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President of Russia Vladimir Putin: Colleagues, good afternoon.

We are here in the Arkhangelsk Region visiting a company with a group of associates at the suggestion of our colleagues. This is not a coincidence, since the Arkhangelsk Region has always been a major centre for the national timber industry.

By the way, I am glad that I came here. I have been to other companies of this kind before, both in Russia and abroad, and I have to say that learning about how this business works was a great pleasure for me. Over 100 hectares of land, the latest machinery – I think that this company has left its competitors in this sector across the world far behind.

Today, we will review the state of this sector, I mean timber processing and the timber industry in general, together with corporate leaders and heads of relevant agencies.

Let me note that we have been raising this issue regularly. In 2020, we took several milestone decisions to develop the timber industry, including measures to promote advanced timber processing, control timber use along the technological chain, as well as improve forest management and oversight. We will definitely review progress on these and other decisions today. Of course, considering the current situation, I suggest that we discuss efforts to stimulate domestic demand for timber products.

Let me note that Russia accounts for one-fifth of the global timber reserves, which is an immense natural asset for our country, including both its environment and industrial development. Whether we are using it wisely is another matter.

For reference, let me remind you that Russia has 82 billion cubic metres of timber, compared to 126 billion in Brazil, 47 billion in the United States, 30 billion in Canada, and slightly over 14 billion in China.

The actual felling volume in Russia is well below the annual allowable cut, while the timber industry’s contribution to Russia’s GDP is rather modest at about 1 percent, or 0.99 percent, to be precise.

Clearly, the industry has proper reserves and good prospects for long-term growth.

However, the domestic timber industry ran into major challenges last year when the situation on the global timber market worsened which, perhaps, was our main challenge. Also, as we are all aware, the European market was closed to our companies. As a result, all of the above has led to a decrease in the output.

It is, of course, important to continue to support our timber enterprises and specialists employed in this area, as well as the companies that have invested and continue to invest in deep timber processing, including in the Northwestern Federal District. It is likewise necessary to help businesses create effective logistics chains to establish ties with new, predictable customers and partners. I look forward to hearing your proposals on this today.

We must certainly stay the strategic course for expanding the timber industry, which includes, as you are aware, increasing demand at home, expanding our own processing capacities and manufacturing high-quality products with high added value, including wooden houses, furniture, paper, and so on. Mr Butorin [CEO of ULK Group] covered this in part today when he gave me a tour of the company.

Also, it is important – the way it is done here – to expand the use of biofuels in the housing and utilities sector.

Mortgage tools should be used more extensively in housing construction. Wooden houses are a good choice for relocating people from structurally deficient residential buildings – we discussed this today – as well as for rural health posts and other social facilities. I think we will go into that in more detail today.

Of course, the availability of the latest timber processing technologies and equipment is of paramount importance. Unfortunately, we remain heavily dependent on our foreign partners in this regard. You and I know well that this is a challenging task to handle, but we must, without a doubt, overcome this dependence.

Please highlight your efforts to create your own timber processing technology in your presentations. Let us know what has been done and what is being planned to increase the output of domestic equipment, and parts and components. I would also like you to report on your plans to expand industry-specific research in this area.

This is important if we want to upgrade our pulp and paper industry. The depth of processing must be enhanced, and new types of products for various sectors of the economy must be developed.

This wraps up my opening remarks. Let us get to work. Ms Viktoria Abramchenko is our next speaker. Please, the floor is yours.

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Vladimir Putin: Let us review some of the results because we are going to formulate the proposals made today in the final document.

Here is what I would like to emphasise.

First. Of course, measures to support the timber industry need to be implemented expeditiously, primarily to help solve its logistical problems. Our colleagues spoke about this, but in fact, everyone in the Government is well aware of it.

As a reminder, there are subsidies for the transportation of industrial products, as we have just discussed. Recently, the Government raised the upper limit to 500 million rubles per company. Mr Butorin suggested changing the mechanism a bit – let us think about that and work on it.

What matters here is the stability of conditions, so we need to keep the parameters of this support at the same level, but, if necessary, I ask the Government to adjust the process, and maybe to raise some of the subsidies. The least we should do is guarantee our colleagues who work in the industry that this support measure will be available for at least three years.

Next. As I have already said, companies in the Northwestern Federal District have suffered the most – the finance minister also mentioned this today – primarily from the actions of our so-called partners. And of course, we need to provide additional support to these enterprises – I would like to emphasise this, I agree with the finance minister here.

