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Introductory Remarks at an Expanded Meeting of the Atomic Energy Ministry Board

March 31, 2000, Snezhinsk, Chelyabinsk Region

Vladimir Putin: Dear colleagues,

The fuel and energy complex has been and remains the backbone of the whole economy. As the structure of the sector gradually changes so is the role of nuclear specialists. Clearly, peaceful nuclear energy is the most promising and inexhaustible resource. Long-term calculations, the boldest projects and progressive technologies are associated with it.

I will permit myself to say a few general things which I am sure you all know. However, I will try to place some accents in order to indicate to you how the Government sees the problems we are going to discuss today.

Last year power generation at nuclear plants increased by 16%. Existing units were actively being modernised and new sites were being prepared.

Of course, even this area is affected by lack of funds, the prevalence of barter arrangements, mutual offsets and surrogate money. They have even coined a new term, “electrical rubles”. Until recently nuclear plants were happy if they could collect at least a third of their earnings in hard cash.

All this leads me to say that the most urgent tasks in the immediate future are as follows.

First. We will provide timely funding for publicly financed consumers to which power supply cannot be cut under any circumstances.

Second. If an enterprise habitually fails to pay its bills for the services of a nuclear plant, that is a signal for bankruptcy proceedings to start, no matter how significant the enterprise may be. We will make a list of such enterprises and take the necessary measures.

Low tariffs is a serious problem. Surely, the Government should care about public sector enterprises, the housing and utilities, social and other spheres that need Government support. That is why we will pursue a tough tariff policy in the field of energy saving and energy supply. Admittedly, it will not be too favourable for energy workers, including nuclear plants. We know what has been happening all this time.

Relatively cheap energy is the basis of competitiveness of other sectors, the basis of import replacement and ultimately the basis of industrial growth. Besides, people’s incomes are still too low. That too accounts for the low tariffs that we have.

To be sure, simultaneously we will have to pursue an equalization policy. We need a long-term action plan tied in with the housing and utilities sector and military reforms, with new policies in the field of agriculture and the manufacturing industry. It is already clear that low tariffs should not be available to exporters as well as those who release in the internal markets products at world prices while buying power at a price that is 3–7 times lower than in the rest of the world.

Nor should we forget that our foreign partners don’t mind taking advantage of the situation. It would be half as bad if we were talking about normal strategic investors interested in the Russian market. But often acting as parasites are those who bring raw materials into Russia, process them under various easy-term schemes and earn windfall profits due to cheap energy and labour.

Meanwhile we ourselves are not doing all we can to promote export of electricity. That attitude has its roots in the past when our “planned” economy was perpetually short of energy and its use was anything but thrifty. Today our strategy is to replace the export of commodities with the export of products. Electrical energy is one of the most promising products.

Unfortunately, we do not see that those in a position to engage in these activities are taking an aggressive stand.

The nuclear industry is a key component of the Russian fuel and energy complex. Like other sectors and other fuel and energy companies – RAO UES, Gazprom and oil extracting facilities – they have their specific problems, but there are many problems and headaches that are common to all. And of course these problems should be addressed in the context of the overall state of the fuel and energy complex.

I would like to stress once again that the problems of nuclear plants cannot be tackled separately from those of the whole fuel and energy complex. We will seek to optimise its management with due account of the energy mix in the country. I would say more: these problems cannot be seen separately not only from those of the fuel and energy sector, but from the whole economy. I have already mentioned the level of solvent demand of households and the rate of the ongoing reform of the housing and utilities sector.

Effective restructuring and conversion of the defence complex, a component of the nuclear industry, is another key problem.

Available resources are still not channeled into priority areas, are distributed unwisely and prevent the development of new cutting-edge technologies. As a result, the money earmarked by the Government for defence purposes often sinks into the sand. It is not enough even to pay the salaries of all the specialists, and the specialists, especially young ones, prefer to look for other, less skilled but better paid, jobs.

