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President Vladimir Putin: Good afternoon, dear colleagues.

Mikhail Yefimovich Fradkov has just returned from a trip to China and the Far East and I would like to ask him now to say a few words about the results of these visits.

Prime Minister Mikhail Fradkov: In China we held the tenth regular meeting of the heads of government of our countries. The general feeling is that the meeting produced quite good results. We summed up the results of our work over the past year and we can say that quite a lot has been achieved. We noted that our relations have now reached a qualitatively new level. Our talks focused mainly on the prospects for developing our trade and economic relations and we concentrated above all on cooperation in the energy sector.

We reaffirmed our mutual desire and possibility to include a branch pipeline to China in our project to build an oil pipeline from eastern Siberia to the Pacific coast. This project is of great interest to our Chinese partners and I think it would have economic benefits for our companies. We agreed that the companies concerned would begin examining the economic expediency of the project, calculate the investment that would be needed and settle the environmental issues involved. As we get all these different issues settled, we can start promoting this project as a promising undertaking. Transneft, Rosneft and the Chinese National Petroleum Corporation are working actively together now and the project is now being studied actively. I think this could be a project with good results.

Regarding the gas sector, we agreed to activate our work in this area now that Gazprom has completed preparation of its work concept for connecting regions in eastern Siberia and the Far East to the gas supply and creating a unified gas transport system, including for export supplies. In this respect we could consider China’s participation as a recipient of Russian gas and we could also look at China’s participation in a number of projects on Russian territory.

There is a large-scale and very promising project in the electricity sector that could give us an additional 40 billion to 60 billion kilowatt-hours of electricity a year, but it is a complicated project in terms of economic feasibility and creation of additional generating capacity. This is an issue we need to look at separately and a matter that we need to study very closely, given the specificities of the energy sector in the Far East, the closed way in which it operates and the high coal supply expenses it bears (coal brought in from distant regions accounts for around 80 percent of electricity production). In this respect we will need to study the matter and examine it closely with our Chinese partners. The main problem here is to agree on an export price: Unified Energy Systems Joint Stock Company and its partner are concentrating on this at the moment.

Vladimir Putin: Regarding electricity in the Far East, we did discuss how the region’s energy possibilities are increasing, and of course it is good to study export possibilities, including opportunities for exporting electricity, but we agreed that our priority is to first examine how we can use the Far East’s growing energy possibilities to develop the national economy and help the region create new production facilities of its own. We discussed this with RAO Unified Energy Systems and with the Cabinet. I would ask the Cabinet to come back to this issue once again. We need to create the conditions for developing new production facilities in the Far East.

As for oil supplies to the People’s Republic of China, we have agreements with our Chinese partners and we are currently supplying oil by rail. (Addressing Deputy Prime Minister Alexander Zhukov) Alexander Dmitryevich, what possibilities do we have for increasing these supplies by rail in order to fulfil our Chinese partners’ demand in the coming year? Up to 15 million tons minimum.

Alexander Zhukov: This year we agreed in principle to supply up to 10 million.

Vladimir Putin: And 15 million next year?

Alexander Zhukov: Yes, 15 million next year. This year it looks as if we will supply a little less. This is not due to problems with the railways. We plan to reach a total of 15 million tons next year and all the work needed for this – the capital investment, including in the railway infrastructure – has been budgeted for in the Russian Railway Company’s financial plan for 2006 and the following years.