Transcript of the beginning of the meeting:

Vladimir Putin: Mr Serdyukov, we actively tackled various aspects of government contracting late last year, late in 2011. In particular, we focussed on naval equipment, submarines, surface ships, and in a measure, aviation and missiles. How is work going in other areas?

Anatoly Serdyukov: I’d like to say a couple of words about aviation and the Navy, which is what we are placing orders for now. We have contracts to 2018-2020, which means that we are absolutely clear about numbers and funds, which we have set forth in our contracts.

As far as other armaments and military equipment are concerned, we discussed matters relating to the extensive modernisation of the T-72 tank in quite detail with Mr Siyenko today. So far, we have a contract for 170 tanks worth of over six billion roubles. The contract is being implemented, and we agreed that the old plant may open additional production facilities in order to be able to increase the extensive upgrades of the existing tank fleet. We have a newly upgraded tank every year… In fact, we are close to the new tank that we have in mind as part of the design and development work that we are performing together with the plant. We hope that we will have the first specimen ready in 2013.

Vladimir Putin: Will the plant be able to handle this much work?

Oleg Siyenko: Mr Putin, we have deployed a second production facility in Omsk, designed specifically for conducting extensive upgrades and expanding upgrade capacities. Of course, we have been preparing for this, and we are now crunching numbers in order to see if we are able to increase output by 50%. I hope that we will manage to do so this year already.

Vladimir Putin: As far as I understand, the extensive upgrade of the T-72 will actually raise its quality to that of the T-90. Is that right?

Anatoly Serdyukov: Yes.

Vladimir Putin: We’ve discussed this before, and you have mentioned it again now: we need to move on to completely new products, to next-generation equipment. How are things in this area?

Anatoly Serdyukov: We hope very much that we will have the specimen ready as soon as in 2013.

Vladimir Putin: Have you financed the design and development work?

Anatoly Serdyukov: Yes, we have already signed the contract and figured out the numbers. In fact, there will be mass production beginning in 2015 and on. However, we want to conduct extensive upgrades of the bulk of our equipment before 2015 – in order to get that new piece, an absolutely new piece of equipment, which we will then proceed to buy en masse, actually.

Vladimir Putin: Does the enterprise find this acceptable?

Oleg Siyenko: It absolutely does, Mr Putin. This summer, along with the military, we will begin testing main units and components so as to able to move on to new, previously approved technical requirements. We hope that we will be able to complete this work in 2013.

Vladimir Putin: I met with the specialists earlier. They seem to be a very good team of researchers and engineers. I hope that our defence capabilities goals in this area will be achieved.

Anatoly Serdyukov: The situation is about the same with respect to all armoured equipment, including armoured personnel carriers. We started buying BTR-82A carriers (over 150, in all) and we are carrying out similarly extensive upgrades.

Vladimir Putin: There were issues with ordering and purchasing armoured personnel carriers at the main plant. You know what I mean.

Anatoly Serdyukov: There was a problem with 83 carriers in 2011. The work was carried over into this year, and we have already signed a contract. I don’t think we will have any problems this year.

Vladimir Putin: Please keep in mind that the equipment they are making for exports is, unfortunately, not being paid on time. Therefore, I suggest that as the main customer, the Defence Ministry should take a closer look at it, so that enterprises are not left without the necessary support.

Anatoly Serdyukov: We began implementing it last year, and transitioned to it fully this year. We make 100% advance payments to all enterprises with which we have signed contracts for several years.

Vladimir Putin: Yes, I’m aware of this.

Anatoly Serdyukov: In other words, this is fairly substantial support for the industry, because that way they have access to working capital, and we could order the entire product range.

Vladimir Putin: I remember you making this request. The government supported you.

Anatoly Serdyukov: Thank you.

Vladimir Putin: Yes, this is a good form of work, which should provide requisite financing for the full cycle of work.