Transcript of the beginning of the meeting:

Vladimir Putin: Mr Yakunin, last year began in very challenging circumstances, there was a sharp reduction in rail traffic. However, the industry showed signs of improvement in the middle of the year. What results did we see? What were the figures for 2009? Also, I would like to hear about investment programmes for 2010.

Vladimir Yakunin: The complete reports will not be ready until May. So far I can report that we managed to reduce the fall in rail traffic to 15%, as opposed to the 19% previously forecast. It reflects certain trends in industry and the economy in general.

It certainly aided stabilisation in the sector, as did government efforts to offset the effects of new tariff regulations. To support the economy, the government decided to halve the planned, economically justified, tariff increase, giving Russian Railways 50 billion roubles' reimbursement to cover our losses.

In addition, the allocations for government investment programmes were very effective. The allotted amount totaled 140 billion roubles. This cannot be seen as support for a single sector, this measure supported the Russian economy as a whole.

We achieved the goals set by government: improving the quality of operations. Performance factors, including service speed, freight train engine capacity and freight train weight, were improved.

I would particularly like to emphasise that the measures taken in 2009 reduced the transport component in the cost of crude oil, diesel fuel, fuel oil and ores by 32%, 49%, 44% and 8% respectively.

Therefore I can report back that the government reform plan has had a palpable positive effect in the industry.

I would like to highlight that we cut costs by 196 billion roubles, as opposed to the forecast decrease of 179 billion roubles. Our employees themselves were integral to this. I reported to you that we had to ask almost 500,000 employees to work part-time: everyone, from the president to those on the shop floor.

Vladimir Putin: Let the president work full-time. What was the total volume of rail traffic for 2009? How much of a decrease was there compared to 2008?

Vladimir Yakunin: Mr Putin, Rail traffic fell by 15% in comparison with 2008. Shipping capacity (containment) and freight operation are forecast to grow by 3.7% and 3.8% respectively in 2010.

Vladimir Putin: What about the financial results for 2009?

Vladimir Yakunin: Turning to financial results. Despite initial forecasts predicting a possible loss of two billion roubles, we managed, and again I stress that this is thanks to the support the sector has received and the measures taken, we managed to finish the year with a surplus of about 11 billion roubles. Thus the sector's stability was ensured and the implementation of the investment programme guaranteed. It applies to Sochi Olympic facilities primarily, which you have toured to inspect work progress.

Vladimir Putin: I must admit that the scale and organisational level of work underway is very impressive.

Vladimir Yakunin: Thank you, Mr Putin. I will certainly pass that on to our staff. I would also like to stress that since you asked us to follow all environmental requirements in construction rigidly, we signed a protocol of intent with the major Austrian company Alpina literally two days ago. We are attracting leading construction and engineering companies to work on the organisation of the process in Sochi.

Vladimir Putin: Yes, I saw that there are European companies working there, a Canadian company is also working there. But you must keep an eye on prices, Mr Yakunin.

Vladimir Yakunin: We are doing our best to make cost savings. As I reported to you, our efforts are resulting in construction cost reductions. Moreover, following the decision to construct the intermodal line and the main line connecting Sochi with all Olympic facilities, thanks to a balanced calculation of passenger traffic working capacity we were able to reduce this project's prospected cost by some 30 billion roubles. We strictly follow your directives in this area.

Vladimir Putin: Despite the well-known hardships of 2009, the company's performance was not bad, and the workforce indeed did their best. Last year we allocated an additional 50 billion roubles to you. What plans are there for the investment programme this year? Have you curtailed it? Re-focused it? What are your plans in this area?

Vladimir Yakunin: Mr Putin, the board of directors prepared their plans for the investment programme, which was then agreed by the government, at practically the same level as in 2009, in fact a little higher. This increase is due to the subsidies for Olympic facilities.

Given our revenue, the funding of our main facilities remains practically the same. Nevertheless, we fulfil the tasks the government, as our major shareholder, charged us with and stick to our commitments in relations with locomotive engine, metals and communication equipment producers. Although by comparison with 2008, we did see a certain fall in 2009.

Vladimir Putin: You were promised financial support. But as far as I can see, this commitment has not materialised?

Vladimir Yakunin: So far it has not. Today I attended a meeting chaired by First Deputy Prime Minister Igor Shuvalov, which drew a line under the debate about this issue. Mr Shuvalov gave a directive to allot subsidies of 50 billion roubles. It is yet too early to speak about the details. In any event, your decision, I mean the decision of the government presidium, is being implemented.

Vladimir Putin: Good. I suggest we review your investment programme again in the near future to consider the main facilities, work progress and deadlines.

Vladimir Yakunin: Fine, we will prepare for those meetings. We also have other opportunities. Anyway, the investment programme is underway. There were no delays last year nor will there be any this year.

Vladimir Putin: We'll go over the facilities commissioned last year and planned for this year.

Vladimir Yakunin: Sure.

Vladimir Putin: Mr Yakunin, what's progress has been made on the Sapsan project? I remember our train ride. Indeed, it made a very good impression on me. How is it operating?

Vladimir Yakunin: A week ago Sapsan saw its 100,000th passenger, a 2 year old boy.

Today I presented Mr Mikhail Piotrovsky with a one-ride certificate as part of our promotion programme. Of course there are certain things the passengers want to see. But overall there is a demand for this project, and passengers like the train.

Of course the train is operated under the supervision of its producer, Siemens, which allows us to clear up operational details.

However, sometimes uncorroborated reports appear in the media...

Vladimir Putin: Let's not discuss that now, I suggest we move on to practical issues. Are their any serious problems that require our extra efforts? Any operational challenges?

Vladimir Yakunin: There are almost no operational problems. As for the arrangements intended to ensure traffic safety... A comprehensive approach is being taken to this work. We are doing all we can to ensure the passenger finds their journey comfortable, safe and enjoyable.

Vladimir Putin: Do I understand it correctly that no serious problems have arisen?

Vladimir Yakunin: No serious problems have arisen.