Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, colleagues,

This is a traditional meeting held after the end of the spring session, when we synchronise our positions and determine our priorities for the second half of the year.

Of course, the main objective for all of us is to draft the budget for 2010-2012. The draft is to be submitted to the State Duma before October 1, as you know. We are working on the draft almost every day. The Government met yesterday to discuss the guidelines of the socio-economic development scenario and ceilings for the natural monopolies' tariffs. In other words, we have determined the foundation for the budget.

I would like to emphasise that next year we expect to report positive dynamics of the majority of macroeconomic indices. We will also work to resume the growth of GDP and industrial production.

We must be maximally active and consistent in the implementation of the Anti-crisis Programme. You must admit that the crisis will not end by itself, without our joint efforts.

At the same time, we should be realistic - I have pointed this out during my meeting with colleagues from the State Duma. We cannot expect our budget revenue to exceed 16% of GDP in the next few years. This means that we will have some 6.5-7.5 trillion roubles annually. The budget shortfall will amount to one-third of the 2008 revenue due to the global financial crisis.

Consequently, we should consider ways to attain our objectives without unbalancing the budget or allowing an uncontrolled growth of deficit, while at the same time honouring all our main commitments to the public. It appears that we will have to cut expenditures, which we should do reasonably and carefully, by developing a system of priorities and enhancing the efficiency of budget expenditures.

We must not and will not allow a mindless reduction of expenditures. But we must reduce all budget expenditures that are not absolutely indispensable. Please, consider this task objectively. Each of you, members of the Federation Council, represents his or her region with its own problems, plans and projects. It is perfectly natural and justified that all members of the Federation Council act in the interests of their regions and advocate regional initiatives at the federal level.

At the same time, we must not forget about the national interests and national objectives. When I proposed a reform of the Federation Council, I said that we needed a house whose members would protect the interests of their regions but would be closely connected to the national interests.

We must join forces to search for optimal solutions to each particular problem. There must be no place for lobbyism or self-seeking interests when we discuss the federal budget.

The same goes for the regional budgets. Please, use your influence and prestige to ensure that the constituent entities of the Russian Federation make realistic plans, as I have said repeatedly at my meetings with regional leaders.

It is necessary to provide enough funds in the regional budgets for implementing social commitments before citizens, paying in full for the fuel and energy resources, and resolving other urgent and fundamental objectives.

For my part, I can say that support for the regions, and co-financing of major social programmes remains one of the federal budget's priorities.

I recall that this year's budget has allocated an unprecedented 1.2 trillion roubles for support of the regions. In addition, 150 billion roubles will be earmarked to balance out their budgets, and another 150 billion roubles will be given to them as three-year-long budget loans.

As for the next year, our trilateral commission will have an opportunity to review your proposals in detail. I am also ready to discuss at our current meeting anything you consider appropriate.

There is one more topic I would like to dwell upon in more detail. I am referring to the tariffs of natural monopolies.

As you know, in 2009 we slowed down the growth of tariffs that had been planned earlier for this year. We will be very cautious over their adjustment next year, too. Thus, we are planning to keep the state-regulated prices on electricity, and cargo railway shipments below the expected inflation rate. In real terms, they are likely to decrease.

I want to say that this is not an easy decision during the ongoing economic crisis, as it will reflect on the real economy. We must fully understand this.

Nevertheless, we have made this decision. However, a complete freezing of tariffs, a kind of a tariff pause, will lead to huge losses, and will eventually cause more harm than good.

For instance, a failure of the housing and public utilities sector to receive the planned profits may disrupt routine repairs, and hence, lead to mishaps in the heating mains during winter, and the destruction of the life-support systems.

I have often quoted examples linked with the railway transport. If its tariffs are not increased, Russian Railways will have to curtail its investment programmes. It will reduce its orders for rails, wheels, and carriages. Hence, this would lead to problems in relevant industries, and we won't be able to resolve them with budget money.

The real way out is in helping the regions and municipalities to introduce energy-saving technologies, and develop the system of social support for low-income citizens, that is, help them pay for housing and utilities.

I hope that the members of the Federation Council will pay special attention to these issues, and, specifically, will take part in the finalisation of the bill on energy saving.

Now I would like to say a few words about the elaboration of laws in general. The Federation Council has supported the Government's anti-crisis laws. Many of them include provisions drafted with your direct participation, for instance, on additional support of small and medium-sized businesses.

It is important to ensure that the resolution of current problems does not interfere with the implementation of strategic development objectives. Thus, amendments were introduced into the legislation governing the work of federal universities, which are designed to become one of the major links for developing and introducing innovations in Russia.

