27 february 2010

Prime Minister Vladimir Putin chairs a meeting on the Russian Railways (RZD) investment programme

Vladimir Putin

At a meeting on the Russian Railways (RZD) investment programme

“Development of railway transport is a long-term national goal. The government will continue funding railway development directly through the federal budget. At the same time, private businesses should also play an increasing role in the industry’s development.”

Vladimir Putin's opening address:

Good afternoon,

Today we will discuss the investment programme for our major transport company - Russian Railways.

A large number of important documents outlining the future of the industry were adopted in 2008, primarily the Strategy for Developing Russia's Railway Transport up to 2030 and the targeted federal programme for developing Russia's transport network through 2015.

These documents outline specific plans for modernising existing railway lines and building new ones, while increasing efficiency and safety. The aim is to realise our transit potential to its full extent by building railways to regions without reliable transport and forming a network of high-speed passenger rail.

I would like to start by saying that these plans remain in place despite the economic difficulties we and the rest of the world are experiencing. Obviously, just as with any other infrastructure, railways cannot develop based only on current demand. We must primarily focus on the long-term needs of customers, the economy and the country as a whole. We must make decisions for the next few years, rather than for the next few weeks or even months or quarters.

This is why it was so important for us not to scale back our construction projects or waste the experience acquired while implementing major projects during the downturn in 2009.

Government support to Russian Railways in 2009 amounted to a handsome 130 billion roubles.

Reimbursement for lower freight tariffs added up to 40.5 billion roubles; 38.4 billion roubles went in subsidies for discounted long-distance travel by students; 41.5 billion roubles for infrastructure construction in Sochi, six billion roubles to build a detour around the man-made disaster area in Beryozniki, and three billion roubles to purchase railway carriages from the Tver rail car plant.

In addition, Russian Railways saved almost 900 million roubles - 890 million roubles, to be exact - on import duties for Sapsan high-speed trains.

First of all, the allocation of these resources made it possible to hold down tariff increases. In 2009, the cost of freight carriage was supposed to increase by almost 16%, 15.9%to be exact, but in reality it did not increase by more than 10.6%.

This took a burden off the real economy during a difficult crisis year by cutting transport expenses. We will continue to keep tariff increases under control this year. Of course, I know that many companies in the real economy complain about high tariffs, but we shouldn't forget about transport companies. We cannot restrict the growth of tariffs so much that we undermine their economic position.

This year freight tariffs will be adjusted less than in the past year - by 9.4%.

Second, Russian Railways received funding to pursue its development programmes and purchase new equipment. All in all, in 2009 the company was able to spend 262.8 billion roubles on investment, half of which came from the government.

These funds were used to modernise a bridge for Sapsan trains on the St Petersburg-Moscow line, to repair a bridge across the Ob River at the 605-kilometre mark of the Omsk-Altaiskaya line, a bridge across the Chuna River on the Taishet-Lena line, and the second stage of the Amur River crossing near Khabarovsk.

The new Big Novorossiisk Tunnel on the North Caucasian Railway was opened for railway traffic.

The Russian Railways investment programme for 2010 amounts to 270.5 billion roubles. The amount of support from the federal budget will even be increased slightly, to 140 billion roubles. In other words, the government is again taking on more than half of all expenses for modernisation and new construction projects. The government will allocate 50 billion roubles to compensate Russian Railways for the indexation of lower freight tariffs, 27.8 billion roubles to partially subsidise long-distance economy-class travel and 60 billion roubles for the construction of transport infrastructure in Sochi.

What are our priorities here? First, we must concentrate on the development of high-speed passenger rail along the Moscow-Nizhny Novgorod line and the railway from St Petersburg to the Finnish border. The Moscow-St Petersburg line showed that high-speed rail is in much demand.

Second, we must continue building a railway to connect Yakutsk with the general railway network. This railway is vital for the social and economic development of Yakutia and the rest of Eastern Siberia. Its construction should be completed by 2013.

Third, it is necessary to increase the capacity of our railways in Baltic and Pacific ports considerably. They should operate as effective logistical hubs.

