Transcript of the start of the meeting: 

Vladimir Putin: Good afternoon,

Let's start by exchanging current information. Mr Kudrin met with his G8 colleagues. They discussed issues associated with the global economy and the way out of the crisis. Could you please briefly comment on this.

Alexei Kudrin: Over the past weekend the G8 Finance Ministers held a full-attendance meeting. They discussed preparations for a G8 summit in L'Aquila, Italy.

They focused on the questions of economic development, and agreed that it is still too early to speak about the start of the economic recovery. There are positive signals but they are not strong enough to conclude that the world is on the way out of the economic crisis. Therefore, it is still necessary to fully use packages of anti-crisis measures.

At the same time it is noted in the communiqué that each country should prepare its strategy for discontinuing these anti-crisis measures because the deficits are very big. Long-term application of these measures will create risks for macro economies and may step up inflation. Therefore, it is essential to adopt a timely and gradual strategy for overcoming the crisis.   

Vladimir Putin: Is it necessary to prepare a strategy for discontinuing anti-crisis measures, or take steps on their discontinuation?

Alexei Kudrin: Absolutely right. This is exactly what we discussed. As I said, right now anti-crisis measures must be applied in full. Withdrawal from the crisis has not yet started. But these strategies must only be applied when this stage approaches.

This is exactly what was discussed. Thus, my American and British colleagues suggested maximum use of these packages because it is still necessary to create the demand and support the economies in full measure. It is important here both not to be late, and not to be early.

In addition, the ministers discussed measures of improving the regulation of financial markets. The Financial Stability Council made a report on its activities. Now Russia is its member as well. A whole number of documents on new regulation have been prepared, and some countries are already starting to implement them.

The ministers also discussed the reform of the international financial infrastructure, in particular, the formation of the so-called global standard. Measures of national regulation or certain standards, which are applied voluntarily, were given another brush. A certain frame for regulating the economies in different directions - from the financial markets to taxes, auditing, and trade - has been created. Today we should discuss the formation of global international institutions of regulation covering many countries. They would compel us to abide by certain rules. The level and mandatory character of the latter's application were also a subject of serious analysis.

The ministers discussed the idea of increasing the IMF's resources for bigger support of countries.

A little more than $400 billion have now been raised. This sum includes the contributions of Russia, Brazil, and China, which have already been announced. India is expected to follow suit now. These funds are much in demand, especially in the parts of Eastern and Central Europe, which have been hit harder by the crisis. This primarily concerns the Baltic countries and some states in Central and Eastern Europe, where the crisis may detonate and worsen the consequences for Europe's banking system.

In addition, the ministers discussed the food programme and food security. The measures drafted at previous G8 meetings are continued. A number of countries signed an agreement on launching a special project on advance financing for the purchase of vaccines. This programme implies that the poorest countries are unable to pay for the supplies of vaccines, and even for the development of vaccines which they need.

The international community is beginning to fund this programme. It is undertaking to do a job which the market cannot now do, and will make vaccines accessible for the poorest countries.

Russia will contribute $80 million in 10 years under this programme, that is, eight million dollars per year.

In addition to that, I met with my Italian counterpart, and we signed an agreement on avoiding double taxation between our countries. This is a revised version approved by our Government. We are making yet another step to meet business halfway, and to improve conditions for businessmen in our two countries.

I have also met with US Treasury Secretary Timothy Geitner, and my colleagues from France and Germany. I discussed with them the situation in Ukraine with gas payments, the need for international efforts in this sphere, and your addresses to the European Union and the IMF.

I have also met with IMF Managing Director Dominique Strauss-Kahn, and discussed this subject with him. I will report to you in detail on my negotiations with him.

Vladimir Putin: Thank you. You have signed with Italians an agreement on avoiding double taxation. Have you spoken with your American colleagues? What are they doing? As far as I know, they are going to tax affiliates of their companies, which are registered in other countries. This will fully eliminate the entire system of agreements, the like of which you have signed with Italians.

Alexei Kudrin: Mr Putin, this is the issue I have not discussed with my American colleague. We are studying relevant information but have not brought it up further...

Vladimir Putin: This is a serious decision for the world economy. If all companies working abroad are taxed, the system of agreements on avoiding double taxation will be fully eliminated.

Alexei Kudrin: We discussed world tax havens and further measures but only regarding individual jurisdictions where taxes due to Russia, France, and other countries are being hidden.

