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President of Russia Vladimir Putin: Good afternoon, colleagues,

Today we have gathered in the Voronezh Region to discuss further development of Russia’s agriculture. First, I would like to note that the Voronezh Region is one of the absolute leaders in terms of agricultural growth. Its growth rate is impressive and stands at 9 percent for the past nine months. I do not think we will see such growth anywhere else.

Overall, the Voronezh Region is one of the top five regions and it is seeing impressive growth. Apart from crop production, livestock breeding and dairy production are on the rise. The region is number one for milk. Well done, congratulations.

Remark: (no microphone.)

Vladimir Putin: Do you object? Are your figures higher?

Remark: (no microphone.)

Vladimir Putin: It will, definitely, if you keep working as hard as before. Absolutely.

Therefore, I would like to thank all industry professionals and everybody who works in agriculture for their achievements this year.

We can report sustainable positive dynamics in agriculture. It has become a modern industry, an attractive investment destination and a growth driver of the national economy.

Despite unfavourable weather conditions in some regions, we are expecting a good grain crop this year. Moreover, it promises to set a record in Russia’s history and reach almost 130 million tonnes. We have spoken about this repeatedly but I cannot help but mention this once again. Let me remind you that in 2016 we harvested 120.7 million tonnes but it was still lower than the 1978 harvest when the Russian SFSR produced 127.4 million tonnes.

We expect a good harvest of sugar beet and other vegetables, as well as oil-plants and other crops. In 2017, we hope to gather in 52 million tonnes of sugar beet, up from 51.4 million tonnes last year, and 16.4 million tonnes of other vegetables, up from 16.3 million tonnes. The increase in the harvest of other crops is comparable.

Livestock production continues to grow. It amounted to 4.4 percent in the first eight months of 2017.

Overall, we can report sustainable positive dynamics in agriculture. It has become a modern industry, an attractive investment destination and a growth driver of the national economy. I recall the debates we held in the early 2000s, when everyone said that agriculture is like a black hole and that any investment in it disappears without a trace or any result. The situation has changed radically since then. The average growth rate in agriculture in 2014–2016 was 3.6 percent.

Our producers have strengthened their positions on the domestic market and have also increased their export potential. According to the Federal Customs Service, the agricultural industry increased exports by 18.8 percent, to $10 billion, in the first seven months of the year.

Grains have been our staple export commodity so far. Importantly, the exports structure has become more diversified. Russia is actively increasing its exports of meat, sugar, and sunflower oil. Prospects are good for promoting deep processed products with high added value. This area is certainly one that we need to focus on.

It is likewise gratifying to note that, in our international dealings, we now have to devote considerable space to issues pertaining to promotion of our meat products on foreign markets. In particular, promoting pork, poultry, or grain, for that matter, is now a separate discussion item in our negotiations.

For example, 18 million tonnes of grain were exported in the first seven months of 2017 alone, which is 15.4 percent up from last year. However, there are other figures that are truly impressive. During the same period, sugar exports grew by 52 times, pork exports went up 83 percent, poultry 32 percent, and sunflower oil 34 percent.

Overall, we should continue to support exports, and to remove infrastructural and logistics barriers, in particular on the grain market. Exporting grain from many Russian regions is still economically unviable because of prohibitive transportation costs. We have discussed this with the Agriculture Minister, and I will talk about our proposals at the end of my remarks. Of course, these costs come from high transportation rates. I am aware that the Agriculture Ministry and the Government in general are working on this issue. Today, we will agree upon what should be done in this area, and how we should proceed.

I would like to focus particularly on veterinary safety, which is critical for human health, and the effective promotion of our products on the domestic and foreign markets.

Keeping tabs on the African swine fever should be one of our areas of focus. This is an important prerequisite for our producers’ credibility with Russian and foreign consumers alike.

We have achieved significant growth in many sectors of our agro-industrial complex due to import replacement. However, problems remain. Our dependence on foreign seeds and breeding stock is still high. Clearly, such a problem cannot be resolved overnight. It will take time, many years of study and research.

We need a clear action plan to focus our attention and apply our resources to the development of selection and genetic diversity in Russia. They constitute the basis of the national food security. The work to create a selection and genetic fund will proceed within the framework of the Federal Scientific and Technical Programme of Agricultural Development for 2017–2025.

Our producers have strengthened their positions on the domestic market and have also increased their export potential.

Increasing the output of products with of a high degree of processing is a major aspect of agricultural development, combined with the creation of new jobs, as well as additional income and taxes collected for the national budget.

