The following issues are scheduled for discussion at the August 27, 2009 meeting of the Government of the Russian Federation:
I. Draft of the Energy Strategy of Russia for the Period until 2030
The Energy Strategy will be implemented in three stages. During the first stage (until 2013-2015), the effects of the financial crisis in the energy sector are to be overcome, and groundwork laid for accelerated post-crisis development. During this stage, the crisis should be seen as a stimulus for qualitative renewal and modernisation of the country's fuel and energy sectors.
An overall increase in energy efficiency in the power industry and the economy as a whole is expected during the second stage (until 2020-2022), due to innovative technological development in the fuel and energy sectors. During this stage, energy projects in Eastern Siberia and the Far East are expected to see accelerated and large-scale movement into the practical implementation stage.
The third stage (until 2030) will build on the preceding stages to ensure the efficient use of traditional energy resources and give Russia a head start in the transition to the non-fuel burning energy of the future.
The main objective of the Energy Strategy is the effective use of natural resources and the potential of the energy sector in order to ensure sustained economic development, increased quality of life, and the strengthening of Russia's position in the world.
The following are the strategic priorities:
The following measures will be carried out in order to achieve these goals:
To diversify the Russian economy and ensure national technological security, programmes are to be implemented for the development of the energy infrastructure. These programs will rely chiefly on domestically produced machinery and metals, with due account of their quality and effectiveness.
Among the unquestioned priorities of the Government are the creation of hi-tech enterprises to extract and process natural raw materials and the creation of the world's best energy sector.
The main courses of action include accelerating the introduction of economic incentives, initiating a differentiated tax on the extraction of minerals and excise taxes (including in the structure of exports) aimed at increasing the importance of high value-added products in the Russian economy, and increasing the production capacity of remote and technically difficult deposits. One of the priorities is to create the conditions for raising the level of utilization of associated gas to 95%.
One of the tasks set by the Guidelines is to eliminate the barriers to economic growth created by underdeveloped infrastructure, which requires accelerating the development of infrastructure, above all in the fuel, energy, transportation and communications sectors. This also applies to developing the financial infrastructure without upsetting the financial stability that has already been achieved.
In a globalising world economy, foreign economic policy becomes a major factor in Russia's social and economic development, technological renovation, increasing economic competitiveness and addressing key social issues. The aim of foreign economic policy is to create the conditions for Russia to achieve a leading position in the global economy on the basis of effective engagement in the worldwide specialisation of labour.
Major infrastructure projects aimed at diversifying the export routes and moving into new markets are to be implemented. The most important of these are the Eastern Siberia-Pacific Ocean oil pipeline, the Baltic Pipeline System-2, the Burgas-Alexandroupolis oil pipeline, the North-European gas pipeline, the South Stream gas pipeline, and the Caspian gas pipeline.
In order to implement the Energy Strategy and achieve the above goals, master plans are to be developed for the development of the oil and gas sectors, a national energy-saving programme, a national programme for the study and development of the Russian continental shelf, and programmes for long-term development in the fuel and energy sector and the strategy for the development of the power industry in the Far East.
Some of these plans have already been adopted, including the Master Plan for the Construction of Power Facilities until 2020, the Programme for creating an integrated system for the extraction, transportation and delivery of natural gas in Eastern Siberia and the Far East taking into account the possible export of gas to markets in China and other Pacific Rim countries. The above set of master plans would enable energy companies to make long-term investment plans more effectively.
According to the Energy Strategy, by 2030 per capita energy consumption will have increased by at least 40%, per capita electricity consumption by 85%, and automobile fuel consumption by at least 70% as compared to 2005. As a result of the modernisation of the fuel and energy sector, the deterioration of the basic assets will be under 40%, as compared with 60% in 2005. The backup capacity of power stations will be maintained at the level of 17% of the total design capacity. By 2030 the specific energy/output ratio is expected to drop by more than 50% as compared with the 2005 level. Annual energy savings are expected to reach 300 million tons of conventional fuel per year, compared with the present level. The efficiency of oil refining will increase from 72% today to 90% by 2030.