Vladimir Putin: But this subject has long been discussed. This is a separate subject. All right. But I would like this question to be cleared up in a dialogue with our colleagues.   

Alexei Kudrin: We will exchange information with our American colleagues.

Vladimir Putin: Thank you. Ms Golikova, how is the Healthcare Project proceeding, particularly in terms of helping the victims of road accidents and cardiovascular patients?

Тatyana Golikova: Mr Putin, colleagues, I would like to remind you that last year we developed two priority areas. They include measures to improve medical assistance to people with cardiovascular diseases and to victims of road accidents. These two areas were chosen because they are the biggest killers. Up to a million people die from cardiovascular diseases every year.

Last year 12 regions were chosen to take part in each of these programmes. So, these two efforts cover 24 regions. Because the main organisational measures, which include fitting the existing medical centres with high-tech equipment and specialised vehicles, were completed in late 2008, we have data only for the first quarter of 2009. The results are as follows.

As for assistance to cardiovascular patients, from the results of the first quarter the number of people who have been hospitalised with strokes increased by 2.6 times, and of people with myocardial infarction has doubled. The rate of high-tech treatment of stroke patients increased by four times and of heart attack patients by 3.1 times. The number of people who have suffered a stroke, but do not need care after treatment, has increased by 3.6 times. The number of deaths from cardiovascular diseases dropped by 15,000, or 4.9%. These are the data for the first quarter for the 12 regions I have referred to.

We see a similar positive trend in the programme of providing assistance to victims of road accidents. The total number of deaths in road accidents has dropped by 1.75 times. But the credit for this goes not only to this programme, but also to the programmes being implemented by the regions and by the Ministry of Internal Affairs, which coordinates the road safety programmes. The number of people who died on the spot in road accidents has dropped by 1.3 times, and the number of victims taken to medical centres has increased by 20%.

The results for 12 regions indicate an improved survival rate situation in the Russian Federation as a whole. In 2009, 12 more regions will be covered by the cardiovascular programme. Preparatory measures are being completed. The same is true of road accidents.

Vladimir Putin: Thank you. 

Mr Zubkov, what is the situation with the flu? I understand there are already some early victims in the UK.

Viktor Zubkov: Yes, there are some early victims. On Thursday, the World Health Organisation (WHO) declared the sixth, or highest, level of alert of the threat of a pandemic caused by the A/H1N1/ virus. As of today cases have been registered in 74 countries.

I would like to stress that the possibility of the virus spreading in this or that country depends on the state of preparedness of the national healthcare system. I must say that our Government Commission is taking timely preventive measures. We have held three meetings. Since April 30 we have introduced mandatory checks for passengers arriving from countries where the flu situation is unfavourable.

We have set out the measures to be taken if the virus is detected. It has helped us to detect three cases of the flu. By the way, I have reported to you on every case of the flu in our country.

Plans to ensure readiness for flu pandemic at the regional and municipal levels are in place. The stocks of antiviral drugs have been checked.

The regions regularly report to the Commission. We have already heard reports from Moscow, the Moscow Region, St Petersburg, and the Leningrad and Kaliningrad regions. Work is going according to plan. The Commission will next meet on June 17.

We consider the immediate tasks to be preparation for vaccination against seasonal flu and the development of a vaccine for the A/H1N1/ flu virus. This work is already underway.

The situation in this country is under constant and effective control, and the measures being taken are adequate to the level of threat. Thanks to prompt and effective actions of the supervisory services and healthcare workers, people today are out of danger.

Vladimir Putin: Good. This work should continue because although some observers tend to think that there is no great danger, nevertheless the state and government bodies must be ready for any turn of events. All that the Commission has done is good and positive, but one has to bear in mind that the danger is still high.

We cannot brush it aside, especially since the World Health Organisation is drawing the attention of all countries to this danger. The measures planned by the Commission must continue.

Viktor Zubkov: I absolutely agree.

Vladimir Putin: What about our dialogue with our Belarusian partners on the supply of farm produce?

Sergei Sobyanin: I have to say that our Belarusian partners are excessively politicising the issue and have made some highly provocative statements, which of course complicate the negotiations. I think Ms Skrynnik will have more to say on the issue.

Vladimir Putin: Provocative statements are of course unfortunate, but we shouldn't take offence. You know, in a crisis people tend to be stressed out.  By the way, we should watch our words ourselves, even if we think we are right, one has to know what to say and where to say it, and we should show restraint.

