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Also on the agenda was a report on the Far East’s development outlook by Plenipotentiary Presidential Envoy in the Far East Federal District Yury Trutnev. Finance Minister Anton Siluanov gave an update on the situation with payment of Ukraine’s debt to Russia, and Deputy Prime Minister Dmitry Rogozin spoke about reforms in the aerospace sector.

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Excerpts from transcript of a meeting with Government members

Vladimir Putin: Good afternoon colleagues.

Today, we will look at the question of road construction in the regions. This is a very complex issue. Before we start though, I would like to address a few matters not related to the main item on our agenda today.

We have been discussing the projects underway in the Far East. The law on the free port of Vladivostok has been passed now, and the Government has approved a list of the six biggest investment projects.

Yury Trutnev: Mr President, colleagues,

The main objective of the law on the Vladivostok free port is to create conditions for a real economic boom in Primorye Territory. For convention’s sake, we can divide the breaks and incentives the law offers into two types. The first type creates conditions for port activity and makes ports more attractive for ships to use. This covers measures such as free trade zones, simplified visa procedures, a one-window system, and entry and exit facilities operating round-the-clock.

The second type involves incentives for developing the region’s economy. These measures include tax breaks on profit and property tax, lower investment payments, faster procedures for getting permits, and simplified inspection and monitoring rules. The experts calculate that carrying out this project would make it possible to double Primorye Territory’s regional GDP by 2023. People in Vladivostok are already saying that life can be divided into life before the law was passed and life after its approval.

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Regarding investment projects, we have spoken a lot about the rapid growth zone project. Along with the free port and the rapid growth zone project, investment projects are the other big instrument we have for developing the Far East. The rapid growth zone project will help to support small and medium business, and for big investment projects, we are using infrastructure support measures.

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As we continue our work with the Far East regions today, governors are sending us many proposals about extending the free port law to other ports. After all, it is clear that not only ports in Primorye Territory need reconstruction, so do ports in Kamchatka, and the ports of Anadyr, Pevek, Magadan, and Vanino. If you have no objection, we will have the Government examine these proposals.

Vladimir Putin: Good. Thank you.

Mr Siluanov [Finance Minister Anton Siluanov], our colleagues have generally settled the situation with Greece. How does this reflect on the markets and on the economy overall, including the Russian economy? Is there any positive or negative influence? What can we expect from this? Although this does not affect us directly, these are nevertheless global issues.

Anton Siluanov: Indeed, Mr Putin, the group of three creditors have worked out a programme with Greece to provide assistance, and it will consist of over 80 billion euro over the course of three years. Now, the Greek parliament must adopt all the key issues as laws in order to receive that aid. This involves decreasing Greece’s debt and lowering the budget deficit.

Vladimir Putin: What is its debt?

Anton Siluanov: 175% of GDP.

Decreasing the deficit and establishing a primary budgetary surplus, carrying out active privatisation; a special fund of 50 billion euro must be created, funded by proceeds from privatisation. These funds should be used to support the financial system, investments, and debt repayment.

Decisions must be made to eliminate individual tax benefits, reduce expenditures, particularly through pension system reforms, increase the retirement age and eliminate early retirement. Overall, there will be many such serious, structural reforms.

This month, Greece must pay its creditors about 7 billion euro, taking into account its arrears to the IMF. If these structural measures are taken and supported, then credit resources will be made available later this month.

How has this affected the markets and Russia? Overall, we have not felt its influence, since Greece’s economy is small and Russia does not have any serious trade or financial relations with Greece.

Of course, issues like the implementation of structural reforms must be timely resolved to ensure their effect is less painful than it is right now for Greece. One needs to approach the budget and the finances responsibly when building one’s policy. So naturally, this is a kind of lesson for other nations as well; we should examine it and be careful in our budgetary and financial policy.

Vladimir Putin: How much money is promised to them?

Anton Siluanov: Eighty billion euro, just over 82–85 billion euro.

Vladimir Putin: Another question, concerning our neighbour: will Ukraine receive money? The situation is very complicated and this affects us directly, since we are Ukraine’s creditors.

Anton Siluanov: Talks are currently underway with the International Monetary Fund.

Vladimir Putin: What is the possible volume of the next tranche?

Anton Siluanov: The IMF has prepared a support programme for Ukraine, and the total volume of the programme, taking into account restructuring, is over 40 billion.

Vladimir Putin: No, right now, for this year – this is the tranche I am referring to.

Anton Siluanov: You mean the tranche from the IMF? It is about 5 billion US dollars.

Vladimir Putin: The next tranche?

Anton Siluanov: Through the end of the year – in order for Ukraine to fulfil its obligations.

Vladimir Putin: Of which three billion is owed to us.

Anton Siluanov: Yes, Ukraine owes Russia three billion. In December, Russia will stop investing resources from the National Welfare Fund into Ukraine’s Eurobonds. We expect them to be repaid according to schedule.

Vladimir Putin: So far, our Ukrainian colleagues have been servicing this credit properly and in accordance with our agreement.

Anton Siluanov: Yes, that’s exactly right. The last tranche to service this debt was paid in full, 75 million dollars was paid fully and on time.

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Vladimir Putin: [Deputy Prime Minister] Mr Rogozin, the law on the Roscosmos corporation has been adopted and signed. Can you please comment on it?

Dmitry Rogozin: Mr Putin, overall, the very process of examining this draft law in the houses of the Federal Assembly really resonated within the expert community as well. All four parties actively supported it, and on Monday, you signed that package of laws. In essence, we are beginning implementation of the second phase of this deep reform of the entire air and space industry.

Right now, it is essential for us to take several urgent measures. First is the formation of the management for the state corporation itself. This will be a supervisory council; in accordance with the law, the Cabinet will nominate five members, while the President will nominate five others. The supervisory board will then consist of eleven people. Including the CEO. I want to say that we will provide you with specific staff proposals soon, today or tomorrow.

Next is the adoption of the entire law’s implementation plan. This is a more difficult undertaking: the organisational and staff structure must be approved by the supervisory board. We will try to avoid various extraneous structures as much as possible – in other words, creating the optimal structure of a flexible state corporation.

Then, there is the adoption of the state corporation strategy, which is a system for managing the air and space industry, increasing the quality and reliability of the space technology it creates and, of course, improving the financial state of our leading enterprises.

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Vladimir Putin: Very well. Is construction of the Vostochny Cosmodrome underway? Is everything fine and going according to plan?

Dmitry Rogozin: There are many difficulties in building it; the workers are operating in three shifts, getting back on the schedule that had a major backlog six months ago. But the decision to create a commission and the transfer of power to the Cabinet is paying off; otherwise, the schedule would have fallen entirely by the wayside. So far, we are planning for everything to go on time. If there are any deviations, I will report them to you, but for now, things are operating on time.

Vladimir Putin: Very well, thank you.

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