We're talking about the reconstruction of the Mga-Gatchina-Ivangorod line and the railway providing access to the southern shore of the Gulf of Finland. We're also talking about and the Komsomolsk-on-Amur to Sovetskay Gavan line, which will help develop the ports of Vanino, Sovetskaya Gavan and some other areas.

Fourth, railway facilities are playing a major role in the construction programme for the Olympics and Sochi's comprehensive development. Today I would like to hear about the progress in this area in greater detail. I have already spoken with Mr Yakunin on this issue. Yesterday he visited Sochi. Russian Railways executives have given this programme a lot of attention. Let's discuss this issue in more detail. After all, we have decided to meet in Sochi for a reason.

Fifth, I would like to emphasize that infrastructure development must be accompanied by serious investments in safety. It is essential that we guarantee a new level of anti-terrorism security, fire safety and technical monitoring of the tracks and rolling stock. Under the plan, 4.5 billion roubles will be invested to enhance railway safety in 2010.

I have already said that the development of railway transport is a long-term national goal. The government will continue funding railway development directly through the federal budget. At the same time, private businesses should also play an increasing role in the industry's development.

When the reform of the Railway Ministry began, our goal was to make railway transport attractive to investors and create a competitive freight and passenger transportation market. We have largely achieved this goal, but we should not rest on our laurels. On the contrary, we must encourage private enterprise as much as we can. In the next few years, Russian Railways will sell many of its assets to investors, primarily its subsidiaries in shipping and services. RZhD will mainly retain infrastructure - railways, locomotives, and a traffic control system.

The funds from the sale of these assets should become a major resource for development. According to tentative estimates, these funds may total 100 billion roubles. I believe that Russian Railways management should use these proceeds to finance key projects.

The biggest sales should be to investors for shares in the Freight One Company and TransContainer. Russian Railways executives have stressed the need to build a second freight shipping company. We will discuss this in more detail today.

We will also discuss other ways of attracting more financing for implementing investment plans in the railway industry.

Let's get down to work.

* * *
Prime Minister Vladimir Putin holds a video conference to hear reports by the heads of Russian Railways partners

Vladimir Putin: Let's hear from our colleagues who work on-site. The first company, the Demikhovo Engineering Plant, which is part of Transmashholding, is represented by Transmashholding General Director Andrei Andreyev. Mr Andreyev, how is your work going, and what are your plans in 2010?

Andrei Andreyev, Transmashholding General Director: Mr Putin, Mr Yakunin, ladies and gentlemen: good afternoon from the assembly shop at the Demikhovo Engineering Plant, a major Russian automotive component and rolling stock manufacturer.

Production began here in the mid-1990s. Since then, the plant has produced 6,000 carriages for commuter trains. You can see the 6,000th carriage in the background. This is a well-known plant; some three million commuters use its eco-friendly, reliable and safe trains every day.

The plant currently employs 3,300 people. In addition to serial production, it also manufactures modern technological prototypes. Some of the latest prototypes are carriages for the Aero electronic train, which are now used in intermodal passenger transport, connecting Moscow's railway terminals with airports. The plant organised a clockface timetabling system last year, which now successfully operates in the Yaroslavl area. This year a commuter train with an energy-efficient drive system will be produced. This drive system will allow the train to recapture some of the energy used for braking, cutting electricity costs by at least 20%.

This plant has been under the umbrella of Transmashholding for four years, receiving 1.3 billion roubles in investment. The company's products are in demand not only in Russia.

This month it is delivering the second instalment of commuter trains to Kazakhstan. But of course the main concern is the investment programme of Russian Railways, since the company buys 70% of Transmashholding products.
Mr Putin, we would be happy if you supported this programme at the meeting today. The main goal of every manufacturer is to sustain production, but unfortunately, production is falling at present. In 2008 the Demikhovo Plant produced 618 carriages for commuter trains, while 553 carriages were produced last year and 501are planned in 2010. This pertains to orders placed by Russian Railways only.

However, there are encouraging signs. At the latest meeting Mr Yakunin agreed to long-term contracts for at least three years, which will allow us to develop a more efficient planning and management strategy.

