Transcript of Meeting on Siberian Federal District’s Social and Economic Development 2009-08-24 23:27:02 Ulan-Ude, Buryatia President of Russia Dmitry Medvedev: Colleagues, This was a planned meeting, a meeting we scheduled to discuss the Siberian Federal District’s social and economic development. We all realise that special circumstances have now arisen. Aside from the economic crisis, which has had a serious impact on economic growth, the tragic events at the Sayano-Shushenskaya Hydroelectric Station have added to the region’s problems. Along with the issues we planned to discuss today, I also want to discuss with you the consequences of this accident, in the context of the work the Government is already carrying out on my instruction, and if need be, we can make the necessary adjustments to its efforts. We will discuss today the key economic tasks in the Siberian Federal District. I think that despite the current difficulties, we need to look to the future, look beyond the crisis, all the more so as most countries are already looking ahead. It is too early to say yet just how things will develop, but there are a number of optimistic signs in the global economy that at the very least force us to think about how to be ready for changes in economic life. One of the most important items on our agenda today will be to clarify the future of big investment projects that for whatever reason, mostly due to the crisis, have either been frozen or are in a suspended state. This requires us to establish a realistic picture of the situation and make the appropriate changes to our plans. Essentially, what we need to do is draw up a road map for the Siberian projects, taking into account the crisis and also new problems that have arisen. And we need to set the final deadlines for carrying out these projects and form a clear picture of what direction our development will take. But before turning to energy supply in the region and other matters, I want to come back to the situation at the Sayano-Shushenskaya Hydroelectric Station. What happened is an unprecedented accident in terms of scale and consequences. Most tragic of all, of course, is the irreplaceable loss of human lives. I would like once again now to express my condolences to the victims’ families. The Government will have to pay particular attention to this issue. A number of decisions have already been taken regarding assistance for the families of those killed and missing. We have held consultations on this matter. The Prime Minister held a meeting at the accident site itself on compensation payments and the various legal issues involved. In any event, these government decisions have been taken, but we will ensure that they get higher legal force, that is, that the necessary presidential orders and Russian Federation laws will be used and all necessary assistance will be provided. On another issue regarding the accident, no matter what this tragic event’s causes – and they are still being investigated, I have instructed the Government to examine everything that took place, and the Government has passed on these instructions to the relevant agencies – what happened is a reminder of some very serious things that, unfortunately, we all too often forget, namely, that Russian industry’s safety and infrastructure control systems require the very closest attention. In a number of cases this infrastructure is no longer effective and requires urgent modernisation, otherwise we will find ourselves paying a tragic cost in the future. There are other problems that everyone, industry bosses and the regional heads, know very well. I am referring to problems with workplace discipline and workers’ qualification levels. We should be frank in recognising that the human resources potential that we built up over the Soviet period has been lost over these last years. Many people have retired, and young people have either left to seek work elsewhere, or are no longer coming to these areas of industry. This makes the issue of workers’ qualification levels a top priority. Of course, we need to decide today how to redistribute energy flows. The Government is working on this, but whatever the case, we need to organise effective electricity supply management within the common energy system. It is important to maintain sufficient capacity in the electricity transmission lines, and take into account too the importance Kazakhstan now takes on in maintaining the common energy supply following the accident that has taken place. This is a complex matter and we will need time to see just how everything is going to fit into place. We have patched up the holes in the supply system for now, but the real test will come with the winter period, and it is how we perform then that will be crucial for deciding many issues. We need to toughen oversight of the technical state of electricity stations and energy networks. Companies’ infrastructure is in need of serious modernisation. We need to draw up and organise special accident control operation procedures. The Federal Service for Environmental, Technological and Nuclear Supervision and the Energy Ministry have already received the instruction to carry out a review of equipment at all of Russia’s hydroelectric stations. This needs to be done within the set deadline, and the results of these inspections should form the basis for making responsible decisions, even if they are painful decisions. Still on the subject of electricity, I want to say a few words about prices. We just visited one of Ulan-Ude’s biggest enterprises, an airplane and helicopter manufacturer. There too, people see electricity costs as the main issue. Why, because this is an issue that worries everyone, not just companies, but ordinary people too. They see what a mixed bag the situation is, with a kilowatt of electricity costing so much in one place and so much in another. Of course, the tragic accident at the Sayano-Shushenskaya Hydroelectric Station has people worried about the impact it might have on their finances. In this respect, we need to make carefully thought-through decisions regarding electricity price rates and the anti-monopoly regulation system in general. I hope that all of the different players on the market will keep the need to be reasonable in mind and not let opportunities for short-term profit guide them. We cannot accept an unjustified rise in electricity costs. I have already given an instruction on this matter to the Government. There are also other issues in need of urgent resolution. A number of regions are experiencing serious fuel and energy shortages, and we must take this into account in our energy supply plans for Siberia. The next subject is one of the planned items on our agenda, namely, the effectiveness of the anti-crisis measures being implemented in the region. The situation remains difficult and there are still serious problems on the labour market. I discussed these matters just now with the President of Buryatia, and I have discussed them on various occasions with other colleagues present