Transcript of the beginning of the session:

Vladimir Putin: Good afternoon, esteemed colleagues. Let's first exchange current information. Mr Kudrin has been in Istanbul, and has called in regularly from there and related how things were going. Please tell us about the discussions that took place there and the agreements you were able to reach.

Alexei Kudrin: Mr Putin, the results of the work in Istanbul may be divided into several aspects. But the list of events that took place includes meetings of the finance ministers from the BRIC countries, the finance ministers from the G8 countries, and the International Monetary Fund's Board of Governors and Development Committee, which is also the board of directors of the World Bank.

All of these events took place over a period of three days. A set of issues connected with bringing the global economy out of crisis and providing aid to disadvantaged countries was discussed at the meetings.

On the subject of the most important results of the meeting: the primary result was an in-depth analysis of the current stage of the global economic crisis and countries' actions in the context of this crisis. Resolutions from the G20 meeting in Pittsburgh have been adopted and are being supported. The necessity of continuing the implementation of a set of measures to stimulate the global economy was discussed. Demand is very unstable so far and investment is not growing consistently, so it was proposed to continue implementing these measures.

In addition, countries must come up with crisis exit strategies. Nobody is talking about carrying out these strategies yet; but when the time is ripe to switch over to these measures, they must be applied without delay since there will be no time for a build-up. Both central banks and governments will have to implement these measures.

One of the key measures is obtaining the necessary funding from the IMF and World Bank in order to support certain countries. Accordingly, the G20 resolution of raising $500 billion to support the balances of payment of various countries has been fulfilled. As late as September, during the meeting in Pittsburgh, this plan was not fulfilled. At present, more than $500 billion has been raised - to be exact, $550 billion, and there are plans for another round of collections to follow - almost $600 million will be collected into temporary funds for an instrument called a temporary loan agreement. This amount includes the $80-billion contribution from the BRIC countries, $10 billion of which is from Russia, and we will use this amount to buy bonds.

Thanks to the Central Bank's gold and foreign exchange reserves, we have the opportunity to invest $10 billion in these bonds during both the crisis and recovery periods.

Vladimir Putin: Why do we need this? What is attractive about this arrangement?

Alexei Kudrin: It is one of the most reliable instruments in the world and it has a yield that is no lower than the market yield.

Furthermore, this is the collective effort of countries, and so it involves our participation as an IMF and World Bank shareholder in supporting other countries. These efforts also include supporting our immediate neighbours and our trade and economic partners - Ukraine, Belarus, Tajikistan, Kyrgyzstan and other CIS countries, and this in turn supports their ability to continue trade with Russia, buy equipment from us, and buy customary export goods from Russia.

Vladimir Putin: In other words, we are, in essence, sending money to the IMF, and we can withdraw this money at any time if we need to, but the IMF itself funds the foreign trade turnover of our neighbouring countries and our main partners?

Alexei Kudrin: Yes, that is its main function and responsibility - supporting the stability of the economic situation of foreign balances of payment.

In addition, we also discussed reform of the World Bank and replenishment of its capital. This work is still going on, and quotas are being specified, new quotas - reformed and rectified quotas for countries in the bank's capital - and capital growth of the World Bank, in order for it to continue operations in a different segment of the market. It supports development programmes rather than balances of payment, such as those facilitating access to food, energy, and other infrastructure, as well as promoting access to education and health care - generally in the poorest countries.

Of course, the World Bank also funds middle-income countries. By so doing it gets a source in the form of interest to cover the costs of lending on easy terms to poorer countries. Therefore, such countries as Russia, which is a middle-income country in per-capita terms, can also borrow from the World Bank at lower-than-market rates. But this is bearing in mind that some countries - poor or poorest - will be granted loans on even more favourable terms.

Therefore, Russia considered and took part in negotiations with the World Bank on borrowing from the bank according to general market terms next year, when we will have greater borrowing needs. I repeat, the bank's terms are a little better than on the market as a whole.

