Vladimir Putin's opening remarks:

Good afternoon, colleagues,

Welcome to Russia, to Moscow.

I am happy to welcome you to the meeting of the Interstate Council of the Eurasian Economic Community. Let our work here be successful.

We have to discuss a range of important issues today. The further development of this organisation depends on how effectively we deal with them. I am referring primarily to an accelerated organisation of the Customs Union of Russia, Belarus and Kazakhstan and the further integration and consistent consolidation of the common economic space of the EurAsEC.

The tightening of the global economy is certainly another important issue affecting each of our countries. Each EurAsEC country is currently working on its own plan to deal with the financial crisis. And it is especially important that we coordinate our efforts and are ready to deal with the consequences of the crisis cooperatively.

In approaching this meeting, our finance ministers and heads of monetary regulators studied these issues and have offered proposals. We have already discussed part of them at our restricted meeting, so today we expect our colleagues to report on the agreements they reached there.

Now I am happy to give the floor to Sergei Sidorsky, the Prime Minister of Belarus which is holding the EurAsEC presidency.

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Closing remarks by Prime Minister Vladimir Putin at the meeting of the EurAsEC Interstate Heads of Government Council 

Colleagues,

I would like to report now on the developments in Russia's economy, like the other heads of government have done, and on the steps we are taking to deal with the consequences of the global financial crisis.

Just like other countries, Russia is adversely affected by it, especially by the tight financial markets and the plunging prices for our traditional exports. However, we are convinced that the national economy has sufficient resources to get through this instability period with only a few scratches. Let me underline that we are not planning to abandon any social programmes.

Russia will see a 6% GDP growth by the end of this year, even despite the problems. People's real incomes will have grown by around 7%; the growth in January-October was 7.6%. Eleven-month inflation was 12.5% and is expected to hit 13.5% in 2008. We have also seen an economic slowdown in the past few months.

On the other hand, food prices aren't growing as fast as before, and prices of refined oil products are dropping, although not as fast as we had hoped.

The declining global prices of oil, metals and other commodities Russia traditionally exports, may still lead us to a negative foreign trade balance. This is a factor of pressure on the national currency.

Nevertheless, we are determined to do our best to prevent sharp fluctuations of the rouble. Russia has sufficient reserves for that. We will pursue a careful and rational exchange rate policy, which is also important for maintaining stable and effective trade and economic contacts between our countries.

On the upside, industrial production will show some overall growth by the end of this year: it went up 4.9% in January through October (0.6% in October alone). Yet, as I have said, a number of sectors are currently forced to slash production to reduce costs. Our metals and chemical industries, building materials production and engineering were hit the hardest because they depend heavily either on exports or on investor demand.

On the other hand, agricultural output grew by 8.8% in ten months. The oil and gas sector is relatively stable. Russia's status as a reliable fuels supplier isn't questioned by anyone. We expect equally responsible behaviour from our consumers and transit partners.

Natural gas output in Russia grew 2.5% in January-November, while oil production decreased by 0.5%. We are making policy changes to ease the overall tax burden on the energy sector, especially on the oil industry. We cut the severance tax (effective from January 1, 2009) and introduced tax holidays for green-field projects in several regions, and authorised oil producers to use more actively bonus depreciation schemes.

We have drawn up and are carefully implementing a detailed anti-crisis plan, and are making prompt and timely decisions.

A special government commission was established earlier this week to coordinate social and economic anti-crisis policies. The commission will be given the required organisational resources and authority.

We can say with confidence that we have prevented a banking system crisis which threatened Russia. We allocated about 4 trillion roubles to support the banking system. The total amount of money earmarked for this purpose by the Government and the Bank of Russia is 9 trillion roubles.

We have managed to preserve bank depositors' confidence, which I think is extremely important. Bank deposits did shrink by around 6% (360 billion roubles) in October, but the outflow dried up in November, which was certainly an encouraging sign.

We will carry on a careful and rational policy aimed at protecting the interests of Russian bank depositors.