Today we will discuss the development of agricultural cooperatives. On January 1, 2017, we had 5,839 agricultural cooperatives in the country. The best results in this area were reported in the Lipetsk and Tyumen regions and in the Republic of Sakha (Yakutia).

Cooperative farming allows small companies to increase production and receive assistance when it comes to farming equipment, tilling land and marketing produce.

Ultimately, this helps increase people’s incomes and improve living standards and is a major factor in enhancing employment, developing farmland and settling urgent social issues.

However, the level of involvement of small farms in agricultural cooperatives remains low. We would like to learn today about practical plans to improve the situation in this area.

Now I will get to the point, as we say in such situations. While congratulating ourselves on a rich or a record large harvest, we must be aware of the economic consequences of this. I hope we will talk about this in detail today. What I mean is that oversupply usually leads to a decline in prices. We should analyse this possibility.

Practical proposals have been formulated, and I discussed them with the Finance Minister and his deputy. I would like to remind you that I had instructed the Government to increase allocations to agriculture in addition to the approved budgetary spending of 20 billion rubles. The Government has augmented the 2018 budget, and these funds can be used to fulfil two tasks. First, we must continue to subsidise the interest rates on agricultural loans, and second, we need to subsidise the railway transportation of grain, so that grain holds competitive positions both on the domestic and foreign markets regardless of the region in which it was produced. As the Agriculture Minister said, and I hope he will repeat this in his report, this money will suffice for the fulfilment of these tasks.

I would like the Minister to speak about this in greater detail. Let us begin with his report.

Mr Tkachev, please.

Minister of Agriculture Alexander Tkachev: Mr President, colleagues,

I would like to thank you on behalf of the farming and agriculture community for the support that you personally and the Government provide to us. Of course, the 20 billion that you had released to us, and which the Government supported, are a great help which we need. We can use this money to do a lot of good and right things all over our country.

The successes of the Voronezh Region are indeed impressive. People there are seriously involved in agriculture, you are right. However, I must say that Belgorod and Lipetsk are truly the flagships of our agricultural production. Many look up to them and learn from them. That region accounts for almost 40 percent of the pork produced in our country. Thanks to this support, primarily coming from the governors and businesses, and national investment projects, we have coped with the task of meeting our country’s need for pork. This is unprecedented. Moreover, we can now seriously think about exporting it to other countries.

We expect the agro-industrial complex to grow 2.5–3 percent by year end, primarily due to a record high grain harvest and livestock production growth rates remaining at about 4 percent.

The anticipated 130 million tonnes of grain are an absolute record not only for modern Russia but, as you said, Soviet Russia as well. You cited the example of 1978. Yes, indeed, it stood at 127 million tonnes. However, as you may be aware, the area of ​​winter crops and sown areas were twice as large. Today, we have 47 million hectares, and back then this figure was 78 million, and the yield today is twice as high. It is due to the yield and intensive technology that we practically reached the 1978 level, but I want to remind you that the area now is half that of what it was back then. That is, if we restore the acreage, then in 10, 20, maximum 30 years from now, Russia will harvest anywhere from 150 to 170 million tonnes of grain, and the issues related to export and removal of surplus grain from the market, which we are discussing now, will come to the forefront. So, we need to actively access the Asian, Eastern, and Western markets, which, in fact, we are already doing.

We are exporting to 140 countries today. To put this in perspective, we exported to 40 countries 10 years ago. The volume of food exports 10 years ago stood at 5 billion, last year 17 billion, this year 20 billion, and we do not plan to stop there. We export sugar, grains, vegetable oil, confectionery, and fish. You were correct when you said that our production of meat is up. We are still only taking the first steps. There are the Chinese, Indian, Asian, and Middle Eastern markets, that is, a vast number of opportunities for doubling and tripling our exports and earning hard currency in the process.

We also had to deal with an emergency. Regrettably, 15 regions sustained damage for a total amount of about two billion rubles. We hope the Ministry of Finance will support us during the budget’s adjustment in the second reading in the State Duma in November and will introduce an amendment for reimbursing all damaged territories rather than only those that were insured. This was your instruction and we hope to carry it out together with the Ministry of Finance.

(The Minister went on to discuss grain prices in different regions of the country and ways of stimulating the industry.)

As for grain exports, I certainly want to quote these figures. We plan to sell abroad about 45 million tonnes. Let me recall that last year the figure was 35 million. So we are selling more grain.

