President of Russia Dmitry Medvedev: Igor Ivanovich, you are going to tell me about the work that you are doing to overcome the problems that we are facing, important work which is also routine, but I would like to begin the conversation by bringing your attention to a topic that we discussed during the meeting with our legislators.
As you recall, last week, there were discussions with leaders of the legislative assemblies of federal subjects about a list of businesses approved by the Government, and what happened after those companies got on this list, meaning, what they got, what they were unable to get, and how we will work with this list in the future. Please tell me about it.
First Deputy Prime Minister Igor Shuvalov: Dmitry Anatolyevich, on December 25, 2008, we published the list of strategic companies on the Government website, having conducted preliminary consultations with subjects of the Russian Federation, the branch ministries, and the Presidential Executive Office. This list includes 294 companies. We are calling this the List of 295, because we designated all companies in the defence industry as one unit. We have a special kind of work in this direction, which I will be telling you about.
Dmitry Medvedev: So in fact, we do not have 294 companies plus one, but rather, many more?
Igor Shuvalov: We have over one thousand.
And so, along with the Commission on Increasing Sustainable Growth in the Russian Economy, we have created two interdepartmental work groups. One group deals with the list of strategic companies, and the second group deals with companies in the defence industry.
(Next, Igor Shuvalov told Mr Medvedev that 26 applications from strategic enterprises have already been reviewed, and that for each application, the following is taken into consideration: plans for financial enhancement, the creation of new jobs, social support for laid-off workers, personnel training, and applications for providing state guarantees for receiving loans, restructuring back taxes, subsidising interest rates, and allowing various payments to be made in instalments. These 26 companies applied for state guarantees worth over 350 billion roubles [about 10 million dollars].
After reviewing all the materials, the interdepartmental group recommended that six companies be given state guarantees worth 47.5 billion roubles [about 1.4 billion dollars]. In Igor Shuvalov’s words, this support is only possible if those measures are truly necessary and if the company is willing to accept many measures to increase its competitive advantage.)
Dmitry Medvedev: The companies that will receive 47 billion in state guarantees, when will they be able to start taking out loans? When, in fact, do you plan to grant them the guarantees?
Igor Shuvalov: The Ministry of Finance is already processing guarantees for under five billion roubles. We are reviewing guarantees for over 10 billion roubles at the meeting of the commission. For example, we have made a decision regarding the GAZ company, a decision that the guarantees must be conditional – in this case, if the creditors agree on unified conditions for providing the loan resources. That is why we are working with state-owned banks and private banks. The Minister of Economic Development informed us at the end of last week that those agreements have been received.
Dmitry Medvedev: So these are feasible conditions for how creditors must be in agreement?
Igor Shuvalov: Yes, these are feasible conditions.
Dmitry Medvedev: This is not a method for refusing to provide guarantees in practice?
Igor Shuvalov: It is not our goal to turn down those seeking guarantees. Moreover, all the experts that analysed the program of financial rehabilitation, including this enterprise, feel that this is one of the best programmes, and that the company has a chance to survive. But we feel that would be wrong, in the current climate, to provide some of the creditors with better conditions for debt restructuring. That is why we are doing this work jointly with banks.
Dmitry Medvedev: I am just thinking about how in this situation (of course, I do not know the details), any creditor can block even the smallest agreement of this kind.
Igor Shuvalov: You are right, Dmitry Anatolyevich. Indeed, we have faced these types of difficulties. Some private banks currently hold a very tough position. But we feel that this is one of the directions in the work of the commission. We must work with all of the creditors, to organise them into a kind of club, in order for the company to be able to see prospects for survival and establishment of a completely different business structure. But at the same time, loan organisations should also be able to see that the loans which are currently problematic for them will be returned at a concrete time. At this time, the companies cannot fully repay the loan, but they have a clear plan for when that debt will be repaid, and are committing to doing so.
