in any case.  

Mr Avdeyev (addressing Alexander Avdeyev, Minister of Culture)… Some sort of a competition is under way. Can you fill us in on it? What is it called? 

Alexander Avdeyev: It is called the All-Russian Music Competition. Unfortunately, in the 1990s the integrated system, the system of selecting talent from across the country was allowed to decline. The vacuum was quickly filled by various pseudo-contests and competitions and so on, in fact in 2008 we had 80 competitions. They all asked for money from the ministries, from the government…

Vladimir Putin: What year was that when they held 80 competitions?

Alexander Avdeyev: In 2008, and the criteria were very vague, and they produced pseudo-laureates. Of course, talent standards plummeted. That disoriented the musical community and other competitions.

In late 2009, you signed an executive order on the holding of an All-Russian State Musical Competition. Today it is the main musical competition in the country and it is held in all the musical disciplines: violin, cello, conducting, woodwinds, folk instruments, etc. We have very tough criteria, selections are made in all the country’s regions, with practically one and the same group of musical specialists going to all the regions which keeps the criteria the same everywhere regardless of how remote the region is. Thus we were able to instantly raise the benchmark. The two first rounds of the competition are held in the regions and the final competition takes place in Moscow. This year we processed 350 applications and we have totally unexpected winners coming from conservatories in Vladivostok, Yakutsk, Rostov-on-Don, Krasnodar, Novosibirsk, Yekaterinburg and so on. Winning our competitions – and now it is an official national competition – is highly prestigious, it is on a par with winning international competitions. This immediately launches young men and women on their careers.

Secondly, through these competitions we monitor the quality of teaching at the conservatories and we can immediately see the variations in teaching standards at the different conservatories. It is important that the competition becomes a place to exchange experiences between teachers and professors of the conservatories. Monetary prizes are also an important aspect: the top prize is 240,000 roubles, the second prize, 185,000 roubles and the third prize in each discipline is 110,000 roubles. That is very welcome support for young musicians. Already we are beginning to build up a system of contests in individual disciplines in the framework of the national competition. So now the programme is in its second year and we are at the point when the selection of talent will be resumed all over the country.   

Vladimir Putin: Is the competition over?

Alexander Avdeyev: No, it is still going on.

Vladimir Putin: When will it finish?

Alexander Avdeyev: By the end of the year.

Vladimir Putin: By the end of the year? And what then? Some kind of concluding stage? A concert?

Alexander Avdeyev: A concluding stage: three winners in every discipline followed by the monetary prize awards.

Vladimir Putin: Will there be a general concert by the winners?

Alexander Avdeyev: Yes, we will hold it in the spring.

Vladimir Putin: Yes, of course, it must be held; we should show these talented young people to the country, to the world musical community and to music lovers.

Alexander Avdeyev: We will hold the concert.

Vladimir Putin: Make it a beautiful concert.

Alexander Avdeyev: With pleasure.

Vladimir Putin: Thank you.

This year we brought in… Not we but the farmers brought in a record harvest, almost 98 million tonnes of grain (97.8 million tones, to be exact). Tenders as part of the grain state intervention programme have begun. How are they proceeding and in what regions?

Yelena Skrynnik: Mr Putin, in accordance with the law on the development of agriculture and in order to shore up grain prices, the Ministry of Agriculture and the United Grain Company has held the first day of state procurement interventions. Eighty-four agricultural organisations have been accredited. Trading is taking place at five trading floors, and 17 remote centres. The purchases today amounted to 83,700 tonnes of grain.

Vladimir Putin: Today is the first trading day.