In the area of the mineral resource management, the proven reserves in new on-land and offshore deposits in the structure of the reproduction of the mineral and raw materials base is expected to increase: the share of mineral resources offshore extraction by 2030 will increase by at least 10-15% for oil and at least 20-25% for gas. The ratio between the annual growth of proven reserves of fuel and energy as a result of geological prospecting and with extraction of basic types of fuel and energy reserves (oil, gas, coal, uranium) will be above one. By 2030 the coefficient of returns on oil is to be raised to 35-37%.
The average annual investment in the fuel and energy sector will approximately double, and is estimated to reach $1.8-2.2 trillion (in 2007 prices) for the period as a whole. Moreover, once investments in energy saving are taken into account, the amount will rise to $2.4-2.8 trillion. The main sources of investment (about 80%) will be the fuel and energy companies' own assets. The share of foreign direct investments in the total structure of investments in the fuel and energy sector will be at least 12%.
According to the Energy Strategy, the stress on the environment (the amount of atmospheric pollution, the discharge of polluted water into bodies of water, and the creation of waste) is to be cut by half, and greenhouse gas emissions are to be 100-105% of the 1990 level by 2030.
The financial viability of the energy sector will be increased through the modernisation of the tax and customs laws, improvement of the tariff policy for natural monopolies, removal of unreasonable administrative barriers, improvement of the system of control and accounting of goods produced, improved quality of goods and the development of technical regulations in the energy sector.
By 2030, the share of energy traded at exchanges is to be no less than 15-20% of the domestic market and the liberalisation of the domestic markets is to be completed.
It is necessary to note that the provisions of the Energy Strategy are aimed at achieving a rational balance in the use of various energy sources. During the period in question, the percentage of natural gas in the total energy consumed is to drop from 52% today to 46-47%, and the percentage of non-fuel power will grow to 13-14%. The ratio between the internal prices of natural gas and coal is expected to be 2.5-2.8. The share of local sources of regional energy consumption is to increase to 20%.
According to the Energy Strategy, the share of world-class, domestically-produced equipment used in the fuel and energy sector is to reach 50%.
By 2030, the percentage of household incomes that must go to energy costs (gas, electricity, heating) should not exceed 8-10%.
In the area of foreign economic activities, the share of LNG in gas exports is to increase to 14-15%, while the share of primary fuel and energy reserves in the energy exports will not exceed 70%. The Russian nuclear industry is expected to strengthen its position on the world markets of nuclear energy generation. The same is true of reactor construction, fuel production, and the extraction, conversion and enrichment of natural uranium. It should be noted that the overall percentage of Russian energy exported to Europe will steadily decline, while by the end of the third stage of the Energy Strategy the share of oil and petroleum products exported to the east will increase from 6% to 22-25%, while the percentage of natural gas exported to the east will increase from 0% to 19-20%.
The capacity of long-distance pipelines for supplying oil abroad will increase by 65-70%; the total length of long-distance gas pipelines will grow by 20-23%. The share of modernized existing gas pipelines will increase from 4% to 25-26% of the total length of the Unified Gas Supply System.
The share of newly introduced coal-mining capacity (in the total volume of extraction) will increase from 4 to 25-30%; the share of enriched fuel coal will increase from 32 to 65-70%.
The share of non-fuel sources of electricity generation will increase from 32% to at least 38%, with the annual generation of electricity from renewable energy sources growing by more than an order of magnitude (to at least 80-100 billion KWh).
The efficiency factor of coal and gas burning power plants will increase respectively by at least 20% and 40%; the efficiency of nuclear power plants will increase by 10%-15%.
The specific fuel expenditures on supplying power from thermal power plants will drop by 18-20%; and losses in power grids will drop from 13 to 8%.
II. Implementing a series of measures to increase the internal effectiveness of natural monopolies and reduce the costs of providing utility services
The series of measures to enhance the internal effectiveness of natural monopolies and reduce the costs of providing utility services developed by the Ministry of Regional Development of Russia includes the following items:
1. Improving the system of development planning for public utilities
In accordance with this item, programmes for the comprehensive development of municipal public utilities infrastructure are to be developed.
These programmes will increase the quality of housing and utility services while limiting expenditures on building excessive capacity. Redistributing available utility resources and cutting excess standby capacity may be particularly beneficial. Improved planning would also decrease the specific expenditures on public utilities by cutting losses at every stage.
Methodological recommendations are to be issued in order to assist in the development of these programmes, which may improve the quality of programmes, become the main blueprint for determining the volume, quality and cost of public utilities to be made available, and enable new consumers to be connected to existing networks.