Dmitry Medvedev: In this regard, I would like to return to what I spoke about in Irkutsk at the extended session of the State Council. First, regarding the state guarantees themselves. I recalled the story of how they came to be. We first came up with this idea October of last year. In December, the Government released the corresponding resolution. Today is the 16th of March, but as far as I understand, we have not yet given out a single state guarantee. We need to do all of this more quickly, because otherwise, we risk halting production. In this case, I am referring to the companies for which you have already made decisions.
I am not saying that we should just give these government guarantees out – God forbid, we should not do that, because we must really help those who are ready to restructure their work in effective ways, those who are ready to make compromises, etc. Nevertheless, we should move more quickly for those companies. That is my first point.
And my second point is what I just said regarding how a given participant in the credit market, such as a creditor or banking organisation, has an influence on the situation in industry and manufacturing. I already spoke about this, and I would like to say it to you again: a situation in which any organisation, even one that has a lawful set of demands, whether big or small, is able to stop the work of a large holding company is unacceptable. I spoke about it then and suggested applying the power of government coercion in this case.
If you want, you can change the legislation, or if you want, you can work on a case by case basis, but we cannot sacrifice the fate of entire companies and the jobs of thousands of people in order to satisfy the ambitions of individual credit institutions. We need to pay attention to this. It is time to end corporate egoism. Please pass this on to our colleagues. If they do not understand, then we will look at this problem from a different angle. I remind you that I spoke about this in Irkutsk, and now we must act.
Igor Shuvalov: Dmitry Anatolyevich, we will act thus, based on your instructions. When we hold talks with banks, we remind them of the support offered to the banking sector, which is without precedent in our country.
Dmitry Medvedev: Absolutely.
Igor Shuvalov: We understand the difficulties that banks are facing, and we are responsibly taking all measures in order for the banking sector to get through these difficult times without perturbation. But from our end, we count on the banks to provide credit resources on different terms, especially if the borrowers have a clear crisis management strategy.
Dmitry Medvedev: Yes, that is why last week, I said that the Government has been able to deal successfully with the tense situation in the banking sector. The banking system is currently working; it is working fully and normally, and it should appreciate that.
Igor Shuvalov: Very well, that is how we will proceed.
Now, regarding defence industry enterprises. 81 such companies have had applications reviewed by the interdepartmental group. And thanks to the work of this group with state-owned banks, 50 companies received loans totalling over 70 billion roubles [2 billion dollars]. We also looked at measures of government assistance in the form of state guarantees, and for eight companies, we have already made decisions to give guarantees totalling over 26 billion roubles [750 million dollars]; those are decisions which have been made and are being implemented.
(Next, Igor Shuvalov talked about the credit resources given to those companies by Sberbank (Savings Bank of the Russian Federation), Vneshtorgbank, and Vnesheconombank. In total, the credit resources that were provided to organisations on this list were enormous: over two trillion roubles [about 60 billion dollars] just to those organisations.)
Overall, I can say that over the past 2 months, the situation has been changing for companies that submitted these applications to the Government. Various social programmes are being implemented, including programmes for professional re-training. I hope that these measures of government support, including state guarantees and the solid resource of state-owned banks that is being offered, will help to stabilise the situation.
Dmitry Medvedev: But since you have started talking about companies in the defence industry, I would like to emphasise that government contracts need to be processed more quickly. Because the fact that government defence companies take out large loans is good, but at the same time, we understand what the price for those loans is today, we know their interest rates. They are all complaining about how it is all so expensive, and naturally, that it would be better for them if they were to start receiving financing within the framework of government contracts, but that option is still not open to many companies. That is certainly partly due to the changes to the federal budget, which will be approved very soon, but I am talking about the fact that we need to replace loan money with financing within the framework of government orders more quickly. This is a very important part of the Government’s work.
Igor Shuvalov: We will do that, Dmitry Anatolyevich. And this week, we have already planned a Government meeting with key ministers to discuss the organisation of work on contracts within the 2009 budget, and conduct the work on awarding contracts in the most effective way possible. We are beginning this work actively this week.
Dmitry Medvedev: That needs to be done immediately, because the money for those needs is already allotted.