Transcript of the meeting:

Vladimir Putin: Good afternoon ladies and gentlemen,

We have gathered together to discuss issues to be brought up during the spring session of the State Duma, certainly the most important of which is the budget. Although we always meet regularly, I feel that we have been meeting especially frequently these days. The previous meeting, which was attended by a smaller number of people, was not long ago. Four days ago, if I'm not mistaken.

Remark: The day before the first reading.

Vladimir Putin: Precisely. We met in the Government House to discuss these problems. But I would like to begin today's meeting with another issue. I just spoke over the phone with Yulia Tymoshenko, who sends you her regards.

Ukraine again seems to be having problems paying for Russian energy, which is extremely unfortunate. The European Union ultimately failed to give Ukraine the funds they had promised for this purpose. They assured us that it would take four to six weeks, but already it's been almost three months, and not a single cent or hryvna has been allotted to Ukraine.

EU leaders tell us it's the European Commission that is in charge of these issues, but the European Commission avoids discussing the issue with us.

I understand what they're doing. They're only going to pay up when their backs are against the wall. They're stonewalling.

As you know, the International Monetary Fund released a statement yesterday, and I believe another one today, saying that the Ukrainian government has been pursuing a pernicious economic policy, and if this continues, the IMF will refuse to cooperate with Ukraine or issue any loans to the country.

However, the current situation is unusual because Ukraine does have the necessary funds, which the IMF reports show. Ukraine has about $27-28 billion gold and currency reserves, and, according to the IMF's estimate, it can ensure the sustainability of its national currency and foreign trade operations with about $12 billion in reserves.

More to the point, the IMF does not object to Ukraine paying for Russian energy resources with these funds. IMF officials even believe that this would be possible and fair.

By the way, a large portion of the IMF funds come from Russian financial resources.

However, according to Prime Minister Tymoshenko, President Yushchenko is preventing cooperation between the Central Bank, which manages the gold and currency reserves, and the Ukrainian government, thus blocking the transfer of the required funds.

I would like to remind you that Russia paid for gas transit in advance, up to the first quarter of 2010. Some $2.5 billion worth of credit have gone into the Ukrainian economy. I'm wondering what we should do in this situation.

I'm raising this question since the budget is being debated at the moment, and its parameters depend on the economic activity of large Russian monopolies. What does everyone think?

Boris Gryzlov: Mr Prime Minister, I would like to express my opinion. While preparing the budget, the Ministry of Finance came up with various ideas for increasing tax revenue, including raising the gas tax. During the debates on this issue, you might say that we blocked this proposal. So, the budget does not envision an increase in the gas tax for now.

We understand that if this were to happen, if the gas tax were raised, we would encounter serious problems. To say nothing of businesses, this increase would affect ordinary people. Plus, funds for the investment programme to expand the gas network would be reduced.

Expanding the gas network is a must for the Russian Government. If gas revenues fall, if we pay in advance, it will only exacerbate the situation. In my view, Ukraine must observe the terms of the agreements it signed, and there must be no indulgences for Kiev.

Vladimir Putin: Good, we will have an opportunity to discuss this issue with President Dmitry Medvedev as well, so we will talk it over later before we make a final decision. Thank you.

Let us return to the main topic for this meeting and continue our regular discussions on crucial economic, legislative and domestic policy issues.

The party is facing many challenges. First, the national economy needs dynamic, post-crisis rehabilitation with an emphasis on innovation ways of driving growth-which means that Russia must overcome the effects of the crisis and launch its programmes for modernising the economy at once.

We should also speed up budget, health service and education reforms, and pursue an active policy of dynamic social development. We will discuss all those issues in detail during the 11th congress of the United Russia Party, which will be held in less than in a month.

I thank United Russia members of parliament for their support for key Government initiatives. Among other things, this support has helped us to enact anti-crisis measures quickly and without delay, and to implement these measures.

Allow me to say a few words about legislative priorities. As I have said, the federal budget is the central issue of the autumn parliamentary session. United Russia parliamentarians were active in its preliminary discussion, and we have taken many of their suggestions into consideration.

Among other matters, this concerns increased funding for road construction and maintenance. This issue was discussed at the Government Presidium yesterday, and the decision was made to increase funding for road maintenance-I will say a bit more on this later. Several essential clauses also increase funding for the construction of sport facilities and support for regional budgets.

The Government Presidium approved many other initiatives yesterday-in particular, to increase funding for several crucial programmes by redistributing budget allocations.

I would like to discuss an issue you brought up. An extra 100 million rouble allocation will go to grants for gifted young people, and almost a billion roubles to support social infrastructure at the Avtovaz Company, and thus ease its financial burden and help it out of the crisis.