2. Creating instruments and mechanisms for attracting investment to projects for the reconstruction and modernisation of utilities
This section envisages the creation of a financial institution that would ensure loans to finance investment projects in the utilities sector. The implementation of innovative projects to modernise utilities will help improve technology and management and cut losses in providing utility services.
The main principles for the newly created financial institution should be the availability and recoverability of the loans issued, exclusive financial support for projects in the utilities sphere, and financing through the use of standard banking services.
In addition to financing investment projects for the construction and modernisation of the utilities infrastructure, this financial institution should provide loans to finance the development of programmes for the comprehensive improvement of the municipal public utilities infrastructure, the preparation of project documentation and registration of utilities for the purpose of investment auctions, as well as to ensure the introduction of automated systems to measure the consumption of utility services.
3. Improving relations between suppliers and consumers of utility services
3.1. Introducing systems for accounting and managing the production and consumption of utility resources.
The development of efficient accounting of utility resources and the introduction of information systems to automate operations at the municipal level would optimize the capacity and management of the provision of utility services, and thus cut costs.
Automated accounting would also make the utilities sector more attractive for investments as it would enable potential investors and creditors to assess accurately the amount of services actually delivered and the flow of payments for utility resources, with due account for the level of payment discipline.
The main economic effect of the proposed decision would be that all the participants in the housing and utilities market would work within a single information space for the purposes of monitoring consumption, making calculations and payments, and providing consumer service.
3.2. Developing standard requirements for utility resources supply contracts. The aim of developing these standards is to increase the responsibility of suppliers and consumers for the quality and reliability of supplying public utilities and for the timely payment for these utilities and the reduction of transaction costs.
4. Spreading the best practices in cutting the cost of producing, conveying and supplying utility services.
4.1. Implementing regional pilot projects for cutting costs.
Pilot projects are being planned to establish municipal databases in the area of public utilities and to modernise the оperating cycle of the utilities organisations in order to make use of alternative and renewable sources of energy.
4.2. Advocating best practices to increase energy efficiency and cut costs in the production and consumption of utility resources.
As part of this effort, the best practices for implementing projects aimed at enhancing the internal effectiveness of utilities are to be advocated and the need to save energy stressed.
III. Approving technical regulations on lift safety
At present, the level of the lift safety does not entirely meet modern requirements. Many lifts in the housing and utilities sector are ageing. In some regions more than 30% of lifts have outlived their service lives (in St Petersburg 49.2%, in Moscow Region 36.3%, and in Primorye Territory 30.3%). By 2010, the percentage of lifts that will have exceeded their standard service life will reach 55%, according to experts.
The draft of the proposed technical regulations sets the minimum requirements for lift safety at the stages of design, production, installation, beginning of operation, operation, modernisation and disposal, as well as requirements for assessing the compliance of lifts and their safety devices with Government standards. The implementation of the draft decree would reduce the occurrence of injuries and accidents in the process of lift operation, improve lift safety by bringing it up to modern international standards, and make Russian lifts more competitive in the world market.
IV. Draft of the federal law On the Accession of the Russian Federation to the May 18, 1973 International Convention on Simplification and Harmonisation of Customs Procedures (revised in accordance with the June 26, 1999 Protocol on Introducing Amendments to the International Convention on Simplification and Harmonisation of Customs Procedures).
The draft of the federal law On the Accession of the Russian Federation to the International Convention on Simplification and Harmonisation of Customs Procedures (revised in accordance with the Protocol on Introducing Amendments to the International Convention on Simplification and Harmonisation of Customs Procedures) has been developed and submitted jointly by the Foreign Ministry of Russia and the Federal Customs Service of Russia.
In accordance with Subclause A, Clause 1, Article 15 and Article 21 of federal law No.101-FZ On International Treaties of the Russian Federation (adopted on July 15, 1995), the accession of the Russian Federation to the Convention requires the adoption of a federal law because the implementation of the Convention calls for amending existing federal laws and adopting new ones.
Pursuant to Clause 1, Article 12 of the Convention, the extent of the Russian Federation's obligations upon its ascension to the Convention is limited to the General Supplement to the Convention.
