Transcript of the meeting's beginning: 

Vladimir Putin: Good afternoon, Mr Khristenko. Towards the end of last year, we adopted a number of decisions to support the defence industry enterprises, implementing some very important programmes. Among these enterprises is Saturn Scientific-Production Association. I have signed a Government resolution today allocating 5.2 billion roubles for Saturn's programmes. How are these funds going to be spent, how are they going to be used? Let us go over these details once again.

Viktor Khristenko: Mr Putin, when we discussed Saturn some time ago, we touched upon a very serious issue of developing a gas turbine engine-building industry in Russia. The past six months proved crucial for the development of gas turbine engine building in Russia. What achievements have we had over this period? In fact, the resolution that you have signed today is part of an extensive plan. First, at the end of last year, we approved the Strategy for Gas Turbine Engine Building in Russia for a Period up to 2025. This is an extremely important industry. The Strategy is aimed at developing advanced Russian engine-building technologies in military and civilian aviation, as well as in manufacturing, primarily for turbine-powered power generation facilities.

It is one of the most highly technological industries. In aviation, for example, the engine accounts for 30% of an airplane's or helicopter's cost, and for 50% of all innovations and the aircraft competitiveness. In addition, the industry's 100,000 employees are the elite of machine building.  

In the Strategy, we have outlined the main goals and set the industrial output levels: to double the production volume by 2015 and to increase the production fourfold by 2025. These levels must be achieved by doubling labour productivity by 2015, and it must increase 6 to 8 times by 2025. I am saying "must" because being competitive in this industry is extremely important for us.  In helicopter building, for example, our goal is to increase the competitiveness level from the current 10% of the helicopter engine production (for Russian-made helicopters) to 70%. In airplane building, the goal is to maintain the 90% competitiveness level of Russian-made engines, while significantly increasing the airplane production volume. We also intend to occupy leading positions in the power generation facilities' niche. Of course, these plans require serious resources and organisational transformations. These issues are also addressed in the Strategy.  

What has been accomplished so far in this area? All Russian facilities and assets in this sphere have been included in the United Engine-Building Corporation. In February, the Government transferred all its shares in the industry's enterprises to the Corporation. In May, MIG transferred all its engine-building facilities to Oboronprom United Industrial Corporation and, correspondingly, to the engine-building corporation. During this period, Oboronprom independently acquired some key assets in the industry. As of today, Oboronprom and the United Engine-Building Corporation have the controlling stock in all major engine-building enterprises.

Of course, Saturn is one of the most important components of this industrial and scientific engine-building merger, as for SuperJet-100, the well-known international project.

Vladimir Putin: The second element is also very important - the Su-35 front-line aviation complex.

Viktor Khristenko: Correct. Both elements that are present there represent, to a large extent, the cutting edge technologies in military and civil aviation. The experience of international cooperation and independent designs is very important for developing new civil aircraft. Despite these achievements, it should be acknowledged that the economic downturn did have its impact on the industry. We had to allocate considerable resources to support the enterprises during the crisis and to continue implementing our strategic goals.

The difficulty is that engine building is a long cycle industry. It includes production and, of course, research and development of new engines. To address this issue, we have merged all assets. Furthermore, at the beginning of the year, the Government has provided significant assistance to engine-building enterprises to minimise the effects of the crisis. We have allocated 9.5 billion roubles to support the engine-building enterprises' capital stock; 5.2 billion roubles have been provided to Saturn; 2.9 billion roubles went to the Chernyshev factory; and 1.4 billion will be provided to motor-building enterprises. These funds come very cheap for the enterprises, but are very costly for the budget. In essence, they improve the companies' credit histories and allow them to work efficiently with banks.    

In addition, this year, those engine-building enterprises that are large exporters have received 900 million roubles in export subsidies covering their shipments and loans they received in Russian banks. Decisions have been made to provide 1.6 billion roubles in subsidies for interest payments on engine-building enterprises current activities. The funds will be provided in the near future. Furthermore, we have allocated 16 billion roubles in guarantees by introducing amendments to the legislation. These measures can also be directed toward supporting the current activities of the defence industry enterprises.

Vladimir Putin: How will these funds reach the enterprises? Do you have a mechanism for that? We need to ensure that funds are transferred without delay.

Viktor Khristenko: There are plenty of mechanisms. The very fact that these funds have been allocated will ensure improved relations with banks. The latter understand that funds are available and can proceed in their normal fashion. The funds will reach the enterprises through the following mechanism. Additional shares of Oboronprom will be issued, which will be redeemed by the Government and transferred to Saturn. The additional emission of Saturn's shares will be handled in the same way. The mechanism will take some time to be implemented, but essentially, the funds will become available immediately upon signing the resolution, as it will provide the banks with a clear and fully guaranteed operational scheme, including in as far as it relates to Saturn.   

As for the current activities, I indicated the numbers and resources that have been provided. It is especially important that implementation of the Strategy and corporate programmes of the United Engine-Building Corporation will be complemented by a sub-programme on aviation engine building, in the framework of the civil aviation development project. It includes 16 engine building technologies with 3.5 billion roubles of funding provided this year and 4.5 billion roubles in 2010 and 2011 respectively.

All tenders have been held and funded by this year's Federal Targeted Programme. All contracts have been signed and the work is in full swing. Most importantly this means that following the well-known SuperJet-100 project, we are launching a new one - the MC-21 medium-range airplane.    

It will compete with all existing analogues in the world and outperform them by 15%. We should also develop the engine for this aircraft ourselves. The funds that have been allocated are directed at designing a family of new engines and aircraft, which will provide a breakthrough for the Russian aviation and engine-building industries.

Vladimir Putin: What are the deadlines?

Viktor Khristenko: The MC-21 will be released in 2016-2017, meaning that it will be available for purchase. I would like to stress once again that it will be a 15% better aircraft than the best existing aircraft of its class - Boing 737 and Airbus 320. For this aircraft, we are developing a brand new technology, the so-called black wing, which is made of composite materials. The work is financed out of the federal budget. We have held tenders and concluded a contract for the development of the black wing. In addition, we are financing the development of new materials for the wing. First Deputy Prime Minister Igor Shuvalov and I have just returned from Irkutsk. We were there to examine IRKUT's site where the MC-21 will be built. The industrial and technological elements of the new aircraft creation are also unfolding here.  

Hence, this decision is in line with the general strategy on the transition to the high-tech innovations industry. I hope that we would proceed in similar fashion not only this year, but also in the years ahead.