Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, colleagues. Chairman of Gazprom’s board of directors Alexei Miller has just brought good news that the construction of the second Nord Stream pipeline across the bottom of the Baltic Sea has been completed. Gas supplies to consumers will start in October with the total throughput capacity of 55 billion cubic metres of gas.

Work on South Stream, the pipeline across the Black Sea, will begin this year. This construction is scheduled for completion in 2015. As we know from Mr Miller’s report, a very reputable man has become head of its board. This is now an international company comprised of, in addition to Gazprom, companies from Germany, France and Italy. The board is now chaired by a renowned and reputable man, first burgomaster (or, mayor) of Hamburg, Mr Henning Voscherau. He is a thorough man respected in the European political circles. On top of that, he is a remarkable lawyer, which is very important in such projects. They now have a very strong group of international lawyers, which gives us reason to believe that this project will be completed in 2015 as scheduled.

Let’s move on to current issues. We have issues that we need to focus on in particular. I would like Mr Puchkov (Vladimir Puchkov, State Secretary and Deputy Minister for Civil Defence, Emergencies and Disaster Relief) who is now acting as the Emergencies Minister, please update us on the wildfires in the Trans-Baikal area. We addressed this issue a while ago. Unfortunately, the situation shows no signs of improvement. What’s going on there? What measures are being taken? Please go ahead.

Vladimir Puchkov: Mr Putin, overall, the situation in the country is stable, with 102 wildfires in progress. The situation in Buryatia and Trans-Baikal Territory is the most complicated of all. There are 59 wildfires there, of which 7 are major ones. In order to be able to better control the situation, we reinforced out troops and put on high alert all units of the Nationwide Warning and Disaster Relief System and all regional emergencies commissions and local governments. We moved an additional 200 paratroopers from European Russia, and brought in 250 employees and 30 pieces of equipment from neighbouring regions. We have also reinforced the aviation group with two B-200 aircraft and three Mi-8 helicopters. The situation is tough. A new wildfire broke out today outside the village of Vasilyevsky Khutor. Unfortunately, seven houses were damaged by the fire.  However, we managed to relocate 110 people. Four people were injured, of whom three were treated on site and a 16-year-old boy had to be taken to hospital with upper respiratory tract problems. He has received medical help.

We managed to stave off fire at two villages and one children’s summer camp. We have planned all our future actions, and we will start fighting the fires tomorrow using all available equipment, including aircraft.

Vladimir Putin: Do you need any additional help?

Vladimir Puchkov: No, we don’t, Mr Putin. We are on top of the situation. Things are complicated by bad weather and unauthorised agriculture-related burnings.

Vladimir Putin: Are you in contact with regional and local authorities?

Vladimir Puchkov: We are fully in contact with them as I reported. The Trans-Baikal Territory’s Emergencies Commission is working 24/7; all municipal authorities are working on-site, so we are able to resolve all issues promptly and on time.

Viktor Zubkov: Mr Putin, we are in contact with the heads of the affected regions on a daily basis, but I’m still going to have a conference call with them tomorrow, because there are issues related to supplies of petrol and lubricants for aircraft and other issues as well.

Vladimir Putin: Please don’t procrastinate, because the situation is difficult. While we are looking at eastern Russia, I would like to inform you that the government took a decision to expand the amount of cargo brought from the Far East and some other areas. The list of the cities, towns and villages that fall under preferential transport arrangements was expanded, and the total number of transport routes will amount to 33. Mr Shuvalov, could you please comment of this?

Igor Shuvalov: Mr Putin, colleagues, favourable arrangements for air transportation from the Far East to European Russia and back have been in place since 2009 in accordance with your decision. In 2009, we transported 160,000 passengers, and, according to the Ministry of Transport, this number will increase to 460,000 in 2012. Indeed, there will be 33 routes. The 2011, 2012 and 2013 financial plans provide for the allocation of 2.5 billion roubles each year. Recently, we adopted changes regarding female passengers. Before, only women over 60 could buy tickets at reduced prices. The age has been reduced to 55 years. Men 60 and older, as well as young people aged 18-23, can travel at reduced prices, too. On April 16, you signed a new government resolution whereby the list of eligible passengers is expanded to include, primarily, people with first category disabilities of all ages, travel companions and persons accompanying children with disabilities. According to the Ministry of Transport and regional authorities, the number of such passengers in 2012 will come to about 25,000. This programme is very popular; we have requests of regional authorities to apply reduced fare arrangements to people with second category disabilities. We will look into these requests during our work on the budget.

