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Excerpts from transcript of meeting with Government members

President of Russia Vladimir Putin: Good afternoon, colleagues,

We will discuss a number of inter-ministerial matters today, following the same lines as our previous discussions. Our main speaker today, [First Deputy Prime Minister] Igor Shuvalov will tell us about the work that has begun within the framework of the Agreement on the  Background information Eurasian Economic Union (EAEU) Eurasian Economic Union. We will exchange the latest information.

[Finance Minister] Mr Siluanov will say a few words about the work underway on priority measures to ensure sustainable development, in other words, what is being done to implement the anti-crisis plan.

Please, you have the floor.

Finance Minister Anton Siluanov: Mr President, colleagues,

The plan does indeed focus on supporting the economy and the social sector. We have total resources of 2.3 trillion rubles at our disposal, a considerable amount of which will be used for measures during the first quarter.

First of all, we have already made the decision and allocated the necessary funds for guaranteeing higher pension payments to pensioners. Pensions have been increased as from February 1 to take into account the higher inflation level. For this purpose, we have allocated from the federal budget…

Vladimir Putin: You are referring to the inflation level reached over the last year?

Anton Siluanov: Yes, last year’s inflation rate of 11.4 percent. We are allocating 34.2 billion rubles for this over the first quarter of this year.

We have earmarked the needed financing for ensuring stability on the labour market. This is also part of the plan.

Supporting the banking system is one of the key issues. Last year, we approved a decision to capitalise the banking system with one trillion rubles through a special federal bond issue. 

The Government has taken the needed decisions and the Deposit Insurance Agency has decided on the banks’ selection and provision of credit resources to them.

The banks are now going through the procedures required to decide on placing these securities in subordinated deposits and bonds in order to increase their capital and be able to provide credit resources to the economy in the priority sectors that we identified.

The next important part of the anti-crisis plan is to use funds from the Government reserves. Part of the National Welfare Fund – 100 billion rubles – was transferred to VTB Bank last year, and this money is already at work now.

By the end of the week, the bank will make available the first tranche of 15 billion rubles to Russian Railways for buying rolling stock. Over the next few days, this money, currently in the form of loans, will reach specific rolling stock manufacturers.

We will also decide soon on investing 34 billion rubles in the project to build the Central Ring Road. This money will also be provided through the banks – the funds from the National Welfare Fund will be used to finance an infrastructure project.

By the end of this week we will invest 75 billion rubles in another important project, Yamal LNG. This money is already ready and will be invested in the project.

Of the additional funds the anti-crisis plan provides for, we will invest 10 billion rubles during the first quarter on carrying out a used car recycling programme. This programme is already underway and the money put into it over the first quarter will ensure that it is implemented in full.

We have also provided for funds to subsidise interest rates in agriculture and industry. These funds come to a total of 20.5 billion rubles. In other words, people working in the agriculture sector will receive the needed financial resources from the federal budget to ensure they can go ahead with the sowing campaign and borrow money at preferential rates.

Another important point is that the federal budget is now speeding up advances to the economy in order to ensure that companies and the economy have the financing they need at a time when credit resources have become quite expensive.

I can inform you that at the moment we are financing spending approximately twice as fast as we were at this time last year. This involves allocating budget money to the economy and business so as to avoid heavy borrowing on what is still an expensive financial market. This is one of the support measures for the real sector of the economy in the current situation.

Mr President, we are drafting amendments to the 2015 budget that will make possible additional support measures for the regions in the form of budget loans.

Along with the budget amendments, we will also present our proposals for tax legislation, clarifying tax legislation, and will include additional guarantees for making loans available to key sectoral players so as to ensure that these companies have stable access to credit funds backed up by state guarantees.

Total federal budget spending over the first quarter comes to 88 billion rubles, of which 20 billion is part of the anti-crisis fund, 20 billion is going through redistribution of programmes approved for this year, and 48 billion is coming through quicker financing for measures set out in the budget.

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Vladimir Putin: Mr Ulyukayev, regarding regional anti-crisis commissions. When we last met, we said that in its work, the Government should rely on the regions, which requires the creation of corresponding structures. How is this proceeding?

Minister of Economic Development Alexei Ulyukayev: Yes, Mr President, you are right. We have been rather active in aligning federal and regional anti-crisis plans. The week before last, we sent out methodological recommendations on the creation of anti-crisis headquarters and the development of anti-crisis plans.

These headquarters have been set up in all Russian regions. The deadline was February 16, and all the regions have submitted their plans. The commissions are headed by governors or their deputies.

