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Moscow, the Kremlin | December 18, 2003
Excerpts from the President’s live television and radio dialogue with the population

Sergei Brilyov: Looking back over the year’s results, how do you see the year as having gone for the country as a whole?

Vladimir Putin: No one gave us any presents this year. All that Russia achieved was the result of hard work. We had many difficulties, problems and losses to deal with, but at the same time Russia showed itself to be a country standing firmly on its feet now and developing rapidly. I think many would agree that we have strengthened our country’s standing internationally, and that our economy has also grown and become stronger. I have with me some figures, which are already well known in general, but I would still like to repeat a few of them now.

In 2002, we had an economic growth rate of 4.3 percent, and we planned for a growth rate of 5 percent this year. In reality we will close the year with a GDP growth rate of 6.6 percent and maybe even 6.9 percent. We had industrial output growth of 3.7 percent last year, but the figure this year will be 6.7 percent – almost double last year’s result.

We have reduced our foreign debt. Remember how everyone was talking last year about how our foreign debt payments would peak in 2003, and people were telling scare stories about how this would affect the country’s life and whether the government would be able to meet its social commitments to the population. But we paid $17 billion and the country did not even notice. Now the ratio between our foreign debt and our GDP is better than in many western European countries, and this one of the major indicators of a healthy economy.

When I first began working as President, the Central Bank’s gold and currency reserves came to $11 billion. In other words, our country had managed to save $11 billion over ten years. In 2003 alone, the gold and currency reserves increased by $20 billion, and the Central Bank’s reserves now total almost $70 billion.

This, along with our foreign debt payments, is not just a collection of figures, but is something of importance that concerns every citizen of this country. Why? Because these combined results suggest that if we continue this economic policy we have been pursuing, we will not see a repeat of what happened in 1998.

There will not be any defaults. I think this is very important.

Inflation is at 12 percent. This is a high rate but it is typical of countries with transition economies and it is coming down. The forecast was for inflation of 12 percent and we have kept within this limit. This is also an important indicator and significant result.

Looking at the population’s real incomes, wages have increased in real terms by 11 percent and pensions have risen by 7 percent.

The rate of labour productivity growth was at 8 percent, but it has begun to rise for the first time in many years. The rate at which incomes are increasing is outstripping the rise in labour productivity, however, coming to 13.5 percent this year and 9.9 percent last year.

In a way it is nice to know that incomes are growing faster than labour productivity, but this is not a very good indicator. This income growth, I think, is more a case of recovering the ground that was lost after the default in 1998.

The birth rate continued to rise this year. This is good, but there are still things we must not forget, whatever the circumstances. At the beginning of 2003, our country counted 37 million people living on incomes below the survival minimum. This figure fell by 6 million in the third quarter, but it still represents a huge number of people and it is humiliating for Russia to have 31 million people in this situation. The survival minimum is calculated differently according to region and population category, but we know the average figure, which is easy to remember – 2121 roubles. This is a very low level. So far, we have not been able to solve this problem and we cannot yet say that we have even come close yet to achieving the objectives we have set.

Question: The life of our city and region depends on industry and on the defence sector. Our plants can make the best products in Russia for the country’s army and navy. You have visited our city and have seen how proud we are of the planes and ships that we make. Now our plants are working on export orders for other countries.

What I want to ask is, when will we get genuinely big defence orders for our own country? When will our plants start working at full capacity? We want to be needed by our country and we want to be able to live and work in this city.

Vladimir Putin: I understand.

I am sure that Russia does need you and I do remember my visit to your city and its enterprises. In fact, I plan to visit you again soon, we have already decided on this with Viktor Ivanovich [Ishayev], the governor of Khabarovsk Krai. I will definitely do this because there is plenty to see and plenty for us to work on together in Komsomolsk-on-Amur and in the region in general.

As for the defence industry, there is nothing bad about the fact that you are working on export orders. I think this is positive. And you who work in these plants know that we are now producing goods for the People’s Republic of China and for India and other countries. Overall, this is a positive thing.

There is a lot of competition in the world for arms markets, and Russia is in a good position on these markets. The state coffers get money from these activities, already several billion dollars. But we are gradually building up once more the demand of our own Armed Forces. We have approved an arms programme through to 2010, and next year we will approve the next arms programme that will take us from 2005 through to 2015.

Unlike in previous years, these programmes are being financed in full according to plan, and I hope that you can see the results of this for yourselves at your plants.

There are some problems. What exactly? First, of course, we would like to be able to do more, especially for our Armed Forces, but we have to keep our defence development plans in line with our economic potential. There are more problems today, though, in organising this work. I don’t know if you are aware, but the necessary documents for the relevant agreements are signed only in the middle of the year, and the money allocated in accordance with these agreements begins to come through only at the end of the year.

A lot depends on the priorities the Defence Ministry sets. I think that shipbuilding companies have been able to see that the navy’s priorities have been given more attention. But I still don’t understand the situation with the Air Force, for example. Modern wars, after all, are fought primarily with aviation, and aviation technology wears out faster and needs repairs more often. But the Defence Ministry has put aviation in eighth place on its list of priorities. This is something for the specialists to decide and a great deal depends on them and on the cooperation between the producers, the clients and the organisers in this process.

There is another problem – the state’s debts to defence industry companies. Do you realise just how much the state came to owe the defence industry over past years? Now we have paid almost all of this off and we have only a small debt for 2002 and hardly any money owing for 2003. I think that we will pay off the last of our 2002 debt at the end of this year. In any case, what you can be sure of is that we do need the defence industry.

But there is one other thing that I want to draw your attention to, and that is that everywhere in the world, the defence industry makes its living not just from producing military goods. Defence companies in all the developed countries also produce considerable amounts of civilian goods. Of course, the directors of our defence companies are aware of this and are working on it. I think there are a lot of reserves we can draw on here.

Question: What exactly will the new Duma give us?

Vladimir Putin: No civilised country can live without a legislative assembly, and nor should it. Much, if not everything, depends on the Duma, including ensuring that the important laws crucial to our country’s effective development are passed without delay. The prosperity of every person in the country depends not only on how well the government and the Duma get through their planned work, but also on how well they will work together on their responsibilities for the country’s development.

A great deal depends on the parliament, and we all, myself included, hope that the Duma will work smoothly and effectively.

I am sure that today’s discussion will bring us back to various aspects of state, national and economic development, and this will give the opportunity to mention some of the priority documents that should be passed this year.

Question: Why is there so much talk about doing something about dilapidated housing, but there is still no solution in sight?

Vladimir Putin: This is a huge problem and it is a pressing issue not just for the mining regions, but also in the central regions of the country. Recently I was in Tula, which is just a hop and a skip away from Moscow, and I was shocked by the state of the housing there.

