The Presidium of the Government of the Russian Federation at its meeting on April 13, 2009, scheduled for discussion the items on its agenda.

1. Progress of the housing and utilities sector reform in Russia, performance results of the housing and utilities sector in autumn and winter 2008-2009, and preparation plans for the next autumn-winter season, 2009-2010.

1). Overview

According to the Ministry  of Regional Development, Russia's financial spending on the housing and utilities sector amounted to 16.3% of the consolidated budgets of the Russian Federation's constituent regions in 2008, down 3.8% from 2007. The reporting period saw an insignificant increase in the expenditure, to 806.6 billion roubles.

Loss-making local utility companies accounted for 38% of the total on average, down 16.6% year on year.

Fixed asset depreciation remained high in the sector, which led to the growth of uncompensated losses for resources such as water (20%), power (15%), and heat (40%). The products marketed by local companies under the individual household metering programme accounted for 65.9% of all cold water supplies, 37.7% of hot water, 92.5% of gas, 99.7% of power and 28.7% of heat.

The sector employs 2.3 million people. A total of 33,845 companies provide water, gas, power, heating, and maintenance services to over 2.66 million apartment buildings with total floor space exceeding 3 billion sq m, and hundreds of thousands of infrastructure and industrial facilities. The sector accounts for 4% of the country's GDP, rendering over 2 trillion roubles worth of services annually.

In late 2008, the share of apartment buildings managed by companies selected by property owners exceeded 36%, including 20% managed by private companies.

The current trend in the sector is the reorganisation of utilities as private companies. While in 2006, the private housing and utilities companies accounted for a mere 7% of the total, in late 2008 the share had grown to 70%. The current average percentage of private companies in the sector is 56.5%.

In 2008, the Russian government allocated over 6 billion roubles to the regions under the sub-programme "Modernisation of housing and utilities infrastructure" of the federal target programme Housing for 2002-2010. The Ministry of Regional Development and other agencies concerned are drafting an act on extending the programme for 2011-2015.

The Housing and Utilities Reform Fund, a state corporation established by federal law #185-FZ of July 21, 2007, is contributing to the sector's reform.

In 2008, the Fund provide financial support to 78 regions granting 143 requests for a total for 54.44 billion roubles, which would pay for capital repairs of 37,777 apartment buildings and resettle families currently living in 13,650 apartments in 2,004 dilapidated buildings.

As of April 1, 2009, there were plans to provide financing to overhaul old apartment buildings and resettle residents from dilapidated housing granting 134 more requests from 79 regions  of the Russian Federation for a total of 72.4 billion roubles (while regional governments will co-finance the projects contributing 107.4 billion roubles). The money will be enough to overhaul 48,700 apartment buildings and improve housing conditions for 7 million people, and 46,800 people will be able to move out of 2,662 dilapidated buildings.

The Fund finances capital repairs of existing apartment buildings and completion of nearly finished residential development projects, as well as construction of new housing for people now living in dilapidated buildings. This policy also helps preserve 1.5 million jobs.

Programme participants are especially active in the Republic of Tatarstan, the Chelyabinsk, Kemerovo, Kaluga and other regions: they have submitted two or more requests.

The number of residents who asked for subsidies to pay for their housing and utilities in 2008 was 7.5%; the average size of a government subsidy was 1,202 roubles per person per month, up 19% from the 2007 level. In 2008, 77 Russian regions provided direct monetary subsidies to their residents.

The number of homeowners' associations accounted  only for 3.4% of  the total number of multistorey apartment blocks in 2008.

The largest numbers of homeowners associations were established in the Republic of Tatarstan and Bashkortostan, the Krasnodar and Stavropol Territories, the Belgorod, Vologda, Omsk, Ryazan, Tyumen and Yaroslavl Regions.

The government's bailout and stimulus policies include an allocation of 20 billion roubles to buy buses and equipment for Russian regions, with 10 billion rouble co-financing provided by regional budgets.

Further reforms in the sector will be conducted in accordance with a comprehensive plan of measures to reform the housing and utilities sector in the Russian Federation in 2009-2011, approved by an order # 28 of the Regional Development Minister of February 11, 2009.

2). Autumn-winter season of 2008-2009.

On the whole, the heating season (autumn and winter 2008-2009) was well organised. All Russian constituent regions set up regional headquarters for safe electricity supply. These headquarters operated in close contact with the local utility companies.

Problems encountered during the season in a number of regions were discussed at meetings of the Interdepartmental Commission for monitoring the preparations of the housing and utilities facilities for the 2008-2009 autumn and winter season. Specific measures were taken to assist problem regions.

Federal financial support was provided to regions that use fuel oil as a primary energy source, including the Republic of Karelia (459.1 million roubles), the Kamchatka Territory (836.8 million roubles), the Primorye  Territory (1097.4 billion roubles), the Khabarovsk Territory (251.9 million roubles), the Arkhangelsk Region (1132.4 billion roubles), the Kirov Region (403.4 million roubles), the Kostroma Region (87.5 million roubles), the Magadan Region (593.5 million roubles), and the Murmansk Region (2507.5 million roubles).