Yelena Skrynnik: Yes, today is the first day. We have made a start. The total value is 379 million roubles. All the purchases have been made by agricultural organisations and we see to it that there are no middlemen. Private farms have priority. This year’s procurement interventions have several features. The first is that the intervention has a spot character. This is because in the following regions – the Siberian Federal District, the Urals Federal District and the Orenburg Region and the Volga Federal District… the assessment and choice of these regions proceeded from the balances in accordance with production and consumption and from export potential, which is why these regions have been selected. In addition, they have been reducing grain prices, market prices. For example, in the Kurgan Region the selling price is 3,700 and at the exchange today grain was purchased at 4,500 roubles. True, the amount is less than the Kurgan Region would like to sell, but more will be bought at the next trading session. And another advantage of the executive order that you signed is that it allows agricultural organisations to buy out the grain earlier sold to the intervention fund. They have this opportunity, and the cost of storage and insurance is covered, that is, even without covering the cost of interest on loans. Therefore the increase of prices after storage will range between 10% and 15%, and so this transaction, given the right situation in the grain market, will be good for agriculture. We have this situation under control, and this is one more form of state support for our agricultural producers.

Vladimir Putin: What total amount are you expecting?

Yelena Skrynnik: About 1.5 million tonnes.  

Vladimir Putin: The amount you will buy? Over what period of time?

Yelena Skrynnik: We usually do it for as long as they file applications, for the longest possible period… And buyback is possible from January through May. As long as there are offers, we carry out interventions.

Vladimir Putin: Good. How much have you exported already?

Yelena Skrynnik: I think more than 13 million tonnes, I can give you a more precise number; we track that figure too.

Viktor Zubkov: It will be about 18 million tonnes before January 1.

Yelena Skrynnik: Yes.

Viktor Zubkov: So things are not so bad.

Vladimir Putin: That is normal, very well.

Today we will discuss the package of legal acts, colleagues, connected with the shift to a new system of providing salaries and pensions for servicemen and interior ministry agencies. Let me stress that this is an inalienable and very important part of our plans to develop and strengthen the army and navy and law enforcement bodies.

Service personnel and members of security and law enforcement agencies must enjoy the full range of social benefits that match their important responsibility: these include decent salaries, the provision of housing, quality medical care and opportunities for further study.

As you know, the salaries of servicemen in the armed forces, the interior troops and law enforcement agencies will grow substantially, by between 150% and 200% on average as of January 1, 2012. For service personnel of other security agencies, salaries will be raised as of January 1, 2013. I would like to remind you of the figures that have been cited many times already. The salary of a lieutenant in the armed forces in the starting officer position of platoon commander will be 50,000 roubles; in the interior agencies, at least 33,000 roubles; and for those who serve under high-risk conditions a lieutenant’s salary may be as high as 80,000–90,000 roubles a month. That is higher than the average wage in key sectors of the Russian economy.

As for benefits and other extra pay, they must be integrated into large groups, as I have said many times, explaining that there will be no significant cuts, the groups will be reformatted, but all the main categories will remain in place. Also beginning January 1, 2012, pensions for all military pensioners will increase by an average 60% regardless of their affiliation. Today we will discuss amendments to the legislation that will enable military pensioners to receive their pensions when they change their place of residence without extra bureaucratic formalities, which is also an important practical aspect for the people. 

Generally, I must note that this is the first sizable increase in military salaries and pensions in contemporary Russia. Moreover, salaries will be adjusted for inflation. You know that one of our priorities is ensuring a decent quality of life for Russian citizens, and this includes military personnel and their families. The necessary funds for the increase in military salaries and pensions are planned for in the federal budget. These are no small amounts: we will allocate an extra 1.68 trillion roubles for 2012-2014 (for three years) of which 389.3 billion will be allocated for 2012.

Another issue we will discuss today is the incentive fund for the regions that achieve the best results in attracting investment, increasing the tax base and promoting projects to create modern production facilities and new jobs. That fund will amount to 10 billion roubles a year.  

Today we must take a decision on distributing these resources among the 20 regions of the Russian Federation which have the best performance indicators, and the regions will be able to use that money at their discretion, to determine priorities and key tasks that call for additional funding.  

We are talking about serious sums that can come in very useful to the regional budgets in implementing infrastructure projects and programmes, socially significant projects in education and healthcare, the provision of amenities in towns and villages, the creation of new openings at kindergartens.