The General Supplement determines the following: the principles for determining customs regulation using a system of risk analysis and management; the use of customs auditing as part of the system of customs regulation measures; the active interaction on the part of the customs service with individuals engaged in foreign trade; the use of simplified customs procedures; the principles for computing, charging and paying customs duties and taxes; the use of relevant international standards; and the procedures for lodging complaints against decisions and inaction of the customs service.
To harmonise the legislation of the Russian Federation with the Convention, amendments to the Customs Code of the Russian Federation are required. These amendments will affect basic provisions used in the Code and require revising some customs procedures, which will necessitate rewriting some of the language of the Code and introducing amendments to other legislative acts regulating customs relations.
V. Draft of the federal law On Introducing Amendments to Certain Legislative Acts of the Russian Federation and Annulment of Certain Provisions of Legislative Acts of the Russian Federation
In order to provide the legal grounds for increasing federal budget revenues, the Finance Ministry of Russia has submitted to the Government of the Russian Federation a draft of a federal law On Introducing Amendments to the Budget Code of the Russian Federation and Certain Legislative Acts of the Russian Federation.
The draft proposes the following amendments to the Budget Code of the Russian Federation.
1. In connection with the reduced federal budget revenues from oil and natural gas due to falling prices and decreased volume of commodity exports, as well as the need to raise additional revenue for the federal budget in order to make up for the shortfalls in oil and natural gas revenues, the draft proposes including a provision in the Budget Code of the Russian Federation whereby 100% of the revenues from the severance tax (tax on the extraction of minerals) in the form of hydrocarbons (with the exception of combustible natural gas) are to go to the federal budget.
The concentration of the revenues from the severance tax in the from of hydrocarbons (oil and gas condensate) in the federal budget would increase federal budget revenues as follows: by no less than 46.5 billion roubles in 2010, by no less than 50.9 billion roubles in 2011, and by no less than 55.0 billion roubles in 2012.
At present, in accordance with the Budget Code, 5% of the revenue from said tax goes to the budgets of the constituent entities of the Russian Federation. All in all, 32 regions of the Russian Federation collect this tax.
The total revenues from this tax for the regional budgets amounted to 79.0 billion roubles in 2008, which accounts for 2% of all tax and non-tax revenues of the regional budgets in Russia.
The greatest revenue from this tax is concentrated in Tyumen Region (more than 60% of the total), and significant revenues support the budgets of the Republic of Tatarstan (6% of the total), Orenburg Region (4%) and the Republic of Komi, Perm Territory, Arkhangelsk Region and Samara Regions (3% apiece).
To minimise the negative impact on the budgets of the constituent entities of the Russian Federation due to the introduction of the proposed amendments, partial compensation for the shortfalls in revenue is to be provided through subsidies that would support measures to ensure balanced budgets of the constituent entities of the Russian Federation (with the exception of Tyumen Region) in the following way: in 2010 the constituent entities will receive subsidies worth 60% of the projected revenues for 2010, in 2011, they will receive subsidies worth 40%, and in 2012 they will receive subsidies worth 20%.
Because the severance tax in the form of hydrocarbons accounts for a large share of the budget of Tyumen Region (more than 40%), the region will receive the following subsidies over the next 4 years: 100% of the projected revenue in 2010, 75% in 2011, 50% in 2012 and 25% in 2013.
2. To maximise federal budget revenues, the revenues from managing the Reserve Fund and the National Welfare Fund will not be redirected into the corresponding funds between January 1, 2010 and February 1, 2012.
At present, the resources in the Reserve Fund and the National Welfare Fund are kept at the Bank of Russia, and some of the resources of the National Welfare Fund are kept in Vneshekonombank.
In accordance with agreements with the said banks, the Bank of Russia transfers the revenues from managing these assets to the federal budget every year, in amounts recorded as of January 15 of the year following the year when the money was deposited. Vneshekonombank transfers the revenues from managing these assets to the federal budget every quarter following the quarter when the deposit was made. These revenues are then redirected into the corresponding funds.
In this regard, the provisions of the Budget Code whereby revenues from the management of assets are redirected into the corresponding funds are to be suspended from January 1, 2010 until after the revenues from management of the assets of the National Welfare Fund are deposited with Vneshekonombank for the 4th quarter of 2011 and the revenues from the management of funds for 2011 are deposited with the Bank of Russia.
These measures will increase federal budget revenues by 77.9 billion roubles in 2010, by 86.4 billion roubles in 2011, and by 25.6 billion roubles in 2012.
