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TRANSCRIPT: Prime Minister Vladimir Putin talks with workers at Magnitogorsk Iron & Steel Works

Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon. I will take a place where it is comfortable to speak with you.

I would like to congratulate you on two occasions. The first is Metal Workers Day which is on Sunday officially, but which, as Viktor Rashnikov (director general of the Magnitogorsk Iron & Steel Works) said, steelworkers start celebrating on Friday. I understand this; you celebrate for three days, Friday, Saturday and Sunday. On Sunday you slow down so you can get back to work on Monday.

And the second event, which is clearly very important for the plant, is the commissioning of the new cold rolling complex, Mill 2000. This is a big event for Magnitka and the steel industry generally, as well as for the automotive industry. We would not be able to achieve our goal of increased domestic content in the auto industry to at least 60% or 65%, without the quality sheet metal the plant will now produce at this new mill.

It is economically inexpedient to import enough sheet metal to meet the production requirements we have set for our foreign partners, 300,000 vehicles a year. When you started producing sheet metal at this plant, it changed the economic prospects dramatically. In short, this will benefit the plant and also create highly paid jobs in the steel and auto industries as a whole. The synergy of the mining, steel and engineering industries is a vital achievement. My congratulations on this achievement.

Remarks: Thank you.

Vladimir Putin: This is all I wanted to say in my opening remarks. I think this is enough; I won't speak at length today. I suggest we talk about your problems.

Who wants to go first?

Pavel Kachurin: Good afternoon, Mr Putin. I'm Pavel Kachurin, a dispatching operator on Sheet Rolling Line 11. This is a happy day for us, as we have commissioned this mill, which is unique in Russia and which will allow us to expand into the highly promising global market of auto body sheet metal. But will foreign automakers provide an opportunity to use the new mill to its full capacity?

Vladimir Putin: I think the automakers will allow us to do what will benefit them. If they will profit from buying your goods, they will do so. The policy of industry does not always coincide with the policy of management bodies or governments. Governments want to create jobs and collect taxes, while producers are interested in an effective operation first. If you roll out competitive goods in terms of price and quality, they will buy them. We have talked with the chief executives of several auto companies who say that their European and American partners are considering using this sheet metal not just at their plants in Russia but also in neighbouring countries where they have plants, because it will be profitable for them. I am confident that this is what they will do.

Next, please.

Vadim Dorofeyev: Good afternoon, Mr Putin.

Vladimir Putin: Good afternoon.

Vadim Dorofeyev: I'm Vadim Dorofeyev, a dispatching operator on Sheet Rolling Line 9. My question concerns the steel industry, which, unfortunately, has been declining in the past few months. In particular, fewer contracts have been signed for the pipes made at Mill 5000, another of our major assets. The question is how can we resolve this problem? And does the government help stabilise the market?

Vladimir Putin: Well, MMK has nothing to complain about in this respect. In 2009, when nearly all other mining, steel and engineering companies were plagued by problems, Magnitka unveiled Mill 5000. If you remember, I attended the ceremony. It was a big event in the country's steel industry. It should be said that the company's management, top executives and largest beneficiaries did not cut corners either then or now. They invested $1.5 billion in Mill 5000 and $1.5 billion in Mill 2000. But it is true that the global economic decline has also affected our industry, our mining and steel companies. But now the world economy and the Russian economy are recovering at a rapid pace. For the Magnitogorsk works, of course, this has been quite an ordeal, as it exports one-third of its output, if I'm not mistaken, and if the markets shrink, demand goes down as well. But demand is recovering, and will go up considerably as a result of domestic requirements. I have already mentioned the automobile industry. But in the first case, the rolling mill 5000 output will undoubtedly be in demand for our infrastructure projects. Where does the steel from mill 5000 go? It goes to construction sites and pipe-making plants. Construction is growing and so is pipeline transport. Moreover, we are building the East Siberia­Pacific Ocean oil pipeline, and we'll also build its second stage. In addition, there is a truly enormous market for pipes in connection with pipeline repairs. Soon we will start building a second line parallel to the gas pipeline under the Baltic Sea, called the Nord Stream. Next on the agenda is the South Stream and perhaps another stage of the Nord Stream. The market is assured. The issue concerns only the economics of each project. I am sure that as the global and Russian economies improve, this market will only expand, there is absolutely no doubt about it. No doubt about it.

Alexei Bobrakov: Alexei Bobrakov speaking, chairman of the Union of Young Metal Workers. Recently, on the initiative of our organisation, the workers of the Magnitogorsk Iron & Steel Works joined the Popular Front.

Vladimir Putin: So you are now the Front's people?

Alexei Bobrakov: That's right. What hopes do you have for the Front, and what can we expect from it?

