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President Vladimir Putin: Good afternoon, dear colleagues.

(Addressing Finance Minister Alexei Kudrin.) Alexei Leonidovich, let’s begin with you. Can you tell us about the final results of your meeting with your G8 colleagues.

Alexei Kudrin: The G8 meeting took place in Moscow on Saturday. It went according to plan and resulted in decisions on six questions that are set out in the G8 communique. Of course, the meeting discussed a great number of other issues that are not reflected in the communique. Discussions on these issues will continue at subsequent meetings and decisions will be taken.

I am sure that this meeting and the discussion of the key issues that reflect the priorities Russia has set for its presidency of the G8 will become a serious foundation for the meeting between the G8 leaders and for the decisions that will be taken on that occasion. The main issue – energy security – was positively received and during their press conference the finance ministers supported Russia’s initiative to develop the gas market and develop a global gas market. They also supported projects that are being carried out in this respect, supported expanding the application of the JODI oil data base and its possible use in the gas sector. A whole number of questions regarding alternative energy sources were also discussed. All of these issues were the subject of serious discussion.

Vladimir Putin: Everyone is busy with oil – even the finance ministers are all busy with oil. How about hoeing one's own row — working on finances?

Alexei Kudrin: This is the issue today that is influencing the development of all the world’s economies. Our initiative to expand the World Bank’s mandate and create additional funds for the creation of energy infrastructure in poor countries also received support. This kind of infrastructure could become a good foundation for economic development and for resolving healthcare and education issues. This group of issues was the subject of a special discussion.

Regarding the fight against infectious diseases, a number of ministers supported the proposal to expand the network of monitoring centres and laboratories. This proposal was put forward by Russia and is currently being worked on at the World Heath Organisation. Governments could take additional economic decisions on supporting their centres and laboratories and creating considerable stocks of vaccines to combat the main diseases. The finance ministers’ meeting in April could settle on a pilot project which will receive these funds in priority in order to achieve a breakthrough in liquidating one of the diseases – I won’t say which one now, we discussed a list of such diseases – especially on the African continent where these infectious diseases take millions of lives.

A number of other questions were also discussed, including the preparation of a report on improving practice in public finances – an area that today is often the source of inter-state and international financial imbalances. The ministers highly assessed their meeting with you, including on political issues, and at their press conference they expressed support for a number of the issues and Russia’s proposals that were discussed with you. I see this as positive. I also made use of the results of these meetings in the final press conference on the G8’s work.

It is very positive that the finance ministers of China, India, Brazil and South Africa took part. Everyone noted this. Their part in trade and their interest in making progress with the Doha round of trade talks, on liberalising trade conditions and access for their goods, above all agricultural goods, to the world market, in which Russia also has an interest, received considerable attention. I think that this will give impetus to the Doha round negotiations.

That’s not to mention the results achieved at bilateral meetings with key finance ministers. I am sure that this all lays a serious foundation for the finance ministers’ meeting in St Petersburg in June, where we will complete discussions and obtain some concrete results and decisions. Of course, some of these decisions will be taken at the summit of the G8 leaders.

Vladimir Putin: The G8 finance ministers’ meeting here in Moscow was, of course, a good preparatory stage for the G8 summit that will take place in St Petersburg in July. The meeting definitely produced some good work. I want to draw the attention of everyone working on preparing the Petersburg summit that they will work within the framework of the programme we have proposed, the programme that has been approved with our partners. The world is developing very fast. It is a global world. If something negative happens in Africa, it has repercussions for many parts of the world, including for our country. This is clear today. But we have agreed from the start that there are some similarly very acute problems in this part of the world, problems linked to education, to the fight against infectious diseases and poverty here in our country and in our neighbours, in the CIS countries.

We must reach an agreement with our partners right from the outset therefore, that a large part of the resources to be allocated to addressing these problems will go to support our neighbours in the CIS countries. Looking at the objective facts, some of these countries practically qualify as being among the world’s poorest.

