Transcript of the start of the meeting:

Vladimir Putin: Mr Ivanov, let's start with the state defence order. How is it being fulfilled?

Sergei Ivanov: At the end of April, during a meeting of the Military- Industrial Commission, we considered the fulfillment of the state defence order in 2008 and its progress in 2009.
If we're talking about last year, then the state defence order was nearly completely fulfilled. I will run through some of the achievements, firstly in fulfilling orders of the Defence Ministry, as an example of what has been accomplished.
Last year we successfully supplied the army with 17 intercontinental ballistic missiles, four Iskander rocket launchers, and 62 T-90 tanks.

Vladimir Putin: What range does the Iskander have?

Sergei Ivanov: It currently has an authorised range of 300km.
The army also received 210 modern APC-80, 41 BMP-3 infantry combat vehicles, 152 mortar guns and weapons, 34 rockets for the new S-400 antiaircraft defence systems, and 4,500 vehicles.
In addition, repairs and modernisation were carried out on six Tu-95 strategic bombers, 82 planes, 31 helicopters, 270 tanks and so on.

We also succeeded in improving the standard of technical equipment in the Interior Ministry's agencies with up-to-date criminal investigation technology. The state orders for our special services - the Federal Guard Service, the Federal Security Service, and the Foreign Intelligence Service - were 100% completed. They were fully furnished with special weapons and military technology.

Certain chronic inadequacies were discovered during the fulfillment of the state defence order. They were related to delays and the consideration of alterations to the state defence order while it was being fulfilled. Here the government customers must be more attentive in their planning, including in relation to industry's real capacity. However, overall, as we planned, the state defence order last year was fulfilled on time and in full.

In addition, as I have already said, new technology has been developing, particularly more modern technology.

Now about the state defence order for 2009. Today I can give you the numbers, and according to the inventory list for the Defence Ministry, 42% of orders have been placed. Such is the state of play at the end of April, or for the first four months of this year. In financial terms that amounts to 66.8% which is a greater portion of the resources. The contracts have already been made. In monetary terms, this amounts to 332 billion roubles for the purchase of technology to meet the needs of the Defence Ministry alone.

The total volume of the state defence order this year is 1,300 billion roubles, and that includes: major construction work, supplies of fuel and lubricants, clothing, and food supplies for all of Russia's security-related forces.

Of course, this year we have tried to allocate the state defence order as fast as possible, because it is essentially the most effective support for businesses in the military-industrial complex. Amid all these additional measures of support for the sector, the state defence order is the most efficient way of bolstering production, safeguarding jobs in these enterprises, and preventing redundancies.

Overall, we are monitoring the condition of the military-industrial complex both through the Military-Industrial Commission, the Inter-Departmental Commission to Support the Military-Industrial Complex, which is headed by Deputy Finance Minister Anton Siluanov, and of course through Mr Igor Shuvalov's Commission to support the economy as a whole. I should tell you that in comparing the first quarter of 2009 with the first quarter of last year, production volume across the military-industrial complex increased by 2.1%. This is not a bad result compared with other sectors.

Vladimir Putin: In the context of the crisis.

Sergei Ivanov: Against the backdrop of the crisis, and given the situation in other sectors - in transport and in machine-building. But of course the structures that produced the yield have changed.

The growth of 2.1% is, as they say, the average temperature in the hospital. The production of armaments and military technology increased by 10%, but the production of high-tech civilian goods in companies that make up the military-industrial complex was reduced by about the same amount, or a little bit less. As a result, we get that overall growth figure. This, however, reflects the general situation in the economy; the demand for civil production fell, that is a given.

We have experienced growth in almost all sectors of the military-industrial complex, but it is encouraging that shipbuilding grew more and faster than everything else. In shipbuilding, production during the first quarter grew by 140%. This is primarily linked to a growth in civilian shipbuilding. For example, work is already underway at the Vyborg shipyards, where Gazprom ordered the construction of two platforms. We were there together. They are building two platforms for the Shtokman field, which at once provides a two-third increase in the overall turnover for civilian shipbuilding.

If we're talking about the support measures for this most important strategic sector, then there was a special attitude to it from the moment the crisis began, and special decisions were made. These decisions are being implemented, and the support for the sector has allowed it to retain the dynamics that I have mentioned already.

Vladimir Putin: We will need to look in more detail at what is going on with shipbuilding in the Far East.

Sergei Ivanov: Yes, in Komsomoslk-on-Amur in particular.

Vladimir Putin: We will talk separately about that tomorrow.

Sergei Ivanov: Those 15 billion roubles that we allocated to subsidise businesses to reimburse some of the expenses associated with loans have proved to be a very good measure. We allocated 8 billion roubles to ward off bankruptcy in strategic businesses. Out of that sum, ten decisions amounting to 3.6 billion roubles have already been made, and this money has been given to the enterprises concerned. Bids for 3.8 billion roubles are currently under consideration.