Vladimir Putin: I can only repeat what I have already said several times before. Political stability was one of the main conditions that allowed us to start up rolling mill 5000, even under the conditions of the crisis and now, as the crisis is ending, to launch mill 2000. We have a good opportunity for development ­ we can make plans for automobile construction and put them into practice (this isn't the only component, but it is a very important one). Who is going to invest in a country that is always shaking like a leaf? Political stability is a key ingredient in any investment process, and we need to maintain this stability. Stability is not equivalent to stagnation. It does not mean that we should not develop, that we should not introduce innovative methods of management in the economy and in political life, it does not mean that we should hold back the process of the democratisation of society, and so on. But still, some elements of reliability should be present at all times. They must be present. This is why the role of United Russia, which is often rightly chastised, has been and remains very important. I do not think my colleagues from United Russia will take offense if I say that when a person sits in the same place for several years, he may begin to feel that everything has been provided for him by heaven. Some of our colleagues are beginning "to bronze over", and it is necessary to make them feel competition from within. This was our first incentive that led us to establish the Popular Front.

The second was to expand the opportunities for public organisations and smaller parties to place their people in strategic positions in order to bring their ideas about how to develop municipalities, regions and the country, about administration and government. That was why I suggested that the Popular Front be established, in order to make it a broad platform for presenting such ideas, and for the people who have these ideas to promote them through the channels of United Russia within these levels of government. I hope that these social lifts will function and will give the members of your collective the opportunity to take direct part in these processes.

Alexei Bobrakov: Thank you.

Dmitry Pobelyansky: Good afternoon, Mr Putin. My name is Dmitry Pobelyansky from the No. 10 sheet rolling mill. The Customs Union now involves Belarus, Russia and Kazakhstan. Ukraine is expected to join the Customs Union in the foreseeable future. Or will this not happen? What are the possible consequences for the iron and steel sector if Ukraine joins in?

Vladimir Putin: This understandable question is not idle, especially as far as steelworkers are concerned, because Ukraine has a well-developed iron and steel industry. We should face the obvious fact that Ukraine is, certainly, our rival. We still don't know whether Ukraine will join the Customs Union and the Common Economic Space. To the best of my knowledge, Ukraine's political leaders still have no such practical plans. What does this mean? This means that the three countries ­ Russia, Belarus and Kazakhstan ­ will agree on how to shield their domestic market from third-country products. An agreement on using various protectionist forms and methods has already been signed. Such forms and methods include the well-known anti-dumping investigations. Incidentally, one such anti-dumping investigation is now being conducted with regard to polymer-coated Chinese steel. Quite possibly, the same instruments may be used against any other third country. As you know, Russia, Kazakhstan and Belarus abolished their respective customs borders on July 1 and now conduct customs clearance proceedings only on the Customs Union's external border. The Russian iron and steel industry, as well as some other sectors, will face tougher competition, if Ukraine decides to join the Customs Union. This will force you, primarily corporate managers and shareholders, to take preventive action and introduce new equipment. In the long run, this should benefit the Russian economy and the economies of the Custom Union's member countries. I don't think that Magnitka will stand to lose something because, as I have already said, your enterprise is taking preventive action. You are introducing the Mill 5000 and Mill 2000 complexes. Some other Russian enterprises are introducing the most advanced technologies. We have just talked to your partner, a representative of Germany's SMS company, and he says that quite recently, 15 or 20 years ago, when they wanted to show off up-to-date production facilities, they invited their potential customers to ThyssenKrupp AG or the United States, but today such clients are invited to travel to Russia. You are currently installing the most sophisticated modern equipment. You should fear nothing. But if the integration process continues, then the parties to this process will have to join other agreements. Which ones? The agreements that have been signed between parties within the common economic space ­ on subsidies and on competition. These basic documents should stipulate equal conditions for all parties to such economic activity. But if we accomplish this, then your happiness will be in your hands alone. Again, I have no doubts that you will be a cost-effective performer during this competitive struggle. The reintegration process should eventually induce us to stipulate equal terms. We will never agree to terms that enable our partners to exploit the advantages of integration without assuming any obligations. I repeat: the terms of the competitive struggle should be equal for everyone. This is the most important thing. I want to say here that Magnitka is taking preventive action in this respect.

Maxim Yurchenko: Mr Putin, my name is Maxim Yurchenko. I have a question about environmental protection. As you know, the Kyoto Protocol is to expire in 2013.

Vladimir Putin: You are very knowledgeable.

Maxim Yurchenko: So far, we, the Russian Federation, including our enterprise, have seen no benefits from fulfilling these obligations. Tell me please, do you see how this process can be expedited to some extent? And what can you say about the Russian Federation's stance on future agreements that will be concluded in 2013?

Vladimir Putin: I think all of you agree that, if we want to live, we must live in a normal environment. Otherwise life may simply stop. We will certainly strive to create a normal environment. We are introducing the most up-to-date environmental standards. Quite possibly, such standards are even more stringent than those in other countries. By no means can Russia be considered a leader in terms of emissions. The United States and the People's Republic of China lead the way here, with India hot on their heels. Russia does not damage the global environment to the same extent as other countries. At the same time, we understand our responsibility, but we will never place the national economy in a worse situation compared to other states. When we had signed and ratified the Kyoto protocol, Russia had assumed sufficiently tough obligations with regard to emissions. We are observing all of these commitments. We must promptly modernise production to reduce the burden on our ecosystem. I can cite your example: this is what is done here at Magnitka.