In politics, like in daily life, taking offence is not the best way. You know, I grew up in the Leningrad street, and the neighbourhood kids said in such cases: "He who calls people names is himself that name."

In politics one is guided by very different considerations. We should think about the interests of our people and the interests of the state. After all, we and Belarus are one family. There may be altercations and quarrels in a family sometimes, but life must go on and we should go on working. Ms Skrynnik, what is being done in this area, how are we working with our Belarusian partners?

Yelena Skrynnik: Mr Putin, members of the Presidium. The current situation with the Belarusian dairy industry is as follows.

We have signed the overall balance with the Belarusian Agriculture Ministry, we have reduced the amount of powdered milk we import at unjustifiably low prices. In addition, the Belarusians have made a proposal to suspend supplies of dried milk to the Russian Federation for two quarters, which are difficult quarters for us. These are quarters of large-scale milk production, the second and third quarters. So, it is a positive proposal as far as we are concerned. It will enable our producers to sell Russian milk at acceptable prices. I believe that the dynamics of our relations are positive, at least at the level of the two agriculture ministries. They are ready to sign the agreement.

Vladimir Putin: Good. The other side of the coin is home market prices.

Yelena Skrynnik: Right.

Vladimir Putin: When I met with Russian dairy producers, they assured me that prices will not go up in the home market. I would like you to monitor this.

Yelena Skrynnik: I will.

Vladimir Putin: Mr Basargin, as you know I have signed an executive order to boost the charter capital of the Russian Mortgage Agency (AIZhK) in 2009. Could you please comment on this decision?

Viktor Basargin: Mr Prime Minister, colleagues, this executive order is on the list of housing construction support measures. The Russian Mortgage Agency plans to buy out loans from banks at 13.5 billion roubles in the first six months of this year; a comparable sum was spent on this in the first half of 2008.

Unfortunately, the volume of funds credited in the mortgage market has decreased; it is going to amount to 52 billion roubles in the first six months of this year, which is almost six times less than in 2008. When I reported to you on the loan interest rate a month and a half ago, it totaled 19% on average, whereas it currently stands at 15.6%, which is a considerable decrease.

Therefore we plan to spend 20 billion roubles the following way: About ten billion roubles will be allocated to the economy-class housing construction support programme, with the Federal Fund for Housing Construction contributing as well; about four billion roubles will be allotted for servicemen and young families support programmes, with the Defence Ministry contributing; a certain share of funds will be spent on loan debt restructuring. We anticipate the following effect: We will bail out the mortgage infrastructure network, namely resume regional banks' work to support the mortgage system and the Agency's regional branches, promote the decrease of interest rates, as well as spur the development of private crediting and attract individuals to the housing market.

That is our task in spending these funds.

Vladimir Putin: Good. How is the decision on spending maternity capital on mortgage repayments working?

Viktor Basargin: It is working well. We planned to receive less funds than we are receiving today.

Vladimir Putin: How much is it, do you remember?

Viktor Basargin: It is now about 20 or 27 billion roubles. We expect to receive over 50 billion roubles in total.

Vladimir Putin: Over 50 billion roubles. Is that the amount of money people really need for these purposes?

Viktor Basargin: Yes, it is.

Vladimir Putin: All right. I would like to inform you that I signed a government executive order to set up a national park The Russian Arctic in the Arkhangelsk Region, on the islands in the Novaya Zemlya archipelago and contiguous water areas in that region. The western sector of the Russian Arctic is a unique area with a perfect combination of biodiversity and bio-effectiveness. This area hosts the largest bird colonies in the Northern Hemisphere, walrus rookeries, a habitat of the polar bear, the Greenland whale and other fauna registered in the International Red Book and the Red Book of the Russian Federation.

This region is remarkable for its bio-profusion and unique historical and cultural heritage sites. In this sense it is of the utmost value for the development of ecotourism, as well as research expeditions. The creation of a national park will not affect business in the region.

Environmental undertakings are regular in this country. There are a lot of national parks in Russia. One more park is going to emerge.

I invite you to spend your next holiday in this national park, or in other national parks. There are a lot of interesting and beautiful sites in this country. Mr Shoigu knows it pretty well; he has invited me to one of these places in summer, and I will probably go there.

So, let us proceed with our agenda.

Firstly, I would like to focus on an issue related to our economic modernisation. I am referring to additional steps to stimulate innovation in business. I remind you that this is one of our Government's priority areas.

You know that the President recently decided to establish a Commission for the Modernisation and Technological Development of the Economy. This Commission must be offered every assistance in its work.