These problems have amassed over decades, but no attempt was made to resolve them for decades. Can we resolve this problem overnight? Probably not. But are there ways to solve this problem? Yes, of course there are, and we are trying to do all we can.

I would just like to point out one circumstance. Only a few years ago, the state allocated practically no money at all to these housing programmes. Three years ago, the state budget allocated only 200 million roubles for this item.

This year, we have for the first time allocated 1.3 billion roubles from the federal budget, with the regions adding at least another 50 percent. Overall, if we keep moving ahead at this pace, we will be able to see some results. But even this will not resolve the problem because it is on such a huge scale. If I’m not mistaken, we have around 89 million square metres of housing considered to be in a dilapidated state.

So what is the solution? I think there is a solution, and I think it lies in developing mortgages. I’m sure that if we had a fully working mortgage system, people like yourself would make full use of it, and I’m sure there a lot of people out there who would welcome it.

So, why are mortgages not so well developed here? I can tell you. Just a minute ago, a girl from the Far East asked what we can expect from the new Duma. What we need are political decisions. Of what kind? There are certain social guarantees for the population, in the housing sector for example, the Housing Code protects you from being evicted. This all seems right, of course, but right for whom? For the housing office, for the owners, for people who have received state housing? These are the sorts of basic principles that create a stable foundation in society.

But there are other aspects to this problem, credit aspects. Imagine that you take out a loan and you secure it with the property that you are borrowing the money to buy. The bank won’t lend you money, after all, if you can’t provide some kind of security, in other words, the property that you are purchasing through this loan. But this is an honest deal, right?

So you either pay back the loan or you return the property. But this requires amendments to the legislation, amendments that will make mortgage loans possible. The legislators – the future Duma – have to decide on these changes. Once they are made, I am sure that mortgage schemes will develop fast and that this will help resolve a lot of the problems we face in the housing sector.

Question: As far as I know, you have not yet made any public statement about whether you intend to stand in the presidential elections, or you have avoided giving a clear answer to this question. Could you say something about your plans now? Do you intend running for a second term?

Vladimir Putin: I planned to make just such a statement very soon, as the official campaign has only just begun. I know there have been a lot of questions on this count. My answer is yes, I will run, and I will soon make an official statement on this point.

Question: Vladimir Vladimirovich, how do you feel about the fact that officials hang your portrait in their offices?

Vladimir Putin: The President, the acting head of state, is to some extent a symbol of the state, just like the flag and the coat of arms. So I don’t think there is anything so bad about this. But there should be a sense of measure in everything, and when some people lose this sense of measure this, of course, does not make me happy.

Question: What does the Russian government intend to do improve the situation of Russian-speaking people outside Russia and make it easier for us to obtain Russian citizenship?

Vladimir Putin: You know, it is always hard to achieve the so-called golden mean in every question. We just had a question about hanging up portraits of the President, and that is a completely different issue, but there should always be a sense of measure, and this goes for the legislators, for the government and for the Presidential Administration.

We really did have to urgently bring some order to our immigration rules. This was not just because of violations of the laws and the need to fight crime, but also because the lack of regulation created a feeding ground for laws to be broken. Finances were also an issue, because payments of state budget money to a lot of people depend on this. Under the terms of the inter-governmental agreements we have within the CIS, someone living permanently on Russian territory, say a pensioner, but who is not a Russian citizen, will still collect a pension from our government, from our budget. And so we had to put some order into things and work out who is really living here and who is not. There were cases of up to 450 people all registered as living in a single 8-10-metre room. Obviously, these people do not all really live there, and so there was a real need to bring order to the system.

But at the same time, I think that the Law on Immigration and the Law on Citizenship are unnecessarily tough and make it hard for us to resolve another problem, that of attracting labour resources to the Russian labour market. It’s no secret that many developed countries with demographic problems use immigration as a way of meeting their labour market needs, but they do this through competent and civilised procedures.

We have not yet managed to develop civilised procedures for attracting labour from other countries. Of course, the most natural reserve for us to draw on is the CIS countries. These are people who share our mentality and find it easy to fit into Russian life. They generally have excellent command of the Russian language and for some of them it is like a native language. These countries form a natural pool of immigrants for us. The law does not regulate this sufficiently well yet but the government does intend to make the necessary amendments and perhaps even pass a special law on migration.

Question: Housing and utilities reform is now underway in the country. We are paying more and more for housing and utilities, but the quality of service still leaves a lot to be desired and the number of services has not increased. Is it again a case of no money being available?

Vladimir Putin: This really is a problem that concerns practically everyone in the country. It is not just a question of financial resources, which really are insufficient. There is not enough money – the sector has a funding shortfall of around 100 billion roubles. It is also a question of the benefits handed out, the lack of attention the sector has had and the fact that there was practically no state support for the sector for many years so that networks are now 60 percent worn out, but this does not mean that we cannot and should not try to solve this problem. I must say that the government has not yet found the resolve to take consistent action in this sector. Why? Because it is concerned, and not without reason, that there could be a sudden sharp increase in prices and rates that would have a negative impact on the finances of large groups of the population.

So what is the solution? The federal and regional budgets continue to channel huge sums of money to monopolist companies that have no incentive to cut their costs and improve the quality of their work. We need to create market conditions and make sure the money goes not to these companies, but directly to the population, so that they can order these services. This is a very complex task. Many cities have already begun moving in this direction and carrying out such experiments. The government has not yet been able to decide on large-scale steps, but I am sure that it will have to do so.

Question: You have already mentioned the subject of mortgages, but I have a question anyway. In Moscow and in some other cities there is already a programme providing subsidised housing construction for young families. Is it possible that this kind of programme will begin in our city, and will the young people of Krasnoyarsk be able to make use of it?

Vladimir Putin: Yes, of course this possibility exists. The federal budget allocated half a billion roubles for it this year – not a big sum, but still significant. This money was used in regions where the regional authorities also provided at least 50 percent.

Overall, a total of 1.3 billion roubles was spent by budgets at various levels on supporting programmes to help young people buy housing. This could seem a big figure, but it is not enough to help solve all the housing problems young people face. Young people very much need housing because without it you can’t start a family, have children and so on. But I still think that the only way to solve this problem generally is to expand mortgage schemes.

Question: There has been talk that reform of the Armed Forces is now coming to a close. Does this mean servicemen’s wages will stay at the level they are now?

Vladimir Putin: No, of course not. For a start, reform of the Armed Forces and their modernisation is not coming to a close, but is only just beginning, and it is not just about increasing servicemen’s wages. Military reform is also about the way the Armed Forces are formed and recruited. As you know, we have set the goal of having contract soldiers make up half the ranks of privates and sergeants. Reform is also about the programme to reduce conscript military service to one year from the end of 2007, and it is about modernising our arms and buying new arms for the army, navy and air force.