In general, we are modernising our economy steadily and effectively. Of course, we would like to do better, but I'll repeat once again that if we want to limit emissions, all participants in the process must make equal commitments. Today, there is a difference because of so-called developing countries or developing economies, which enjoy special privileges by virtue of their status and are allowed to make more emissions without being fined. Under the Kyoto protocol, Russia does not fit into this category, but the level of China's development, for one, indicates that we should reconsider the parameters of development according to contemporary requirements and the results of that development. Or, take the United States and its peculiar approach: it does not undertake these commitments for the time being. I don't understand why Russia should make more extensive commitments. We won't to this.

Maxim Yurchenko: But, Mr Putin, we've already fulfilled some commitments, haven't we? Can't we get some money by selling our (emissions) quotas?

Vladimir Putin: Selling quotas is such a tricky issue. We are working on it through Sberbank, but I don't think that should be a primary path for our development. We must carry out modernisation and introduce innovations and new technology with a view to the future rather than trade in quotas in the hope to receive more for emitting less. Let other countries do that. If we are entitled to payments on certain terms, let's make sure we get them, but it would be wrong for us to see this as a primary means of economic advance.

We must do what you are doing here at Magnitka. We must promptly upgrade and modernise our production. In this case, labour productivity will grow, and production will become more effective while the burden on our environment is reduced. Tough as it is, the negotiation process is still underway, albeit without results thus far. On the whole, we'll support this process because I personally believe the world community must come to some consensus and agree on common rules of the game in this sphere, which means splitting it fairly and not shifting the burden on anyone.

Alexei Naumenko: Alexei Naumenko, sheet-mill workshop No.11, foreman of the shipment section. Mr Putin, I'd like to ask you a question. It is no secret that a bill is being drafted to allow world car makers not only to deploy assembly plants in Russia but to use Russian steel, including ours. What is the status of this bill and what is the attitude of car makers to it? I think, and everyone from our top managers down to rank-and-file workers shares my opinion, that we must not only manufacture products but also sell them.

Vladimir Putin: Sure. This is a very relevant and mature question. We can produce limitless amounts of nails, ties, briefs, watches, and so on, but if they are all gathering dust at warehouses, we'll get nowhere. No doubt, your products are in demand.

What are we doing to sell your products? We have already passed a decision that if a foreign car maker comes to Russia... Until recently, a car maker had to produce at least 25,000 cars on Russian territory. Now we are changing these terms, or, rather, have already done so, and set new requirements on our foreign partners in the automobile industry. They will have to produce at least 300,000 cars per year, and, as I've already said, localise their production in Russia by no less than 60%. This means that 60% of the cost of the manufactured product should be produced on Russian territory. Under these conditions, they stand to gain economically by using Russian-produced metals. When they had to turn out 25,000 cars, they were in a position to import sheet metal from abroad, but with 300,000 cars, buying in Russia is a better deal.

Until recently, they had nothing to buy here because the Mill 5000 did not exist. Now, you have it, and it is already clear that they will buy from you. We've just spoken with the people from Sollers who are here and with AvtoVAZ, which cooperates with Nissan and Renault. They will buy 100% of their metal from you. I'm sure that other producers that have achieved such a scale of production and localisation will also buy from you. The government has already passed these decisions.

I'll be frank with you ­ we are in the middle of a difficult dialogue with the European Commission and our American partners on Russia's accession to the World Trade Organisation (WTO). They insist that we change our position on this issue and rescind the requirements on 300,000 cars and 60% localisation. We said we want to join WTO but will not change our terms. This is a red line that we cannot cross because we cannot forego the interests of our domestic producers.

Alexei Naumenko: Thank you, Mr Putin.

Vladimir Putin: You're welcome.

Igor Bobrov: Good afternoon. My name is Igor Bobrov; I'm the operator of the Mill 5000 main post. Like all Russian car owners, I'm worried about growing petrol prices. Analysts have calculated that the average Russian family spends 10% of its budget on petrol as compared with 1% for a European family.

Vladimir Putin: Well, in Europe, petrol is about twice as expensive, and their expenses on it must be properly calculated. This explains why our oil companies are trying to export their petrol by hook or by crook. This is typical for any business ­ products are sold to those who pay more. Nevertheless, the general growth of consumer prices since the start of the year registered at about 5%-5.1%, whereas the relevant figure for petrol is 9% ­ much more than the average. That is not good. We must give credit to the oil companies ­ they are making headway and, by and large, understand the problems, react to the government's demands, and keep their promises (especially on such complicated issues as sowing campaigns, harvesting, and some other large-scale economic undertakings). On the whole, I think that there are some problems that need to be addressed, and, quite recently, we discussed them with oil companies at the Kirishi oil refinery in the Leningrad Region. The first problem is that our major oil refineries are delaying modernisation and do not invest enough into reconstruction. That is a problem for you, as well, by the way. Not all Russian companies work the way the Kirishi oil refinery does. It is commissioning new, powerful facilities for deep processing in order to produce high-grade petrol, but this is not the case at all companies.