I note that action has already been taken in this area. Taxation leverage is operational, which allows the favourable treatment of investment in new technology, research and development, and production renovation. Sections of the innovation infrastructure are developing: science towns, technoparks, special economic zones, and venture capital funds.

Through federal targeted programmes, the state directly supports groundbreaking high-tech areas of research such as space science, nuclear energy, aviation, shipbuilding and nanotechnology. Incidentally, this year we have cut their funding, but bear in mind that next year the money to fund these funds' activities will have to be found.

Nevertheless, the sensitivity of the economy and business to innovations overall remains low. In Russia, the proportion of businesses implementing technological innovation amounts to 9.4%. By comparison, in the Federal Republic of Germany the figure is 73%, in Belgium 58%, in Estonia 47% and in the Czech Republic 41%.

Furthermore, today's economic dislocation creates additional risks. The developing situation pushes some businesses to make on the spot decisions to cut their investment programmes and to put off their plans for renewing their production base until later.

However, it is clear that this is a dead end which contradicts the long-term interests both of those companies, and of the economy as a whole. That is why in this regard our measures need to be consistent and, should it be required, harsh. Not just to create favourable taxation and customs duties systems, and to put in place measures to support the export of high-tech goods, but also to create a business climate in which their refusal to innovate and preservation of their underdevelopment effectively drive them out of the market.

Modern technical regulations must be used to apply this rigorous policy, in addition to raising the legal requirements that apply to energy conservation, the environment and industrial safety.

It is necessary to consistently restrict or prohibit the use of obsolete and wasteful technologies, which are harmful to people and the environment, in order to improve the quality of our produce and make it more competitive in the world market. Thus, we have already made decisions to secure the rational use of petroleum gas, and stop the production of low quality gasoline. A number of new regulations have been successfully introduced in the food industry, including milk.

Next on the agenda: the complete renewal of the regulatory framework for construction, and also the passing of a package of legislation regarding energy conservation.

Support for individual businesses is also offered within the framework of the anti-crisis measures, on the condition that they innovate and modernise, and of course, we will not turn our backs on the principle of help in exchange for innovation.

Clearly, we must find additional reserves to support innovation in our businesses. Therefore, resources held by state development institutions, and the programmes to support high-tech exports must be used more effectively.

And one more important observation. Today it is not actually possible to gauge accurately the total amount of funds spent on science and innovation. These allocations are made through a variety of agencies, without adequate mutual coordination or agreement.

This situation can and must be changed. I suggest strengthening the coordinating role of the Ministry of Education and Science in setting the priorities and formulating a common rationale for Government expenditure on research and the introduction of new technologies.

In addition, we need to broaden the scope for business initiatives in innovation, including among small businesses, research teams, and educational institutions.

And finally, it is vital that we resolve this question with the complete commercialisation of intellectual property created by budget resources. 

The authors and other interested parties, and this is something we have spoken about on many occasions, must have the right to use the relevant developments, presumably on condition that they transfer part of the income to the Government, since they were created using state resources.

The documents from the Ministry of Economic Development contain a raft of other proposals. I suggest that we discuss them in detail today.

Now onto the next question. We are due to summarise the implementation of the federal targeted programmes in the first quarter.

I remind you that during the revision of the 2009 budget we significantly redistributed resources to benefit the implementation of anti-crisis measures. I remind you that as a whole the expenditure even increased a little, but reallocation took place within the budget.

The financing for the federal targeted programmes had to be cut significantly - from 1,161 billion roubles to 909 billion roubles: That is a cutback of 252 billion.

Nonetheless, we managed to retain the expenditure volume on the fundamental, most important areas of the priority programmes.  This was a difficult decision. You know how difficult it was to get confirmation of each budget allocation figure, and how long and gruelling the arguments about this were.  That is why it is crucial that the targeted programmes are implemented efficiently, and that the resources are used effectively.

Today we must carry out a thorough evaluation of the state of affairs in all the federal targeted programmes. And we will certainly take the results into account when preparing next year's budget.

In addition, our agenda includes adjustments to the Budget Code, which stipulate moving the time the federal budget bill is presented to the State Duma to October 1. This anti-crisis measure will be temporary, and adopting it will allow the preparation of a better, more realistic budget for the period 2010 to 2012. In view of what we have to do, the Ministry of Economic Development should prepare a high quality forecast, which we can use as the basis for the country's main financial document for the coming three years.

Let's get to work.