Alexei Kudrin: We examined this issue from precisely this angle and we already have some concrete results. I have not spoken about them perhaps with regard to specific countries, but concerning Russia, the International Fund for the Fight against AIDS, Tuberculosis and Malaria, to which we contribute, is allocating Russia $100 million on an international basis to combat these diseases. This is more than we contributed. In this way we are certainly taking part in many initiatives and we are receiving support on the issues of particular relevance to Russia. Concerning writing off the poorest countries’ debts to international financial organisations, for example, we managed to obtain an agreement that Tajikistan, for example, fits the criteria of the countries covered by this initiative and it has now been included on the list of countries that will have their debts written off, as has one Southeast Asian country that was not previously covered by this programme. We have reached agreement on these programmes.

Vladimir Putin: That is good. Our relevant ministries, the education, healthcare and social development ministries, should be kept informed on the discussions taking place during preparations for the summit in Petersburg and should make their contribution to helping coordinate our efforts on achieving the goals that we have set for the summit and that we want to achieve together with our partners.

Alexei Kudrin: In conclusion, I would like to thank all the ministries and agencies, especially the Foreign Ministry, the Government Office and the Presidential Executive Office, and also the law enforcement agencies for ensuring security. Everything took place at the highest level and this was noted by everyone.

Vladimir Putin: (Addressing Defence Minister Sergei Ivanov.) Sergei Borisovich, how did the Russia-NATO Council events go?

Sergei Ivanov: The NATO and Russian defence ministers held their traditional meeting within the Russia-NATO Council at the end of last week in Sicily. We had a brief discussion on the medium-term prospects for military relations between Russia and NATO and looked at global security issues and the now traditional issues of the fight against terrorism, non-proliferation and so on. There were also some new issues raised in Sicily. You noticed that the finance ministers were all busy discussing energy security. Well, I can tell you that the NATO defence ministers also discussed energy security. This is a matter of great interest to them and of some concern too, given the situation in the world.

We also discussed more serious questions that have become problematic – illegal immigration, for example. Various practical steps were outlined in this respect. Through the Defence Ministry we have already outlined and are already carrying out some practical measures. This concerns above all the Active Endeavour operations in which Russia is taking part. Everyone noted that Russia is the only non-NATO country that has gone beyond promises and declarations and is actually taking part in practice in this operation.

The NATO Secretary General and the Italian Defence Minister visited our missile cruiser, Moskva, and a detachment of vessels from the Black Sea Fleet. They met and talked with our officers in order to assess their preparedness for carrying joint operations, because our ships and NATO vessels will leave Sicily this week and will be active in the central Mediterranean.

Vladimir Putin: Where are the ships based?

Sergei Ivanov: At the moment they are based in Sicily, in the town of Taormina, the port of Messina. This is a civilian and military port.

It is also symbolic that ceremonies and various commemorative events were held in Messina to honour the sailors from Russia’s Baltic Squadron, who in 1908 saved more than 1,000 Italians during the terrible earthquake that struck the town. The Italians have not forgotten this and several of the central streets in Messina are named in honour of Russian sailors. There’s a street named after the Russian sailors of the Baltic Squadron, for example. I saw this street myself. There are memorials there to our sailors.

Coming back to the Active Endeavour operation, the NATO Secretary General was very surprised by our sailors’ high standards of training that he had the opportunity to see while visiting our ships, including the standards of our marine infantry groups that have been prepared for these operations. He checked their knowledge of English and their equipment and found everything to be of quite a high standard.

Vladimir Putin: (Addressing Public Health and Social Development Minister Mikhail Zurabov) Mikhail Yuryevich, I called you last week about healthcare issues in Chechnya.

Mikhail Zurabov: Construction and rebuilding work has been planned for 31 facilities in 2006. At the same time, there are plans to begin construction of a further 15 healthcare and social sphere facilities in Chechnya. Total financing for these programmes comes to 595 million roubles.