We have agreed with them how to organise this joint work ­ in fact, it is primarily their work, but they should tailor it to our modernisation requirements. That is my first point. Now the second point. At one time, we seriously increased export customs duties on crude oil. Oil companies switched to dark petroleum oil and fuel oil and started exporting them as raw materials for petrol production abroad. We agreed to lower customs duties to 60% for crude oil but insisted that the rate for dark petroleum oil would be 66% in order to guarantee enough raw materials for the production of petrol, primarily high-grade. We agreed that the oil companies will have to supply the domestic market with a certain amount of petroleum products. We also agreed to develop medium-sized and small business by giving preferences to companies working small deposits. We decided to develop commodities exchanges, which, regrettably, are not yet effective in this country. I hope that we will carry out this package of measures.

The Ministry of Energy is currently in the process of signing agreements with major oil companies. These voluntary agreements will pass through corporate procedures, that is, the boards of directors. Serious sanctions, primarily of an economic nature, will be used against companies for violating these agreements. I think that this is an absolutely positive process that does not infringe upon the interests of our oil-producing companies and refineries. We treat them with love and care. But in my opinion, this process will ensure that there is a domestic demand.

Remark: Mr Putin...

Vladimir Putin: Yes, please.

Tatyana Goncharova: My name is Tatyana Goncharova and I work at sheet rolling mill No. 11 as a crane operator. This is my situation: prior to the economic crisis I took out a mortgage loan in the amount of one million dollars.

Vladimir Putin: US dollars?

Tatyana Goncharova: Roubles.

Vladimir Putin: You think in broad categories, well done!

Tatyana Goncharova: I have just had my debt rescheduled for 30 years. How can I, a single mother, live with a debt of four and a half million roubles?

Vladimir Putin: What does rescheduling mean in this case?

Tatyana Goncharova: It works out that I will be paying off the interest on the loan for many years to come.

Vladimir Putin: Where did you take out this mortgage?

Tatyana Goncharova: From Gazprombank.

Vladimir Putin: You borrowed one million roubles from Gazprombank? What do your interest rates amount to?

Tatyana Goncharova: For the first six months I pay 5.5%, and then it goes up to 10.9%.

Vladimir Putin: 10.9%?

Tatyana Goncharova: Yes.

Vladimir Putin: And when did you take out this loan?

Tatyana Goncharova: I took it out in 2006. This year they rescheduled my debt for the next two years.

Vladimir Putin: You mean they've stretched out your payments?

Tatyana Goncharova: Yes.

Vladimir Putin: What did they tell you when you applied for the mortgage? What were the interest rates?

Tatyana Goncharova: I would have paid one million roubles in interest over 15 years.

Vladimir Putin: But what were the interest rates? Can you recall?

Tatyana Goncharova: In terms of percentage?

Vladimir Putin: Yes.

Tatyana Goncharova: 14%.

Vladimir Putin: 14%. And now your interest rate is 12? So it has been lowered?

Tatyana Goncharova: Extended to 30 years and lowered.

Vladimir Putin: What if they were to say that they won't extend the loan and you must pay it off right now?

Tatyana Goncharova: As it worked out, I was able to make payments on my debt for two years, and then I could no longer afford to pay so much. After the debt rescheduling I still owe more than one million three hundred thousand. How can it be that my payments for two years have been going nowhere? How does this happen?

Vladimir Putin: We need to do the math and consider things carefully. In general, when someone receives a loan, we need to carefully consider how the situation will develop in the future. Let's look at your case. Are you raising your child on your own?

Tatyana Goncharova: Yes.

Vladimir Putin: How old is your child?

Tatyana Goncharova: She is eight, it's a girl.

Vladimir Putin: Eight. We can talk about this. I promise you that I will talk about it. The company's management is here listening, and the governor as well. I am certain they will support you. I have no doubt.

Tatyana Goncharova: I would be very glad.

Vladimir Putin: I will not even ask them, they are already in agreement. But in general mortgages are, for certain... No matter how difficult things may be, in the future, mortgages should become a more effective tool to deal with housing issues. Today, interest rates are still high. You borrowed at 14%, but now interest rates are 12-12.5%. Sberbank is currently lending at 8-8.5% interest. The Housing Mortgage Agency is a federal government agency (you could get them involved in your case, but I don't think that is necessary) that is lending at 8.1%, and certain categories of borrowers can obtain loans at 7.9%. Naturally, banks cannot lend without some government support. We provide direct support through the Housing Mortgage Agency and through Vnesheconombank, who provides the funds which are, in fact, government funds. But in general, interest rates will decrease along with inflation. There is no other way. The only alternative is to work exclusively with separate categories of borrowers ­ such as yourself, for example.

For mothers like you who raise their children alone, for young professionals who have come to work, particularly to rural areas ­ there are, in many of the Russian regions, special programmes that co-finance your first investment or your first payment, or calculate your interest rates. As a rule, the region assumes the responsibility of paying interest. After the birth of the first child, the principle of the loan is significantly reduced, even further after the birth of the second child. After the third child, the family does not have to deal with repayment at all. These regions exist in Russia, as do these programmes. Misha (addressing Mikhail Yurevich, governor of the Chelyabinsk Region), are you listening? Mr Yurevich, these programmes and these regions exist. Think about it...