We have a record harvest of sugar beet. We have produced 6.5 million tonnes of sugar and preserved our world leadership. We have surpassed Germany, the United States and France that always reigned on this market.

Today we fully supply our factories with raw materials and we have increased exports dozens of times over. This season the export potential of the industry was twice as high – up to 700,000 tonnes. Recently I visited Uzbekistan, Morocco and some other countries where we discussed potential sugar supplies.

We need a clear action plan to focus our attention and apply our resources to the development of selection and genetic diversity in Russia. They constitute the basis of the national food security.

At the same time, some of our partners in the EAEU, notably Kazakhstan and Belarus, bring in imported raw sugar duty-free for processing and engage in unfair competition in our market of end products. They are producing confectionery and sweet soft drinks, which certainly undermines the marginality of our sugar industry. Belarus and Kazakhstan bring raw sugar to their markets and this greatly affects our prices.

I would like to cite an example. If in July the price was about 40 rubles per kilo, today it is 23–25 rubles. It was almost cut in half. Of course, our EAEU partners, I believe, are engaging in unfair competition. They are bringing in raw sugar without paying duties and receive cheap sugar. They are selling it to us at lower prices while keeping higher prices on their domestic markets and as a result, our prices collapse. And our whole industry loses huge proceeds. Our losses run into tens of billions of rubles.

I am hoping we will address this issue at the October 25 meeting. I recently met with a number of ministers and hope they have heard me.

Vegetables are being harvested at a fairly fast pace, with over 2.5 million tonnes harvested so far. Greenhouse vegetable harvesting dynamics are likewise good. This year, we gathered 21 percent more vegetables, which is unprecedented growth. Of course, tomatoes and other produce show good numbers as well. Thanks to the investment programme and subsidies, we started building 50 greenhouse complexes, which translates into half a million tonnes of tomatoes. Four to five years from now, we will meet the demand in full and will start thinking about exports, which is also a very good niche. We anticipate that due to the construction of new greenhouses and more orchard starts, we will reach last year’s numbers. To meet the domestic demand for greenhouse vegetables in full, as I mentioned earlier, we need to build over 1,000 hectares of greenhouses. As a matter of fact, going at the current pace, we will achieve this goal.

We started the autumn work to get orchards and vineyards ready for the next season. In the spring, agricultural producers increased the acreage under new orchards by 24 percent, and vineyards by 50 percent. Next year, it is important to maintain the achieved pace of orchard starts, so that we can replace all imports, especially imports of apples, pears, and grapes, in five years. If the pace of subsidies and other forms of support remains the same, in five years we will also be selling apples, as the Poles did in their time, by building an enormous complex near Belarus. They created a production facility with refrigerators and processing, and, in fact, saturated the Russian market. They lived at our expense, and were getting rich in the process. Now we are engaged in this business. We will take over this initiative, and grab up other markets as well.

With regard to the good grain harvest and feed, livestock production is expanding dynamically, with pork production up almost 5 percent. That is, we keep increasing the production of poultry which is up almost 7 percent. We have also increased egg production by almost 4 percent and milk by 0.6 percent.

The situation with milk production is more complicated, because private subsidiary farms with their cows, which were traditionally run by rural folks, are leaving the market, and, for understandable demographic reasons, young people are unwilling to engage in it. So, if you take the milk economy structure in any European country, 40 percent of the milk is produced by farmers, and 60 percent comes from large agricultural producers. I think that we should strive to establish a similar model. We need to produce an additional 15 million tonnes of milk within the next 7 to 10 years in order to replace outgoing private farms and ensure growth. Today, the shortage runs at about 7 million tonnes.

We also had to deal with an emergency. Regrettably, 15 regions sustained damage for a total amount of about two billion rubles. We hope the Ministry of Finance will support us during the budget’s adjustment in the second reading in the State Duma in November and will introduce an amendment for reimbursing all damaged territories rather than only those that were insured. This was your instruction and we hope to carry it out together with the Ministry of Finance.

(The Minister went on to discuss grain prices in different regions of the country and ways of stimulating the industry.)

As for grain exports, I certainly want to quote these figures. We plan to sell abroad about 45 million tonnes. Let me recall that last year the figure was 35 million. So we are selling more grain.

We have a record harvest of sugar beet. We have produced 6.5 million tonnes of sugar and preserved our world leadership. We have surpassed Germany, the United States and France that always reigned on this market.