You also raised the question as to how equipment would be obtained for healthcare facilities opened in previous years, as the financial estimates for these facilities did not provide for the acquisition of equipment. This matter has been settled. The Finance Ministry has provided for 524 million roubles in budget aid to Chechnya to purchase equipment for 32 facilities that are already in operation but that are not all working at full capacity because of the lack of equipment. The plan is to allocate a total of more than 1.1 billion roubles this year for this purpose.

Nine new facilities will be opened this year. I would note among these the Central District Hospital in Gudermes, a dentistry clinic in Grozny and the republic’s cancer centre. The situation with cancer treatment is quite complicated at the moment in Chechnya. This means that once the first part of the project is completed, the question will remain of building the second phase in order to make available the necessary equipment so that the full spectrum of cancer treatment services can be provided within Chechnya.

We don’t see any problems that need to be settled at presidential level. The government has already signed the relevant instruction. We held additional consultations with the Chechen leadership last week and they are happy with the solutions proposed for these issues.

Vladimir Putin: (Addressing Economic Development and Trade Minister German Gref) German Oskarovich, your ministry is preparing for the Cabinet meeting a development strategy for Russia’s financial markets. What are the results you expect?

German Gref: On the Prime Minister’s instructions we have prepared two key documents – a concept for the development of corporate law, which was discussed last week at a meeting of the Competition Council. And this week the Federal Financial Markets Service will submit together with us the concept for developing financial markets. These two documents are very closely linked and aim at resolving key problems that are coming to light as the financial markets continue their rapid growth. Just last week alone, for example, the financial markets rose by four percentage points. This makes it urgent to address problems that had not previously been settled. What problems am I talking about?

For a start, there are problems with the organisational and legal forms of companies. Now, when companies need to raise serious investment through the financial markets, it is clear that our corporate law is not ensuring this development. We have more than 40,000 joint-stock companies in the country, of which only 200 are traded on open markets, and 40 of these account for 98 percent of entire market capitalisation. It is clear therefore that we have to review the whole concept of dividing joint-stock companies into open and closed companies, and we have to improve the law on the regulation of commercial legal entities.

The second problem is lack of protection for ownership rights. There are areas in our legislation that have not been conceptually resolved. For example, there is essentially no law guaranteeing ownership rights to non-documentary securities.

The third problem is the high transaction costs involved in being listed on the Russian market. It is important to bring down these costs so as to make it more attractive to be listed on Russian stock exchanges compared to European and American markets.

The fourth problem is the imperfect stock market infrastructure and insufficient instruments in the area of derivatives.

The fifth problem is the payments system, the fact that is not possible to carry out all settlements on-line. Settlements are carried out in delayed time and are carried over to the next day, and with the volume of trading on the market what it is, this creates certain risks. This all has to be resolved, especially now that Russian companies are opening up and raising money on the markets for direct investment. We have to do the maximum to put in place conditions that will ensure that as much of this money as possible is placed on the Russian market. This is useful for resolving the balance of payments issue and for developing our market, especially given that as from January 1, 2008, the percentage paid into the individual account pension system will be six percent instead of the four percent it is now, and this will considerably expand the offer for money on the Russian market. We have to ensure that pensioners’ money will be fully absorbed by the Russian market and maintain a positive dynamic, as was the case last year, when interest earned on pension accounts was higher than inflation for what was probably the first time. All these factors together make this a very urgent issue from an economic development point of view and in terms of addressing social problems. If the concept is approved then we will need to pass a whole series of legislative acts over the next two years to settle these problems.

Vladimir Putin: Are there drafts already prepared?

German Gref: Yes, both concept documents are being submitted along with a number of documents that have been prepared and approved. If the concepts are approved, the draft laws will be sent immediately to the State Duma.

Vladimir Putin: Are you in contact with the deputies? Do they already know what is involved and are they taking part in drawing up these draft laws?

German Gref: These documents have already gone through discussion at expert level and with the participation of the State Duma deputies. The relevant Duma committees have taken full part in these documents’ preparation and the committee chairman has spoken. These are very complex issues. What we are talking about is essentially our choice of future model for our corporate economy and market. This means that any mistakes made would come at a great cost and we have spent the last year discussing all these documents in great detail.