We spoke about this topic on our way to the meeting. Mortgages are not yet well developed here, but there is a demand for them. As long as interest rates remain this high, these targeted programmes must be employed, and must be implemented. In general we should work toward lowering the interest rates to 5-6 %, or perhaps even lower.

In countries where this system is developed, where inflation levels are low and easily controlled (well, relatively easily), interest rates are low ­ 3 to 4 % ­ and significantly lower in some countries (in Denmark it is at 1.1%), but the inflation rate there is 1.5% maximum. I have to check, I cannot recall the latest numbers. Where inflation is high, such low interest rates do not exist. But we need to work toward this, and we will do just that.

But we will address your specific case individually, okay?

Dmitry Khaziakmetov: Hello. I am a senior engineer at the Chief Power Engineer Department. I have a personal question. I have tremendous respect for you as a person.

Vladimir Putin: Thank you.

Dmitry Khaziakmetov: I am raising a son, and am wondering if I could ask your advice on how I can raise this young man to become the future president of Russia. This is the first part. As a follow-up, in general, we know very little about you...

Vladimir Putin: Are you serious? I think people know more about me than I do myself.

Dmitry Khaziakmetov: ...about your youth, your personal development. I'm sure that everyone would like to hear an anecdote from your childhood or youth, a significant moment of some kind. Perhaps there was some decision or choice that you made. If possible, please.

Vladimir Putin: What do you need to become president? I believe that the most important quality is integrity. Integrity in everything, in your relationships with the people close to you, with your coworkers, with your government. I am deeply convinced that without this fundamental quality you cannot become president, nor manage a region, a province or a large enterprise. This is most important. Then of course it also requires knowledge, professionalism, the ability to build relationships with others. But without this fundamental quality of integrity, none of this is possible. A person who is indecent, who doesn't keep his word, must not be allowed to head any group of people, let alone a country.

As for choices, or a situation when I faced a choice, yes, there were quite a few such situations in my life ­ I don't remember about childhood ­ when I had to make a choice, to take a risk. Yes, there were times when I had to bet all or nothing and decide how I would act ­ as I feel is right, as my heart tells me, or as circumstances dictate. I must say that I was resolute in making such decisions.

There is always a conflict of motives, yet I somehow managed to make honest decisions, as my conscience dictated. Surprisingly, I sometimes thought ­ I'll do this and what will be, will be. Pack up and go find yourself a new job. But strangely ­ do you get my point ­ everything turned out fine for me in such cases.

I wouldn't like to speak of tragic things, but still... If you asked me, I would tell you honestly how it was in 1999, when the militants attacked Dagestan and we could have spent months procrastinating in search of a better solution, waiting for elections, and fearing that our decision could be harmful to us because the people obviously did not support the war, and because society was tired of bloodshed.

It seemed we had exhausted our internal resources in that struggle, yet it was clear ­ at least it was to me ­ that we would push the country into a tailspin unless we acted consistently and harshly. I faced a choice.

Frankly, I thought that that was it. I was prime minister then, and I had to make a decision in that capacity. I thought my career was over, but no one else could make the decision for me. And so I decided that I would act in the interests of the country, not in my personal interests. I thought the game was over, at least for me. But no, when the people saw that we acted courageously and consistently, seeing our decisions through, nearly all of them supported my decision. I did not expect it.

Or take that phrase, when I said that we would waste them...

Dmitry Khaziakhmetov: ...in the outhouse.

Vladimir Putin: Right, in the outhouse. I came to St Petersburg from where I said it ­ I don't remember where it was. I was upset, and my friend asked me why I was upset. I replied: "I have said something foolish, which is unpleasant, because I must not say such a thing in my capacity." He told me: "I was in a taxi right now and the driver told me that there is a guy who says the right things." I made two conclusions from that ­ first, you must never put on airs, thinking that everyone is in their rightful place, me in mine and you in yours. Sorry, what do you do?

Dmitry Khaziakhmetov: I'm a senior engineer.

Vladimir Putin: A senior engineer, not just an engineer. And I was prime minister, and thought everyone knew me because I was sitting so high. But there was that taxi driver, who said: "There is a guy who says the right things." First, he did not know who I was ­ I was just "a guy" to him. And second, what I said then was probably incorrect in form, but correct in essence. I think that this is exactly how we should act, above all as decent people and with due regard for expediency ­ but this is only if you are sure you are acting correctly.

Nikolai Prokopyev: I'm Nikolai Prokopyev and I represent railway workers. I'm a dispatcher. Here is my question...

Vladimir Putin: The metallurgists don't particularly like you, I think.

Nikolai Prokopyev: No, we seem to be working well together.

Vladimir Putin: They say your fares are too high.

Nikolai Prokopyev: My question. Will the project to build a railway to Norilsk be implemented? More specifically, do we need it for modernising equipment at the Norilsk plant, or for strengthening our positions on the non-ferrous market?