I remember discussing this at various forums, including, I believe, at the Business Russia forum. The Kaluga Region Governor raised these issues, saying essentially that we are stifling those who are performing the best, denying them the opportunity to use the extra money that they earn from their efficient activities, taking away these earnings and placing them in the federal budget and then redistributing the money among those who do not perform as well. The mechanism we discussed has been proposed and will be implemented. I would be interested to hear how you intend to spend that money. Please, go ahead.

Anatoly Artamonov (Governor of the Kaluga Region): This truly is a long-awaited decision. I think that although this may not be such a large amount for the country as a whole, this is a considerable amount for us.

Vladimir Putin: It’s a lot. Ten billion.

Anatoly Artamonov: The money will play a big role, there will be a multiplier effect, because it provides a real incentive for building up our tax potential. Within just ten years the Kaluga Region, which used to depend heavily on subsidies (we consistently occupied the bottom place in the Central District), next year will become a donor region in accordance with the principles set out by Anton Siluanov… There are both pluses and minuses for us there. But our meeting today will somehow make it possible for us…

Vladimir Putin: This is good for you.

Anatoly Artamonov: Yes, we intend to spend that money…

Vladimir Putin: The Kaluga Region will receive 2 billion.

Anatoly Artamonov: Yes, thank you very much. It will be very helpful. We intend to put that money towards restoring water supply and sewerage facilities. We are gradually taking them away from being leased by Rosvodokanal, as I have been telling you. Of course the facilities are 92% used up. The situation there is catastrophic and this is where we will direct the money.

In addition, we still have a waiting list for children waiting to attend kindergarten. We need additional places at preschool childcare centres and we need to raise the pay of the workers there. Starting from December 1 we have practically banned public sector salaries that are below 10,000 roubles [a month] – such wages will no longer exist. But since this decision has been made, it must be financed and we may have to tap into this sum to some extent.

On the whole I can say with confidence that the policy of creating favourable investment conditions has resulted in a burgeoning of the economy in our region. This year we are once again the fastest growing region in Russia. The policy has paid off. We have two goals: to increase the tax potential and to raise wages.

Vladimir Putin: How much will your GRP increase this year?

Anatoly Artamonov: By about 24-25%.

Vladimir Putin: All right – 24-25%?

Anatoly Artamonov: Yes, for the fifth year in a row we have the third highest average wages in the Central Federal District.

Vladimir Putin: You see how Siluanov is fidgeting, he has heard these figures. You have outstripped China by two or three times, your production growth rate is three times higher than in the People’s Republic of China.

Anatoly Artamonov: Mr Putin, we are great friends with the People’s Republic of China and they are implementing some projects here, so to some extent we are following their example.

In general, the fact that we are steadily increasing remuneration, and not by some administrative methods, but as a result of fair competition in the economy, is very good for the social and political climate in the region, making it easier to work and to discuss decisions and future tasks. This is one of the main challenges at present, as you are constantly reminding us.

Vladimir Putin: What about kindergartens? Are you going to build any?

Anatoly Artamonov: We have adopted a policy of creating “school-kindergarten groups”. It is no secret that vacancies are popping up at many schools, and we are converting some of the premises. By the way, it’s very good for the kids when they move directly from kindergarten to primary school.

Secondly, we are creating additional groups and we have to build new kindergartens for this purpose. For example, we are currently building a new housing estate next to the Volkswagen factory that is due to be completed next year. The first phase, which includes 1,500 houses, a school for 540 pupils and three kindergartens, will be opened next year (Viktor Basargin will be there to open it). This is the only way to proceed in this area – we are building new housing estates in other places and there will be new kindergartens there too. But of course we cannot have investors build our social infrastructure for us: this is our responsibility and we are building it, but of course that also calls for funds.

Vladimir Putin: What is the salary of your kindergarten teachers?

Anatoly Artamonov: It depends on the municipality.

Vladimir Putin: But what is the average? But keep in mind that the people back in Kaluga will hear you.

