Transcript of the beginning of the meeting:

Vladimir Putin: Mr Mamsurov, let's talk about the current situation in the Republic: what was the state of affairs at the end of last year? We will return to that. What are your plans for the immediate future and what issues warrant additional discussion?

Taimuraz Mamsurov: I would like to say straight away that I have nothing to report, because we have accomplished everything contained in our three year forecast, everything we planned to do. Everyone is aware of the circumstances, but even so, no key indicator suggests that people's living standards, by comparison with last year, have fallen. This is the case for housing and wages. It is also the case in the agro-industrial sector.

Vladimir Putin: In crisis conditions, that's not bad at all.

Taimuraz Mamsurov: Thank you for appreciating this. But we would like to do more, of course. In a word, every problem that affected the country as a whole - affected us. Nevertheless, we were able to fulfil all our social spending obligations. Social spending accounts for 65% of our budget.

At the same time, we managed to increase our income and avoided a full depression. We were able to mobilise resources to these ends. Even though excise duties are the greatest contributor to budget revenue. I know that you had to intervene heavily in this system.

And much of that revenue comes from zinc, which we sell on the London market. Unfortunately, its price has fallen. Nevertheless, there has been no collapse.

It is the steadily increasing birth rate that is most important for the Caucasus, and for us. We are already in a position to say it is steady. And in three years, life expectancy has increased by four years.

Vladimir Putin: That's even a little bit higher than the national average.

Taimuraz Mamsurov: Yes. I think that as an integrated indicator, this shows that people now have confidence in the future and some certainty in life.

Now, regarding our problems. Your deputy, Envoy Khloponin, visited us four days ago. He spent 36 hours with us, visited several firms and organisations and met with leading representatives of our artistic intelligentsia. We gave him a detailed report, which I'm sure he has already relayed to you.

I don't think that we're letting the country down; however, the dream and the main goal remains for Ossetia not to be a burden on our government. We want to be a pillar of support. We are striving for growth. We are ready and willing to boost our efforts even further.

Objectively, difficulties do remain. Every tenth refugee in Russia, according to data from the Federal Migration Service, is resident here, in what is in terms of size, the smallest republic. One in ten residents have not lived in Russia for 20 years. They are already here, and suddenly they placed a great burden on our public sector, on our kindergartens, hospitals, roads, farmland and so on. But we're bearing up. It's now a fact that we can't reverse.

Vladimir Putin: We need to resolve these problems. We will do this. What is the situation here regarding wages?

Taimuraz Mamsurov: Wages are rising steadily. Right now, they're somewhere around 12,000. That's not bad for us.

Vladimir Putin: That's the average across the economy?

Taimuraz Mamsurov: Yes.

Vladimir Putin: Are there delays in paying them?

Taimuraz Mamsurov: There are no delays. As of February 1, we had somewhere around 970,000, but there's no danger of any increase on that. The general prosecutor's office reported to me that it had been in touch with Rosstat. I don't know whether it is making requests or recommendations, but it details the debts owed by those who have gone bankrupt, including former collective farms and so on.

Vladimir Putin: And what's the situation on the labour market in terms of unemployment?

Taimuraz Mamsurov: On the labour market, from January of last year to the end of the year, we went from 4.2% to 3.7%. That's over 12,000...

Vladimir Putin: So it decreased?

Taimuraz Mamsurov: Yes, it decreased. First of all, there are still vacancies. I don't think that there is social tension. Whatever the particular circumstances here, a common terminology is used across Russia. I am probably rather old-fashioned and a frightful conservative, but maybe we need to introduce our southern republic to the concept of sponging. Because people used to really pity anyone who said they were unemployed.

I think we are starting to see the opposite taking hold: in other words, being unemployed is seen as an achievement and an occasion to reproach the government: "You should do something about it, I'm unemployed!" Even when there are vacancies!

Vladimir Putin: Nevertheless, we have to be objective in our analysis. And those people, who really need support, must be able to get it from the government.

Taimuraz Mamsurov: The federal social service signed an agreement with us first.

Vladimir Putin: How much did you receive under this program?

Taimuraz Mamsurov: We have received 400 million roubles this year, but we consider this an evaluation of work carried out.

Vladimir Putin: Did these funds help?

Taimuraz Mamsurov: Very much. And there was no fuss. We said, clearly and firmly, what this money was for. In other words, we did not start giving it out only to regret it later. We managed to resist that. There was no mass spending.

Therefore, the Russian government endorsed how these funds were to be used, for retraining, social work, new jobs and so on, and that is how the money was spent.

Therefore, in my view, we were assessed and were the first ones with whom they signed an agreement. And this year it is a very good figure.

Vladimir Putin: You built new facilities, there were new commissions in health and education...

Taimuraz Mamsurov: Yes. We commissioned the federal centre, and you were present at its opening. We commissioned an impressive school in one village under the federal target programme.

Vladimir Putin: How many students does it have?

Taimuraz Mamsurov: There are 400 students there, but it is simply magnificent.

Vladimir Putin: Modern?

Taimuraz Mamsurov: Yes, it is a modern school, it meets all of the national programme's requirements and so on.

Vladimir Putin: And the medical centre, where does it stand in terms of equipment?

Taimuraz Mamsurov: It is almost fully equipped. It has already seen its first operations in neurology, not cardiology. Professionals have rated them very highly. It does not have a high turnover rate, because these are rare operations. There's no massive demand. But the main thing is that the country's best specialists and our medical personnel are able to match their ambitions with the work of professionals.

Vladimir Putin: Mr Mamsurov, how are relations developing with your relatives and neighbours in South Ossetia?

Taimuraz Mamsurov: Relations are basically the same as before, but there are peculiarities of which neither we nor they are fully conscious. There is, after all, the fact that this is an independent state and must have all the concomitant attributes. But I have to remind myself and my colleagues that all issues must now be resolved through the Russian foreign ministry. In other words, we help them without violating what is for us an historical fact. Today, we are drafting a proposal on cross-border cooperation that takes the new circumstances into account.

I have the feeling that they understand this now. First of all, I do not agree with those who are ruthless in their criticism. Only two years have passed, this is a very short space of time for a new country, and they are also having a difficult time. It seems to me that this is a unique case where, for understandable reasons, they always want to resolve every issue together with the Russian leadership and with us as brothers, as you said. But all the same they need to grow and mature into the status that they have attained.

They have some highly specialised technological capabilities. The main factories that produce, let's say, building units, such as the Su-155 construction company, have production facilities in our republic.

Over the past two decades people have lost the ability to work and create. And we're helping with this. And the Russian Federation contributed a great deal of engineering and intellectual effort in that direction, in addition to the money. And I think that this should help normalise the situation.

Vladimir Putin: Mr Mamsurov, you, of course, correctly called it an "independent state" and said "we will act within the framework of international law." But there's something we need to remember: the state is independent, but the people are one.

Taimuraz Mamsurov: The people are indeed one.

Vladimir Putin: And therefore, it is, after all, a very particular situation, a special case. We must do everything to ensure that they feel our support.

A contractual-legal base is now being established, and if you feel that it lacks something it needed to develop these special relations, let us know.

Taimuraz Mamsurov: All right, Mr Putin.

Vladimir Putin: We will take your recommendations into account.

Taimuraz Mamsurov: I understand.