Vladimir Putin: You see, we are supporting the Norilsk plant even though its main shareholders still cannot come to an agreement and continue fighting each other. We thought that we had settled the problem and they had agreed on the main issues, but there is still tension in the air. I hope that the problem will be eventually resolved, that they will join forces to develop the company. We have taken a number of decisions on social development in Norilsk and on supporting the plant. I plan to check on the fulfilment of the agreements reached during my visit to Norilsk. You probably know about it.

As for the railway line, it is being built with due regard to the Russian Railways capability and with federal support. Last year, we allocated an additional 25 billion roubles of budget funds to the project. Next year, we may consider raising rail transportation fares only to adjust them to inflation. There are positive and negative sides to such a decision. The positive side is that we will use economic methods to keep the growth of fares at the level of inflation. I am confident that this will suit metallurgists, miners and transportation companies, but this will also create problems in the implementation of Russian Railways' investment projects.

It will be very difficult to allocate enough from the budget to make up for the possible growth of fares. We will support Russian Railways, but not in the amount that will allow it to finish its projects very fast. We will need to finance at least basic repairs and maintain equipment in working order at least in some directions, and also to provide funds for investment projects.

It is very expensive to build roads in the polar regions of the country. We must thoroughly analyse all of the economic aspects, although infrastructure development will not just greatly facilitate the work of Norilsk enterprises, but will also allow establishing new businesses. We should consider each project individually and calculate all of their economic aspects.

Nikolai Prokopyev: Thank you.

Vitaly Beginyuk: Good afternoon, Mr Putin. I'm Vitaly Beginyuk from the furnace shop. We have big problems with healthcare in Magnitogorsk ­ some hospitals have not been repaired; there are huge queues in understaffed outpatient clinics, and, most important, we don't even have enough medicines and bandages. MMK is funding some medical institutions. They don't have such problems. Could you explain why?

Vladimir Putin: I'm sure you heard that we have launched our programme on healthcare modernisation. It is designed... This is a separate programme of support for municipal and regional healthcare. It is designed for two years and its funding amounts to 460 billion roubles. We have never transferred such federal funds to the municipal and regional budgets. This is the first point. Second, every region was supposed to submit its programme for modernising municipal and regional healthcare to the Healthcare Ministry and justify it. I'm sure such a programme has already been endorsed for your region. I just don't remember how much is allocated to a region. What's the sum (addressing Mikhail Yurevich)?

Mikhail Yurevich: 9.5 billion.

Vladimir Putin: An additional 9.5 billion roubles. The programme provides for repairs and the purchase of new equipment for villages and cities, including Magnitogorsk. Part of the funds will be spent on increasing salaries of medical workers. Medical standards and cost of treatment are changing. Say an injection cost 10 roubles before; now it will cost 35 roubles. The salaries of medical personnel depend on this. I hope these measures will help upgrade the healthcare system in Magnitogorsk. In fact, this is the goal of these measures. We also hope that the regions and municipalities will preserve and further upgrade the achieved level. Some measures have also been taken in Magnitogorsk recently. If memory serves, a new tomography centre for 740 visits has been commissioned. To sum up, you are moving forward. But now we'll ensure serious... Now the ball is in the court of the governor and other top managers. The main task it to put money to good use and make a tangible difference for people.

Yekaterina Vorotintseva: My name is Yekaterina Vorotintseva. I'm an engineer from the Central Control Lab. I'd like to ask you about maternity capital. What are the prospects, possible changes on this issue? It provides no small support for young families and this is why it is an important issue.

Vladimir Putin: I think I mentioned this in my address in 2006, and we allocated the necessary funds. We promised to make annual adjustments to it and this is what we've been doing, though some of my colleagues were against adjustments. We didn't agree and we continue making them. I don't remember exactly but I think this year maternity capital amounts to a little over 375,000 roubles. It is climbing to 400,000 roubles. Next year it will exceed 400,000 roubles after adjustments.

We have expanded opportunities for using maternity capital. I believe we have agreed to reserve 12,000 for current expenses during the crisis. Mothers can also use these funds for building houses. It is possible to expand the uses of the capital because we have got the money. Honestly, for the time being I have abstained from decision making on this issue. I dread to think that this money will be siphoned off! This is the problem. We could allow mothers to spend this money on cars or on many other things, but it will simply dissipate. A bunch of swindlers could start trying to get their hands on this money. I simply want to protect your interests. It can be spent on housing, on mortgage payments, but this is obvious spending on the family and the protection of the interests of mother and child. However, there is no doubt that we will carry out this programme in full.

Yekaterina Vorotintseva: Could you please specify the duration of this programme?

Vladimir Putin: We have set the deadline for it. We are not going to extend it for the time being. But we will implement everything we have promised to do during this period. We are not going to extend it beyond this period so far, but we can resume this discussion later depending on our budget capabilities and our economic progress.

Yekaterina Vorotintseva: Thank you.

Alexander Neronov: Mr Putin, I'm Alexander Neronov, troubleshooter.