As for wages, you know that wages according to rank were raised as from January 1 of this year, and as from October 1, military wages and civil service wages underwent an indexation of 11 percent. I want to point out one particularly interesting circumstance. Last year, we pegged military wages to civil service wages so that there would not be a gap between them. The Defence Minister fought hard for this in various ministries, above all in the Economic Development and Trade Ministry and the Finance Ministry. The result was that wages paid to servicemen were brought up to the level of wages paid to civil servants, so that there would not be a gap between military and civilian officials.

But here is the real spice of this decision. We have approximately 330,000 civil servants, while our army comes to 1.2 million people and almost four million when everyone else counted as being in this category is also included. So, we made these almost four million people equal to 330,000 people. But I think that given the importance of the work the army and navy do, this is correct and fair, and this kind of indexation will continue in the future.

Question: Comrade Commander in Chief, the Americans have finally managed to capture Saddam Hussein, but I don’t think this will improve the situation in Iraq. I think that Iraq will be like a second Vietnam for the Americans and that they’ll end up running away from it all, but that we’ll all feel the consequences of the chaos they leave behind.

Vladimir Putin: You know, we have no interest in seeing the United States defeated in their fight against international terrorism because we and the United States are partners in this fight.

As for Iraq, this is a different matter in that when Hussein was in power there were no international terrorists there. This is a separate problem. Under the current international law, force can be used abroad only if approved by the United Nations Security Council. To put things mildly, any use of force without UN Security Council approval cannot be called fair and justified. But I must say that throughout the history of humanity, great countries and empires have always been afflicted with various problems that have only aggravated their situation. These include a feeling of being invulnerable, conviction in their own grandeur and a sense of being able to do no wrong. This has always got in the way of countries aspiring to be empires. I certainly hope that this will not be the case with our American partners.

Question: There has been a lot of talk lately about increasing the tax burden on the oil sector. As is already known, the Surgutneftegaz oil company works in very difficult conditions and exploits difficult oil fields that have already been more than half used up now. The average depth of oil wells is 3.5 kilometres and this is in very watery conditions. This requires us to introduce new technology and new equipment, and to maintain the level we have reached, we also have to develop new oilfields. If you increase the tax burden on we oil workers then it will be clear to us that our companies simply won’t be able to develop further. In whose interest is it to do this? We ask you to answer this question and give us your point of view.

Vladimir Putin: First of all I’d like to say that the work of you and your colleagues, and not only in Surgutneftegaz, but in other oil companies too, merits the highest appraisal and is worthy of respect. You really do work in very difficult conditions, as we can see just from looking at the TV screen now, and without any exaggeration you really do achieve exceptional results.

For the first time in many years, Russia has become the world’s number one oil producer, edging out Saudi Arabia. And if we add gas production then we really are in a field all of our own.

Now, to answer your question, yes, there has been a lot of talk lately about the need to toughen taxation in the oil sector. There is a certain logic in this talk and it lies in the fact that our economic development is one-sided. This regards not just the oil sector. Our fuel and energy sector is developing faster than the processing industry. Ultimately, this is negative for the fuel and energy sector too. This is why we need to balance the development of different sectors of our economy. But of course, we need to be very careful about how we go about this.

There are some specific things I would like to draw to the attention of you and your colleagues and the people who manage the sector. Last year, there was a big discussion on raising taxes in the oil and gas sector. There were some justifications for this because the sector was making super profits as a result of high world prices for oil. Taxes were raised accordingly – by 400 percent. In other words, this really was a serious burden on the sector. At the same time, the government proposed increasing the amount of super profits it collects from the oil companies. That is to say, rather than creating a stranglehold of taxes, the government would collect a greater share of the super profits. In all the developed economies the state collects super profits from oil companies at a ratio of around 20:80. Different countries have different ratios, but it is generally around this figure. I repeat that we are only talking about super profits here. Twenty percent of these profits would stay with the oil companies, and 80 percent would go to the state. What we have now is a situation where the state and the oil companies share these profits fifty-fifty.

Last year, the government proposed changing this ratio and increasing the share of super profits that go to the state. Lobbyists for the oil companies blocked this proposal in the Duma. The government proposed increasing export duties and raising the tax on use of mineral resources. Two instruments were proposed as a means for doing this. But the oil company lobbyists did not let this happen. For reasons I don’t understand, the Communist Party faction in the Duma voted entirely against it, so did all of Yabloko and most of SPS, while 90 percent of United Russia voted in favour, but some of their deputies were also against. And the other centrist factions in the Duma also could not ensure the bill got enough votes to pass. The bill was a fair one, but the government did not get a chance to push it through. If the bill had gone through, the state would not have been able to pump dozens of billions out of the sector, as some experts claimed, but the added income from super profits could have come to another 20 billion and the revenue would have gone up by around $3 billion.

But I do agree with you that there should be a differentiated approach, and the government is working on this at the moment. Taxation should depend on the state the oil well is in, the production volume, the amount of water and so on. At first, only a flat-rate mineral resources tax was designed because it was seen simply as an anti-corruption measure. But now the government is ready to look at a differentiated approach.

But the main thing, and what we should not forget as we introduce these changes, is that the oil and the fuel and energy sectors are like the goose that lays the golden eggs, and it would be stupid, unreasonable and unacceptable to kill the goose. But don’t worry, this will not happen.

Question: I live in Kabardino-Balkaria and I’m a Kabardinian by nationality. My last name is Balkarov and I work in the Russian Theatre. I have a question about inter-ethnic relations, a complicated question.

Now Mikhail Saakashvili, the likely future President of Georgia, and his supporters are all but in power in Tbilisi, and once again Abkhazia is being threatened. More than 400 years ago, the Kabardinian people voluntarily became a part of Russia, and today, the Abkhaz people, a people very close to my own, want to do the same.

Vladimir Vladimirovich, maybe it would be worth taking Abkhazia and also South Ossetia into the Russian Federation and thus prevent a new war? We have stability, peace and harmony in our region and we want it to stay this way because these are very valuable things.

Vladimir Putin: This is indeed a very complicated question you have raised and one that is very pertinent for the whole country now, and especially for the south of Russia.

Only recently, ensuring our territorial integrity was one of our most acute problems and pressing priorities. I think you would agree that this task has been resolved, overall. But we cannot follow these principles by applying them only to ourselves and not giving this right to our neighbours. This is why the principle of territorial integrity is recognised by international law, and as a member of the United Nations, we will respect our international commitments.

At the same time, there are some specific questions linked to the fact that the mountain peoples form a special community. The mountain peoples have centuries-old traditions of strong direct links between themselves. We are certainly not indifferent to the fate of these peoples and we cannot be indifferent. That is the first thing.