Today we fully supply our factories with raw materials and we have increased exports dozens of times over. This season the export potential of the industry was twice as high – up to 700,000 tonnes. Recently I visited Uzbekistan, Morocco and some other countries where we discussed potential sugar supplies.

At the same time, some of our partners in the EAEU, notably Kazakhstan and Belarus, bring in imported raw sugar duty-free for processing and engage in unfair competition in our market of end products. They are producing confectionery and sweet soft drinks, which certainly undermines the marginality of our sugar industry. Belarus and Kazakhstan bring raw sugar to their markets and this greatly affects our prices.

I would like to cite an example. If in July the price was about 40 rubles per kilo, today it is 23–25 rubles. It was almost cut in half. Of course, our EAEU partners, I believe, are engaging in unfair competition. They are bringing in raw sugar without paying duties and receive cheap sugar. They are selling it to us at lower prices while keeping higher prices on their domestic markets and as a result, our prices collapse. And our whole industry loses huge proceeds. Our losses run into tens of billions of rubles.

I am hoping we will address this issue at the October 25 meeting. I recently met with a number of ministers and hope they have heard me.

Vegetables are being harvested at a fairly fast pace, with over 2.5 million tonnes harvested so far. Greenhouse vegetable harvesting dynamics are likewise good. This year, we gathered 21 percent more vegetables, which is unprecedented growth. Of course, tomatoes and other produce show good numbers as well. Thanks to the investment programme and subsidies, we started building 50 greenhouse complexes, which translates into half a million tonnes of tomatoes. Four to five years from now, we will meet the demand in full and will start thinking about exports, which is also a very good niche. We anticipate that due to the construction of new greenhouses and more orchard starts, we will reach last year’s numbers. To meet the domestic demand for greenhouse vegetables in full, as I mentioned earlier, we need to build over 1,000 hectares of greenhouses. As a matter of fact, going at the current pace, we will achieve this goal.

We started the autumn work to get orchards and vineyards ready for the next season. In the spring, agricultural producers increased the acreage under new orchards by 24 percent, and vineyards by 50 percent. Next year, it is important to maintain the achieved pace of orchard starts, so that we can replace all imports, especially imports of apples, pears, and grapes, in five years. If the pace of subsidies and other forms of support remains the same, in five years we will also be selling apples, as the Poles did in their time, by building an enormous complex near Belarus. They created a production facility with refrigerators and processing, and, in fact, saturated the Russian market. They lived at our expense, and were getting rich in the process. Now we are engaged in this business. We will take over this initiative, and grab up other markets as well.

With regard to the good grain harvest and feed, livestock production is expanding dynamically, with pork production up almost 5 percent. That is, we keep increasing the production of poultry which is up almost 7 percent. We have also increased egg production by almost 4 percent and milk by 0.6 percent.

The situation with milk production is more complicated, because private subsidiary farms with their cows, which were traditionally run by rural folks, are leaving the market, and, for understandable demographic reasons, young people are unwilling to engage in it. So, if you take the milk economy structure in any European country, 40 percent of the milk is produced by farmers, and 60 percent comes from large agricultural producers. I think that we should strive to establish a similar model. We need to produce an additional 15 million tonnes of milk within the next 7 to 10 years in order to replace outgoing private farms and ensure growth. Today, the shortage runs at about 7 million tonnes.

Mr President, thank you very much for the support on ASF. The main thing is not to stop and we are resolved to continue. I would like to cite Germany as an example. This is a close, intelligible country. They export half of their pork. Say, Germany produces 5.5 million tonnes of pork a year and exports almost 3 million tonnes, primarily to China and Indonesia and some to Japan, Korea and so on. So we should by no means stop our pork production. We must increase it. A large complex is under construction in the Far East.

Vladimir Putin: Indonesia is a Muslim country. They do not eat pork there.

Alexander Tkachev: South Korea. The growth of production is a result of the increase in… It does not matter. They will eat it. (Laughter.)

Vladimir Putin: They won’t.

Alexander Tkachev: As for farmers, small businesses, they receive serious grant support. We are actively working on dairy cattle breeding and increasing cattle productivity. But we do not just provide grants. Owing to this year’s loans on easy terms, over 90 dairy farms for almost 100,000 cows will be built. This will be a significant increase in production. So, we will spend on the dairy industry alone about 66 billion rubles this year. We will also actively work on milk production at livestock farms.

