Transcript of the meeting:

Vladimir Putin: Mr Berlusconi, we will acquaint you with several of the numerous projects of our many years' partnership with Italy. Colleagues present here are engaged in the automobile industry. We will concentrate on farm machine and aircraft building today. I do not want to speak long. I will give them the floor and they will tell you about their plans and the work that has started already.

Vadim Shvetsov: My name is Vadim Shvetsov. I am Director General of Sollers Company, and its principal owner.

Our partnership with Fiat began five years ago. We have five plants in Russia-the long-established Ulyanovsk Automobile Plant and Zavolzhsky Engine Works are Russian assets. All new assets-three plants we have built in Naberezhnye Chelny and one being built in the Russian Far East-are connected with Fiat.

Our products can be seen on the next page (showing booklets). They range from cars to jumbo lorries. As you see, we manufacture Fiat cars and Fiat Ducato light commercial vehicles.

You will see on the next page a formula we have attempted to deduce for the success of Fiat-Sollers partnership. It bases principally on the localisation and adaptation of present-day platforms, the development of components-one of the crucial parts of our partnership-and, last but not least, innovation engineering. This is so because an Italian company was the first to provide us technologies for such cutting-edge platforms as Fiat Ducato. A plant was built to manufacture those LCVs, with 500 million euros invested.

The next page demonstrates our present-day assets. We are not afraid to invest and build new plants. We are building a plant a year. We dare take risks because we rely on our partner. We make it a point to have a true partnership.

This page illustrates the establishment of the component basis, one of the crucial parts of our partnership. Our Fiat Ducatos will have Russian petrol engines from the Zavolzhsky Engine Works. We have never done anything like that-we purchased almost all technologies abroad.

Vladimir Putin: Will it be joint production?

Vadim Shvetsov: Yes, we are establishing a joint venture at the Zavolzhsky Engine Works, and intend to launch the production of Italian-designed diesel engines. But then, Zavolzhsky is manufacturing its own engines, so it will be technological exchange-our petrol engines and Italian diesels.

The next page is devoted to innovation engineering, a large field of our activities. We have designed a line of social cars from ambulances to taxis for disabled passengers. Importantly, we have started personnel training. We have made a contract with a Turkish polytechnic institute to train engineers in Russia at the Kazan Aviation Institute.

The following page presents our next objective-to get established in the CIS markets. We and Fiat are drawing a relevant social programme, and we hope that Fiat Chrysler SUVs will make Russia a production centre.

Vladimir Putin: What Mr Shvetsov has said is very interesting, new, practical and important.

First, they have invested more than half a billion euros by now. Second, entire construction is based on the latest technologies. These five major plants in Russia are an absolutely private group with no government participation.

Of especial importance to us is our approach to another project, which envisages another plant built in the Russian Far East. It is an essential project, for a number of reasons. First, it will offer well-paid high-tech jobs in a region that needs such jobs.

Second, it will give the population of this region, so remote from European Russia, an opportunity to acquire latter-day Russian-manufactured cars.

We know that Sollers has posed a big target, hard to hit because the Far East is remote from the principal Russian industrial centres, so we have promised to support it in several fields.

We subsidise automobile deliveries to the Russian Far East, and we will subsidise reverse deliveries to open the entire Russian market to the new manufacturer.

We have also promised to help with loans. How much do you need?

Vadim Shvetsov: 5 billion roubles.

Vladimir Putin: Vnesheconombank, our state bank, will grant it for six years at an affordable interest. Fiat will have similar terms.

What brands are you going to manufacture there?

Vadim Shvetsov: Fiat Ducato. Social vehicles are of great importance because of the wear and tear of the urban infrastructure. We want to change the entire local automobile fleet with Fiat Ducatos. We will also manufacture SUVs, which are very popular there. Lorries come last but not least. Large-scale construction is on in the Russian Far East, so we think our lorries will sell well in all its markets.

Mr Berlusconi, I want to add that there are small Italian companies among our partners alongside Fiat. For instance, we have arranged technological exchanges with Premo Co, whom we offer know-how related to our UAZ SUVs, while Premo is offering us a larger lorry, for 3.5 tonnes.

These lorries will be indispensable in road maintenance, and will be welcome on railways because they can go along tracks. They are good on rough terrain. As to our vehicles, they promise to do well in the Italian mountains.