Anatoly Artamonov: Yes, the average figure is about 12,000 roubles. These are rather low wages and we have raised them by 30% starting on September 1. Now we will retroactively raise the salaries of all preschool childcare personnel as well as salaries in medical institutions, also by 30%. Teachers received a 40.8% pay raise and last month their average salary was 22,000 roubles, so there are no problems in that area at present.

Vladimir Putin: At the end of the year the average wage in the country will be 23,300 roubles, that’s the national average.

Anatoly Artamonov: It will be about the same in our region.

Vladimir Putin: Very good, thank you very much. (Addressing Vladimir Yakushev, Governor of the Tyumen Region) How are you intending to spend our money in the Tyumen Region?

Vladimir Yakushev: Of course when we received the good news about this massive grant we had a serious discussion. Meetings that we have held with ordinary people, which have been particularly frequent of late, have revealed two serious problems in the region: repair of the residential housing stock and demolition of decrepit and unsafe housing. So we have decided not to spread the money too thin, and to use the entire grant to address these two problems.

On the whole I would like to say that this is a serious incentive. When the people in my region hear this report, and later when I return and tell them about this meeting, it will be a great incentive for investment activities, which is our major effort today. And most important is the effort of the municipalities, because they will have concrete proof that we have started to use that money to repair housing, and to pull down decrepit housing. I'm sure that the heads of municipalities and their teams, and everyone who is working there will be aware that this increased effort to attract investment to the region and create new jobs is worthwhile. Therefore this is the lever, the mechanism that the government is using today, and this decision that is being made is a serious step in support of all our work, for which I would like to express my gratitude.

Vladimir Putin: How many square metres are you planning to repair and how many families are you planning to relocate from houses that are unsafe to live in? Approximately?

Vladimir Yakushev: Our plan is to divide the sum in half, with one half going towards housing repair and the other half to relocate people from decrepit and crumbling homes. It will take less time to pay out compensations for those who live in decrepit housing. The average fixed price of one square metre today in our region is about 30,000 roubles. Divide 1 billion by 30,000 and you get about 300,000 square metres of decrepit housing that we can demolish using that money, if my calculations are correct. It's 30,000, isn't it? Pardon me, 30,000. 300,000 feels like a bit too much. But 30,000 square metres represents serious progress in the demolition of old housing.

Vladimir Putin: That's for demolition. And repair, I suspect, will cost far more?

Vladimir Yakushev: Of course, repair costs much more because the price for one square metre will be lower. Secondly, when we prepare project and cost estimates based on when a house was built we look at what kind of work will be needed. Today, under the programme that we are implementing to repair the housing stock, we are directing the main investments into ensuring that the basements are dry, repairing the roofs, and the networks. In other words, these are the three main things we are focusing on, and then we will look to all the other work, depending on the age of the house. These are the three basic areas.

Vladimir Putin: Thank you. (Addressing Sergei Mitin, Governor of the Novgorod Region) And what about Novgorod

Sergei Mitin: Thank you. First, regarding these figures. We have good figures to report. 588 million. But we managed…

Vladimir Putin: 589.

Sergei Mitin: 589?  Thank you. Another million, even better.

Vladimir Putin: Not an extra million. That was the sum from the beginning. I just want you to know the exact sum.

Sergei Mitin: We achieved that through the implementation of some investment projects. We have identified groups of advanced goods for the internal market and we have done a fairly good job. For example, we increased meat production by 5 times within four years and we are continuing to move forward. This year we expect to increase it by 22%. Ultimately, we increased the volume of investments – one of the key indicators – by 70%, and the consolidated budget also by 70% in four years.

More money has been generated. I should say that the kindergarten situation in the region is not bad. The waiting list in the entire region is less than 1,000 kids. There are no waitlists in Novgorod. We have met the city's needs. Frankly, how are we going to use that money? Our region has 560 boiler rooms. They are old-style boilers that burn coal and fuel oil. Switching the boiler rooms to gas and pellets, as we are doing now, has proved to be highly effective. First, the price of a gigacalory goes down. Second, we get rid of environmental hazards. There is no point in carrying coal or fuel oil across the whole country. I think that we will spend about 200 million on these boiler rooms. The average price of revamping one boiler room is between 5 and 10 million, but they will be modern boiler rooms. One operator will be able to service three boiler rooms and that instantly pushes down the price of running the facility and the utilities rates, which is very important for the people.