The second thing is that with the collapse of the Soviet Union, old conflicts flared up once more. This includes the Nagorny Karabakh conflict and the conflicts in South Ossetia and Abkhazia. But it would not be right to think that all these problems can be solved at Russia’s expense. Let me explain what I have in mind.

You know, I have already gone quite deep into this question. Here and there I often hear the same thing from our colleagues. They say, ‘say that you put pressure on us and that we will agree, so that it will be easier for us to then talk to our own people.’ And I tell them, ‘no, this won’t do. You want us in Russia to end up making an enemy of one of our neighbours for centuries to come? No, you come to an agreement among yourselves on mutually acceptable conditions and we will act as guarantor, for we are ready to do that, but only honestly and up front.’ This goes entirely for the regions that you mentioned. I repeat that we are not indifferent to what goes on there and we will follow the situation in these regions very closely, but we are in favour of Georgia’s territorial integrity and will support it, and we hope that all the problems of relations with Abkhazia and South Ossetia will be resolved in such a way as not to harm the interests of the people living in these regions.

Question: I am a writer and I am a Balkarian by nationality. Good afternoon, Vladimir Vladimirovich, Kabardino-Balkaria sends its greetings. We remember your visit here, a very warm visit it was.

My question is the following: it is against the law to incite interethnic hatred in the Russian Federation, and this is very good and we all remember it. But during the election campaign, we saw that some parties were openly campaigning under slogans such as, “Russia for Russians.” So, my question is, why were these parties allowed to publicly say such things and make such statements on television?

Vladimir Putin: Your question is particularly important for a country like ours. You know, when it comes to people who say things like “Russia for Russians” it is hard to remain restrained. Either they are people with no sense of decency who don’t understand what they’re saying, in which case they are just stupid, or they are provocateurs, because Russia is a multi-ethnic country. What does it mean, “Russia for Russians”? Do they want certain regions to secede from Russia? Do they want to see the disintegration of the Russian Federation? What are they trying to achieve, these people? The answer is clear. These are more likely provocateurs that are using some problems as a way to win cheap capital for themselves, make themselves look like radicals and get something for themselves out of it.

The Criminal Code has provisions dealing with this kind of thing and the Prosecutor’s Office should react to these kinds of manifestations if it sees in them grounds for criminal prosecution.

I must tell you that last year there were, I think, more than 60 criminal investigations made into cases of inciting inter-ethnic hatred. Of these, 20 cases went to court and guilty verdicts were handed down in 17-20 cases. This year, several dozen such cases have also been investigated.

As for the parties that made these kinds of statements during the election campaign, I didn’t see any examples of this myself, but I didn’t follow all the debates so closely. It seems to me that any reasonable person would not have done this, because the burden on voters has been too big of late. But if there were such cases, then I shall definitely talk with the Prosecutor General and ask him to analyse all the information available on this matter. There should be a reaction.

Question: Don’t you think it is time to end privatisation and begin nationalisation?

Vladimir Putin: It seems to me that your question is about the results of the economic policies followed from the early to mid ‘90s and certain negative tendencies that we are still encountering today. I hear this question often. Of course, I have my own view on this matter. When privatisation began, when the country was just beginning to move over to the market, we thought that the new owners would be a lot more effective. This is right. Everywhere in the world private owners have proven more effective than the state.

But there is one thing that we must not forget here. Developed economies already have a smoothly functioning administrative system and in these countries, state revenues, which the state uses to meet its social commitments, depend directly on how effectively companies are run. What happened here, though, was that companies began working well, sometimes very well, but there was no real administrative system in place, as a result of which the state did not collect the revenue it needed.

That is why it seems to me, or rather, why I believe that we need to take another road and not end privatisation, but strengthen the state’s organisation, reinforce the legislation and improve the way things are administered so as to ensure that the benefits of successful private companies spill over into the economy as a whole and can be felt by each individual. This we can achieve, and we need to follow this road to do so.

Question: There has been a lot of discussion about civil liability for drivers. Some say this law will take effect and some say it won’t. I want to know if this law is to be abolished, or if there will be some preferential conditions for veterans? My pension comes to 2,100 roubles and I am supposed to pay 1,700 roubles to insure my Niva. That is a lot of money.

Vladimir Putin: First of all, I would like to congratulate you on your 70th birthday. That is a big event and I wish you health, happiness and prosperity. As for this civil liability for drivers, or car insurance, the people who proposed this law had good intentions, of course, It was supposed to reduce the number of traffic rule violations, improve the financial situation and well-being for car users and maybe even make it easier to travel around the country and abroad. In a word, there were plenty of positive aspects.

But I agree that the base rate, which is 1980 roubles, I think, is a lot of money, especially for pensioners. The legislators will have to decide what to do about this problem. In other countries there are very flexible approaches that help resolve this problem. For example, you can take out a seasonal insurance policy. I know that some pensioners don’t use their cars during the winter.

In my time, and without being a pensioner, I used to drive a Zaporozhets car and I would put it in the garage on December 7 and leave it there until spring. We could introduce a seasonal insurance policy, or a policy that only covers the weekends, because there are people who only ever use their cars during the weekends. There are other ways of making this law more acceptable for everyone, even for people on low incomes. The government and the Duma will have to examine this issue, of course.

Question: Here in Stavropol we have had 12 terrorist acts over the last three years. These crimes are killing our children and our young people. The last terrorist act, in Yessentuki, killed 45 people. How can we stop this? When will these gangsters’ crimes be put to an end?

Vladimir Putin: You have raised one of the most painful problems that we face, and you know that not just Russia, but many other countries also face this problem.

What exactly is the root of this problem? For understandable reasons we keep coming back to the question of Chechnya. But Chechnya is not the only problem today. The problem is that there are people in the world who have decided that they have the right to influence the thinking of all who follow Muslim traditions, of the entire Muslim world. And not only do they want to influence minds, they also think they have the right to establish their control over areas where Muslims live, and they use religious slogans as a cover for pursuing their political aims.

This is all very relevant for our country because we have areas with a high proportion of Muslims, and these destructive forces of what we call international terrorism are focused on these areas and on our citizens. Of course, they have taken opportunity of the collapse of the Soviet Union and what happened in Chechnya, the separatist moods.

But their aims are completely different. Their aim is not independence for Chechnya, but for all the areas where there are a lot of Muslims. We, of course, must fight this if we don’t want to see the collapse of our country. If this were to happen, it would be worse than Yugoslavia. It would mean a Yugoslav scenario for Russia in its worst form and with far more victims. Armed with this knowledge we have to fight this problem, fight together with the whole international community, because the threat does not come from within, it comes from beyond our borders.