Cooperation with Italian partners perfectly satisfies us, and I hope we will step it up. Thank you.

Silvio Berlusconi (as translated): I want to thank and congratulate you, too-and ask some questions, if I can. First, what is the annual turnover of your company and how many do you employ?

Vadim Shvetsov: We have 2,000 employees, and our turnover approaches $4 billion.

Silvio Berlusconi: It is really a large company. How much do you sell in Russia and abroad?

Vadim Shvetsov: We export only UAZ sport utility vehicles-about 16,000 a year, which makes 30% of their output.

We and Fiat orient mainly on the CIS countries. I think we will start exports next year. We hope Fiat Ducatos will be in demand abroad-that is, we expect to sell up to 5,000 lorries a year in the CIS countries.

Silvio Berlusconi: I congratulate you again on your successful performance. And another question, how has the crisis influenced your company?

Vadim Shvetsov: Just as the entire automobile industry. These are hard times, but all-round government support helps it keep afloat.

Stability has come in, at last. Things have begun to improve this autumn. Our plants are working steadily again. We would be really hard put without government support. It is hard to imagine where we would have been otherwise-but we are surviving thanks to the government.

Vladimir Putin: We should pay the company its dues. It works at a good pace, and manufactures quality vehicles. When did we arrange it for you to start a Far Eastern plant?

Vadim Shvetsov: It was in Khabarovsk last July.

Vladimir Putin: Right. I chaired a meeting in July in Khabarovsk, a city in the Far East. We agreed then for the company to build a factory in that part of Russia.

Vadim Shvetsov: 20% has been done by now.

Vladimir Putin: Construction has started, and 20% of the assignment has been fulfilled already. The first vehicle will be ready soon.

Vadim Shvetsov: It is scheduled for December 29.

Vladimir Putin: So the first car will get off the conveyor at the end of December.

Vadim Shvetsov: Mr Berlusconi, I want to demonstrate government aid again: 30% of our turnover this year is connected with government support, some way or other. It is hard to tell how we would manage without it.

Silvio Berlusconi: Russia is lucky to have Mr Putin. I have always said so, and I say it again.

Vladimir Putin: Thank you.

Silvio Berlusconi: Can I ask another question? It will be my last. Can I buy the first car you make?

Vadim Shvetsov: Of course.

Silvio Berlusconi: Can I expect a small discount? If Mr Putin buys the first car, I will buy the second.

Vladimir Putin: Oh no, it is settled! I'll better buy me a plane.

Silvio Berlusconi: Are you interested in investments made in your company?

Vadim Shvetsov: Of course, we are.

Silvio Berlusconi: I think you should contact Mr Valentini, my aide, because we have some opportunities and can make offers. I will explain it. The matter is of great interest.

Vladimir Putin: Please, Mr Kogogin, tell us about farm machinery manufacture.

Mr Kogogin represents KamAZ, one of our leading lorry manufacturers. You might have heard about it. KamAZ lorries have won the Paris-Dakar race in their class for several years running. Here, however, we will talk about farm machinery manufacture with Italian partners.

Sergei Kogogin (KamAZ Co Director General): We are a pure automobile company now but the project interests us because farm and construction machinery provides a niche in the Russian market. Our farmers need more productive machinery than what has been manufactured in Russia to this day.

We have studied the farm machinery market, and chosen several world production leaders. Negotiations made us prefer Case New Holland-the world leader in the field. It has possibly only one competitor, John Deere.

We have soon found common approaches to the matter-partly because the brand is well known in Russia. But it takes subtle localisation to have good demand in Russia during the economic crisis.

Our company has been integrating into the world automobile industry for many years, and we have organised the manufacture of competitive engines and transmissions. We can offer our partners new quality items very soon.

Vladimir Putin: I attended when you were signing contracts. Just when was it?

Sergei Kogogin: About two weeks ago.

Vladimir Putin: Ten days or so. Their first combine harvester will be ready as soon as March.

Sergei Kogogin: We have to be quick to get it for spring sowing.

Vladimir Putin: So they are working apace.

Silvio Berlusconi: I want to make an addition for the Sollers representative. Do plant construction workers have a five day workweek?

Vadim Shvetsov: No, six, and I expect them to shift to seven days.

Silvio Berlusconi: Do they work at night, too?

Vadim Shvetsov: No, that would be against safety regulations.

