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Vladimir Putin: The industry is currently witnessing the dynamic processes of company mergers and the creation of modern integrated production complexes. The success of these steps is evident and is highlighted by the stability we observe in Kuzbas and the Rostov Region. The industry has overcome a deep crisis and has attained a level of profitability that was never achieved in the USSR. Frankly, what I find most heartening is the growth rate of labour productivity.

And there is a striking contrast between private enterprises and those enterprises which have still not renounced government support and the outdated methods of economic management. Today a miner in Russia logs no more than 1,200 hours. We are not expecting abrupt changes. We discussed it with Governor Tuleyev recently and he will speak to you later.

Another problem is outdated and flawed legislation. It frequently impedes economic growth, including growth in the industry. The coal industry will cease to be interesting and attractive unless we get rid of outdated norms. Several serious problems need to be addressed if we are to consolidate the success achieved in the industry. First is the imbalance of the price policy regarding the main types of fuel: gas and coal. Today gas is cheaper than coal in the domestic market. It creates a major tilt towards increasing domestic gas consumption. It undermines the gas export potential and simultaneously diminishes the domestic market for the coal. We must realise that the price disparity cannot be preserved for long. Cheap gas is a temporary phenomenon. Domestic prices will inevitably be leveled with the world prices. The gas consuming enterprises must be mindful of this prospect.

This was one of the topics we discussed with the miners. Of course, the change is not supposed to happen overnight. The problem of gas consumption by households is even more delicate. We can well afford to keep the prices low for households because we are the biggest gas-producing country, but the leveling of prices is justified.

Besides, the proven coal resources are larger than the gas resources. In other words, coal is, among other things, a tangible factor of security and energy stability for our economy. And so there is no alternative to actively including coal in the national fuel and energy plan.

We should analyse the state of resources and the extractive capacity of the coal industry and assess the potential demand in the domestic and foreign coal markets. The analysis should form the basis of the Russian energy strategy up until 2020, on which we should work more energetically so as to complete it by November 2002.

The second problem is the factors that are holding back the growth of the coal industry’s export potential. It is important to know that export is a serious source of investments and it also can cushion the domestic market against fluctuations.

It is not that the European or Asian markets are closed to us. The problem is the lack of an effective and integrated export strategy. And frequently, it has to be said, the problem lies in the inability of domestic producers to develop a viable price policy.

Another basic factor for building up coal exports is the development of integrated transport schemes, including above all sea and river transport. None of the Russian seaports have the technology required to export coal. They are in need of serious modernisation.

Infrastructure development is an area where the interests of transport workers, exporters and the government intersect. There are already instances of successful synergy, I am referring to the modernisation of the Ust-Luga port in St Petersburg.

Third, the coal industry today is one of the key industries in the Russian economy. And there must be a clear awareness that its role and significance will increase over time.

It is necessary to make skilful use of the modern levers for boosting production. They include production sharing agreements and the lease of equipment. This should greatly contribute to the flow of investments into the sector, both foreign and domestic. In fact, we don’t care whether they are foreign or domestic.

Finally, the deep processing of coal is another untapped potential for improving the quality of the industry. And here much will depend on science and the development of new technologies. Integrated complexes comprising extractive and processing enterprises hold promise. Success, by the way, can be ensured by cuts in transportation costs and so on. As we have already been saying here, it is better to ship products after primary processing than ore.

Fourth. The export of Kazakh coal is still a problem. I think it would be wrong and impossible to renounce cooperation with Kazakhstan. We should build our relations and policy with regard to our partners and with due account of the increasing export of our coal to the CIS, including Kazakhstan. If we keep their products out of our market, they may choose to retaliate and then a key part of our economy would be put into question.

Of course we should not forget that in the Soviet times Ekubastuz was tied in technology and in terms of equipment to energy consumers in the USSR. And there is another problem not directly connected with the economy. It is a moral problem. That part of Kazakhstan is inhabited mainly by ethnic Russians. Because of the circumstances you all know they have found themselves to be living in a foreign country. But the amount of coal we get from Ekibastuz is, I think, negotiable. So we will discuss our interaction in this sphere with the people involved in energy, including within the framework of the EurAsEC.

Fifth is the failure to appreciate the importance of the natural factor in developing the coal strategy.

Recently, the managers of coal-mining enterprises have often attributed the industry’s losses and declining production to the “warm winter”. Of course we should take into account the natural factor and global climate change and so on when working out the energy strategy.

The Government is no longer directly involved in the coal industry, but in reality we owe a major debt to the miners. The issue has not yet been raised here, but it would be dishonest of our country to forget this problem. It is affecting the whole country, especially the coal regions. The problem I am referring to is decrepit housing. I would like to stress that the federal budget must have separate and important line items this year. It must be admitted that so far the Government has failed to give due attention to this problem. The total cost of the bill – and the Government adopted a corresponding programme up until 2010 early this year – is 160 billion roubles.

Of course, neither the federal centre nor the regions can meet this challenge alone. And it is a good thing that we have gathered today in this format and are discussing it at the Presidium of the State Council. It must be stressed that we can only meet this challenge together with the regions. The 2003 budget envisages considerable sums to address this problem. This is the start-up capital. In 2002, 65 million roubles will be allocated. That is not nearly enough. Next year, for the first time in history, we will allocate a more serious sum: 1.3 billion roubles. That said, according to my calculations, the annual sum should be 1.7 billion roubles. Yet even so, this would signify considerable progress. But the Federation will only disperse the money if the region assumes a significant part of the cost of implementing the programme.

The coalminers’ trade has always commanded respect in society. Russian coalminers marked their professional holiday several days ago. And I would like to end my remarks by congratulating you all on that holiday.