Vladimir Putin: Go ahead, Sasha.

Alexander Neronov: I would like to ask, will the government allocate federal funds for capital repairs and the demolition of dilapidated and hazardous housing? Will this programme continue?

Vladimir Putin: Yes, we have extended it to 2013 so far. Indeed, this is a very effective programme, this is true. I'm not sure I should mention this, but it's no secret. When the court passed a verdict on Yukos, the state received $50 billion in roubles, which is hundreds of billions of roubles. We used a large portion of these funds in three areas ­ the Housing and Utilities Fund (for resettlement from dilapidated housing and slums and for the repair of multiple-dwelling buildings that have not been repaired for decades), the formation of nanotechnology companies and the construction and repair of federal motor roads. Later on we started adding strictly federal funds for these purposes.

This programme has helped many people ­ almost a million buildings have been repaired all over the country. Many have received new flats ­ I think about 250,000 families have left slums for new housing. We will continue this programme. Another question, please.

Fyodor Nasledov: I'm Fyodor Nasledov from the coke department. I have a question about Russian education today. The Soviet educational system was rated very highly, but it was broken from top to bottom ­ from universities to kindergartens. Now we have problems with the Unified State Exam (USE) and the two-tier Bologna system with Bachelor's and Master's degrees... Education today is only getting worse. Why have we done all this?

Vladimir Putin: Indeed, the Soviet educational system had many fundamental values and good points. This is true. Otherwise, there would have been no space exploration or nuclear power industry. All of them are rooted in fundamental research in maths, physics and chemistry. Where did it come from? It was all rooted in school; the government also invested a lot in academic institutes. A considerable portion of these efforts went into building up national defence. However, the general educational system was also in good shape.

However, the world is changing, and at some point we realised that the training of specialists was lagging behind labour market requirements. I don't know what Mr Rashnikov (chairman of the MMK Board of Directors) will say. Are top managers content with the level of training of the graduates of lyceums and universities? As far as I know, almost all of them have to be retrained and brought up to some working standard. Meanwhile, they should be able to come and instantly start working in their chosen fields. It is abundantly clear that something was going wrong. Thank God, the fundamental research in which the government invested enormous funds over decades is still alive, but there are problems ­ more money and attention is required. This is the first point.

Second, our borders are open, and I hope we will never keep our citizens behind closed borders with guard dogs. Ours is a free country, and this is what it should be. I think one of the few achievements that were made in the difficult 1990s, in fact, the main achievement was the feeling of freedom that every citizen had come to know. We have become involved in the international division of labour. In this context we must pursue the following goal. Our specialists, graduates of our universities, institutes or vocational schools should have an opportunity to work where they please. Foreign specialists educated in Europe should also be able to come here freely for work.

Meanwhile, we occasionally cannot take on a graduate of a well reputed school. So if we seek to integrate with our partners in Europe or elsewhere, we should try to set some common standards and to agree on the mutual recognition of diplomas and degrees.

Let me emphasise once again here that we need a modern level of training ­ a challenge that calls for the introduction of up-to-date teaching methodology. And, of course, we need unification.

We'll have to introduce bachelor's and master's programmes [in Russia] so that foreign employers hiring Russian personnel and Russians employing foreigners could have a clear idea of what kind of specialist they will be dealing with.

But we should make sure we don't throw the baby out with the bath water. We mustn't let ourselves lose the competitive edge given to us by our old education systems. This is why certain colleges and universities should admit applicants on the basis of an interview as well as their performance on the Unified State Exam.

Sure we should try new things to progress, but we should advance with care.

Please, your question.

Lyudmila Novgorodova: My name's Lyudmila Nogvorodova. I'm an economist. I wonder what you, Mr Putin, see as the principal achievements of your presidency and premiership. And which of those achievements do you value most?

Vladimir Putin: There've been quite a few accomplishments, but there remain many problems to address. The main aim of any government, whatever the country, is to provide normal living conditions for the population. The number of Russians living beyond the poverty line has fallen considerably in recent years, but there are still quite a few people in need out there. So, we've come a long way, but still have quite a long way to go.

There's a special government programme aimed at eradicating poverty. It includes many components. The main one is the development of productive forces and of the economy at large.

Over the years of my presidency and premiership, our GDP has nearly doubled. This would be quite an achievement for any country.

We don't highlight the fact on the daily basis, but GDP is the foundation of an economy, and ours has doubled. Which is a spectacular accomplishment, really.

Looking back, this country was in a state of civil war in 2000. These days, we face occasional terrorist attacks, disasters with substantial loss of life, and so forth, but I think you would agree that the situation has since improved dramatically.

Back then, an all-out war in the Caucasus was underway, with tanks, aircraft, artillery and other military hardware involved. But we cornered them eventually. True, there remain some pockets of resistance out there; they occasionally get out and stage terror attacks leading to casualties. But, obviously, the situation isn't as bad as it was in those days, we can now enjoy greater stability.

Having said that, we shouldn't be complacent. We can no longer content ourselves with old managerial tools and revived concepts. We need new instruments, innovative ideas, and fresh talent; we need to modernise and innovate in order to ensure rapid economic growth, the advancement of public services, and political consolidation. In this area, too, quite a lot has been done, I believe.