The latest military operations in the Caucasus show that the gangs now being pursued in Dagestan are almost half made up of mercenaries from other countries. These include not just people from Arab countries and from former Soviet republics, but also Russians, Ukrainians and Germans (not Germans of Turkish origin, but ethnic Germans) and people from other European countries. This we are all aware of. This is an international problem. Unfortunately, it has also hit Russia in full. The only solution here is not to give in to their pressure and not to let panic take hold, but to consolidate our forces and be consistent, decisive and tough on the criminals. And, of course, our law enforcement agencies also must improve the quality of their work.

Question: Does your family have savings, and what currency are they in, roubles, dollars or euros?

Vladimir Putin: I will speak not just as the head of state and as the President, who has to keep his savings in the national currency, but as someone who works on economic issues every day and discusses these matters with the government, the Economy and Finance Ministries and with specialists.

It is most profitable today to keep savings in Russian roubles in bank deposit accounts. Deposit accounts take into account the inflation rate and also pay some interest on top. The Russian rouble is one of the most stable currencies now and confidence in it is increasing. So I repeat, in roubles and in deposit accounts.

Question: Why is there such haste to introduce the single state exam to schools, after all, children are still studying according to the old system and won’t be able to prepare for the new exam system in just a year. In general, there’s a lot of confusion with this new system of education standards. I went into my local school to vote and didn’t understand anything of what I saw there on the walls.

Vladimir Putin: This problem does exist. I don’t consider myself an expert on every question. This issue, of course, concerns a great many people and here I have to agree with what the specialists say. But I do agree that things should not be done hastily, and I don’t think they are. What is going on now, after all, is just an experiment.

I don’t remember the exact figure, but I think that something like 640,000 school leavers sat their final exams under the new system. Next year, in 2004, this figure will increase to around 900,000 students. Why are we doing this? We are doing it to help young people, especially in the more remote parts of the country, not just pass their exams but also make it easier for them to get into prestigious universities far away from where they live and study, to lower the amount of corruption that goes on in the university admissions system and to unify the admissions demands that higher educational establishments set.

These are noble aims and I hope that will be fulfilled in their entirety. But this will all happen only after we have studied the results of the experiments that I just mentioned.

Question sent by Anatoly Nikitin from Murmansk Oblast. “Police and Traffic Police departments are openly or covertly engaged in business, and security is guaranteed only for “employees.” Do you have full information on the real state of affairs in these organisations?”

Vladimir Putin: I think it is not coincidence that Anatoly has put this quite sensitive question in such a polemical form. I wouldn’t rule out that he has come up against some kind of injustice involving the Interior Ministry or other state agencies.

Unfortunately, this would not be the only such case. This is a fact and we have to not just recognise it but also do something about it. This year more than 19,000 violations were brought to light in the Interior Ministry system, of which more than 2,500 involved direct violations of the law. Many police employees have faced administrative or even criminal liability.

You know about the investigations that made more of a noise. These were not just chance and were not timed for the Duma elections, as some have suggested, but were begun a lot earlier, well before the election campaign began. Some of these investigations were very complex and began a year and even a year and a half ago. When people who themselves work in the law enforcement system break the law, these are generally complicated cases because they involve professionals. It can be difficult in such cases to catch the perpetrator because he is qualified and knows all the methods.

But this combat is nonetheless going on and will continue in all areas. The law enforcement agencies’ own security departments will be strengthened. We will pay more attention to the social sphere and will raise living standards for people in the law enforcement agencies. Hopefully all of this will have positive results.

And to answer Anatoly’s question directly, I think that I am aware of the real state of affairs in the law enforcement agencies.

Question: Is the state going to do something about Chinese immigration in Siberia and the Far East?

Vladimir Putin: I understand that this is a sensitive issue. I don’t think we should be trying to halt immigration, but trying to regulate it. We need to know where, how many and what kind of immigrants we need. Once we have an idea of the country’s needs, we can draw up mechanisms for attracting the labour resources we need and then we can also turn more attention to fighting corruption, especially in this area, because the level of corruption here is high, in the law enforcement agencies and amongst the local authorities.

Question: Will the Russian rouble be made fully convertible?

Vladimir Putin: To make our national currency convertible, we first need to ensure that a whole number of factors linked to a strong national economy are in place. Over recent years a lot has been done to work in this direction in order to resolve the question that you have raised. The Law on Currency Regulation that was passed recently aims at resolving precisely this question.

I hope that the time will soon come when Russian citizens will be able to go abroad with just their passports and Russian roubles and won’t have to run around currency exchange booths before they leave. But there are different interpretations of the term ‘fully convertible.’ If by fully convertible we mean what I just mentioned, then this is something we can achieve. And I hope that we will resolve this task quite soon.

Question: Will procedures be put in place to fight corruption among the state authorities, including among the prosecutors and courts?

Vladimir Putin: Just recently I discussed this very subject at meetings with human rights organisations and with Russian and foreign business representatives. It is obviously a pertinent subject for us. I think that, although tougher measures are also possible and perhaps justified today, we need to not just get tougher but also to work on some basic issues. I’m thinking here of the need to begin real administrative reform. The less opportunities officials have for meddling in the decision-making process, the better. This also goes completely for the law enforcement agencies. Laws should have direct application. The judicial system should be at once independent and also transparent and under public supervision in the way it works. There are certain mechanisms in place, including for dealing with such problems among the ranks of judges. These laws were passed just recently and I hope that they will begin working soon.

Question: It has been said that Anatoly Sobchak, one of the founders of the democratic movement in Russia, was your teacher in politics. I would like to know how you felt about the defeat of the right-wing parties in the elections?

Vladimir Putin: I do indeed consider that Anatoly Sobchak was my teacher, quite literally, too, because he taught me at university and I also really did learn a lot from him later on once he was already involved in politics.

As for the right-wing parties and their defeat in the Duma elections, this does not make me happy. I think that all the political forces in the country should be represented in the parliament. But at the same time, these parties’ result, or rather lack of it, is a signal of their complete defeat and the result of their policies over recent years and the strategic and tactical mistakes they made in their election campaign. If we look at the so-called administrative resource, given that SPS was headed by Anatoly Chubais, who runs the country’s electricity system, we can safely say that there was no shortage of administrative resource or any other resource needed to campaign in parliamentary elections here or in any other country. They had enough of everything except an understanding of what people wanted from them and the political will to unite their dispersed forces to act together in the elections.

I hope this will not lead to a situation where these political forces will fade from the country’s political life, because millions of people here share the views these right-wing parties promote and are trying to make them a part of our political and economic life.

In any case, as I already said publicly, we will hold consultations with both SPS and Yabloko and try to create a situation in which we will be able to draw on the personnel resources they offer and begin ongoing work and a constant dialogue between them and the government, the Presidential Administration and the Russian parliament.