You mentioned the issues of genetics and breeding and, naturally, we are also actively working on them. During the past two years the state has been reimbursing expenses to build breeding centres. The first ten centres and four breeding-and-genetics and breeding-and-seed-growing centres have already received support. This will allow us to cut imports of seeds almost in half by 2020. We will have up to 50 percent of domestic sugar beet seeds; up to 25 percent of corn and sunflower seeds; and up to 40 percent of seed potatoes.

In livestock production, our priority task is to reduce poultry imports where dependence is up to 80 percent. I am hoping that by 2025 we will be self-sufficient in poultry production.

The endorsed federal research-and-technical programme for the development of the agro-industrial complex is a consistent driver of growth here. To create a foundation for it we must establish a centre on the basis of the best agricultural universities.

In principle, universities have actively joined these efforts.

Active introduction of online vet certification will become a major impetus for the production of quality goods. It will reduce the share of fake products, rule out re-export and will help counter grey and banned goods. The Ministry of Agriculture has established an operational headquarters that is already working actively. This is not an easy process with a large number of participants. The task of the headquarters is to help participants in the market to smoothly and gradually transfer to online vet supporting documents. The monitoring of indicators is demonstrating positive dynamics: about 8 million online vet certificates were registered in August and 9 million in September. The Volga Region, Siberia and Trans-Urals are particularly active in this respect. Chelyabinsk, Kuban, Bashkortostan, Tatarstan and Novosibirsk are also among the leaders. Regrettably, in some regions the authorities are doing nothing or even impeding the introduction of online certificates. But we are actively working and I would like to thank Mr Belousov and Mr Dvorkovich in your presence. I hope we will fulfil our tasks on time and these efforts will greatly improve the quality of food products.

The problems of grey imports concern not only the dairy market but also greenhouse vegetables and other agricultural products. According to expert estimates, supplies of banned products amount to 700,000 tonnes per year and are worth $700 million. According to Russia’s Federal Service for Veterinary and Phytosanitary Supervision (Rosselkhoznadzor) and the Federal Customs Service, about 25,000 tonnes of banned products have been destroyed since the introduction of counter measures in response to sanctions. I would like to thank you. We have largely built a barrier against poor quality banned goods. But, regrettably, attempts are still being made to bypass our posts via forest roads. We are ready to open our tomato market to Turkish partners. They are officially stating their intentions and would like to enter the Russian market on a small scale. We must work hard to prevent Turkish tomatoes from being smuggled into Russia through Belarus and Azerbaijan and from destroying all our efforts and investment in this branch.

I want to reiterate that after we banned imports of European and Turkish vegetables, exports from Belarus tripled, unfortunately. Just think of it, imports of potatoes from Belarus in 2016 stood at 40,000 tonnes. Today, they are three times higher at 120,000 tonnes. Today, imports of fresh vegetables amount to 231,000 tonnes compared to 109,000 tonnes earlier. Tomato imports grew by 50 percent, imports of cucumbers doubled, cabbage imports more than tripled and imports of carrots and beets are up by 40 percent. Is there anything that we need to discuss further? By the way, the Belarusian statistics authorities purposefully conceal these data to keep us in the dark. I am not sure why they are doing so, though. That is, we impose restrictions, and these products clearly make it to Russia through Belarus and other sanction-free countries. Clearly, Belarus is making money off it, probably earning windfall profits. I believe it is time to end this, because it destroys our domestic market. The message we are sending to businesses, such as go ahead build and invest, is, of course, highly inefficient.

This grey imports' channel must be shut down. We met with the FCS yesterday on behalf of Mr Dvorkovich. We must check every truck. If no phytosanitary or veterinary papers are available, such loads should be destroyed on the spot rather than sending the goods back (unfortunately, this is what we are doing now, because there are no corresponding regulations in place). If there are no proper papers, the truck should not be sent back. What they do is cross the bridge back to where they came from, and then go back to Russia using forest roads. That way, we will destroy another 70 percent of illegal imports meaning that those hapless smugglers will suffer losses, and, of course, forget the way to us.

Our current legislation including both the Code of Administrative Offences and the Criminal Code do not provide grounds for bringing violators importing restricted items to justice. In fact, entrepreneurs are not afraid to do so. It is imperative to toughen administrative liability for importing restricted products, as well as to make provisions for seizing not only the produce, but trucks as well.