I would like to use this opportunity to bring up one more issue: organising suburban commuter services. The paperwork for establishing suburban commuter service operators has been almost finalised, but no funds have been budgeted for upgrading rolling stock. One of the solutions to this problem is to alter the budget code and make separate appropriations to regional budgets to support suburban commuter services. Thank you.

Vladimir Putin: Mr Andreyev, you are the head of Russia's major developer and manufacturer of suburban and regional electric trains, accounting for over 80% of Russian-produced electric trains. However, passengers place a very high demand on transport quality. This is why Russian Railways purchases railway vehicles for long distance passenger transport needs from abroad. What is your development strategy?

We would like to hear what innovations will be introduced at your production facilities in 2010, including at the Demikhovo Engineering Plant or other facilities under the umbrella of the holding company. What are you going to focus on?

Andrei Andreyev: As I mentioned, we plan to develop an electric locomotive with an energy-efficient drive system. But it is undeniable that we lack the international expertise that today's Russian Railways requires. This is why we will be working in close cooperation with our main partner, Alstom.

I hope that all the basic agreements will be signed in the near future that will enable us to offer dual-voltage electric trains to our customers. Unfortunately, we had to concede the Sochi project to Siemens, since we do not produce the required machinery. I hope that the cooperation with our strategic partner will allow us to develop a comprehensive production line and meet Russian Railways' demands.

Vladimir Putin: Good, thank you.

Andrei Andreyev: Thank you.

Vladimir Putin: I believe it is very important that the holding company, the plant and Russian Railways work together on investment, while keeping in mind the needs of the economy and passengers.

We must anticipate the future and foresee prospective trends in the manufacturing industries. Cooperation with our international partners, be it on the Sapsan project or with our Italian partners on the high-speed rail line to connect St Petersburg and Helsinki, must be pursued on the conditions of localisation and the subsequent development of production facilities in our country.

Naturally, orders could not but decrease under the present circumstances. However, this reduction is not critical; it's less than a few dozen. Nevertheless, we will also discuss this issue separately.
Thank you very much.

Let us turn our attention to the Urals Railway Engineering Plant, managed by the Sinara holding company, and hear from Mr Alexander Saltayev, Director of Sinara Group. Please.

Alexander Saltayev, Director of Sinara Group: Prime Minister Putin, President Yakunin, ladies and gentlemen,
I am at the Urals Railway Engineering Plant, which you visited in December. I am sure you noticed that this plant operates and develops, producing mainline and freight locomotives for Russian Railways.

This is the consequence of cooperation between Russian Railways and Sinara Group. Russian Railways, which sets the tone for trends in innovation, gives us challenging tasks to create new machinery and at the same time signs contracts with us. This is why it took us only two years to develop our 2ES6 electric locomotive from scratch. Up to 80% of the solutions applied in the development of this electric locomotive are innovative and have never before been employed in engineering.

The electric locomotive that you saw has travelled over 23,000 kilometres on the testing ground of the Sverdlovsk Railway. It operates in the harsh, frigid conditions of the Urals and has met all the parameters we set.

Vladimir Putin: In 2009 the first stage of manufacturing these electric locomotives began, with 60 two-section locomotives to be produced each year. What are your plans in 2010?

Alexander Saltayev: We have two major objectives for 2010. First, we plan to open a similar production facility to manufacture 120 locomotives, or 240 sections, annually.

The other objective is to take advantage of this plant's capacity and enter into a joint venture with Siemens, the world's leading locomotive manufacturer. Siemens sees us as reliable partners, able to organise production. We have the necessary capacity, and the opportunity to localise production. We are set to present a brand new locomotive to the joint venture in December. This new type of locomotive, with an asynchronous motor drive, will surpass the 2ES6.

Vladimir Putin: When are you going to begin producing this locomotive? In what year?

Alexander Saltayev: We will present the first locomotive at the end of this year. I thing certification and testing will take six or seven months. We will be able to deliver the first locomotives between October and December 2011.

Vladimir Putin: Now, a question for both you and Mr Yakunin. How well are your operations coordinated with Russian Railways' orders?