Question: Looking at the lives of pensioners and at the size of the pensions they receive, you can’t help but wondering about what to do. Two years ago, I signed an agreement with a private pension fund and now I pay some money into this fund out of my wages every month. At the same time, the Duma passed a law on pensions for former and current deputies. This pension comes to 16,000 roubles, which is far beyond what ordinary pensioners in Russia receive. My question is, Vladimir Vladimirovich, why did you sign this law?

Vladimir Putin: This is a good question and I am glad that you raised it, because I think it is right that the whole country hears about a few things that we should all be thinking about.

Just a few minutes ago we were talking about corruption in the state agencies and also about the state of affairs in the law enforcement system. When I answered the question from the oil workers in Siberia, I said that the Duma did not allow the government to pass some laws on oil and gas sector taxation that were of great importance for the state.

I think that we should all try to understand that in order to deal with these negative things we do have to pay the people upon whose work the state’s functioning depends. We do have to do something for ourselves and get away from this socialist principle of giving everyone the same crust of bread. We have to understand this and accept it.

Of course, there have to be limits and we cannot allow ourselves to go too far. What you spoke about is indeed the case. Pensions for members of parliament are roughly six and a half times higher than for your average person working in, say, the public sector. This is true. And Duma deputies’ wages are on the same level as those of federal ministers, even though we have only 25 federal ministers but more than 400 deputies. But we did this so as to ensure that conditions are in place for the parliament to go about its work without problem.

Question: Russia is rightfully proud of its achievements in space and in aircraft building. These priority areas get state support, but what about doing the same for our environmentally safe technology for cultivating, storing and processing fruit that, in the end, is vital for the healthy lives of our population? I can assure you, Vladimir Vladimirovich, that Russia can also be proud of our Michurinsk varieties of apples.

Vladimir Putin: I am sure that we can indeed be proud of our apples and other agricultural products. I have no doubt of this because I know something about it and can say that perhaps our technology is not always as effective as Western technology, but it shows a lot more concern for consumers’ health. We hardly use genetic engineering at all. And now we are starting to see how many problems it causes. Fortunately, we have not encountered these problems yet.

As for priorities regarding the defence industry, agricultural sector or other sectors, I can say that the agricultural sector is just as much a priority and gets just as much state support as the defence industry or aircraft building sector that you mentioned.

I am sure that you know some of the basic figures, but I don’t know if everyone living in rural areas or working in agriculture knows them. The federal budget allocates around 20 billion roubles a year for leasing, subsidising interest rates and direct support for agriculture, and the regional budgets allocate another 30 billion roubles. As for the aviation industry that you mentioned, the budget has provided for only 3 billion roubles plus 1 billion roubles for leasing. So, agriculture does and will continue to receive support from the state. There is a whole programme for agriculture and a law on agriculture is currently being worked on and we hope that parliament will pass it in 2004.

Question: Why is Russia not doing more to defend the rights of Russians in the Baltic states?

Vladimir Putin: I agree that there was a time when Russia paid virtually no attention to the complicated processes taking place in some of the former Soviet republics, and especially in the Baltic states.

But I think, to be fair, that our Foreign Ministry has paid a lot more attention over recent years to protecting the rights of Russian-speaking people in the Baltic states. There are indeed some matters of concern for us there. We think that we cannot yet say that these people’s rights are being upheld in full, and some of these people have lived in these countries for decades. We provide moral and political support for these people and try to give them assistance in various courts and we also work through diplomatic channels. And we will continue this work in the future. But there are some standards that are applied in Western Europe, including in areas that we would call hot spots, and that should also be applied to the Baltic states with regard to the Russian-speaking population in these countries.

In Macedonia, for example, the OSCE and the European Union say that representation in state agencies and in the police should reflect the proportion of, say, the Albanian population in the south of the country. But why then should this principle not also be applied, say, to Latvia, where half of the population of Riga is Russian-speaking?

Why should we accept double standards in Europe? We do not understand this and we will fight it. But we need to do this through civilised methods, of course, so as not to make things only more difficult for the Russian-speaking population that we should be showing our concern for everywhere, including in the Baltic states.

Question: I work with young people and I’m very concerned by the drugs problem. What is your view on the idea of handing down life sentences for drugs trafficking?

Vladimir Putin: I agree with you that there should be tougher penalties for a number of crimes, including for drugs trafficking. Recently I proposed some amendments to the relevant laws and the Duma passed these amendments just recently. The Federation Council also supported them and a week ago I signed these amendments that introduce tougher sentences for this kind of crime, including up to 20 years for certain categories of crime.

I think this is a serious measure and I think it is enough for now, but let’s see how it will work in practice.

Question: Our town is located on the border with Finland and we are interested in knowing if simpler visa procedures could be introduced for our Finnish neighbours wanting to come here, and then maybe they would do the same and let us travel to Finland without visas?

Vladimir Putin: This is possible, of course. But it should not take place as was the case in the past with authorities in the border areas acting only in their regional interests and not thinking about state interests and making decisions that it would be hard to even call separatist.

The question is not about this or that region being able to make more money from this or that activity, but about settling these questions on a bilateral basis and in a way that is acceptable for Russia.

As for introducing simplified visa procedures for our Finnish friends, I support such a move. But this would imply them introducing the same procedures for Russian citizens, because these things have to be done on a parity basis. This is what we are trying to reach an agreement on with our Finnish partners.

Question: What do you see as the main threats for Russia in the twenty-first century?

Vladimir Putin: The biggest threat is that economic growth will slow down. If we cannot ensure that our economy keeps growing, we will also fall behind in all the other areas.

Today, as always, there is a lot of tough competition going on in the world, but unlike in the past, this competition is not so much about military confrontation as economic battles. Here, we must be competitive and effective, all of us, from private individuals to the state. If we can do this, not only will we survive and make our country prosper, we will also be able to resolve a lot of the complex problems we face now.

Some questions have not yet come up in our discussion today, but I think they are important.

This question for example, from Vladimir Antonov in Ivanovo Oblast: “Why in the four years you have been in power, has there been nothing in your speeches about the size of the state’s internal debt to its citizens, including the debts of Sberbank from June 1991? What procedures are in place for paying off this debt and when is this to happen?”

And there are other questions on this line, for example, “when will Sberbank deposits from before 1992 be repaid”

I must say that I have spoken about this subject on a number of occasions. Clearly, you have not heard either my explanations or those of the government on this question.

A law on compensation for people who lost their bank deposits was passed in 1995. In my family there were also some considerable losses. My father at one point sold his Zhiguli car and put the money in his Sberbank account, and it then dissolved away.

What I want to say is that the total debt the state owes the population comes to 11.5 trillion roubles. Just to put the scale of this tragedy and misfortune in perspective, total federal budget revenue this year was, I think, 2.4 trillion roubles, and the debt is 11 trillion roubles.