First of all, I ask the Government and Russian Railways to see what can be done to increase the shipment of goods by rail. We have just heard from the transport minister and the head of Russian Railways. That is what we need to focus on. Of course, we need to help everyone, but primarily those who find themselves in a difficult situation.

In this regard, I would like to ask you to provide subsidies for the maritime transport of timber products from the ports in northwestern Russia. Our colleagues said this would be related to the load on the Port of St Petersburg – that is right, I agree completely. We need to calculate the size of these subsidies and react accordingly.

Now, there are almost no relevant sea routes at present, due to the changes in logistics, so they need to be launched with state support, as industry specialists say, we need to get them rolling.

I have one more solution to offer, namely, to provide businesses – someone mentioned this today, and I agree with that proposal – with the option to make deferred forest tract lease payments based on unharvested timber volumes. Volumes have declined, but businesses continue to make their lease payments while there is no output. This is unfair; this injustice must be adjusted. Moreover, it is important to ensure that these liabilities can be written off in an amount that does not exceed the actual product transport costs, less the subsidies, meaning the 500 million in subsidies that have been set aside as of today.

Please be mindful of the fact that this is a temporary measure (we believe the situation will improve in one way or another) and it should address companies located in the beleaguered regions, primarily, northwestern Russia.

Our colleagues from Siberia and the Far Eastern Federal Districts are with us today. We will see how this will work. The Far East is closer to today's markets, so they do not have issues like this. It is important to analyse things and see how they work in order to support businesses while the logistics are being restructured. Should things in other regions change in this regard, we will respond accordingly.

Second, concerning the long-term and structural goals of the timber industry, of course, it is important to bolster domestic demand for the industry's output and increase the volume and availability of mortgages for the construction of standalone wooden houses. I think everyone would agree with that.

I think we can use the arrangement used in the construction of blocks of flats. I am talking about escrow accounts, which guarantee the safety of home buyers’ funds and the construction funding. Banks will not be affected, since the money will be deposited in their accounts. Should anything happen, they will get their money back. The lenders are also guaranteed against losing their money. Hopefully, that will settle the problem of fraudsters targeting equity holders’ money.

I would like the Government, in conjunction with the ДОМ.РФ corporation, the Central Bank and the State Duma, to adopt the necessary decisions as soon as possible.

Notably, wooden housing construction embraces all phases from lumber harvesting to completion of construction. Without a doubt, we need to expand these capacities. I would like the Government to draft a set of measures to support the manufacturing of wooden house kits.

And one more point. We have a lot of construction under national projects and other state and regional programmes. Urgent care centres, cultural centres, libraries, Russian Post offices, etc.

(Addressing Vladimir Butorin.) Mr Butorin, you have built social facilities from this material for the most part, haven’t you?

General Director of the ULK Group of Companies Vladimir Butorin: We have.

Vladimir Putin: There you go. Mr Butorin is focusing on social issues at this point. I hope other companies are doing the same. But it is necessary to introduce adequate regulation and support measures.

I believe it is possible to resort to wood construction technology on a bigger scale and use common designs for building projects, while of course observing all safety requirements.

I would like to ask the Government and the Ministry of Construction to study this further, and work with the regions.

In addition, this year we need to use manufactured, low-rise housing construction in the programme for resettling people from dilapidated housing. Many of you have spoken about this today, and I fully agree.

This could be a very convenient and effective solution. Mr Mutko [General Director of DOM.RF] has just described the attitudes people have towards their own housing, their own home.

Third. I suggest approving an additional infrastructure budget loan, for the next two years, of at least 15 billion rubles to upgrade municipal boilers (we have also spoken about this when reviewing these facilities). I am referring to converting them to fuel granules (pellets). There is a source for allocating the additional 15 billion, and the Ministry of Finance knows what it is. We have discussed these opportunities, and I would like this source to be used. Naturally, this conversion must be economically justified and expedient.

I will add that it is important here to fix the terms of supplies for the long term. This will allow housing and utility companies to have stable purchasing prices and guarantee sales to biofuel producers.

At the same time, I suggest thinking about support for domestic boiler equipment manufacturers. We have discussed this as well, and I fully agree with it. This support should include subsidies for discounts during sales of this equipment.

In conclusion, I would like our colleagues from the Government and the Presidential Executive Office to study today’s proposals closely. Overall, they fit into what I said in conclusion, but there are some details. We need to consider them with a view to drafting the final instructions.

I would like to thank everyone for your work today. Thank you.