Vladimir Putin: Good, thank you.

Mr Trutnev, you went to the Khanty-Mansi Autonomous Area on an inspection. What’s going on there? What problems do they have?

Yury Trutnev: Mr Putin, colleagues, substantial amounts of petroleum products find their way into the Arctic Ocean via the Ob and Yenisei Rivers. These amounts are declining…

Vladimir Putin: Petroleum products?

Yury Trutnev: Yes.

Vladimir Putin: Where do they come from?

Yury Trutnev: Primarily, it’s crude oil present as film in water reservoirs. There are about 300,000 – 500,000 tonnes annually.

Vladimir Putin: Up to 300,000 tonnes?

Yury Trutnev: No, 500,000.

Vladimir Putin: In what period of time?

Yury Trutnev: Per year.

Vladimir Putin: What does it come from? What source?

Yury Trutnev: We went on this trip together with experts precisely in order to figure this out. First of all, we analysed the work performed by TNK-BP, because they are responsible for the bulk of polluted land (2,200 ha) according to the Federal Service for Supervision of of Natural Resources. There were 784 accidents involving oil spills at TNK-BP facilities in 2011. That’s over two accidents per day. The main cause is deficient pipes. Given the amount of funds invested by TNK-BP in their renovation, it will take 22 years to replace them, but their service life is only 12 years, meaning that the situation is only getting worse. They can do better than that, because there are as few as 20-28 accidents per year at oil fields developed by Surgutneftegas, Lukoil or Bashneft. Bashneft has had no accidents at all. I have instructed the Federal Service for the Oversight of Natural Resources to prepare a lawsuit on damages and I’ve suggested that companies draft plans for renewing their pipelines. They have sufficient financial resources to triple investment and modernise their pipeline systems within five to seven years.

Vladimir Putin: Mr Shmatko (Sergei Shmatko, Energy Minister), what is going on there? Why such a difference?

Yuri Trutnev: Here are the photographs showing how it looks.

Sergei Shmatko: Mr Putin, we have always discussed this issue with TNK-BP. Its dividend policy differs dramatically from the dividend payments by other Russian companies, both private and state ones. I would like to provide figures to show that the company’s owners have decided to pay nearly all of its 2011 profit in dividends, which amounts to nearly $8 billion.

Vladimir Putin: Eight billion dollars?

Sergei Shmatko: Yes, $8 billion. This is probably why Mr Trutnev mentioned the lack of funds. They definitely have funds to prepare and implement a programme to modernise their pipelines.

Vladimir Putin: I am asking you to act in accordance with law. You should meet with the company’s management and shareholders to find a solution using all tools stipulated in the current legislation.

Mr Shmatko, please report on the fuel stocks.

Sergei Shmatko: Acting in accordance with your instructions, the Energy Ministry is monitoring fuel stocks on the domestic market. This is what I can report: we collect information on the consumption and production of petrochemicals and available stocks in the regions on the daily basis. We are confident that there is no threat of petrochemicals shortage on the domestic market. Our oil producers have prepared for the spring season, when the consumption of fuel and lubricants traditionally grows, by accumulating 1.8 million tonnes of petrochemicals, which is 1 million more than by late April 2011, when there were shortages in some regions and you issued the instruction to find the reason and prevent future shortages.

What have we accomplished? A special headquarters at the Energy Ministry is working on a daily basis and comprises representatives of oil companies, self-regulating organisations and independent operators. We discuss the data we receive with the regions where we have any worries. Most importantly, we are monitoring the repair schedules at refineries. Their planned repairs are to be coordinated with the Energy Ministry, which is not a mere formality because we determine how the shortfall is to be compensated, i.e. which companies in the regions are to supply the necessary amount of refined products. These are the intervention measures. Why do we need to take them? The reason is that our capacities barely suffice to satisfy the demand at periods of peak petrochemicals consumption. Therefore, we need to create reserves. According to our calculations, we need approximately 1.2 million tonnes of reserve petrochemicals to compensate the shortfall during peak consumption periods. As I have said, we currently have 1.8 million tonnes, which is why there should be no unnecessary concern.