Vladimir Yakunin: Mr Putin, they are fully coordinated. Our investment programme and purchase plans are the basis for the plant's development strategy. What Mr Saltayev just mentioned is also part of our plans.

Vladimir Putin: Are you satisfied with the level of cooperation and the amount of orders from Russian Railways?

Alexander Saltayev: Yes, we signed a three-year contract for the 2ES6. We are preparing a contract for 2ES10 now.

Vladimir Putin: Mr Yakunin, according to the information I have, you plan to purchase 40, 61 and 70 electric locomotives in 2010, 2011 and 2012 respectively. Correct?

Vladimir Yakunin: Yes. This issue is critical, since there was only one electric locomotive manufacturer in Russia. And there were no production facilities of the sort in the Urals. This is not just modernising a production facility. This production facility was built practically from the ground up and in accordance with the development strategy and the federal targeted programme, as we reported to Deputy Prime Minister Sergei Ivanov. This is not only an updated programme for Russian Railways and the plant, it is part of the federal targeted programme.

Vladimir Putin: Thank you very much. Mr Saltayev, I wish you every success and all the best. Thank you. Good luck.
Let us move on to the next facility, the SKF ball bearing plant in Tver. Please.

Jerzy Konewski: (Director of SKF Tver): Good afternoon, my name is Jerzy Konewski. I am the director of the Rail Bearing Plant in Tver, where we are now. Next to me is Alexander Nikitin, managing director of SKF in Russia.

Alexander Nikitin: Good afternoon.

Vladimir Putin: Good afternoon.

Jerzy Konewski: We represent a global brand that produces rail and antifriction bearings. We have decided to develop our production facilities in Russia because we think that the prospects for the development of Russia and its transport are tremendous. Mr Yakunin and his team have managed to persuade us about this.

Alexander Nikitin: Indeed, Mr Yakunin was very convincing about Russian Railways' large-scale investment programme. We see for ourselves that the company is ready for an innovation breakthrough. Judging by its dynamic policies, we believe that the industry is ready for big positive changes.

This is very important for us because Russian Railways is our main customer. Its positions determine the demand for our products.

Vladimir Putin: Mr Konewski, when will the plant start working?

Jerzy Konewski: We will launch production next March. We started building it a year ago.

Vladimir Putin: When will it be inaugurated?

Jerzy Konewski: We were planning to inaugurate the plant in early July.

Vladimir Putin: What about your relations with consumers in the Russian market?

Alexander Nikitin: We are working with different operators, for instance, Sinara, which took party in the previous teleconference bridge. This company uses our products. We maintain relations with producers of carriages, locomotives and other rolling stock.

Vladimir Putin: This is a very welcome event for Russian manufacturing. The plant will play a major role in this industry overall. Obviously, it is impossible to resolve all issues without the support of local authorities. You occupy a rather large area of land in Tver - 85.5 thousand square meters. What could you say about your relations with the local authorities regarding infrastructure issues?

Jerzy Konewski: We are building the plant, and the infrastructure is developing simultaneously. Now we have electricity, water and access to telecommunications infrastructure. A permanent motor road is under construction. We will have the infrastructure we need by the time we launch production.

Vladimir Putin: How many people will you employ?

Jerzy Konewski: We will hire 45 people before the end of this year. We are planning to employ 150 people in the future. Everything depends on our commercial load.

Vladimir Putin: Where are you training specialists?

Jerzy Konewski: We not only train them at our enterprise but also send them to the countries that have our best plants. For instance, our operators have been sent for training to Italy. Our engineers study in other countries as well.

Vladimir Putin: I would like to wish success to you and your team. All the best. Thank you.

Jerzy Konewski: Thanks.

Alexander Nikitin: Many thanks.

Vladimir Putin: Let us move on to the St Petersburg-Buslovskaya stretch, which Mr Yakunin has brought up already. Mr Oleg Valinsky, the acting manager of the Oktyabrskaya Railway, has the floor.

Oleg Valinsky: Good afternoon, President Yakunin, Prime Minister Putin, ladies and gentlemen.

I am at the Buslovskaya station, a major part of the St Petersburg-Helsinki high-speed rail project. Its receiving-departure tracks are being extended, and the roadbed is being laid.