According to Russia's Ministry  of Regional Development reports, Russian regions' budget spending on housing and utilities totalled 528 billion roubles in 2008, including 144.3 billion roubles on preparations for the winter.

The past heating season saw five emergencies and 28 accidents, which is only one-third the number registered during the 2007-2008 season.

The accidents were mainly due to inadequate repairs in engineering infrastructure because of insufficient financing from budgets at all levels and the companies' own funds.

Indicatively, the regions that are effectively implementing the housing and utilities reform reported no emergencies or accidents (the Volga and Urals Federal Districts).

Regional executive bodies were rated on the effect of their contribution to the preparations for the heating season; the ratings were published in the media. The rating methodology used was approved by the Interdepartmental Commission for monitoring the preparations of the housing and utilities facilities for the 2008-2009 autumn and winter season.

Russian utility companies' 2008 receivables totalled 360.3 billion roubles, and their debt, 348.5 billion. Their aggregate overdue payments to the federal budget amount to 42.3 billion roubles. Payment for energy consumed accounts for the bulk of their debt.

2. Signing an oil cooperation agreement between the Russian Government and the Government of China

To develop the memorandum of understanding on oil cooperation, Russia and China signed on October 28, 2008, Russia's Energy Ministry in association with the federal executive bodies concerned, the Amur Region government and Russian companies, have drafted an intergovernmental oil cooperation agreement.

The two countries agreed to design, build and use the Skovorodino-Mohe oil pipeline. The pipeline will pass under the Amur River, and will have a through capacity of 15million metric tons of oil per year (302,055 bpd). It will also have surface sections on the Russian and Chinese  territories (on the Russian territory: the Skovorodino - Chinese border oil pipeline). The oil link from Skovorodino terminal to the Chinese border is a branch of the East Siberia-Pacific Ocean oil pipeline and part of Russian efforts to diversify export routes from West and East Siberia. China is expected to be the main market for the oil to be shipped through the pipeline.

A feasibility study of the surface segments was conducted under the Skovorodino-Chinese border project, and contractors have begun construction.

The agreement, in particular, specifies competent bodies on both sides of the border, authorised to coordinate the project, as well as the Russian and Chinese companies involved in the project; it also stipulates main cooperation conditions.

The agreement will require additional funding from the federal budget to set up a temporary checkpoint near the construction site. The authorised Russian operator has already filed a request for financing for the agencies concerned.

The agreement is subject to ratification in compliance with sub-clause A of clause 1 of Article 15 of Federal Law No. 101-FZ of July 15, 1995 on Russia's international agreements, because Clause 13 of the agreement contains regulations different form those established by Russian law for access to mainline pipelines and terminals for oil exports.

Clause 13 says that Russia grants the companies Transneft and Rosneft access to pipelines for 20 years to supply oil to China in repayment of the loan taken out under a loan agreement with the China Development Bank. Clause 10 of the agreement exempts building materials needed for the pipeline construction (including construction machinery and equipment) from import duty, value-added tax and customs clearance fees for export or import; Chinese contractor's vehicles and services are exempt from the VAT.

Clause 15 of the agreement exempts from Russian and Chinese taxes all interest and other payments under loans extended to Russian authorised project operator and Rosneft in compliance of this agreement.

3. Financing of 2009 proactive measures to reduce workplace injuries and occupational  diseases and to provide free resort and recreational services to people employed at harmful and/or hazardous jobs.

Russia's Ministry of Healthcare and Social Development will be presenting a draft government resolution on financing in 2009-2011 proactive measures to reduce workplace injuries and occupational  diseases and to provide free resort and recreational services to people employed at harmful and/or hazardous jobs.

The document was drafted to fulfil Article 9 of the federal law on the Social Security Fund budget for 2009 and the planning period of 2010 and 2011.

Article 9 authorises the Social Security Fund to channel up to 20% of all premium sums for mandatory social insurance  against workplace injuries and occupational  diseases  collected during the previous year (minus the appropriate insurance payments made during that year) to finance proactive measures to reduce workplace injuries and occupational  diseases and to provide free resort and recreational services to people employed at harmful and/or hazardous jobs.

In 2009-2011, the proactive measures to reduce workplace injuries and occupational  diseases and to provide free resort and recreation services to people employed at harmful and/or hazardous jobs will be financed within the limits of allocations for this purpose from the Social Security Fund, approved by Federal Law No. 216-FZ of November 25, 2008 "On the Social Security Fund Budget for 2009 and the Planning Period of 2010 and 2011."

The above measures will be financed in 2009-2011 according to regulations approved by the Government-established procedure.

Moscow,
April 11, 2009

* Press releases by the Department of Press Service and Information contain the materials submitted by the executive federal bodies for discussion by the Presidium of the Government of the Russian Federation.