Furthermore, Russia has signed an agreement with the World Bank on providing $50 million during three years for a trust fund to support the most vulnerable countries during this crisis period. This is our own measure, which Russia announced at the G20 meeting - participating in a trust fund for the countries with significant increases in the disadvantaged segments of their populations.

We also discussed reform of the IMF. This issue, in essence, has come up in earnest. The BRIC countries raised the issue of equitable, fair participation of both developed and developing countries in managing these institutions - the World Bank and the IMF. This is very complex work because, in essence, a number of countries, primarily those in Europe, will have to reduce their shares of capital and diminish their influence on making decisions. But the discussion was held, and we found certain compromises within the context of which we will continue to work.

So as a result, I can say that there are proposals not to diminish the role of these institutions in preventing global crises and supporting certain countries, and not only during this recession, but in the future, too. Accordingly, there are more long-term strategies for developing these institutions - first of all, with regard to tightening international monitoring of the markets, primarily on the part of the IMF, along with the timely warning of the world's economy and governments of the risks for specific countries.

What is more, countries such as the US and China have signed documents stating that they will undergo inspection and the international community will issue recommendations on the results of inspections and monitoring with respect to these countries. In this case, monitoring will be voluntary and recommendations will be of advisory nature. But this is the first step towards developing international regulations in which leading countries will have to participate on equal terms.

I also met with the deputy prime ministers or finance ministers from ten countries - the US, Serbia, Ukraine, Bulgaria, France and others - in other words, with most of our main partners. We met on bilateral terms and discussed a number of current issues in our bilateral relations.

Vladimir Putin: Regarding the loans - as I understand it, the Finance Ministry does not plan to borrow from any international financial organisations. You just hypothetically worked out such an option, correct?

Alexei Kudrin: We do not plan such borrowing from the IMF. Our balance of payments is stable, and we do not even anticipate having to resort to borrowing even in such a difficult crisis as this one.

With regard to the World Bank, we are considering this possibility, but we have not made any decisions yet. If terms for such a loan were to be more favourable than on the markets, we would not rule out this possibility.

Vladimir Putin: But the World Bank usually grants such loans for specific projects?

Alexei Kudrin: Yes.

Vladimir Putin: All right. Good.

Mr Shchegolev, at the Russian-Italian meeting, you discussed issues connected with the high-tech sector and, more specifically, telecommunications. How did this work go?

Igor Shchegolev: A large group of Italian business leaders visited Russia last spring. A decision was made at that time to give special attention to cooperation in telecommunications, digital TV, and information technologies.

Companies from the two countries had worked closely together in the past. We discussed the development of Russian telecommunications networks, including fixed-line and mobile services, as well as using IT in providing public services to the population. We also discussed joint projects to develop digital television, and launching a new generation of satellites as a part of projects already underway.

Our Italian colleagues also told us about their experience in setting up information and communications network for the Turin Winter Olympics in 2006. All of the projects were carried out by Italian companies, although international IT giants took part in the public bidding. Our Italian colleagues are willing to participate in similar projects in the preparations for the 2014 Sochi Olympics.

We have thoroughly studied the Italian postal reform. The system was very inefficient in the early 2000s, but became profitable in a matter of three years. They introduced cutting-edge technologies, IT, and a high degree of automation.

We already have joint projects underway. A major automated sorting-out office will open in the Moscow Region in late October, built jointly with our Italian partners. Russia has not seen this kind of project in 30 years. The last time the technology of the Russian postal service was upgraded was in the run-up to the Moscow Olympics in 1980.

The new office will process over 3 million postal items per day. Labour productivity and energy efficiency will be very high. It is a very interesting project. We are certainly interested in further cooperation in this area.

Vladimir Putin: Good. Now that you mention the Olympics - Mr Kozak is just back from Copenhagen where he informed the International Olympic Committee on the progress of our Olympic preparations. (To Dmitry Kozak) Tell us about that discussion, please.

Dmitry Kozak: Yes, Mr Putin. We heard a report on the progress of the preparations for the 2014 Winter Olympics in Sochi at the 21^st session at the IOC yesterday.

In fact, the audience heard two reports, one from the traditional IOC commission that supervises preparation for the Olympics, and the other from Russia.

