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President of Russia Dmitry Medvedev: I want to discuss three matters with you.

The first is domestic. Neither our country nor Gazprom are facing the easiest times at the moment. But investment continues, and so does work on the main priorities. I would like to hear from you what you consider the major priorities right now, what decisions the board of directors has reached, and how it all ties in with Gazprom’s overall tasks of connecting households to the gas supply network and preparing for the winter season – the human dimension, in other words. That is my first question.

The second question I propose we discuss today is that of cooperation in the Caspian region. I will be meeting at the end of the week with the leaders of several Caspian countries – Kazakhstan, Turkmenistan and Azerbaijan. We will hold an informal summit, discuss various issues, and, of course, gas-sector cooperation will also come up. I would like to hear your proposals in this context. For my part, I just want to say one thing. I think that given the nature of our relations, their history and prospects, they require clearer legal regulation not only at the commercial level, through the economic contacts between companies, but also at the state level, through state procedures such as an intergovernmental agreement and perhaps other kinds of legal documents. Do you think that this would be the right approach in this area, and what steps could we take here?

Finally, I would like to hear your comment on the situation with our main consumers’ debts: is everything in order here, and are the payments being made? Please, go ahead.

chairman of the Management Committee of Gazprom Alexei Miller: At its board meeting Gazprom examined adjustments to its investment programme. Faced with the current difficult circumstances in our traditional markets we have scaled back investment. But at the same time, we have seized new opportunities to refocus on our priority projects. We have increased funding for projects such as the Gryazovets-Vyborg pipeline that will supply gas to the Nord Stream pipeline between Russia and Germany, and we have increased investment in the preparation work for the South Stream pipeline. We are also allocating more funds to our gas programme in the east of the country. Gazprom has begun this programme’s implementation and work is underway now on building the Sakhalin-Khabarovsk-Vladivostok mainline gas pipeline. Vladivostok will be receiving gas supplies by the end of 2011, in time for the APEC summit.

We have started developing new gas fields in Yakutia Republic and Krasnoyarsk Territory. We have also increased funding for sites related to the Sochi 2014 Winter Olympics. This month, we will begin building the Dzhubga-Lazarevskoye-Sochi gas pipeline, which will be completed by 2012, and we are starting work on building the Adler Thermal Power Plant, which will also be ready to come on line by 2012.

Of course, our programme to connect the country’s regions to the gas network remains one of our priorities. In accordance with the instructions from Russia’s leadership, we are expanding into new regions and continuing our work on this programme, and of course we are increasing and not decreasing funding for this programme.

Dmitry Medvedev: How many regions are covered by the programme now?

Alexei Miller: 69.

Dmitry Medvedev: It was a completely different situation when we began this programme four years ago.

Alexei Miller: We began with 25 regions and we have 69 today. The programme funding has grown, the cooperation mechanism for teamwork with district and regional authorities is up and running. The operation is all based on synchronised schedules and timetables. Only a small handful of regions are lagging behind in our joint work schedule. This programme is one of our biggest priorities, and it is a programme with a social dimension. Of course we will continue to give this work our closest attention.

Dmitry Medvedev: As we agreed, particular attention should focus on bringing gas to the rural areas. These were the areas with the biggest problems and insufficient financing, and so this is a priority.

Alexei Miller: Of course, we have made a lot of progress in getting rural areas connected over these last years, but there is still a lot of work to do. Unfortunately, bringing the gas supply into the countryside was seriously underfunded over the previous decades. The extent of gas supply distribution in rural areas was almost two times less than in urban areas. Taking into account the priority the state places today on the agriculture sector, getting the rural areas connected to the gas supply network will not only give people in the countryside a new quality of life but also lay the economic foundation for developing agribusiness.

Dmitry Medvedev: This is why bigger investment is needed in this work, based on the principles we agreed on, of course, that is, the co-financing principle, Gazprom and the regional and local authorities have to share equal responsibility for this process.

Let’s turn to our second subject now – cooperation in the Caspian region.

Alexei Miller: Gazprom has positive experience of working with companies from the region’s countries. Of course, most of our cooperation so far has been based on commercial agreements, purchase contracts in particular. The Caspian region has abundant fossil fuel reserves, and of course, Gazprom’s medium- and long-term cooperation with the companies in the region should be based on a comprehensive approach that encompasses not just gas purchase contracts but also production, transportation and processing. I think it would therefore make perfect sense for Gazprom’s medium- and long-term cooperation with the region’s companies to be based on intergovernmental documents, intergovernmental agreements that would form the foundation for our cooperation.

Dmitry Medvedev: Good, if you support this idea I will discuss it with my colleagues at the meeting later this week and ask them to consider giving this kind of medium- and long-term cooperation a legal foundation either at intergovernmental level or at some other level that would be sufficient to ensure full-fledged and long-term relations.

The last subject I want to discuss is the situation with our consumers. Are there any problems, or is everything going fine?

Alexei Miller: Of course, I want to start with our CIS neighbours, Ukraine and Belarus.

Regarding Belarus, a debt of more than $200 million had built up early this year and has decreased a little since then. Part of the money was paid off in August, but the debt still remains substantial. We hope that Belarus will pay off in full its debt for gas supplies from Russia by the end of the year.

Ukraine has been paying in full for gas supplies from Russia these last two months, but our Ukrainian colleagues have suggested that it would be good for us to consider the possibility of making transit payments in advance. We did use such mechanisms for assisting Ukraine prior to signing the contract last year. We have made a substantial advance payment of over $2.2 billion, and as things stand today, we have paid in advance for gas transit via Ukraine through to the end of the first quarter of 2010.

Dmitry Medvedev: It is good to hear, of course, that our Ukrainian partners are settling their bills. We welcome such approach which shows that they honour their obligations responsibly.

As for the idea of advance payment of transit fees, I want to ask one simple question: is this stipulated in the contract?

Alexei Miller: No, the contract does not stipulate advance payment for transit.

Dmitry Medvedev: Then don’t pay. You should act in accordance with the terms of the contract concluded specifically for such purposes. It cost such a lot of effort and pain to reach, and has had a serious impact. We are following its terms now, and it should be the basis on which we build our relations. Let’s not invent anything new. We need to act in accordance with the obligations that each side agreed to. We are not going through the easiest times either, and so I think that this is the position Gazprom should take.

Alexei Miller: We will follow this policy.

Dmitry Medvedev: Good.