The high-speed railway will cut the current five hour and fifty minute trip to three and a half hours, an hour and a half of which will be in Russia.

240 kilometres of tracks have been repaired along the St Petersburg-Buslovskaya railway, and 86 man-made facilities, including 41 bridges, have been reconstructed. 304 kilometres of overhead lines have been renovated, and many other projects completed. At present, the total cost stands at 19.5 billion roubles. We will spend another 7.8 billion roubles this year to modernise the entire infrastructure of this stretch. We will be ready to handle high-speed trains by October 1.

Thank you.

Vladimir Putin: How long is the railway?

Oleg Valinsky: 158 kilometres from St Petersburg to Buslovskaya.

Vladimir Putin: That means to the Finnish border?

Oleg Valinsky: Yes.

Vladimir Putin: What will maximum speed be?

Oleg Valinsky: 200 kilometres an hour. The train will reach maximum speed along a 106 kilometre stretch from Pargolovo to Vyborg.

Vladimir Putin: Mr Yakunin, the new railway will use Pendolino trains from Italy. How is your partnership with the manufacturers arranged? Do you merely buy the trains?

Vladimir Yakunin: We have the basis of a contract with Alstom, the manufacturers, which will be part of a general contract. We are preparing a contract, to sign it quite soon, for Alstom to acquire a golden share in Transmashholding. Russian Railways also holds a blocking stake with the permission of the government.

Naturally, we are encouraging the localisation of production. The purchase of the golden share by Alstom is meant to interest it in such localisation and provide legal grounds for it.

Vladimir Putin: So the railway, which is 157 kilometres long, entails the reconstruction of fourteen stations, signalling control facilities, overhead lines, man-made structures, passenger platforms and much else. When will it be ready?

Oleg Valinsky: Before October 1.

Vladimir Putin: Okay, we will see. Thank you. I wish you every success.

The Mga-Gatchina-Veymarn-Ivangorod railway is necessary to enhance transport to and from the European Union countries and guarantee the smooth operation of the Ust-Luga port, now under construction. Mr Yury Petrov, project manager, has the floor.

Yury Petrov: Prime Minister Putin, President Yakunin, ladies and gentlemen, I am Yury Petrov, the head of the customer group of the board for comprehensive railway reconstruction.

We are at the 3rd kilometre of the Frezerny-Gatchina line, where a secondary track is being laid and a railway flyover being built across the St Petersburg-Luga railway.

This is part of the company's major investment project for the comprehensive reconstruction of the Mga-Gatchina-Veymarn-Ivangorod stretch and railway approaches to the ports along the south coast of the Gulf of Finland.

At present, concrete is being laid on the left side of the backwall, track crossbeams are being assembled, and slabs of a ballastless bridge deck are being laid. Minor preparatory works are also underway.

This project must be completed before other work along the Frezerny-Gatchina line can begin. The deadline for this is April 25, which will allow the tracks to be laid in May.

Bridge-Building Company No. 47 is the contractor. The general contractor is Building and Installation Company No. 1, an arm of a Roszheldorstroi affiliate.

We finished facilities worth 6.128 billion roubles in 2009 through an investment project to meet the needs of Ust-Luga Company for freight access to the port, and provided a capacity of 36 train pairs to travel along the Mga-Ust-Luga line each day. And with the completion of the second stage of the North Lines project and construction of the Neftyanaya station with nine receiving-departure tracks, we will be able to provide train collection, car cleaning, and car supply for loading and unloading at port stations.

This year, the company management instructed construction workers to increase capacity to 36 train pairs a day. We will build and put into service six segments of the secondary major line with a total length of 53 kilometres, finish reconstruction on six stations to connect them to the secondary major line, finish the construction of the Neftyanaya station, and put into service two new railway substations at the Novolisino and Gatchina stations and a reconstructed substation at the Mga station.

Freight traffic to the Ust-Luga port will increase next year, so the Russian Railways investment programme will spend 860 million roubles on additional work. Funds have been allocated to continue design work on railway stations near the port-including the second stage of the South Lines, the third stage of the North Lines, the Gazovaya station and a major railway yard.