And we have yet another dream. Many of our children are into Eastern martial arts. Yakovlev of Novgorod recently defeated a Spaniard in a very exciting bout, and we will present an award to him tomorrow. I have held a meeting with all of the coaches and the kids, and we want to build an Eastern martial arts centre in our city. That will cost about 120 million roubles. When I learned about this, we even commissioned the Ministry of Sport to do this project, so children could come here from all over the region and train and study. Perhaps we could build up a kind of philosophy around these kinds of sports. It is a very popular sport.

The remaining money will be spent to build municipal polyclinics. We were unable to include several facilities in the modernisation programme because it makes more sense to build new ones. And we are building a district hospital. That’s the breakdown of the sum.

Vladimir Putin: In what district?

Sergei Mitin: In the Lyubytinsky District. This is a remote district on the border with the Leningrad Region, 250 km from Novgorod. We will build a good, modern district hospital there.

Vladimir Putin: Very nice. You have also mentioned problems with the moat around the Kremlin and that you needed approvals from the Culture Ministry – since you are here and the culture minister is here.

Sergei Mitin: Thank you very much for remembering. The moat is not our property. It is federal property. Otherwise, I would long have fixed it. The moat was filled with water. The water drained away, and there are holes there. We have agreed with the ministry, and it repaired half of the moat for us. It looks beautiful. I asked you to give relevant instructions to help us repair of the second half.

Vladimir Putin: How much does it cost?

Sergei Mitin: I don’t think that it is a lot of money – perhaps 25-30 million. I might not even be asking you, but the point is that I simply cannot do it myself. This needs to be preceded by studies. Scientists must see to it that the walls do not collapse and the water does not seep out. Anyway, it is federal property.

Vladimir Putin: Mr Avdeyev, speak up, please.

Alexander Avdeyev: That is a lot of money for us – 25 million. The region must share the cost, as all other regions do. This is a federal monument, but it is on the region’s balance book and, of course, we must do it together.

Sergei Mitin: I can't. This is not a regional object, unfortunately.

Sergei Ivanov: He cannot do it by law.

Sergei Mitin: I cannot do it because that would be a serious violation.

Vladimir Putin: So, you can take a chunk out of the 25 million from the money that we have allocated to you.

Sergei Mitin: I think that would be unfair, Mr Putin.

Vladimir Putin: Unfair?

Sergei Mitin: That wouldn’t be fair. We maintain and repair a lot of other monuments. Honestly, I think the Novgorod Kremlin deserves a more forthcoming attitude from the Culture Ministry.

Vladimir Putin: You see whose company you are in – the culture minister is sitting across the table and the finance minister is right next to you. They will solve the problem together.

Sergei Mitin: Thank you. Thank you very much.

Vladimir Putin: Mr Siluanov (addressing Anton Siluanov, acting Minister of Finance). Look into it together with the Culture Ministry. The moat around the Novgorod Kremlin must be repaired.

Sergei Mitin: Thank you very much.

Vladimir Putin: Mr Kovalyov (addressing Oleg Kovalyov, Ryazan Region Governor), what are you plans for the Ryazan Region?

Oleg Kovalyov: The people of Ryazan are very pleased because, for the first time in a decade, the Ryazan region has been cited as a dynamically growing region. This is heartening, but of course we are not complacent because our growth rate is not as high as in the neighbouring region and there is yet much to be done. The foundation has been laid, including the legal framework. This enables us to develop and attract investments. We have streamlined all of the budget spending, put it in order, increased the returns on our spending, and we are addressing demographic issues.