In addition, in accordance with your instruction on safe handling of pesticides and agrochemicals, it is necessary to authorise Rosselkhoznadzor to control the presence of pesticides and agrochemicals in domestic and imported produce. The draft law is pending approval by the Ministry of Economic Development and Rospotrebnadzor. We want Rosselkhoznadzor to be able to go directly to the areas where tomatoes, vegetables, potatoes, or meat are produced. Of course, things should be brought up to code in crop production as well.

Of course, it is necessary to expand the powers of Rosselkhoznadzor to control the activities of regional veterinary services. This will not only help effectively combat grey imports, but will also contribute to eliminating African swine fever which not only threatens domestic pig production, but also limits the export potential of this industry, at a time when the agro-industrial complex enjoys significant export potential. It is important to diversify production in terms of geography and commodity structure, as well as to bring aboard farmers and agricultural cooperatives. As part of the priority project for exporting agricultural products, we plan to begin to offset a portion of costs involved in transportation of agricultural products during export operations, and to expand this type of support to agricultural cooperatives.

Mr President, with regard to promoting agricultural cooperation, agricultural cooperatives have been receiving, since 2005, grants for developing their material and technical base so that farmers could chip in and buy equipment for supporting, processing and marketing products. This year, the number of regions participating in the cooperative support programme has increased by 50 percent. The amount of support has doubled to almost 2 billion rubles. By the end of the year, the average grant for a cooperative will have increased by 60 percent to 12 million rubles. Over 740 new cooperatives were created in the first 8 months of this year.

Indeed, as you have noted, agricultural cooperation has been particularly successful in the Lipetsk Region, which is in first place nationwide. I have already said that we bring delegations here to learn from their experience. We have full support of the small and medium-sized business corporation. As a result, as early as this year ten regions are launching their own programmes of agricultural cooperation support based on what they saw in Lipetsk.

Easy-term loans are also a support for farmers. As you have already told us, we are launching a new mechanism of easy-tern loans in the agricultural complex with an interest rate under 5 percent. Conditions for borrowers were made easier – competition among 100 authorised banks makes the interest rate go down. Small businesses have taken out 50 billion rubles worth of loans. We have established a rule at the federal level that at least 10 percent of the total amount of subsidies must go to easy-term loans for small businesses.

Moreover, next year 72 billion rubles will be approved for loans taken out to finance agricultural produce processing. Commercial loans worth 115 billion will be taken out to purchase agricultural equipment and machines. Let me stress that these are subsidised loans.

This comes down to 700 billion worth of easy-term loans approved this year with 500 billion of investment loans and 200 short-term loans. This is unprecedented: for the first time in the agency’s history we have managed to meet all the requests received from agricultural producers, especially for investment loans. Yes, this will require around 100 billion rubles for servicing. That is, the federal budget carries huge losses; nevertheless, we are aware that this paves the way for new plants, factories and manufacturing facilities that are high-tech, competitive and so on.

In order to preserve the pace of positive processes that have emerged in the industry, its government support in 2018 will remain in the same amount of 242 billion rubles.

I would like to express our gratitude once again, Mr President. Those additional 20 billion for agriculture – they deserve special words of appreciation from agricultural workers.

Vladimir Putin: Thank you, Mr Tkachev.

I would like to single out a couple of issues. First, we are talking about continuing the subsidies of both Russian Railways shipments and interest rates on bank loans out of those additional 20 billion. There is another component I want to draw your attention to. You saw that yesterday some of the colleagues present here and I met with German business leaders. Some of them consider themselves, and quite legitimately so, to be Russian producers because in agricultural equipment production, say, they reached the level of domestic manufacturing required from them by the Russian Government. They have posed a question on behalf of all Russian agricultural producers regarding the extension of subsidies on agricultural equipment. Mr Dvorkovich proposed 2 billion out of those 20, and I think this is the right thing to do, just for your information. We know that these subsidies are not at your Ministry, they are handled by the Ministry of Industry, but to avoid inconsistency, this is also an agricultural sector, also needed for agricultural production, so let us keep it in mind. This is the first point. Thank you very much.

Now the second point, regarding selection and genetics. The programme I mentioned earlier covers both seeds and genetics, but why is it scheduled until 2025? Why so long?

Alexander Tkachev: We are going to sort out this problem before 2020 in plant growing whereas poultry farming involves hatching eggs, so it is a longer-term and more complicated process and we are doing it step by step. Unfortunately, we have a tough job on our hands, and there is no other way.

Vladimir Putin: Did you make any estimates?

Alexander Tkachev: We did. We cannot make it quicker technology-wise.