I would like to tell you that we received very high ratings for our efforts. Even other IOC members said that no other country had such high ratings recently. The approval was mainly due to our progress in designing and constructing Olympic facilities, which is our main concern at this stage.

The work of the organising committee also received a high rating, especially for its success in attracting sponsors. The organising committee has been successful in this respect even despite the recession.

Overall, I would like to repeat that our efforts were praised. But this is still no reason to relax. We need to continue along the same lines. We have established an effective procedure for supervision and control, which primarily ensures that construction deadlines are met. The schedule is tight, but this is all we have.

Let me also tell you about some of my observations while monitoring the construction schedule. The contractors responsible for specific facilities make sure that the deadlines are met... We can be safe there.

Back to yesterday's report from the IOC members, and the organising committee. It was not entirely based on our own reports. Members of the IOC and the organising commission visited our Olympic construction sites during the September 19 Economic Forum in Sochi. They saw the progress in construction personally, and could therefore be objective.

As for meeting the deadlines stipulated by the schedule, we have found that those responsible are making every effort to meet these deadlines, even intermediate ones.

Nevertheless, the big problem we have is the excessive number of administrative bodies which must give their approval, but which often step aside and just watch. Let me draw the federal government's attention to the fact that if some deadline is not met because these administrative bodies take too long to coordinate issues... they will have to bear the same responsibility as contractors. It is important that we work as a team.

Other than that, we have no serious concerns about the Olympic preparations, and neither does the IOC.

Vladimir Putin: So we'll follow your schedule and visit all of the facilities under construction in Sochi in the second half of November, and see which of the deadlines have been met and which have not, if there are any. And, if so, why haven't they been met. I will ask you to inform all of your contractors in late November. I will arrive on site and see for myself.

Dmitry Kozak: Good. We have inspections every week.

Vladimir Putin: Yes, I am aware of that, but it wouldn't hurt to inspect the facilities on location. I have signed a number of Government executive orders that concern various aspects of our activities. One of the executive orders provides government guarantees worth 36 billion roubles to the Agency for Housing Mortgage Lending. Mr Kozak, how do you plan to use these funds?

Dmitry Kozak: This indeed is a very important executive order. It provides additional opportunities to the Agency for Housing Mortgage Lending to support and encourage mortgage lending in the Russian Federation.

The Agency will borrow 36 billion roubles on the market by means of issuing certified coupon bonds against the guarantees of the Russian Federation, which are to be paid off between 2017 and 2027. This will allow the Agency for Housing Mortgage Lending to increase the amount of credit it gives out.

At the same time, the money that will be brought in by the Government guarantees has a specific purpose. This money will be used to ensure low interest rates to middle-income borrowers. Currently, the maximum interest rate is 12% per year, and the maximum amount one person can take out in a loan in large cities is up to four million roubles, and two million roubles in medium-sized and small cities. This will encourage the construction of less-expensive residential housing and help resolve an important social problem. 

Simultaneously, it will boost our construction industry by stimulating demand. Currently, the main problem faced by the construction industry is decreased demand. This morning, I attended the fifth All-Russian Construction Workers' Assembly. They, too, are looking forward to these decisions, which will help them achieve this important goal.     

Vladimir Putin: Good. We have consistently stressed the importance of supporting high-tech industries. The words, however, should be followed by real action and funding.

I have signed executive orders allocating one billion, 982 million roubles worth of money from the budget to increase the registered capital of the Oboronprom United Industrial Corporation. Mr Khristenko, please comment on this. The executive orders mention helicopter engineering and manufacturing motors, with reference to the high-tech areas of manufacturing these products.  

And the second decision is the executive order to grant subsidies for the VSMPO-AVISMA State Corporation, which manufactures products with a sufficiently high level of processing. Please comment on this, too.

Viktor Khristenko: Mr Putin, these two decisions are interrelated, as they represent major elements in implementing the national strategy for developing our aircraft industry.

As you have mentioned, this first decision is directed at the aircraft industry first of all. But it will also benefit producers of titanium and titanium-based products. Titanium is the most important metal in manufacturing airplanes and helicopters, and Russia currently remains the world leader in titanium production.