True, we've changed how governors are selected, replacing direct vote with appointments. I had the old scheme changed because behind the backs of elected governors, I could see some criminal figures rising. Those thugs got their pockets lined and tried to manipulate both the governors and public opinion.

In keeping with the new regulations, governors are appointed by the president as well as by a regional legislature, which is an elected body. So, in fact, elections do take place, albeit indirectly.

I cannot see anything here running counter to the principles of democracy. In the United States, there's no direct presidential election; American presidents are chosen by a college of electors, not through popular vote. But no one sees the procedure as undemocratic.

I personally don't think there's anything wrong with this.

We've brought all regional statutes and constitutions in line with the Federal Constitution.

In 2000 or even as recently as 2002-2003, some of the regions had constitutions proclaiming their sovereignty and establishing their own customs rules and even currency. Some avoided mentioning they were constituent members of the Russian Federation. Such a state of affairs borders on disintegration. But we set this right, bringing all regional legislation in conformity with the Constitution.

Having said that, we should continue delegating some of the federal powers to regional and municipal authorities. Powers not related to any underlying, fundamental values of the state, powers that facilitate economic processes and decision-making in the social area. That's quite a challenging task because each department wants to be the one who sets the tune. But we'll carry by all means.

Please, your question.

Zhanslu Khasenova: Zhanslu Khasenova, of the chief accounting department.

Vladimir Putin: The chief accounting department?

Zhanslu Khasenova: Yes, I'm an accountant with the chief accounting department.

Vladimir Putin: So you are your boss' right-hand person, right?

Zhanslu Khasenova: No, I'm just an accountant with the chief accounting department, you know.

I wonder just how you see the future of rural Russia and whether it has any future at all? Also, what can be done beyond state support to improve the situation there?

Vladimir Putin: We just mentioned the Soviet system of education, which has a lot of strong points. Was there anything good about Soviet agriculture?

Not much beyond the workforce, actually. To be fair, though, there was extensive construction going on (throughout the Soviet period).

A lot of large animal farms were built. But agricultural produce of all sorts was always in short supply. We relied on imports to meet our grain needs in those days while now we are a major exporter of wheat. This is the result of the efforts we've made in agriculture in recent years, in recent decades. It was hard to imagine that Russia would one day begin to export wheat. We used to import everything ­ from countries such as Canada, the United States and Australia. And now we've come to rank 2nd or 3rd among the world's top exporters, right after Canada. Can you imagine that? Last year, we suspended our export following a sharp drop in crops owing to the severe drought we had suffered from for two years running. This was a protective measure to ensure that we would have enough [grain] to cover our domestic needs and to avoid the kind of problems we recently had with petrol.

This measure has had the desired effect. We've stopped the prices from rising further and we've fully met our (domestic grain) needs.

Yesterday, I saw the list of countries where we resumed the export of grain starting on July 1. The list includes countries as far apart as Egypt, Turkey, the United States, Georgia, Azerbaijan, the Baltic States, Latin American and African nations.

Look at how much we've done in livestock production lately. Six years ago, we purchased 1.6 million tonnes of poultry. While last year, only 250,000 or 300,000 tonnes was brought in from abroad.

But now many of our domestic producers say, "We don't need any more. We'll provide everything by ourselves. We still have an unsold stock in storage for several months now."

We've doubled our poultry output, which, I think, is an unprecedented achievement. And we've had spectacular increases in the output of pork. Admittedly, though, we're still lagging behind on beef. But beef breeding has never been our strongest point, for that matter.

In the Soviet era, most of the beef on store shelves came from dairy cows slaughtered because of their old age.

Now we're trying to develop meat livestock breeding as a separate sector. We're just making our first steps here. The production cycle is quite long, 8 to 10 years, but we've made some noticeable progress already. And milk output has increased several times over.

I'm sure Russia's agriculture will have a happy future. This year alone, we are sending 150 billion roubles in direct federal funding. We also subsidise loan rates and offer tax breaks, and we've developed a whole number of sector-specific programmes.

Last year, we had fodder shortages owing to the drought. We promised to release an additional 5 billion roubles and distribute that amount among those farmers who managed to preserve their livestock. Now we're beginning to distribute those funds.

During the drought, we provided financial aid to almost every farm, along with subsidies for fertilisers and petrol, loan rescheduling schemes, and so forth. That was support on a large scale.

The current priorities include the development of public services, such as education, healthcare and housing. One radical solution would be to raise the income level of rural dwellers so that that they could buy on their own everything they need. But the incomes are still too low.

We need to have more targeted social programmes, I believe. We're already running a social programme intended specifically for rural communities. Perhaps, we aren't doing enough at this point, but we'll step up our efforts.

There's a great future in store for rural Russia, I think. There are 40 million rural dwellers in Russia ­ one-third of the country's population. There's no way we can abandon that many people. So we'll be doing all we can to advance our agriculture.

Thank you, guys, thanks a lot.

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