Mr Putin, there are no serious problems holding up construction at present, although there are issues we are addressing. Two of them are important. One concerns connecting the new railway substations to the grid. We have applied for station supply with a total 75 megawatts of power. Grid companies are considering our application and drawing up relevant technical specifications.

The other issue being settled now involves assigning a 324 hectare area for the railway yard. We have leased 80 hectares of forested lands so we can lay a connecting track this year and next year from the 174th Kilometre station to the North Lines, which will eventually develop as a new railway yard.

On the whole, the client and the general contractor have settled all organisational matters. A detailed list of this year's investment projects has been compiled and approved. All relevant contracts have been signed and a schedule set up. Tenders have been held to supply 45% of the entire equipment necessary for this year. We are meeting all deadlines.

Thank you.

Vladimir Putin: Mr Petrov, your presentation makes a fine impression. You have everything-figures, amounts and schedules-at your fingertips.

This is one of the most crucial projects, because the European Union accounts for more than a half of our trade, and we must certainly build up the related infrastructure, especially seaports. We know our problems and where we have bottlenecks. We need direct access to the sea, and we should expand our capabilities.

Mr Levitin, to what an extent has Russian Railways Co brought its work into step with the harbour routine? And what about the canal?

Igor Levitin: We have synced it all to the full to dispatch the first batches of boiler oil from Ust-Luga in time. This is our main goal now as the construction of a huge oil terminal will be completed quite soon.

Vladimir Putin: How deep is the canal?

Igor Levitin: 16 metres.

Vladimir Putin: Is it enough?

Igor Levitin: Quite enough for the oil terminal, but the depth will increase to 17.5 metres when the Baltic Pipeline System-2 reaches it in 2012.

We have coped with the first stage of the task you posed us. The canal can cater for vessels with 100,000 tonnage.

Vladimir Putin: Mr Yakunin, what do you think about it? Are there any concerns or requests?

Vladimir Yakunin: None. Due to the government's constant attention, Ust-Luga is really synced quite well from our point and so from the point of relevant agencies-I mean that we are normally cooperating with the regional authorities.

As is always the case, the problem is that the amount of freights grows quicker than we expected while drawing up initial plans. That's nice, however. It means that the economy has resumed its progress.

We are ready to accept more stringent deadlines if the relevant ministries find it necessary. We think the contractors will cope, too.

Vladimir Putin: Thank you, Mr Petrov. I wish you and your personnel every success.

Yury Petrov: Thank you.

Vladimir Putin: We are returning to Sochi to hear what Mr Solntsev, head of the municipal department of capital construction, has to say about the transport infrastructure, as far as it concerns railway construction to deliver athletes, Olympic guests and residents of the Imeretinskaya Valley, a neighbourhood in Sochi, up to the mountain sport facilities and back to the seashore.

Yevgeny Solntsev: Mr Putin, Mr Yakunin, esteemed colleagues,

My name is Yevgeny Solntsev. I am glad to greet you on behalf of the department of railway construction and comprehensive reconstruction. What you see in the background is the south portal of the first tunnel cluster, the construction site of a road to link Adler with Krasnaya Polyana.

Russian Railways Company began to design new projects with federal budget support as soon as Sochi was appointed to host the 2014 Winter Olympics. Six Olympic projects are under construction now.

We use high-tech construction machinery and draw on the latest managerial know-how, some of which we borrow from foreign colleagues with an experience of creating the Olympic transport infrastructure.

We have signed a contract for joint management with the Canadian SNC-Lavalin, whose staff experts took part in implementing transport projects for the Vancouver Winter Olympics.

We are also cooperating with the experts of Amber Engineering and Alpine Bau GmbH. Both companies specialise in the construction of technically sophisticated projects. My colleagues and I are sure that priority attached by the Russian leadership to Olympic preparations will make it possible not only to offer the games all hospitality they deserve but also to create an infrastructure for further development of the Krasnodar Territory.

I have said all I wanted to say, and I invite you all to Sochi in 2014.