As part of implementing this strategy, we have been consolidating assets in these sectors of our economy. As of today, this process has almost been completed. We have adopted a corporate development strategy, which is being implemented. This year, despite the difficult conditions and the economic downturn, these sectors will see a positive rate of growth and continue to modernise their production facilities.

This is also related to the fact that consolidating assets required attracting substantial credit resources in order to complete the consolidation process, and subsequently enter into the market and attract investors. The goal of finding effective investors in the market has not been abandoned due to the crisis, but only postponed.

For the time being, the funds that have been allocated - three billion roubles to VSMPO-AVISMA and almost two billion to Oboronprom's United Engine-Building Corporation - should be sufficient to support both the development of these sectors of the economy, as well as their consolidation and subsequent increase in efficiency.

As a result, this year we will not only see growth, but we will also manage to implement the Corporate Development Strategy. By 2012, both companies will increase their production outputs by 50%. Therefore, this is an important, necessary, and very significant decision.

Vladimir Putin: Very good. Hopefully, the allocated funds will be used efficiently.

I would like to go back to my meetings in Vladimir. I have already mentioned that people came to the Reception Office of the Chairman of the United Russia Party with specific issues. Some were private matters, but others, as I mentioned during our last meeting, were systemic issues. The first issue concerned extending loans that had been issued to agricultural producers for specific cattle-breeding projects. The second issue was about the regulation of milk and milk products.

With regard to the first issue, our colleagues, and they are in fact our colleagues, as they are involved in real projects and are doing real jobs, are worried because they are having difficulties paying off the loans. Their inability to pay back their loans is probably related to the current financial situation, as well as to the state of the economy on the whole. But this needs to be examined, of course. No concrete promises have been made. We have agreed that we would explore the issue in detail. 

And secondly, the issue of regulating milk products. There are very specific complaints, which, to put it bluntly, have to do with the fact that these regulations are either inefficient or not working at all.

Ms Skrynnik, please explain the situation.

Yelena Skrynnik: As far as the first issue is concerned, we have been taking the following measures to support milk producers.

First, this year, the government support for milk producers amounted to 27 billion 200 million roubles. Of that amount, 21 billion 200 million roubles were allocated to subsidise interest rates. As a part of the government anti-crisis measures, interest rates are being subsidised at 100%, as opposed to 80%.

In addition, loans have been extended. Short-term loans have been extended by six months, and loans for investment from eight to 11 years, which is by more than three years. These loans are worth 30 billion roubles, 71 million of which has gone to the Vladimir Region. So, we have been taking measures to support the producers.

The total amount of loans for the industry is 250 billion roubles over a period of three years. On top of that, we have also enacted some well thought-out customs duty and tariff regulation measures. This includes the agreement with Belarus on powdered milk. All of these measures support the producers and are conducive to increasing the purchase price of milk for the producers.

Currently, the prices are increasing, though insignificantly. They have reached 10 roubles per litre. This is not much, of course, but we are expecting additional 10%-15% increase in November.

Vladimir Putin: I understand, but what about the technical regulations, are they working?

Yelena Skrynnik: Unfortunately, the technical regulations have not achieved the goals they were intended to, and the number of marked somatic cells that currently exist certainly do reduce the quality of milk sold by the producers.

Therefore, we have introduced modifications to the regulations. They will provide for the more effective sale of milk. We are working on this.

Vladimir Putin: Remember, when we discussed these regulations, we said that after their introduction, real whole milk as well as a milk beverage should become available. 

The consumers I have spoken with say that there is no such product in the stores as a milk beverage. This means that your regulations are not working.

Yelena Skrynnik: Amendments have been made. We are working on this and will make the regulations work in the near future.

Vladimir Putin: Let us agree as follows. Let us examine things. We can discuss things, make some technical changes, but in practice everything will remain the same as today. Therefore, in a certain period of time we should return to this issue and carefully examine it again. 

Mr Zubkov, could you comment on the issue of loan extensions for specific cattle breeding projects?