Deputy Prime Minister Arkady Dvorkovich: We will be able to do it with potatoes and sugar beet, which is critically important, whereas poultry and pig farming require much more time.

Vladimir Putin: All right.

Concerning those “grey” or “black” imports from the countries that fall under sanctions: the most efficient way is expanding the application of electronic certificates. Unfortunately, very few of them are registered today, just 9 million electronic certificates per month whereas we need 300 million. Two tasks or two questions arise. First, we must have the capacity taking into account that this is a federal system. This should be taken care of beforehand. And preventive steps must be taken now so as not to face the situation when volumes are growing while the system cannot cope with them. The second component is a regional one. I would like to address heads of Russian regions – a great deal depends on you here and a large part of work is imposed on you. Meanwhile, in some regions this work is being done whereas in others it is almost absent. I would like you to pay attention to this problem and expedite its resolution.

And now Mr Korolev of the Lipetsk Region, please, go ahead.

Lipetsk Region Governor Oleg Korolev: Mr President, colleagues,

To be honest with you, it is difficult for me to speak here today for one reason – I used to be a head of a collective farm. As a former collective farm head who grew up in the toughest conditions and lived, together with our colleagues, through the troubled times before 2000, I could never have imagined how much all of Russia and our Lipetsk Region have achieved. I could not have even imagined it. And I keep on thinking how it happened that starting in 2000 people gained hope, which later turned into conviction. And we made it. I have an answer, and I will be so bold as to word it.

The point is that you, Mr President, helped farming not so much as an economic sector – with funding, economically – as you helped it as a way of life, as an area of life which, together with forestry, occupies 85 percent of the Russian territory, and it is improving it. We can build several cities but Russia would be squalid without agriculture. And starting in 2000 it became possible to put so much soul into it and to prop up this way of life and all the branches of the economy.

Friends, Mr Tkachev, you were right in everything you said, but apart from what you rightly noted, we have to say how much has been done for the people – hospitals, rural medical assistance centres, access to natural gas all across the country, roads, improvements, the rural way of life as a whole. It is this comprehensive solution that allowed for the achievements you spoke about.

I will just cite a few figures illustrating what has been done since 2000, using the Lipetsk Region as an example. I am not going to speak about the 300-billion ruble investments, I will just say that since 2000 grain and pulse harvests have tripled, the output of sugar beet rose five-fold instead of just doubling, oil-plant crops grew 13-fold, potatoes tripled, cattle and poultry production grew four-fold, sugar production – six-fold, and vegetable oil – 30-fold.

Today we can confidently report that by backing the import replacement target you set, we will complete by 2020 the greenhouse vegetable growing complex that will let us increase production volumes of high-quality fifth-generation vegetables by 30 times. Friends, the fifth generation is when the greenhouse master is the hornet and an entomologist as an insect specialist, not someone who sprays everything endlessly. And even if someone from Turkey or Poland will want to come back to our market, it won’t be easy for them, because people will get to know the real taste of our Russian, high-quality, non-carcinogenic, non-allergenic products. Let me emphasise that whole complexes have undergone special development.

Mr President, a coin has obverse heads side but it also has a tails side. The point is that high technologies triggered a sharp increase in labour productivity. This is very good. Yet it also means that many jobs become redundant.

When I managed a collective farm, I had 1,500 tractor drivers, mechanics and animal farm workers, whereas now my former collective farm has only 28 workers. Cows are milked by a robot while 28 people operate wide-coverage equipment. How can the others survive? And experience prompted us to take up something that will be a reliable guarantee for people’s support and development. We felt that such a guarantee, along with our comprehensive measures, should be agricultural cooperation based on simple principles that will be clear for ordinary farmers. Voluntary participation, joint efforts, equal opportunities for managing and distributing revenue. As they say, cooperation means profit for everyone. It allows us to preserve human potential, enhance it, improve the quality of life, and make sure that people can have a stable supplementary income, and not a small one, an income sufficient for living.

Confidence in the viability of agricultural cooperation stems from the following simple arguments. Agricultural cooperation engages the currently idle human and land resources.

Friends, even in our region, which has high-intensity agriculture, private land – and it makes up almost 50,000 hectares of black soil – is used inefficiently. Our grannies have grown old whereas young people, as they say, do not want to bust their hump for the middleman: “If there were a system, we would do it.” And such a system has been set up now. Thus, agricultural cooperation helps to involve additional resources: human resources, land and others.