Vladimir Putin: But this is not enough! True, your optimism and cheerful disposition have impressed me but tell us what you are planning for this year. What scope of work are you planning? What are your goals for the year? If I am not mistaken, the railway stretch in question is 48 kilometres long but it has 8,500 passengers an hour, plus another 11,500 for the parallel highway.

This is an expensive project, and one of the most important for regional development. Its cost has been estimated at more than 227 billion roubles because it's a formidable job. It is no mere laying rails and sleepers. The project implies sophisticated facilities: the tunnel which we see and which you are building, many bridges, overpasses, etc.

I want to know what you intend to do this year and when the project will be completed.

Yevgeny Solntsev: Mr Putin, we have posed ourselves the most ambitious goals possible for this year: to complete the initial stretch of the highway as far as Picket 56, and the first cloverleaf. All in all, there will be five such cloverleaves to connect the old and the new highways.

We will complete the construction of the second, fourth and sixth tunnels this year, and bore the full length of the operational utility adit of the first and fifth tunnels, and the fifth highway tunnel. We will also do 30% of the work on the third tunnel complex, whose construction is the most complicated of all.

These are our basic goals for 2010.

Vladimir Putin: You have used 41.8 billion roubles for now. What expenditures do you expect this year?

Yevgeny Solntsev: 60 billion roubles.

Vladimir Putin: Good. Mr Yakunin, you can ask any questions you like.

Vladimir Yakunin: No, Mr Putin, it is not a question but a report. You have mentioned the total cost of the project. I want to stress that we have cut it by 39 billion roubles after repeated improvements of design and construction. The sum has been saved for the national budget due to efficient concepts of traffic control and safety, and the turndown of continuous secondary tracks.

Vladimir Putin: Thank you. It is really a huge job to build 48 kilometres of single-track electric railway with double-track stretches, two new stations and passenger terminals in Esto-Sadok and the Alpica Service.

Russian Railways will also reconstruct the Adler station and build a new passenger terminal there, build a secondary track on the Sochi-Adler-Olympic Park stretch with the Sochi station to reconstruct, build the Olympic Park station and passenger terminal, and a halt platform in the Imeretinsky resort. It is really a huge job, one of the most important, complicated and expensive Olympic projects. It is essential from the point of the Olympic infrastructure and the development of the entire regional infrastructure, as you have said correctly.

It is no exaggeration to say that nothing of the kind would be built in the Russian South in the decades to come and possibly even later, if we had not launched the project now and met the deadline to complete it.

This is a vital matter, I repeat. We are facing an ambitious task-a technical challenge.

When I visited the construction sites, I was glad to see your attitudes to our principal foreign partners and the use of the latest sophisticated technology, which is indispensable in the situation.

I wish you every success. Goodbye.

Let us move now to another part of Russia, the Far East, and talk about the reconstruction of the Komsomolsk-on-Amur-Sovietskaya Gavan railway stretch, which includes the new Kuznetsov Tunnel, currently under construction.

Mikhail Zaichenko, Far Eastern Railway manager, has the floor.

Mikhail Zaichenko: Good afternoon, Mr Putin. Good afternoon, Mr Yakunin.

Mr Putin, we started building the Kuznetsov Tunnel on your order two years ago. We have bored the main shaft, 505 metres long, by now. A huge job is ahead.

We are working according to schedule. More than that, as the construction people have said during today's meeting, the tunnel will be completed a year ahead of the deadline if the funds earmarked for 2012 come in this year.

Mr Putin, Kuznetsov Tunnel construction is a must as the capacity of the Komsomolsk-on-Amur-Sovietskaya Gavan stretch is exhausted, while the tunnel will increase it to 22 million tonnes. Its gradual increase is one of our main objectives. The capacity grew by 60% to 12.6 million tonnes last year.

The tunnel construction should gain pace as the project improves the performance of the entire Russian east. As you have said in your opening address, it will increase work oriented on the ports of the Pacific and the Khabarovsk Territory.

Thank you.

Vladimir Putin: What do you deem the most important this year? What do you intend to do and find affordable within the limits of current funding and without deadlines shifted and plans changed? What do you think you are able to do within the year?

