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President Vladimir Putin: Good afternoon, dear colleagues.

Let’s begin today with the draft federal law on mineral and hydrocarbon resource use. (Addressing Economic Development and Trade Minister German Gref) Go ahead, German Oskarovich.

German Gref: At its meeting on Thursday the government examined the new draft federal law on mineral and hydrocarbon resource use. This draft law was prepared by the Natural Resources Ministry together with the Economic Development and Trade Ministry and it has already gone through a whole number of public hearings. We are completely agreed on it and will examine it on Thursday.

This law will replace the 1992 law that set out the principles for administrative relations regarding mineral and hydrocarbon resource use. That law did not contain a whole series of mechanisms that would make it possible to encourage investment in mineral resource development and provide those involved in this sector with the wide-ranging instruments they need to attract investment and ensure protection of their rights as investors. At the same time, the law gave the state only minimum possibilities for overseeing the rational use of mineral resources and ensuring that users fulfil all their obligations. The law is now seriously outdated and the new law aims above all at resolving the fundamental contradictions that the old law was not able to address.

What specific points are we talking about? First, the new law establishes federal ownership of all mineral and hydrocarbon resources and clearly delimits the powers of the federal and regional authorities to dispose of these resources. The regional authorities have the right to dispose of common minerals and sections of what lies underground. All other sections of what lies underground – hydrocarbon resource deposits, solid mineral deposits, shelf sections – come under Federal authority.

The second fundamental innovation in the new law is that it establishes a gradual move from licence-based mineral use to civil-law contracts. At the moment, licences are accorded and, in accordance with the current law, a licence agreement can be concluded. That is, a confusing situation has emerged where we have not only the administrative act and the licence but also some kind of agreement that is signed as well.

The draft law that we are to examine provides for the signing of civil-law contracts for the right to use mineral and hydrocarbon resources. These contracts set out all the state’s powers and all the user’s obligations regarding investment, rational use of the resources, compliance with proper extraction technology and all the mechanisms that are a normal part of developed legislation in this area today. We analysed the legislation in this area in Europe and the United States – countries that have incorporated in their legislation all the most modern rational mineral use control mechanisms.

The third key element is that the new law clearly regulates the procedures for opening up use of mineral and hydrocarbon resources and ensures that these procedures are completely transparent. It clearly sets out the procedures for allowing geological exploration to begin in an area and for the subsequent issue of a licence for industrial extraction. The main procedure that has been set out is based on auctions. That is, auctions are not an obstacle to setting out all the conditions that the contract will establish for the future user, but are a completely transparent procedure for according the rights to use mineral and hydrocarbon resources. The new law regulates in detail the content of the contract signed with the user and defines its nature. The law also has a chapter on the payments system for mineral and hydrocarbon resource use – something that the old law does not have.

In our view, this law represents a considerable step forward. It aims to liberalise the legislation and lower the administrative barriers while at the same time giving the state sufficient means of acting. We think that if the government approves this law and if it is passed by the State Duma, it will create completely new and attractive conditions for investment in mineral resource development.

Vladimir Putin: German Oskarovich, I want to turn now to the Prime Minister and our other colleagues. One thing that we definitely must ensure regarding the provisions of this draft law that you have just told us about is that it provides all the necessary means to protect the interests of the people who live in the different territories concerned. What we’re talking about here, above all, are traditional kinds of economic activity and environmental protection. These questions must be examined very thoroughly and provisions must be put into practise. This is something we must do. Wherever I meet with people, especially in the north, they always point out the importance of this aspect. No one is opposed to the federal authorities, the state, having control over national resources, but we must develop mechanisms and provide legislative protection for the people who live in these territories and for the environment, and I would ask you to pay particular attention to this issue.

(Addressing Deputy Prime Minister Alexander Zhukov) Alexander Dmitryevich, you head the commission on personnel training. How is this work going? I know that some progress has been made.

Alexander Zhukov: The presidential programme for training management personnel has been running for the last seven years now. Several thousand young managers and directors receive training through this programme every year in the most advanced methods both in Russian and foreign companies. This is all paid for by the federal budget and I can tell you that in total, over these seven years, 29,000 specialists have received training in Russia and more than 8,000 have done internships abroad. The programme has proved quite effective because, after doing their internships, these young people move up the ranks quite rapidly, becoming more effective managers and often opening new firms of their own, producing new goods. More than 13,500 young chief directors took part in the selection process for training in 2004–2005, and 5,500 of them made it through the selection process and have now begun studying. We allocate federal budget money to this programme every year. We think it is an effective programme and we want not just to continue it but to expand it. We are actively getting the regional authorities involved and they are helping to finance these programmes.

Vladimir Putin: You said that some of them go on to open their own businesses, establish new companies. Some of them no doubt do. At the same time, anyone who opens a new business and registers a new company should get a medal for their bravery because the government and the regional authorities have still not managed to create the conditions for small and medium-sized businesses to develop freely. I’m not talking about taxation now, we know that efforts are being made to simplify the system. But registering a company is impossible. It’s just making a mockery of people and common sense. Many of the issues here are the responsibility of the regional and municipal authorities. I ask the government to come back to this issue. We need to work with our colleagues in the regions to find some common solutions. If we can’t reach some common solutions this chaos will just continue.