3. In accordance with federal law No.86FZ (adopted on July 10, 2002) On the Central Bank of the Russian Federation (the Bank of Russia) 50% of the profits of the Bank of Russia are annually transferred to the federal budget.
To bring additional revenue to the federal budget, the draft proposes increasing the amount of the profit transferred by the Bank of Russia to the federal budget in 2010-2012 to 75%, which will bring at least 20 billion roubles annually in additional revenue to the Federal Budget.
4. Federal law No.192-FZ (adopted on July 19, 2009) On Introducing Amendments to the Budget Code of the Russian Federation and Article 45 of the federal law On the Central Bank of the Russian Federation (Bank of Russia) adjust the format of the federal budget indicators for 2010 and the planning period of 2011 and 2012 with regard to the planning period.
Thus, the above-mentioned federal law stipulates that the departmental structure of budget expenditures (reflecting the budget allocations to finance federal targeted programmes) and the breakdown of allocations by section, subsection, targeted articles and expenditure items will be approved only for 2010.
In this regard, because of the difficulty of making economic forecasts for Russia due to the financial crisis, it is deemed necessary to create the legal framework for approving a supplement to the federal law On the Federal Budget for 2010 and for the Planning Period of 2011 and 2012 for long-term (federal) targeted programmes only for 2010, and to suspend the provision requiring the submission of a list of public normative commitments and related calculations for the planning period.
The detailed structure of the federal budget spending, broken down by agencies, as stipulated by the current budget legislation, can be approved only for 2010. In the current conditions, it would be practicable to approve only the basic outline of the budget for the planning period of 2011-2012.
In connection with this draft, Clause 3 of Article 3 of federal law No.192-FZ should be annulled.
VI. Introducing an amendment to the Statute on the Ministry of Economic Development of the Russian Federation
In accordance with Subclause 1.1, Clause 1, Article 36 of the Land Code of the Russian Federation (as revised under federal law No. 281-FZ of December 25, 2008) the procedure for fixing the price and payment for land that is federal property and is offered for sale to the owners of buildings and structures located on that land is to be established by a federal executive body authorised by the Government of the Russian Federation. Previously such procedure was established by the Government of the Russian Federation.
According to the June 5, 2008 Statute on the Ministry of Economic Development of the Russian Federation approved by Government Resolution No.437, the Ministry of Economic Development is the federal executive body that develops Government policy and provides legal regulations in the area of evaluation and land tenure. Therefore, the powers to establish the procedure referred to above would most reasonably be delegated to the Ministry of Economic Development of Russia.
VII. Introducing an amendment to the Statute on the Ministry of Regional Development of the Russian Federation
The draft resolution of the Government of the Russian Federation on the above issue has been submitted by the Russian Ministry of Regional Development pursuant to the federal law On the State Service of the Russian Cossacks and the April 30, 2009 Decree No.485 of the President of the Russian Federation On Introducing Amendments to the Acts of the President of the Russian Federation and Annulment of Certain Provisions of the Acts of the President of the Russian Federation Regarding the Russian Cossacks.
In accordance with the regulatory act referred to above, some powers with regard to the Cossacks are exercised by the federal executive body authorised by the Government of the Russian Federation to interact with Cossack communities. In particular, the authorised body exercises the following powers:
The draft resolution proposes the Russian Ministry of Regional Development as an authorised agency for these purposes. In particular, it proposes an amendment to the Statute on the Ministry of Regional Development of the Russian Federation approved by Government Resolution No.40 on January 26, 2005 whereby the Ministry of Regional Development is the federal executive body that formulates Government policy and provides legal regulation for interaction with Cossack communities.
The resolution would make the interaction between Russian Cossacks and the Government and society more effective, and would contribute to social stability and civic engagement.
VIII. Introducing amendments to Government Resolution No.372 of July 23, 2004
IX. Budget allocations to the Government of the Chechen Republic from the Reserve Fund of the Government of the Russian Federation for Emergency Situations and Disaster Relief and the issue of state housing certificates in the aftermath of the torrential rains and gale-force winds that struck the Chechen Republic in July of 2008.
Moscow, August 26, 2009
* Press releases by the Department of the Press Service and Information contain the materials submitted by the executive federal bodies for discussion by the Government of the Russian Federation.