Laws improving corporate and anti-monopoly legislation have been adopted. Procedures for anti-corruption expertise of legal acts have been determined. The establishment of a company in charge of federal motor roads has been approved.

Speaking about the package of laws on anti-monopoly legislation, I would like to note that there is still one issue that requires additional consultations, but must be adopted by all means, preferably, during the spring session. I am referring to criminal responsibility for the violation of anti-monopoly legislation. These ongoing consultations look more like deliberate procrastination.

I would like to emphasise that the senators were critical enough in their work. Some bills were rejected, and refined during reconciliatory procedures, which indisputably raised their quality.

You have one more plenary meeting before the end of the session. I would like you to discuss and support key social bills. First and foremost, I am referring to the bill on increasing pensions, and on switching to insurance-based accumulation of revenues by the pension system. This is a decision, which we have been discussing for more than a year, and our senior citizens are very much looking forward to it.

As for the plans for the autumn session, apart from drafts of the federal budget, and the budgets of government extra-budgetary funds, I would like to mention the bill on trade.

Many members of the Federation Council took a most active part in drafting and refining this bill, facilitating a search for ways of building fair and effective producer-consumer relations.

It is also necessary to continue working on technical regulations, and make decisions on additional support of small and medium-sized businesses.

As for the bill on trade, yesterday the Government approved its final version, having considered your proposals and amendments.

The Government also has other initiatives in its portfolio. I consider very important the participation of the members of the Federation Council in working groups on drafting the relevant bills. This makes it possible to use your rich intellectual potential and life experience from the very start.

I hope very much that the work will continue in the positive spirit. As we have always done in recent times, I am referring to our work with the involvement of experts, all interested parties, all public and other organisations, and representatives of the business community, if adopting these relevant laws concerns their interests.

Let me return to the bill on trade. As you know, we met both with retailers and top managers. I have discussed this issue with trade unions, members of the Federation Council and Duma deputies. I hope that the balance has been established. This concerns anti-monopoly regulation, dominance on the market, and renunciation of bad practices, bonuses, and so forth. I know that there are interested parties among those present here, who are taking an active part in this process. Today, we can discuss this in more detail. I dealt with this issue today in the morning.

Sergei Mironov: Mr Putin, thank you for supporting this good tradition. Indeed, at the end of each session we have a tradition - to meet and discuss what has been done and what we will do in the future.

You have exempt me from the need to sum up our results, as you have covered all legal issues which we discussed with you, the Government, and the State Duma during the spring session.

I would like to express a few ideas for the future, and my colleagues will follow suit. I will simply make an announcement. Svetlana Orlova (Deputy Chairperson of the Federation Council {FC}) will speak about socio-economic issues, environmental protection, and the bill on trade. Yury Vorobyov (FC Deputy Chairman) will speak about our legal work on countering corruption. Mikhail Nikolayev (FC Deputy Chairman) will focus on issues linked with some problems of human habitation in the Far North, as well as agricultural issues. Alexander Torshin (FC First Deputy Chairman) will deal with questions pertaining to legislation on banning drug trafficking, and to the production and distribution of drugs.

First of all, I would like to avail myself of this opportunity for expressing my deep gratitude to you and your deputies - Sergei Sobyanin, and your envoy in the Federation Council, Andrei Yatskin. We are working "online," to use the modern term, on all bills coming from the Government.

Incidentally, at one time we expressed concern that ministers considered it possible not to attend government hours, but to send their deputies instead. This practice is now a thing of the past. Now the work has become very exact and coordinated, and I must say thank you for this.

In the conditions of the financial and economic crisis, Federation Council members have been conducting intensive work in the regions on my instructions. They are taking part in measures to prevent social effects of the crisis, and in the work of regional anti-crisis headquarters. They regularly report on what they have done and exchange experience. This is a very good and positive effort.

Vladimir Putin: Are they working in the anti-crisis headquarters?

Sergei Mironov: Yes. More than that, I am very pleased to say that, apart from my deputies, there are another 4 members of the Federation Council attending this meeting. Each of them visits their respective region regularly, where they carry out on-the-ground work. Moreover, they do not simply hold meetings with governors in their headquarters; they also visit industrial enterprises and meet with their employees. This makes for a very good system of feedback.

I also agree with what you said regarding the role and significance of the position taken by members of the Federation Council. Yes, indeed. We openly speak about the problems and lobby for the interests of our regions. That is also our function as representatives of the regional branches of power. But we also have a second purpose, which is no less important: when we visit a region, we serve as promoters of federal and central politics. My colleagues are also carrying out this work, and there are some very positive processes underway.

