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President Vladimir Putin : Good day dear colleagues!

We were planning to discuss the domestic oil and gas sector. As you know, our country is the world's leading producer of oil and gas. We can be counted on to provide for our own needs and for exports.

The oil and gas industry plays a key role in the country's general economic development, and is one of the prime targets for both Russian and foreign investment in our country.

However, there are obvious problems, as described in the 2007 President's Address to the Federal Assembly. Above all, how efficiently and effectively we use our fuel resources will determine whether they have the greatest possible impact.

Today, the oil sector constitutes almost 50 percent of the Russian economy, and petrochemicals about one and a half percent. Domestic companies have fallen far behind foreign companies with respect to processing petroleum and basic oil products. Because we export so many raw materials, Russia has to buy many products linked to oil and gas processing, ranging from plastics to chemical fibres. In fact, the weakness of our processing industry has substantial economic costs for us. We also lose the opportunity to occupy more lucrative niches in the global division of labour.

This issue was discussed in detail at a meeting with representatives of the business community at the beginning of the year. We then gave instructions for developing a system of incentives for increasing the amount of minerals processed in Russia. But this work has unfortunately been slow to take effect. Today I would like to talk about what steps have been taken to quickly remedy the situation and what we can do in the near future.

Regarding transport, I would suggest discussing the deadlines for the completion of the pipeline to the Pacific Ocean.

There should be no delay in resolving other long-standing problems. According to the most conservative estimates, we burn every year more than 20 billion cubic meters of gas produced as a byproduct. Such a waste is unacceptable!

The measures that must be taken are well known and have proven effective in many countries. This involves introducing a system of accounting, increased fines for environmental offences, stricter licensing requirements for the mineral extractors. Please inform yourselves on how work on all these fronts can proceed. We really do need to create an environment in which it is profitable to work in this sector. Today it is more profitable to burn gas rather than refine it. So we burn it.

In conclusion, a few words on another important topic. We have consistently been guided by a desire to offer a transparent environment for foreign investors. I have to point out that Russia has one of the most liberal regimes for allowing foreign investment in the oil and gas sector. We must work not simply at openness but for maximum understanding and transparency, so as to avoid any ambiguity whatsoever. We talked about the need to improve legislation in this area, and I would also like to speak about that today.