Obviously, these are mainly strategic plans and have a lot in common with the Government anti-crisis plan. However, there are a number of things that some regions have developed rather thoroughly.

First is the budget optimisation and taking care of the regions’ debts to commercial banks. Then there is import replacement and the support of exports for enterprises located in the regions, and alignment with the plans of corresponding ministries – the Industry Ministry and Agriculture Ministry – on investment projects implemented within import replacement scheme.

This also includes the use of new financial support instruments for enterprises that have been developed by the federal authorities, which the regions are actively trying to use. I am referring here to project financing and instruments that would provide guarantees for small and medium-sized businesses. We are consolidating all of this.

These plans also contain a large number of requests to the federal authorities, and there are a number of system-wide matters pertaining to federal legislation, customs tariff regulations, technical regulations and so forth.

Within the Government, we are now setting up anti-crisis headquarters to regularly work with the regions and provide them with methodological and practical support. They have interesting proposals and we will involve them in further efforts both on the Government action plan and on specifying the anti-crisis plan.

Vladimir Putin: Fine. Thank you.

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Vladimir Putin: Mr Novak wanted to brief us on the transition from Euro-4 to Euro-5.

Energy Minister Alexander Novak: Mr President,

One of the tasks facing the Energy Ministry is uninterrupted fuel supply for domestic consumption and raising the quality of motor fuel. Let me give you some figures.

If we speak of grade 2, sulphur emissions amount to about 500 mg/kg. Grade 4 has 50 mg/kg, or ten times less, while grade 5 has fifty times less, only 10 mg/kg. This is why in 2011 we set the task of shifting to the production of high-quality motor fuel in Russia.

To achieve this task, as of January 1, 2013, we adopted the Customs Union technical regulations that envisage banning environmental grade 2. Then as of January 1, 2015, we ban grade 3 fuel, and as of January 1, 2016 – grade 4.

The Government has set the task of achieving this within a very short time-span. Usually, in other countries this takes about 7 to 10 years. Nevertheless, we are making progress due to several economic stimulation factors, primarily in the form of excise duty differentiation based on environmental grade.

The second factor is administrative stimulation, the signing of quadripartite agreements between the companies, Rostekhnadzor [Federal Service for Supervision of Environment, Technology and Nuclear Management], the Federal Anti-Monopoly Service and Rosstandart [Federal Agency on Technical Regulation and Metrology]. Such agreements have been signed with 33 oil refineries. These agreements envisage modernisation of 130 re-refining units and the construction of new ones.

We have met the target that we have set to do away with grade 2 and 3 fuel. As of January 1, 2015, Russia only has environmental grade 4 and 5 fuel. Sulphur, aromatic hydrocarbons and benzene emissions into the atmosphere have gone down significantly. In the past four years, the share of grade 5 fuel has grown almost 2.6 times from 25 to 64 percent. We have commissioned 47 out of 130 units.

This year we are to commission another 27 units. In 2015, environmental grade 5 gasoline will account for 75 percent of the total production of gasoline and diesel fuel in Russia for domestic consumption. For diesel fuel, the share will be 80 percent.

The total amount of investment as of now is 830 billion rubles. Next year the investment will constitute about 250 billion. We are currently having some problems with funding the commissioning and upgrade of 27 new units. However, given the anti-crisis plan and measures that Minister Ulyukayev has just described, we are working with the companies to establish a funding mechanism for these units.

Many companies have already met their targets, a majority are on schedule, however 2015 has its peculiarities and we are monitoring the situation to make sure we comply with the plans we made in 2011, namely to shift completely to grade 5 fuel as of January 1, 2016.

Our principal goal, of course, is to fully supply the home market. The plan for 2015 envisages the production of sufficient volumes of automobile gasoline: 36.8 million tons of gasoline and 77.5 million tons of diesel fuel. The market will have sufficient production facilities to meet domestic consumption needs.

Vladimir Putin: I would like to brief Government members on my visit to Hungary. Many of our colleagues attending this meeting were there; they have seen and heard it all. I believe you will agree that our work was very constructive and substantive. We have developed corresponding instructions.

I would like to stress here that nothing is impossible and we are actively working. The Agriculture Minister is heading the Intergovernmental Commission; he will summarise it all. We will agree among us about what we need to do in this direction. We are speaking here of the power industry, agriculture, high technologies – everything. We have great joint plans. I would like to ask you to give special attention to this work once you have the relevant documents.

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