Second, a set of measures is being implemented to support the manufacturing industries, in particular, to stimulate internal demand and to enable entities with a government stake to buy into the capital of various businesses. We are working actively with the banking community to maintain lending programmes for development and modernisation of production. Of course, the interest rates will be high. The Central Bank policy tries to prevent the outflow of capital and overall it is succeeding. In connection with the increasing interest rates, we are providing mechanisms for subsidizing interest rates as well as offering the resources of the government institutions of development to maintain lending to the economy.

The reserves transferred to Vneshekonombank finance the repayment of the external debt of our companies. We have already disbursed $50 billion for these purposes. We are now using these resources. Much of the collateral that until recently was in the hands of foreign financial institutions has migrated into the portfolio of the Vneshekonombank of the Russian Federation. We will continue this policy and give priority to the businesses that have strategic importance for our economy. We will allocate additional resources for that purpose if the need arises.

The practice of issuing state guarantees is expanding. The last Government meeting decided to offer an extra 300 billion roubles in guarantees to core enterprises. Just yesterday I chaired a meeting in Rostov-on-Don in support of agricultural equipment production. We made some important decisions including the expansion of leasing offers to essentially boost demand - this is the biggest problem for this sector. To solve the problem we have decided to allocate an additional 25 billion roubles for leasing programmes. We have decided to subsidize interest rates on loans to businesses and farms at two thirds of the bank rate. A package of tax amendments has been passed to support industry, agriculture and small and medium-sized enterprises. We are shortly to consider an additional package of measures for agriculture. We will also take special measures to support the construction industry. Some are being developed and we are considering other options.

Third, there are problems in the labour market. Unemployment in Russia reached 4.6 million in October, which is 300,000 or 8% over last year. That is an alarming sign. So far we do not see any changes for the better, but we are developing a package of measures to prevent the situation from getting worse and even to improve it. We are talking about public works, reorientation of our major infrastructure companies towards the regions that face the biggest unemployment problems. We will of course pay attention to the development of small businesses and the retraining of redundant workers.

You are aware that we have cut foreign labour immigration as a forced and temporary measure. We are reducing the original quota declared by the regions by half. Let me stress that this move is prompted by labour issues inside the Russian Federation. I hope you will understand the rationale behind the decision. At the end of the day we are all interested in a civilised labour migration policy.

Fourth, Russia will fully abide by its international financial commitments and take part in anti-crisis measures together with other countries. If necessary we will support our partners on a bilateral basis. I have already said publicly that we have transferred $1 billion to the International Monetary Fund which redistributes the money, with our participation, among the countries that are the hardest hit by the crisis. I repeat, if necessary, we will support our partners on a bilateral basis, not stopping short of credit lending.

You already know that an agreement has been signed on a $2 billion loan to Belarus to support its budget, in fact to support its trade balance. Already $1 billion have been remitted to our Belarusian partners.

We are actively discussing granting a loan to Kyrgyzstan in the amount of $2 billion, of which $300 million may go to support the budget and $1.7 billion to finance major infrastructure projects, including those in the energy field. I believe this work may be completed before this year is out.

We believe that cooperation within EurAsEC is an effective strategy with the potential to ensure economic stability and further growth in the region. We therefore support the expedition of the integration processes, above all the organisation and launch of the EurAsEC Customs Union. It is vital to stimulate mutual trade, joint investment projects, production cooperation and thus preserve jobs and open new markets for our businessmen.

I am convinced that our countries, whose economies are so closely interconnected, can best cope with the crisis if they work together. Indeed, not only to cope, but to take advantage of the current situation to make our economies more competitive and effective.

In conclusion I would like to take advantage of this meeting to touch upon another important issue, the 2014 Winter Olympic Games in Sochi. We would like all of our neighbours to take part in this unique project. In practical terms, we could consider inviting our partners, given an interest, to build one hotel each in the area around the Olympic Park and name them after their capital cities.

As a result a complex of modern hotels in the very heart of the Games, the Olympic Park, will enable guests at the Games to see the rich culture and traditions of our neighbours. This is an attractive initiative and not only in economic terms. It is a prestigious location and I am sure that after the Olympic Games investments there will make many times the economic return on investment. In fact we are talking about a major humanitarian project which would boost the prestige of our states.

Thank you.