Silvio Berlusconi: My employees need mere two months to complete a big assignment on a system I have elaborated myself.

I am building an earthquake-proof town to accommodate 34,000. We use the latest safety rules. The construction will take mere five months.

Vladimir Putin: You will need construction machinery.

Silvio Berlusconi: Yes, it is wonderful machinery. We toil in three shifts, including weekends, so we are working well and quickly.

I also want to use this machinery for large-scale government construction works.

I want to add that these tractors are very well designed and beautiful. They are fine to look at. You have made huge progress in this field.

Sergei Kogogin: You mean your company-I have not made it yet.

Silvio Berlusconi: The last time I bought tractors was 20 years ago. They were for my orchards. So I have not seen a tractor for a long time, and do not know how far progress in this field has gone.

Vladimir Putin: This project has a great merit. It concerns a major automobile manufacturer with vacant production areas. They invest $50 million and create 1,000 new jobs at once.

Sergei Kogogin: We are very serious about promoting this machinery because we have a dealer service network in Russia and the other CIS countries. We expect to create a basis for its all-round servicing within two years. This is of no smaller importance than Russian-based production.

Silvio Berlusconi: I feel obliged to say at once that I am Gulfstream's client, and I will not let it down.

Vladimir Putin: Let us not overleap. We will see later, judging by what our discussion brings us to.

Mikhail Pogosyan (Director General of Sukhoi Co): The new regional jet family we are designing will offer greater comfort than Gulfstream, so we are trying to prove to you that promising products might be superior to those available in the market.

Silvio Berlusconi: How many will the new jet seat?

Mikhail Pogosyan: It is a jet family, the smallest seating 75, the basic 95, and the largest 115. The basic one, for 95, gives an opportunity to design a business class jet for VIP passengers.

Vladimir Putin: Mr Pogosyan, please tell about your partnerships.

Mikhail Pogosyan: To convince you, I want to say that our Italian colleagues are designing business jet interiors. They are attracting Pininfarina to design its passenger cabin.

We are getting through several stages at once. The jet is undergoing license tests. Three jets have made 500 test flights approaching 1200 flying hours. Our certification follows both Russian and European standards. We are working with SAS on a parallel arrangement. Our Italian partners are engaged in this job. They are responsible for European licensing and post-sale service. That is why we intend to have some of the license tests in Italy-noise gauging and the effect of electromagnetic fields. These tests will be the responsibility of Alenia.

European pilots have made ten or so tests flights, and highly appreciate the jet.

Silvio Berlusconi: So the jet will compete with the French-manufactured Airbus jet?

Mikhail Pogosyan: Our aircraft is a bit smaller, so our competitors are in another niche.

Vladimir Putin: Their engine production is cooperated with France.

Mikhail Pogosyan: Our family complements the Airbus family.

Vladimir Putin: We have done it to expand the limits of the project.

Mikhail Pogosyan: We are positioning our jet as a good supplement to the Airbus family with an account for the sizeable participation of our European partners. Many companies flying Airbus want to have our jet in the regional class, as well.

Silvio Berlusconi: Have you sold any jets to Italian companies?

Mikhail Pogosyan: We will begin supplies to Italian companies next year. We have a contract for ten jets with ItAli Airlines, small regional carriers.

Vladimir Putin: Ten is not bad.

Mikhail Pogosyan: These are regional jets. The joint venture we have established in Venice for post-sale service takes part in the tender, so we hope to promote our jets in the Italian market rather actively.

Vladimir Putin: I think the first step has been made today.

Silvio Berlusconi: I must say I am rather close to Alitalia because I took part in the struggle to make the company truly Italian. I made a pool of 15 entrepreneurs who purchased it. My position contrasted to that of the Left government, which intended to sell Alitalia to Air France.

I opposed the decision because I considered that your market and the European one were developing the quickest from the point of tourism, and you know it.

When I was in New York, I read about the latest United Nations research on this theme. A conclusion was made from it that the number of tourists would increase by 50% in eight years-from 800 million to 1.2 billion. The forecast concerned international and domestic interregional tourism.

I think extensive development awaits this market from the point of jet sales. If you are interested in investments, please notify me-I have some interesting ideas on this score.

Mikhail Pogosyan: We are working with our Italian partners with this aim. We will tell them about your ideas and possibly ask you for support.