What will be our spending priorities? We have set the target to solve the problem of preschool childcare in 2012, especially for children aged three – and even more so for two-year-olds. Why? Because when a child turns three, his mother must return to work. If there is no kindergarten, she loses her job. So, we will spend part of the money on that. And, this may be an odd thing to say, but we will use part of the money to build the infrastructure for an industrial park because we must continue developing the economy. To do that, we must lay the infrastructure to create conditions for would-be investors. I think the people of Ryazan will understand me. I will try to explain this to them.

Vladimir Putin: What is the current situation with the industrial park? What is happening there?

Oleg Kovalyov: As regards the special economic zone, I would like to ask the government to pass a resolution even though there is no managing company yet. It is not rights that there is no government resolution… Even when I speak with our development institutions, they say that they are ready to pitch in, but they need a government decision. And when you talk with the residents, they say that, fine, they understand about the special economic zone, but when? In other words, I am ready to assume the largest share of responsibility that I am allowed to, but I am asking the government to pass a resolution and then I will work day and night.

Vladimir Putin: Mr Kovalyov, are you talking about this particular zone?

Oleg Kovalyov: Yes, about this zone.

Vladimir Putin: The reason that I am asking this question is that there is still no managing company and, therefore, no resolution, but you are going to spend the grant money that we are giving you to build the infrastructure around the zone, which is still not working, yes?

Oleg Kovalev: I have a meeting with Elvira Nabiullina tomorrow to discuss the mechanism of managing the zone. I would like to discuss this topic with her tomorrow, but still a resolution is needed. A decision must be taken in principle. I am not shirking my responsibilities. I am responsible and I am working and will continue to work. I will work, of course, with the ministries and with the development institutions, but you see, we have been working for two years...

Vladimir Putin: We are all for it. The Economic Development Ministry will be happy if you get the zone up and running. We all want this to happen. The only question is that it should be workable. It should not remain only on paper. It should function.

Oleg Kovalyov: It will be in working condition, I assure you.

Elvira Nabiullina: We will discuss this tomorrow, but I would like to cite the example of your neighbour, Anatoly Artamonov, who has been building industrial parks without any federal decisions. It is part of the job, and we don’t have to do everything at the federal level. We have the opportunity to develop such zones at the regional level. However, we will discuss tomorrow whether it will be possible to help out with managing companies and residents.

Oleg Kovalyov: Mr Putin, there is no federal budget money there. But when I talk with development institutions – the Development Bank and Sberbank – they are ready to take part and even become founders of the zone. However, they refuse to talk in the absence of a government resolution. The agreement of principle is there. There is a concept for the zone. A good concept has been developed, but...

Vladimir Putin: OK, discuss this with the Economics Ministry tomorrow and Elvira Nabiullina will report back to me.

Oleg Kovalyov: Mr Putin, today, investors, of course, go where zones have already been created. If a zone is already in place, they go there, of course. I need a government resolution, and then I will work on this. 

Vladimir Putin: All right, all right. Please, start working with the ministry tomorrow.

Mr Morozov (to the Ulyanovsk Governor), what are your plans for the region?

Sergei Morozov: Mr Putin, this award is extremely important for us. You know that – even ten years ago – Uyanovsk was a depressive region. In the past six years, thanks to the Economics Ministry's extensive support, we have developed a whole new strategy and a system for working with investments from the ground up.

In 2008, we won a bidding to set up a special economic zone – an aircraft manufacturing and port zone. We already have three large resident companies, and have completed talks with three more. As I reported to you on Sunday, we are going to break ground tomorrow for a plant making composite materials for aircraft applications. It is a unique project. We’ve discussed that with (Deputy Prime Minister) Sergei Ivanov. We will begin building the plant tomorrow and start manufacturing wing structures for MC-21 and Sukhoi Superjet-100 aircraft as soon as next year. Designers say that our products will be better than Europe's.