Mikhail Zaichenko: We will complete...

Vladimir Putin: Your funds for this year come close to sixty billion roubles-59.9 billion, to be precise.

Mikhail Zaichenko: Of this, 3.6 billion roubles have been earmarked for the tunnel. We will bore approximately 2.5 kilometres this year. We have completed a pilot tunnel and made an approach from the east. We will lay the rails and sleepers in spring. The job has started with the west part of the tunnel, as planned.

Vladimir Putin: You are expected to join the old Kuznetsov Tunnel, aren't you?

Mikhail Zaichenko: We are working in the old tunnel too, according to the year's assignment.

Vladimir Putin: So you are reconstructing it?

Mikhail Zaichenko: Right.

Vladimir Putin: It was built during the war, if I am not mistaken?

Mikhail Zaichenko: Yes, in 1944. Now, it is exploited in unfriendly conditions.

Vladimir Putin: Mr Levitin, what are the plan targets for the freight turnover increase in the Vanino and Sovietskaya Gavan seaports?

Igor Levitin: Mr Putin, they are our crucial ports because Primorye will be busy with oil transportation along the East Siberia-Pacific Ocean pipeline, on which South Yakutia will entirely orient its development. We expect the ports of the Khabarovsk Territory to transfer about fifty million tonnes of cargos-coal from Neryungri and the Kuzbas, and much else. All freights will be clustered there.

Together with Russian Railways, we have made federal allocations to the project but the contractors are demanding more. We cannot give them any more this year but we will see how to complete the project ahead of schedule, in 2011 instead of 2012.

Vladimir Putin: Sovietskaya Gavan is expected to transfer three times as many cargoes than Vanino. Am I right?

Igor Levitin: It concerns the whole complex.

Vladimir Putin: So the entire infrastructure demands precise arrangement.

Igor Levitin: But the tunnel is a headache.

Vladimir Putin: I see. Mr Yakunin, do you want to comment?

Vladimir Yakunin: Mr Putin, we railway and construction people do not merely want to do the job as quickly as possible. The thing is that, as I have said, the traffic volume has increased by 20% compared even to 2008, a fat year. We cannot cope with the freights, and clients insist on the tunnel to open quite soon, or we will have problems with exports and imports in that part of the country.

Vladimir Putin: Okay, we will see what else we can do for the project. I agree that trade with Asia and the Pacific is on the upswing and demands infrastructure development. Here, you are facing a huge job: to build a tunnel, lay sidetracks and upgrade stations. All this will allow increase freight transfers in Vanino and Sovietskaya Gavan to fifty million tonnes or even more-much more, to all appearances.

I wish you every success this year. We will see what else might be done to pace up tunnel construction.

Thank you, Mr Zaichenko.

Mr Yakunin, what can you say about provisions for oil trade with China?

Vladimir Yakunin: Mr Putin, we have met all our targets. They concerned the transport corridor to Zabaikalsk and the completion of a pipeline from Skovorodino. We have invested more than 14 billion roubles in Zabaikalsk alone. As for Skovorodino, the pivotal task was to upgrade the station and the track. We have coped. I have recently talked to the Transnefteproduct CEO, so I know oil exporters have no grudges to bear on us railway people.

Problems come one after another in this part of Russia. They are due not to oil transport but to port machines and cisterns standing idle. Rosneft CEO Sergei Bogdanchikov appealed to me a few days ago to complain of rolling stock shortages.

We have settled the matter, for which delays in seaports were to blame, as the 1st Freight Company has provided additional stock. Partnerships with ports and uneven supply of cars and cisterns have always been a headache. Such problems were settled previously within the framework of node agreements.

Such agreements have not been amended even with major industrial changes. We are to blame for this, I am afraid-at least, partly to blame. We should improve teamwork with ports as much as possible.

Vladimir Putin: Okay. We have assessed the situation in the Russian North, Northwest, South, East Siberia and the Far East. We will supervise the key projects of the Russian Railways investment programme just as closely.

Now, Transport Minister Igor Levitin will assess the current situation and the prospects of revising plans for 2010-2011 in the points he deems it necessary to streamline.