I hope you will forgive me, I would like once more to say thank you for another matter. An international conference entitled "The Role of Siberia and the Far East in Global Development" took place as part of the Baikal Economic Forum in Ulan-Ude on July 9 and 10. I would like to thank you personally for sending your deputy, Finance Minister Alexei Kudrin, there.

Vladimir Putin: Yes, he reported back at yesterday's Presidium.

Sergei Mironov: Yes, his attendance boosted the event. The conference acquired much more significance. Thank you very much for that.

Vladimir Putin: Well, at least you commended him, as he is under constant attack.

Sergei Mironov: Please note, I was commending you...

Vladimir Putin: But he was the one that boosted...

Sergei Mironov: Yes, he did boost the event. In fact, it was a very interesting report.

Now back to our agenda. There are several points. You know that we are working on the President's instruction to step up the work done by the legislative bodies towards leading their legislative initiatives through the Federal Assembly. We have prepared the concept, we have agreed that we will work together to prepare the so-called consolidated legislative initiatives.

These are initiatives advanced by regional legislative assemblies. We are analysing them, making necessary amendments and prioritising them in terms of their expediency and urgency, and then introduce them to the Federal Assembly on behalf of the Federation Council. This is not simply the Federation Council's initiative, but a consolidated legislative initiative from the region or regions that received our full support.

We have requested the State Duma to introduce several alterations to their regulations, and to devote particular attention to the progress of such initiatives. Today we have signed special agreements on this kind of work with 35 regional legislative bodies.

Incidentally, I know that the Government's decision for any legislative initiative, any draft law, to be given preliminary consideration by the Government with participation of the State Duma deputies and members of the Federation Council, has med with positive response.

We ask that particular care be taken in discussing questions related to those consolidated legislative initiatives that originate as regional initiatives.

Now, allow me to gist our agenda.

The Border Cooperation Law: we drafted it on a direct order, and submitted it to the State Duma a year ago. The Duma received its approval six or eight weeks ago, when we addressed you the last. To tell the truth, there is no response yet though it is a burning issue, and the relevant law is ready. The recent meeting in Petrozavodsk referred to it. The Government has approved it. The law deserves to be passed in the first reading even if it leaves room for progress. Please convince the State Duma that this is a very timely law.

It would be worthwhile to think in autumn what legislative measures can be taken to facilitate farmers' access to the market-preferences for shops contacting with them, or promoting mobile shops and organizing special sites for them. Consumers need the opportunity to buy straight from the manufacturer because small private farms and household plots account for more than a half of Russian agricultural production.

Legislation might be amended also to use the opportunities of Tsentrosoyuz [the central organisation of consumer cooperatives] to greater effect. Meanwhile, cooperatives are by themselves with their problems, and the public at large with theirs though they would benefit by joining hands.

I also have a practical initiative. I heard about an interesting problem as I visited Star Township. It was a small town with limited access and with no municipal status until quite recently. Now, it will be a closed administrative territorial unit since December.

Once the status is obtained, our universally respected cosmonauts, twice Heroes of the Soviet Union and Russia, will get the legal opportunity-at last-to privatise their flats, while next March is the deadline for free privatisation.

Letters are coming from the military who are appointed flats for demobilisation but will be unable to privatise them after March 2010. It might be worthwhile to prolong the right of free privatisation at least for a year for the military-a population group we are ignoring for some reason.

Many letters are coming to the Federation Council, whose authors are afraid reforms will put an end to some of the military's few existent privileges-for instance, free spa treatment and fares. We think these privileges and grants must survive at all cost, especially during the crisis.

I also want to inform you that we and Defence Ministry people wondered about the families of Russian officers and men who died while repulsing Georgian aggression against South Ossetia. We took a list of the poorest families. Federation Council members collected about 4.5 million roubles for them, and we transferred slightly over 60,000 roubles to each family last May, that is, a months and a half ago. I told Federation Council members to visit some of those families for firsthand information about their problems and living conditions.

There are two proposals in this connection. First, to think about survivors who are serving in the Russian Army or will soon demobilise. Possibly, soldiers who defended South Ossetia deserve a special status, though they have none now.

Second, we will appeal to the Defence Minister or right to the Government after bereaved relatives' request, which might seem bizarre but is quite understandable. They ask us to arrange a trip to South Ossetia for them. They don't set whatever deadlines. They want to see and worship the spot where their sons and husbands died to protect South Ossetian and Russian lives.