It was planned to begin payments for certain age categories starting in 1996, and these payments did begin. In 2002, 1,000 roubles each was paid to everyone born up to 1942 inclusive, in 2003 payments were made to people born up to 1945 inclusive, and in 2004, payments will be made to people born in 1947.

An important decision has been taken that I would like to mention once again. First, a second round of payments of 1,000 roubles has begun. Second, in the event that someone dies before getting the money they were supposed to be paid, then their heirs will receive up to six thousand roubles, providing, of course, that the original bank deposit was not less than that. Now I’d like to draw your attention to the rate and volume of these payments. In 2001, and even in 1999, when I had just begun work as Prime Minister, the budget allocated 2.2 billion roubles to these payments. In 2001, this was increased to 6.7 billion, and then to 16 billion in 2002, 20 billion in 2003, and we plan for 25 billion in 2004. These payments will continue and the government is now looking at how to optimise this work in the future.

“There is a lot in the press about how big financial flows are leaving Russia. What is being done to prevent these capital outflows?”

There are flows of capital leaving Russia, and quite sizeable flows too. We need to differentiate, though, between two types of capital outflow: criminal and legal. Criminal capital outflows are subject to criminal and economic liability.

But as we all know and has been said so often before, hundreds, even thousands of people think up laws, but millions of people think of how to get around them. This is why the government is always coming upon new ways that have been dreamt up to take capital out of the country. One such way is the provision of fictitious services. Last year, $9 billion worth of such services were provided, but experts say that in reality the Russian economy could have exported no more than $2 billion worth of services. A law has been passed to deal with this and will come into force on January 1, 2004. This law will make services exported abroad subject to VAT. I hope that this economic measure will make a difference in preventing the outflow of capital.

I also want to mention another very important and essential point. After all, to prevent legal capital flight and even part of the criminal outflow, all we need to do is create more favourable conditions for investing in our own economy. That is the main general solution to this problem.

In this respect, we are seeing some positive results. I say the word ‘some’ with caution, though we have actually had quite good results. Investment in fixed capital came to only 2.6 percent in 2002, but this year it is 11.2 percent. That is still not a high figure, but it represents a serious increase compared to last year. Capital flight is decreasing. In 2000, when I had just been elected President, the figure was somewhere around $24 billion-$25 billion, but in 2001 it was down to $16 billion, in 2002 it was $8.2 billion and for 2003 it should be around six-seven billion with a sharp decrease for the fourth quarter of this year.

“Does it make any sense to raise pensions if prices for everything immediately rise as well? Who is responsible for regulating these things?”

This question from Vladimir Adamov is well put. There should be more state control over regulation of inflationary price and tariff growth. The government can and should take more energetic measures here.

As for pension increases, they will definitely continue, at least to keep up with inflation. But I want to point out that pensions are rising at a faster rate than inflation and prices. Inflation will be 12 percent for this year, while the real increase to pensions, taking into account all the inflationary processes, is 7 percent this year, and real wage growth is 11 percent.

“Vladimir Vladimirovich, can you imagine Russia without its small towns? If not, then what is being done to help them revive themselves? Amur Oblast, Chebanyuk.”

It is impossible to imagine Russia without its small towns. Almost half of our population lives in small towns. But to develop the small towns, we have to develop the whole country, develop its economy and provide support for small and medium-sized businesses. There have been hardly any questions about this today, but it should be one of the government’s priorities for next year and the coming years. Some steps have already been taken to improve taxation and reduce bureaucracy, but this is still not enough and more will have to be done soon.

Another important aspect of small towns’ development is the development of local self-government. In this aim, a whole series of documents delimiting powers between the federal, regional and local authorities has just been passed. This is being done in order to ensure that local authorities have the financing they need. I hope that this will make a considerable contribution to helping develop small towns.

“How is it that Russia can have so many talented and clever people, and not just among its politicians, but among ordinary people, and so many different natural resources, and yet we can’t reach the level of the developed countries?”

There is a similar question from Valentina Kuzmina: “Vladimir Vladimirovich, the participants in a round table on TV said that people in the West know how to work and people in Russia don’t and are used to freeloading. You have been to many different corners of our country. Do you agree with this view?”

No, of course I don’t. Various political figures at various times have had their word to say on this count. In one of his works, Vladimir Lenin, the founder of the Soviet state, said, “Russians are bad workers.”

Of course I do not agree with this view. People bring up this subject through whatever political considerations. But it must be said that there have always been restrictions in the Russian economy linked to lack of freedom. This was the case during the tsarist era and it was the case during the planned economy. You can’t have 80 years of a planned economy without it leaving a mark. Officials were used to being able to give everyone orders and the state was constantly and ineffectively intervening in the economy, and of course this has left its mark.

But at the same time, there where the new economy is beginning to bloom, we can see examples of modern entrepreneurship, modern business and labour organisation methods, and the results are excellent.

“Vladimir Vladimirovich, can the state do something to regulate the rise in price of bread? In our grain-producing region of Stavoropol one kilo of bread costs almost 12 roubles.” Dina Panova, Stavropol Krai.

This is an important and pertinent question. Last year, as you know, we had a record grain harvest and grain prices fell. This year’s harvest is not as good as last year’s, but it is still decent and sufficient for our domestic needs, but prices have risen nonetheless. They have risen on world markets too, and the people working in the agribusiness sector are obviously trying to make maximum profits.

There are various points of view and various approaches here. The liberal economists say that we shouldn’t meddle with the agribusiness sector and with agriculture and shouldn’t stop them from collecting the money they can get on the market by selling their goods today.

But there are also social considerations to take into account. Bread is a basic foodstuff and we cannot let its prices go sky high. This is why almost all the European countries and our neighbours in Kazakhstan are limiting grain exports. The government has already approved a decision to increase export duties on grain, and I hope that this will help keep bread prices down.

“Vladimir Vladimirovich, my son heard that your dog has had a big litter of puppies.” I already talked about this. “Please, send a letter explaining that this is impossible.” That is, giving a puppy as a present.

No, it’s not impossible, but I would just have to know first into whose hands this puppy would be going. We will discuss this separately. I’ve put this Internet message aside.

“People have got into trouble for calling you last year. The local authorities make it impossible to get work. When will this situation end?” I won’t name the person who sent this question, or give his address.

I just want to say to you that I have received your message and the appropriate response will follow. I will get in touch with you.

“In my opinion, housing and utilities reform has been a failure.”

Well, we already discussed this today, and I already talked about what we should and need to be doing in this area.

“Do you have any of the prominent members of the Yabloko party in mind for the new government?”

I have already spoken on this subject.