Speaking about restructuring, I do not mean mere downsizing of the workforce. Downsizing of the work force is not an end in itself. That would be the easiest, but also the most dangerous way, as we have recently experienced in the coal industry. It is particularly dangerous for restricted territories where such facilities are usually located and where people have no alternative employment. So today, at the new phase of development we need a different, well-thought-out and reasonable approach to conversion that takes into account all the economic and social consequences.

The only conclusion that suggests itself is this: if we continue to drag our feet on conversion, no injections of budget money will be effective. By the way, last year the federal budget met tall its commitments. We will continue to meet our commitments. But we expect that you too will take a sober view of the situation, distribute finances and your own intellectual resources in a competent way.

The All-Russia Institute of Technical Physics already has many scientists and engineers working on civilian assignments, as I have mentioned earlier. They are developing unique medical equipment, they have opened their neutron therapy centre to treat cancer patients, and they are developing modern technologies for the food industry. I am 100% sure that other ideas and other developments are in the pipeline.

I would like to mention another problem which we usually tend to “put off” until later. In recent years, unfortunately, environmental concerns have ceased to be a priority. Our lag is chronic. People of the older generation remember that as late as the 1960s the Rhine in Germany was one of the most polluted rivers not only in Europe, but in the whole world. And in Osaka policemen wore oxygen masks.

It has to be said that the situation in this country has improved recently; unfortunately, it happened not due to the use of corresponding technologies, but simply because of a slump in production.

Many environmental problems in the country go back to the period when nuclear weapons were developed, as people in this part of Russia know better than in other places. The Atomic Energy Ministry is already doing something to repair the damage: three quarters of the surface of the notorious Lake Karachai have been filled with earth; money has been allocated for environmental measures in the city of Lermontov; the Presidential Programme to unload nuclear fuel from decommissioned nuclear submarines is underway.

But the Atomic Energy Ministry can do a lot more to address environmental problems. By generating more than 100 billion kilowatt/hours of electricity nuclear plants reduce the environmental load equal to the burning of 50 billion cubic metres of gas. The result is less atmospheric emissions, which releases carbon emission quotas set under Russia’s international obligations. We realize that this is one of the resources for implementing environmental programmes.

Other ideas have been proposed for raising money for environmental purposes. We are not thinking in terms of transferring to the Atomic Energy Ministry the function of coordinating all environmental programmes in the country, as is the case with the US Department of Energy. But we are certainly looking to see a greater role of the Atomic Energy Ministry in this area.

Radiation security is a special concern. It is inadmissible that the assets allocated to the Atomic Energy Ministry for these purposes do not reach the enterprise level. And unfortunately it happens.

I think it would be wrong to limit ourselves to the problem of nuclear waste disposal. The main concern is that people are daily exposed to radiation and live in cities which are full of instruments with radioactive substances.

One should not forget that the nuclear industry is an area of our strategic interests. Its successful development determines the status of Russia as a power that can protect itself against any aggression. I mentioned it at the very beginning.

We are conducting and will conduct negotiations on further reductions of strategic offensive arms. In doing so, we seek to make our world safer, to clean it of the stockpiles of weapons, of excessive weapons. This is the aim we pursue in our efforts to ratify the START-2 Treaty and pass on to the next stage, START-3.

But simultaneously we have to make our nuclear deterrent more effective. So, the importance of your industry, far from diminishing, is increasing many times over. I don’t want anyone to have any doubts about it and I want to make it clear to everyone, those present in this room, your colleagues who cannot be here because of lack of space and the nation as a whole. There should be no doubt. The problem is how to make the industry safer and more effective.

In conclusion, I would like to stress that we should preserve and strengthen the Russian nuclear weapons capability. But this is not to say that we will increase its size, it is already excessive in some ways. We are talking about enhancing the security of the country and strengthening the nuclear “shield” of the Russian Federation. We must use 100% the intellectual resources of the sector, support unique teams and laboratories and scientific centres. That will generate new technologies for the industry. That will power the economic recovery and successful development of our country.

March 31, 2000, Snezhinsk, Chelyabinsk Region