Thank God, the national leadership is good on its pledges and the gambling plague has been prohibited in Russia since July 1. I don't want to discuss gambling areas here. What is more alarming, we have left legal loopholes. Poker clubs and Internet salons are mushrooming, and lottery machines are everywhere-what's their difference from gambling machines, I wonder.

I think we need technical regulations to specify that difference explicitly. And a ban on Internet gambling is necessary. The matter is worth pondering.

The next issue is social. Today, there are 3,239 Heroes of Socialist Labour in Russia-quite few. They are not equal to Heroes of the Soviet Union and Russia for social benefits. I think they should.

First, they enjoyed equal rights formerly and, second, there are only 3,239 now.

You have said how important it is to draft the budget and submit it in time. Please carry on our good tradition this year-convene a large meeting at the start of September with Government and Federation Council members, and regional representatives. It will be a kind of zero budget reading. As soon as people from the regions learn future indices, they will be not so hard put with their own budgeting, so the Federation Council will be spared the hottest debates. Please tell the Finance Ministry and the Economic Development Ministry to arrange the meeting with us.

By way of conclusion, I want to ask a practical question about a particular place. I visited the Kaliningrad Region in June. You know the navigation problem in the Kaliningrad, or Vistula, Bay has not been settled, and Russia is losing big money. I think the problem should be reconsidered and navigation permitted. I don't think anyone but our secret services think a ban is necessary for some reason.

After I returned from Kaliningrad, I wrote you two letters-about the Autotor automotive works and Telebalt Company. You have given ministers relevant orders. Thank you. We are waiting for results.

Last but not least, I want to ask you another two questions, Mr Putin. They also concern the whole audience. A state commission for the development of the Far East has been established. It is responsible for the Russian Far East, Transbaikalia and the Irkutsk Region. When we visited Ulan Ude recently, we were asked what the Government thought about regional goals in the context of its work. Possibly, efforts should be coordinated at the federal, regional and municipal levels.

My second question concerns drinking. It is a bad danger. Russia has always had problems with alcoholism but present consumption makes one gasp-18 litres of pure alcohol a year per capita.

We want to know what the Government intends to do about it and how we legislators can help. I know Mr Gryzlov demanded state monopoly of grain alcohol distillery and circulation at a recent meeting. I have been demanding the same for several years now. The huge number of lethal drunken accidents calls for tough measures.

Thank you.

Vladimir Putin: Allow me to review some of the problems you have mentioned.

The Border Cooperation Law is necessary. You are right here. But it needs practical content to regulate social and economic life in border areas effectively. Russia has frontiers of tremendous length, and its new frontiers are not sufficiently equipped. That is important. The new law needs close analysis from this point.

As for free housing privatisation for the military, I have never heard about any problems related to it. Anyway, we will delve into the matter. As for the prospects of abolishing all their privileges, including free travel on leave, the Defence Ministry has never proposed anything like that, and the Government is not regarding any such initiatives. Even if someone advances them, they will not be taken seriously. That is certain.

As for the relatives of Russian soldiers who died last August defending South Ossetia, their trip can be arranged. I never doubt South Ossetia will welcome them as cherished friends.

As far as gambling is concerned, I fully agree that it is being disguised as quite different entertainments. We must think together how to put an end to such subterfuges-poker clubs and all. The Sport Ministry is drafting a relevant decision to be made public quite soon. As for other loopholes, we will think together how to stop them. The Government is ready to take up the job, and I will give necessary instructions to involved agencies. We will work at it together.

As to navigation in the Kaliningrad Bay, I have said on many occasions that it should resume-in particular, for Poland and Lithuania, which are our neighbours. It must be done.

The Far Eastern question is serious. A commission has been established to tackle it. After Mr Medvedev's visit to the Russian Far East, we are improving certain aspects of its development programme on his proposals. First Deputy Prime Minister Igor Shuvalov heads the commission. We will necessarily adopt the programme, and we are ready to do it together with Federation Council members who represent that part of Russia.

Mass alcoholism is a very sensitive problem. It is essential socially and economically alike. The market offers a great amount of homebrew vodka and other alcoholic beverages. I know about the idea of shifting excises to alcohol. I repeat what I said when I met with State Duma group leaders. The matter demands the utmost attention. Russia is the only country in the world where beer costs less than drinking water. That is abnormal. But decision-making in this sphere must proceed from the following point: what we need is not a ban and bloated prices of all strong drinks but promotion of fitness and healthy living. The public needs sport facilities and interests to distract it from drinking.

If you have more practical economic ideas, we will be glad to discuss any. I repeat, we should not create new problems, which we will have if we follow the notorious principle of "Hold 'em fast!"

Let us get over to more detailed discussion of all those problems.