“What is your view on the idea of a longer presidential term in office and on the possibility of running for office three or more times?”

My view on this is negative.

“Will mergers of Russian regions continue, and will their reorganisation follow the same lines as what is happening with the Komi-Permyatsky Autonomous District?” Vyacheslav Busygin, Komi Republic.

When the modern Russian Federation was formed, a lot of decisions were made regarding the independent existence of constituent regions in the form in which the federation agreement was signed.

But practice has shown that many of these regions are not economically viable on their own, and this has an impact on the lives of the people living there. The people of the Komi-Permyatsky Autonomous District and the Perm Oblast have decided to unite. This is the right decision and we will support it. But the Constitution rules that these matters fall within the competence of the regions themselves. If the people think this is possible, necessary and justified, then we will support it.

Sergei Dvoryaninov, Kemerovo Oblast: “Russia has developed so many kinds of new weapons, but why do they get sold to other countries instead of going to our army?”

I already answered questions on these lines when I spoke with the military people. Selling arms is a useful business that helps support our defence industry, and we will continue to compete for international arms markets. At the same time, we have a programme for re-equipping the Armed Forces through to 2005, and we are working on a programme for 2005-2015. We will carry out this programme. There are positive things going on now. We are modernising our space group for all branches of the Armed Forces and there is some progress underway in the navy and the air force. It would be good to see more. We will base ourselves on the country’s and the Armed Forces’ real situation and needs and on the possibilities the economy gives us.

“Are you really going to step down in four years time?”

First we have to make it through to March 2004, and then we can begin talking about the next elections in 2008. But I can already say that no matter how good the intentions and no matter whom the idea comes from, I am against violating the Constitution of our country.

“Do you have an agricultural development programme, and what is its main substance?”

I have already tried to answer this question in various ways, but I will nonetheless try to give a brief answer to A.N. Krayev, a student from Tyumen Oblast. What does policy in this or that area of the economy consist of? It includes budget policy, tax and customs policy, tariffs, social policy, insurance, in this case insurance for crops, and price regulation, which I already spoke about.

I imagine there are people out there who would argue with the last point, but overall, we are forced to have a certain amount of regulation, at least of basic prices for basic foodstuffs. So, what is being done for agriculture? As I already mentioned, the federal budget is allocating 20 billion roubles in support for agriculture with another 30 billion coming from regional budgets. This will continue.

Then there is tax policy. I want to tell you that from January 1, 2004, the Law on the single agricultural tax will come into force. Somehow this news seems to have slipped our attention. This law will introduce a simplified taxation system for agriculture and will reduce the tax burden on the sector several-fold. I think this marks a serious step forward.

We will continue to subsidise bank lending rates for work linked to the harvest and we will support leasing of agricultural equipment and so on, and we will continue the policy of quotas for imported agricultural products, but within reasonable limits so as not to push up the price of foodstuffs on our market.

Question: What are your expectations for the New Year?

Vladimir Putin: Well, this is a traditional and natural question for this kind of occasion.

I think that in such cases we should also ask ourselves another question. We are all expecting something from the state, but what do we need the state for?

There are plenty of different potential answers to this question. I will try to formulate my answer and hope that it will be understood by most of our listeners and viewers.

What we hope for from the state is that it will make our lives more prosperous, more secure, both at home and abroad, so that we can feel ourselves a part of world civilisation and at the same time preserve our national and cultural identity, and we want the state to provide for the future of our children.

How can we achieve this and through what means?

Various countries have achieved this through different means at different times. But there are some basic elements that must be firmly in place if the state is to reach these objectives. What are these basic elements and what should the state do first?

In the modern world, the first thing the state must do is ensure the rights and freedoms of its citizens, because without this it is impossible to do anything. These are not just abstract words for Russia.

While on this point, we can’t let anyone and everyone start abusing these basic terms of democracy to pursue their own clan interests. Nonetheless, strengthening democracy is something that is having a practical application in Russia already and will do so next year too.

Here I am referring to the recently passed Law on Political Parties, Now we have just had parliamentary elections and we have a unique situation in our modern history when we can create a functioning multiparty system with a powerful centre-right flank and a centre-left flank represented by, say social-democratic ideas and their supporters and allies on both flanks or marginal parties and groups. This has become a genuinely feasible objective in the near perspective.

Of course, we can’t do anything unless we achieve effective economic development, as I already said. In this area we have very concrete objectives. I won’t go into the figures here, they are available and are easy to obtain for anyone who wants a closer look. Our objectives include raising wages, raising real incomes and pensions and so on. We have also set an economic growth rate objective of around five and a bit percent, not including surplus revenues from oil prices.

But this is not the only question. The real question is that we need to cement in place these basic elements that will get our country working effectively today and tomorrow. What are these basic elements?

We need to continue tax reform. We need to reduce the tax burden on the economy. We have planned concrete measures from January 1, 2004. First, we will cut VAT by two percent and bring it down from 20 percent to 18 percent. The 5-percent sales tax is being completely abolished. In this respect, the big retail chains have promised to lower their prices as from January 1, 2004. We shall see how they go about keeping their promise.

But we also need to resolve a number of other questions. Namely, we need to pass amendments to the Tax and Budget Codes so as to enable the previously passed laws dividing powers between the federal, regional and local authorities to go into effect in full. We need to bring order to this area. I hope that people then will start to see a better quality of services provided in their regions. This is one aspect of creating the basic conditions necessary for providing people with better housing and utilities services, better education and medical services. We have concrete plans and they can and must be implemented.

There is also the very important set of questions concerning improving the way we use our natural resources. We need to enact a Water Code, a Forest Code and laws on mineral use. We must put an end to the way our natural resources are just being sold off, and we must bring order to their use.

Finally, we need to begin full-scale administrative reform, but I won’t go into more detail now as a lot has been said about this already.

We also need to substantially develop mortgage schemes.

That is part of the list of economic objectives that we have set ourselves for 2004.

We will strengthen the Armed Forces, and I hope that this also strengthen Russia’s position in the world.

Finally, we should not ever forget the task that I set in the Address to the Federal Assembly, and that is the fight against poverty. As I already said, 31 million of our citizens have incomes lower than the survival minimum. Now the government is working and we now know how these 31 million people break down into categories, how many of them are working already, how many are able to work, how many of them are disabled or need particular care and attention from the state. We also know how much money we need to resolve this problem and how much time it will take. All we need to do now is to work hard and consistently and make all the effort we can, and we have everything we need to do this. I am confident that we will achieve our goals.

If the opportunity arises, we will continue the practice of this kind of dialogue and we will go through and analyse all the information that came in today either by telephone or through direct address or via the Internet.

I must say that this is very important information for analysing the real situation in the country, and this information will be studied and taken into account in our practical work, both at presidential level and at government level.

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