Vladimir Putin: 1.8 million instead of the required 1.2 million tonnes?

Sergei Shmatko: Yes, we have 1.8 million tonnes of reserve petrol. Operators and regional authorities only need to address the Energy Ministry’s headquarters and the operators of filing stations in case of any concerns. We are able to resolve their problems.

However, there is a system-wide problem: What should be done to prevent fuel shortages with due regard to peak consumption? We are now using the 60/66 system, which we have coordinated with you, Mr Putin, and oil companies will invest over 200 billion roubles in modernising their refineries in 2012, or 75% more than the amount… Or rather, this is approximately as much as was invested over the past four years. As a result, petrol production should reach 44 million tonnes by 2015, whereas demand is estimated at about 39 million tonnes, given that consumption is expected to grow considerably. We will have sufficient capacity to satisfy demand during peak periods. That’s all I have to say.

Vladimir Putin: Good, thank you. Keep up the good work.

Let’s discuss the agenda for this meeting. The first issue is one of our topmost concerns: the drafting of state programmes, if you remember what it concerns. The point at issue is that budgetary spending is still not focused in individual spheres but distributed among all spheres. For example, allocations for healthcare are provided not only to the Ministry of Healthcare and Social Development, but to nearly all our numerous healthcare agencies. Or take education, where federal funds are allocated not only to the Ministry of Education and Science, but also to a number of other ministries, which explains current problems in our key industries.

This is why we discussed drafting government programmes covering an entire industry irrespective of the ministry to which corresponding organisations are accountable, so that, first, we could see the whole picture, and, second, we could ensure that federal funds are spent more effectively. Ultimately, people should receive the best services at affordable prices.

We have drafted 39 of the 41 programmes we need, but far from all of them have been approved. If memory serves, only two programmes have been approved. We must do our best to ensure that the 2014 budget is based on targeted programmes. Preparing the expense part of the 2014 budget is a crucial task from the viewpoint of ensuring the efficient use of government resources. This is the first issue to which I wanted to draw your attention.

There are a few other important issues I would like to speak about. One of them concerns the protection of people’s labour rights, in particular better legal guarantees for families with children. What does this mean? Under the current legislation, women are guaranteed their jobs for three years during child-care leaves. We must ensure that this provision is honoured without exception and also monitor the application of law because this provision is sometimes violated. Anyway, the law guarantees women a three-year child-care leave. However, there are no firm guarantees against dismissal for fathers who are the sole breadwinners of large families. This is why we have drafted a law preventing employers from terminating labour contracts with fathers of large families where mothers have no beneficial employment but devote all of their time to raising children. I want to emphasise once again that we must create the most favourable conditions we can for families with children. Everything is important here, from government support, to the solution of housing problems, to the development of preschool education and labour market benefits.

One more innovation I would like to highlight concerns expanding the list of obligations in collective agreements between employers and employees. Currently, our Labour Code has only a short list of such obligations, and the norm itself can be described as a recommendation, which gives the sides only a general impression of the contents of a collective agreement. Such vital issues as the indexing of salary based on the inflation rate, social guarantees and compensations, and professional development are not incorporated in collective agreements and can be added only upon agreement by the sides. As we know, such a bilateral agreement is almost impossible to reach, and furthermore, these issues are not even discussed in most cases. We should formalise these important aspects in a law.

Besides, negotiations on collective agreements are sometimes deliberately drawn out, so that people, whole collectives are held in limbo, as they say. Therefore, I believe that it would be fair to set a deadline for drafting labour agreements – six months since the start of negotiations. We will discuss the corresponding amendments to the Labour Code, which should improve the situation of working people, today for their subsequent discussion in parliament.

And one more thing I want to say in conclusion: it has been proposed that the Federal Space Agency be given the power to issue permits for building space infrastructure. I hope that this will accelerate the guaranteed implementation of our plans concerning the Vostochny space centre. As we know, it is one of the largest landmark projects for Russia as a whole and for its Far Eastern regions in particular. In general, this decision should help us more efficiently modernise the existing infrastructure of the space industry.

Let’s start working.