We won a second bid and received 1 billion roubles from the Investment Fund in 2009, and invested the money in building a regional industrial zone and its infrastructure. As of now, a dozen large companies operate there, and we still have… By the way, we want to use part of the money – 100 million roubles – for the zone’s infrastructure. We have completed negotiations with 79 large investors. They are at various stages in their projects now. Overall, we plan to invest over 100 billion roubles. Starting from 2015, we will add about 8 billion roubles per year to the region’s total taxes paid to the consolidated budget.

We won a third bid to build a nano centre. We are completing the design project now – an Italian company is doing the design and will finish around March 2012, so we’ll invest another 100 million of that money to build the centre. We’ll have some 20 million roubles left and we will use it to award grants for innovation projects.

Vladimir Putin: To whom?

Sergei Morozov: Seven large projects have already been submitted to the centre that we are building. It is highly important to support them during the development stage. They are worth about 70 billion roubles.

Vladimir Putin: Good. Great.

Mr Vakhrukov (to the Yaroslavl Governor), could you tell us about the Yaroslavl Region’s progress?

Sergei Vakhrukov: Mr Putin, first of all, I would like to thank you not just for the grant, but for the general support that you gave to the projects we proposed in the past.

We focused on the traditional sectors of the regional economy, namely mechanical engineering. We have accompanied you to Saturn, our rapidly growing aircraft engine plant. Saturn has designed the Sukhoi Superjet engine, which is performing well. The company is expanding its business into other segments, such as power engineering. We are putting a lot of effort to build an energy cluster there.

Thanks to you, General Electric is implementing a large investment project in Rybinsk. We have already allocated a site and a production facility has been designed. Construction will begin next year.

We have completed a new diesel engine plant. Production has already started. That’s another project where you provided support and helped us to secure Vnesheconombank financing. We are grateful for this, too. The plant has rolled off the first 50 engines. It is a cutting edge plant. I expect that it will reach its design capacity next year.

The next important industry that we are focusing on is pharmaceuticals. This sector has not showed rapid growth in our region until recently, and we have also received great support here. We have formed a pharmaceutical cluster. A new modern plant – fully compliant with international GMP standards – launched some time ago. It is in pilot production now, and will obtain a licence soon. We have a total of seven projects in the sector requiring over 10.5 billion roubles in investment. And there is also the Teva Pharmaceutical Industries plant. We signed an agreement on this project at the Sochi Forum. This is another large industrial enterprise…

Vladimir Putin: So how many producers are there in your pharmaceutical cluster?

Sergei Vakhrukov: We have seven producers now. They do not only manufacture drugs. We also try to involve large pharmaceutical companies in practical medicine. We have signed an agreement with Novartis, which is a global pharmaceutical leader. Today, we are working together on… We have already completed three stages of a project to introduce innovative cardiovascular therapies. We organised a large conference with the Healthcare Ministry last week, which brought together cardiovascular experts from every region. The ministry provided significant assistance in proliferating international modern technologies. Major medical aid centres are actively using them in the regions, and quite effectively, too. The mortality rate from heart attacks and strokes has dropped and many patients have returned to the workforce. This is the result of timely high-tech medical intervention. Pharmaceutical companies are actively cooperating in this regard.

In short, we have diversified the regional economy and over 50 investment projects are in progress now. We have organised five industrial estates. Two are already operating. Two are located in single-industry towns. This is something else that I should thank you for. The two industrial estates already working are Gavrilov-Yam and Tutayev. The government has provided invaluable support, and we continue to work closely with the Economic Development Ministry. This creates more jobs and new opportunities. The Tutayev industrial estate has already signed a contract with the SaarGummi Group to manufacture sealing systems and other rubber components for automotive applications, in particular, for assembly plants in Kaluga. Over 52,000 square metres more will be provided for use by investors.

As for the funds that we have received at this point, they are smaller than those received by our colleagues because we still have to catch up in terms of our pace of development. We are dealing with problems that are typical for many Russian regions, so part of the funds will be spent on building preschools and kindergartens. This problem persists, although we have adopted a programme and are planning to build 12 facilities in the next two years. Still, we know that we need to work faster and resolve this problem in the next 2.5 years.