Three and a half billion roubles have been earmarked to develop high-end stock-breeding and seed farming. This resolution, as you know, has received active support from United Russia parliamentarians. Ten and a half billion roubles will be allocated for a national census. You brought up this issue, and Mr Mikhail Shmakov, the Chairman of the Federation of Independent Trade Unions of Russia, also brought it up when we met recently.

I want to inform you about another change. We initially intended to allocate 250 billion roubles next year to support banking.

As you know, the Central Bank has reduced its refinancing rate again today-another sign of financial recovery.

That is why we have decided to redistribute this money. Banks will receive only 100 billion-they need a safety cushion, while the other 150 billion will go to replenish the anti-crisis fund.

We will use the money for a wide range of economic rehabilitation programmes, which will naturally be focused on industry.

The budget for 2010 focuses on social programmes, with one of its key articles dealing with a large-scale pension reform. We all know a lot about this issue, and have discussed it a lot.

Pension allocations will account for roughly 10% of the gross domestic product-an unprecedented amount that will increase pensions by an average 46% throughout the year.

Macroeconomic stability is another of our budget policy's principal targets, which implies reducing the budget deficit and curbing inflation.

As for inflation, it might prove smaller than we have expected this year. We will see how it turns out. This also concerns the budget deficit. At any rate, we might have spent less than expected from the National Welfare Fund and the reserve funds.

All this requires the utmost thrift. We cannot afford any waste, even on the most attractive goals.

I want to call your attention to legislation that in my opinion needs to be enacted more quickly. The law on the general principles of public services and federal and municipal duties comes first.

This law was discussed at the Presidium of the Local Self-Government Council in Kaliningrad a few days ago. The public is unhappy with public services, with their inadequacy, excessively complicated administrative procedures, and numerous intermediaries, who make money on bribes. I call on the United Russia Party to monitor the matter closely. The law should be passed as soon as possible, and complied with everywhere.

Second, there is a legislative package to support and streamline the economy, enhance its effectiveness, and promote private enterprise.

We must finish preparing the law on energy saving and enhancing its efficacy this autumn, and continue work on technical regulations. All this will be a major legislative incentive for technological innovation, and so will make Russian companies more competitive.

We all are aware of the economic results of such decisions. It is risky to increase the strain on the economy so much and so quickly. However, all economically active entities and persons should clearly see the present trend for their adequate and timely decision-making.

The Tax Code needs amendments to establish the procedure for claiming refunds for the VAT, and thus make it so that exporters can receive such refunds more quickly. This sort of practical support for conscientious taxpayers is essential today.

Ladies and Gentlemen, I am willing to discuss any other initiatives you deem socially and economically important.

Mr Boris Gryzlov has the floor.

Boris Gryzlov: Mr Putin, we really have put a lot of work into next year's budget, including a zero reading and discussion before the first reading and after the budget was submitted. Its support for social programmes is evident.

There are another two themes we have mentioned on previous occasions but not today.

I attach tremendous importance to the decision to assign new housing to veterans of World War II, even if they were put on the waiting list on or after 2005.

We have also said that it will be possible to increase student grants in all universities and colleges beginning September 1, and to raise military wages, if the economic situation is beneficial in the first six months. Wage increases in government-financed companies might also become possible a bit later, by December. That would be good.

As for the laws you have mentioned, we are monitoring them. We will discuss the law establishing the general principles for rendering public services during the first reading in November, and I think the State Duma will pass it during the autumn session.

We are also working on the law on energy saving and effectiveness, and the State Duma will pass it as early as November. We are working on technical regulations together with the Government, which can enforce them by executive orders. The State Duma, in its turn, passes laws, so we are trying to decide together which option of adopting the new regulations is preferable-a Government order or a law.

The party congress has been scheduled for November 21, so we would like to discuss related matters. The economic situation is certainly of essential importance. We have just chosen the congress venue. It will be the Lenexpo exhibition centre in St Petersburg, which usually hosts international economic forums in St Petersburg. We will carry on our work there.

There are also matters that only concern the party, for example streamlining its programme documents, drafts of which have been distributed to the regional party branches.

The party will elect its new Supreme Council, because the present Council's term is expiring this year. We also want to discuss amending the party Statute, because the United Russia Party needs to be more democratic, by, for example, introducing primaries, and participating in television debates. All this deserves to be included in the Statute.

We also want to discuss the implementation of our social projects. There were 37 such party projects. Some of them have been upgraded to the status of government or federal targeted programmes.

Such is the agenda for today.