Some 38 billion roubles have been allocated to increasing the authorised capital of major defence companies, including: 15 billion roubles for MiG, 4 billion roubles for the Kazan-based aviation production facility named after Gorbunov, and 8 billion roubles to the Khrunichev State Research and Production Space Centre. This money has also been contributed as a state contribution to the enterprise's authorised capital.

We have 100 billion roubles set aside in this year's budget for state guarantees on loans for enterprises. A portion of this money, 30 billion roubles to be precise, has already been set aside for particular enterprises.

We also have particularly focused support measures, such as the 1 billion roubles allocated to subsidise wages in businesses in high-tech, innovative production. As for the second measure, not long ago we discussed the extra resources that will be allocated to subsidise interest on loans for businesses that use the leasing system.

Subsidiary companies of the United Aircraft Building Corporation have received about 1 billion roubles. This money has already reached the enterprises. The Saturn Research and Production Association, which manufactures all the modern engines, including those for the Sukhoi SuperJet, and the leasing companies received about a billion roubles.

In total, these measures provide a solid basis from which to support stable work in the military-industrial complex. Such is the situation in the military-industrial complex as a whole.

Along with this, in spite of all the effects of the crisis on the economy, we will continue to create major integrated structures in the military-industrial complex. You signed a Government resolution just yesterday, in fact.

Vladimir Putin: The order to create the new concernVega.

Sergei Ivanov: Yes.

Vladimir Putin: What do you expect from its creation?

Sergei Ivanov: As stipulated by a previous presidential decree, the concern, a pubic company, will integrate 20 radio-engineering enterprises throughout the country. It will include scientific-technical institutions and plants producing radio apparatuses, which will allow us to focus our efforts on building ground-based space and aeronautical facilities for monitoring and surveillance. This will serve not just our state security services, but will also produce high-tech goods for the civilian sector, such as navigation systems.

These developments will allow for a concentration of efforts in precisely those sectors that are developing new products, and those that are involved in repairing and servicing the already supplied equipment.

Vladimir Putin: Excellent news. Institutions, enterprises in Moscow, St Petersburg...

Sergei Ivanov: Kaluga...

Vladimir Putin: Rybinsk, Chelyabinsk. The order stipulates that by September 20, 2010, the Federal Agency for State Property Management and the Ministry of Industry and Trade must have implemented the whole set of measures on...

Sergei Ivanov: That is, to reincorporate, or privatise, all the businesses.

Vladimir Putin: Yes, as is stipulated by that order. I would like you to make sure you are on top of this.

Another sector you are responsible for is transport. We know what problems there have been with airline carriers. People suffered because the carriers did not carry out their duties. The summer holidays are approaching. What measures are being taken to ensure nothing like this happens again?

Sergei Ivanov: In line with the Government and Federal Anti-Monopoly Service plan, you ordered the development of a project on non-discriminatory access to airport services, starting with refueling centres, and those companies that supply kerosene to the aircraft, in addition to aviation companies that use these services, which use kerosene to refuel.

The Federal Anti-Monopoly Service prepared such proposals right before the holidays. On April 30, I called a conciliatory meeting. There were some differences of opinion between the Federal Anti-Monopoly Service and the Federal Tariff Service and the Ministry of Economic Development, but the disagreements have now been settled, and the Federal Anti-Monopoly Service has already sent the bill to the Ministry of Justice for approval, after which it will be presented to you for your signature as a Government executive order.

The idea behind this is that fuel production sites are now practically free of the middlemen who used to dominate them, who neither produced fuel nor provided services, and simply supplied the fuel at a premium. You were correct, it was this issue that we were confronted with last summer when world oil prices were rising and kerosene prices peaked. In our case, however, it turned out, if you recall, that the price of aviation fuel (kerosene) was even higher here in Moscow than on the London stock exchange.

Vladimir Putin: This was the case not only in Mosow, but also in several other regions....

Sergei Ivanov: In the Far East it was double the price. Incidentally, the current price for Moscow transport of aviation fuel is half the price in the Far East. This is linked with the transport hub and the lack of oil refineries and petrochemicals industries in the Far East.

Of course, this is a strategic problem that we also need to resolve. For the moment, however, we have at least pinpointed and defined the services of any refueling complex in any airport throughout the country as solely to store aviation fuel purchased from oil industry enterprises and made available to planes when they refuel before take-off. We also previously regulated the tariffs on state services such as take-off, landing, and air traffic control.

With the introduction of this bill, the Federal Tariff Service will set the tariff for fuel storage in the airport and its supply to the plane when it refuels. In places where we already have competition in the airports and where there are two refueling stations, then without exception the price to the aviation companies for using these services, and in the end the price for the plane ticket, will be lower than where there is only one refueling station. However, now even in those places where there is only one refueling station, we will introduce price regulation and limit the services that can be provided by these refueling points.

Vladimir Putin: Good, we'll see how it works, how it will help people.

Sergei Ivanov: As summer approaches, this is clearly a timely measure, because if we again see the projected oil prices fluctuate, we won't repeat the situation we had last time.

Vladimir Putin: Let's see how it pans out.

Sergei Ivanov: Yes. We'll see.