Another major problem is resettling people from dilapidated and dangerous buildings. We have made sound progress here, resettling over 120,000 people, but we need to do more. People want to move out or to have their buildings renovated.

There is one more problem that we have not addressed properly before. I am referring to connecting more facilities to gas distribution grids, including rural households and resident companies at our industrial estates because with these companies the demand for gas has surged. I met with (Gazprom Chairman) Alexei Miller last week. We signed an expanded programme for which we need co-financing. So, part of the funds in question will be used to co-finance connections to gas grids.

Vladimir Putin: Do you mean to build low-pressure pipeline systems?

Sergei Vakhrukov: Yes. They will carry gas to… We have four high-pressure pipelines traversing the region. We also have a gas distribution grid. But we need to build a pipeline around Yaroslavl because – as the local industry grows – gas consumption is increasing, too. Improving rural areas is one of our priorities today. Having a connection to gas grids means a great deal to rural residents – more comfortable living conditions and lower housing and utilities costs because there are still over 100 electric boiler rooms there now. There are another 50 running on fuel oil and a few operating on diesel fuel. We have made progress in the past few years, but there are many problems still affecting utilities costs and reliability. We have upgraded nearly 100 of 700 boiler rooms, but we will have to work on this more in the coming months. We are also cooperating with the Energy Ministry on an energy efficiency programme…

Vladimir Putin: One-hundred boiler rooms out of 700?

Sergei Vakhrukov: We have overhauled 100 of the 726 that we have.

Vladimir Putin: This is good enough. How many more require extensive overhaul?

Sergei Vakhrukov: We need to improve 150 more without question. We have put them in the programme. These are the boiler rooms that we have used.

There is usually a hospital, a kindergarten and a club in the village and they receive heat from the boiler station, either coal or oil-burning. They need to be rebuilt. We have planned new, small boiler stations in Yaroslavl together with WOLF GmbH that will use engines produced by Yaroslavl Motor Plant. We have upgraded them to 190 kilowatt cogeneration gas powered generators, and they are now being installed. They aren’t big, but are very efficient. Further plans include 300 kilowatt generators and using solid fuel. We have already installed several boilers, two at schools in Rybinsk, for example. After switching from coal we managed to save four times more money, which in fact equals the cost of a boiler station after a year. These are modular, automatic stations, and they are experiencing no problems. I believe that after two or two and a half years of our energy efficiency programme the problem will be solved for the most part.

Vladimir Putin: Good.

Sergei Vakhrukov: It is a common problem.

Vladimir Putin: Yes, this is clear.

We created the stimulation fund for the successful regions, which was only the first step towards supporting our colleagues in the regions. Again, we need to review the system of inter-budget relations both with respect to the regions and the municipalities. We are doing this now – there is a special group in the government  that is currently reviewing the authorities and the investment sources at  various  levels.

There is a simple logic to it: regions that are being developed actively, building up their economic strength, should receive more money and should be allowed to keep more money. Of course 24% growth in GRP in Kaluga is a serious figure. One of the absolute global leaders with the highest growth rate in the world is China, I’m not kidding. This year it is expecting 8% growth while you are expecting 24%. And we should remember that this region does not have oil or gas fields, or gold mines, or any other valuable mineral resources that are in high demand on world markets. It is all about industrial development based on modern technology which means anybody can do it.

We should accelerate the process of reviewing the system of inter-budget relations and establish additional incentives for the regions. It is important for maintaining the so-called points of growth and ensuring the balanced development of the regions around the country, creating additional opportunities for using individual professional potential and increasing the standard of living for people.

One more issue on our agenda today is directly connected with the interests of the people in the Kaliningrad Region, one of our important regions. We are going to review a draft of the agreement with our Polish colleagues. This document will facilitate the process of crossing the border for the people living nearby, it particularly concerns the required invitation from the receiving party which will no longer be necessary. We have achieved some progress in this respect with our European partners. We will address these issues together. I hope the negotiations will continue in a positive nature.

Let’s move on to the discussion.