Next. This is assisted by the capacity of the agricultural market, which has not yet been filled and where demand for organic produce is skyrocketing. And organic produce is basically produced by small farms and cooperatives.

Friends, the state has only one priority – ensuring social peace. And cooperation is a powerful method and a way to ensure employment, which allows us to achieve this goal. It is a solution of the employment problems, an additional gross product and an enormous resource for the gross domestic product growth. We estimate that if cooperation takes its worthy place in the whole of Russia, it will mean a 30 percent GDP growth. In a word, it means a wealth of opportunities.

The trust of the rural population towards cooperation is growing and the process is gaining momentum. In our region alone there are over 900 agricultural cooperatives. They already incorporate over 50 percent of private farm holdings. Everyone will join before the spring of 2018 as everyone has realised its benefits.

Thanks to cooperation we have managed to raise the efficiency of our land resources. Cooperatives today purchase six billion rubles worth of farm products. Friends, let me translate it for myself into Russian: those are six billion rubles that go to those grandmothers and grandfathers, the people who kept their commitment to the countryside and did not abandon it. Also, cooperatives produce over 5 billion rubles worth of organic farm products. I can give many such examples.

Cooperatives are not alone in selling their products: there are retail chains springing up, and online trade is growing in popularity, such as the Koop48.rf site, where 48 is the region’s designation. I browsed through it, and large city residents, Muscovites are always online. These products are going today to Moscow, to the nearest large cities, and to the local residents directly, bypassing retail margins and therefore at a lower cost for the cooperatives and at lower prices for consumers.

I would like to underscore one example, Mr President. As you are aware, three quarters of consumer cooperatives funding comes from the cooperatives themselves via credit cooperatives. All our elderly men and women who had put their money in jars and buried them under their apple trees, have taken that money back when they learnt about credit cooperatives and have given out 6 billion rubles worth of loans thanks to affordable credit cooperatives which are developing now. It looks like a perpetuum mobile: they credit themselves, and they do not have problems with loans when there is a credit cooperative system.

Cooperatives are certainly given every support and help. We have a three-level system, good assistance comes from the federal authorities, the Ministry of Agriculture, Small and Medium-Sized Business Corporation, a number of other agencies, and I would like to thank you for that. However, Mr President, the current legislation offers a basis for developing cooperation but some of the legislative acts must be reviewed. I am confident that we will achieve sound and comprehensive federal legislation on cooperation within two years. We will realise the need to improve the targeted federal programme for cooperation support.

Mr President, you received me two years ago and I had the opportunity to report to you on the possibility of a pilot project on cooperation development. You supported the initiative and told Mr Belousov to look into it. Mr Belousov got the Ministry of Agriculture, Small and Medium-Sized Business Corporation, and other government agencies engaged in the project. And in the past two years we have done what I partly said about already – we have trained 19 Russian regions using the Lipetsk Region’s experience.

In short, agricultural cooperation as a method of social provision of employment offering benefits for all has achieved success. It deserves to be one of Russia’s national priorities.

Vladimir Putin: Thank you very much.

Mr Korolev, you were right to highlight the positive shifts, of course. They are tangible and evident in agriculture. This is what the achievements of the agricultural complex in the past years show. That is obvious. But in terms of many indicators, unfortunately, the situation is far from what we could consider good.

As for the road network (I have cited the data recently), 80 percent of federal roads are at the level required by the standards, I believe. The figure for regional roads is lower, and municipal roads, which also include rural roads, are still in very poor condition. I am not saying that their state was better in the Soviet time, maybe it was even worse, I do not remember, but today’s situation in this sphere, in rural areas, definitely requires our close attention and must be rectified.

The same applies to the number of beds in rural medical assistance centres and hospitals, even district ones. There are about 100 beds per 10,000 people in a city, and in a rural area there are only 40 beds per 10,000 people. This is the difference. As a result, life expectancy nationwide is 72.5 years, and in rural areas it is 70.5. That may not seem to be a big difference but it is there nevertheless.

The same goes for income levels. I am not even talking about the number of cultural facilities per person or per 1,000 people, or 10,000 people. Their number in rural areas is much lower, without any doubt. We see the same with the level of incomes. That is why here, in social sphere, we have a lot of work to do together.

But as for the developments in rural areas’ economy, they are certainly very encouraging, because if the rural economy produces such good results, then these are clearly the pre-requisites for developing the social sphere as well. We just must not forget that this has to be done on a mandatory basis. We must devote attention to this area both on the regional and the federal levels.

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