today. Registered and actual unemployment are on the rise. This is a problem affecting the whole of the Siberian Federal District. Wage arrears are also on the rise overall. This obviously arises from the fact that we did not succeed in building a balanced labour market in the region. Efforts were made in this direction, and in some regions they have produced some decent results. Unemployment has been held in check and we are learning to better manage the employment situation and learning at least in part how to manage the wage arrears problem. But there are numerous other issues to address too. The use of foreign labour also has a part to play in the employment situation. The regions have an interest in a number of cases in obtaining foreign labour quotas, but this all needs to be closely coordinated because it is a very sensitive issue. Our people are watching very closely any cases in which companies lay off our own workforce but bring in foreign workers, even in cases where this makes sense. They are anxious to ensure that their own interests are protected. This is a complicated process and we have to learn how to manage it well. Formation of the regional budgets is another important issue. I will not repeat the words you have already heard from the Government, the Finance Ministry and other agencies, but the issue of financial discipline has to be at the fore today. The executive authorities in the regions need to be fully aware that by increasing our budget deficit we are increasing our debt, and we need to think about how we are going to pay off this debt in the future. Another subject of particular relevance for the entire Siberian Federal District is that of environmental problems. Our top priority right now is to do all we can to minimise the environmental damage caused by the accident at the Sayano-Shushenskaya Hydroelectric Station. The Ministry of Natural Resources and Environment and the Ministry of Emergencies have already received instructions in this respect. The situation is problematic in the Siberian District in general. There are areas where major industrial facilities, unique industrial sites, are right next to equally unique natural sites. This is a particular responsibility for the regional authorities. We also have concerns regarding our neighbours’ economic activities. We should not hide our heads in the sand, but need to speak as partners with them about these issues. We have a high level of cooperation and strategic partnership with China. I think that we can discuss these subjects with them in open and constructive fashion and not keep problems under silence. After all, if anything does go wrong, the consequences would be far worse. Another matter that the Government is working on in the medium and long term is the future of the Baikal Pulp and Paper Mill. I hope to hear today what exactly is proposed in this respect. I will not go into detail on this matter now, but I do want to hear a few words about the situation and about a decision that will affect the lives of tens of thousands of people. There are social sector problems to address, above all regarding the state of social infrastructure facilities in the Federal District. Funding for some of these facilities’ day-to-day operation comes from the federal budget, and also from the regional budgets. For those financed locally, the state of social infrastructure facilities in the regions is a problem. This concerns healthcare facilities for the most part, but other facilities also have their problems. This situation is aggravated by the fact that sickness levels in Siberia are considerably higher than the national average, and this includes the so-called social illnesses (this is an issue I also discussed just now with the President of Buryatia), and also a number of complicated diseases such as cancer. Unfortunately, each of our regions has moles of its own that can later turn malignant. This then is our agenda. Of course, the subjects I have named are not an exhaustive list of the problems and prospects. The picture is not as bleak as I have just painted it perhaps. But our job is not to go through all of our victories, but to speak openly with each other about our problems and take the responsible decisions that it is the job of the President, Government and regional authorities to take, or at the very minimum, at least propose solutions to these problems. Of course, there is a whole series of instructions that I will sign following the meeting. I think you will add to this list, and we will come back to it. Let’s begin our work. Given what has happened, I think we should hear a brief account from Mr Shoigu, the minister of civil defence, emergency situations and disaster relief. Minister of Civil Defence, Emergency Situations and Disaster Relief Sergei Shoigu: Mr President, colleagues, What we could call the biggest technological disaster of these last 25 years, caused considerable damage to the station’s turbine hall, which has a total area of 1,200 square metres, leading to the failure of ten generators, releasing turbine oil into the Yenisei River and the turbine hall, flooding the generating facilities and shutting down the hydroelectric station. Rescue workers have rescued 14 people and found 69 bodies under the rubble. The bodies of six people are still missing. The accident has disrupted energy supply and the operations of a number of Siberia’s biggest metallurgical plants and there was a real threat of disruption to normal operation of other economic and social sector facilities. It was only swift organisational and technical measures that enabled us to keep the power supply running to consumers, reduce the scale of the economic and environmental damage, and prevent panic from spreading among the population. An anti-crisis management group was set up rapidly to deal with the accident. Two-and-a-half-thousand people and more than 200 vehicles, including 11 aircraft and 15 aquatic vessels, are involved in the cleanup. Emergency Situations Ministry fire-fighting and rescue units have dismantled and removed from the site more than 5,000 cubic metres of material, pumped out more than 160,000 cubic metres of water, and put in place more than 8,000 metres of oil spill containment booms. Transneft and Emergency Situations Ministry specialists have collected more than 150,000 tons of oil-containing emulsions. Work has been organised to keep the population informed, provide psychological counselling to the families of those killed and injured in the accident, and compensation payments are being made to the families of those killed or missing. Emergency Situations Ministry aircraft have made 293 flights to neutralise oil products in the Yenisei River, spraying more than 200 tons of active substance to coagulate the oil slicks over an area of more than 1,000 square kilometres. The operation is drawing to a close at the moment. By August 26, the Emergency Situations Ministry units will leave the site and hand it over to units from the Ministry of Energy. That is a brief summary of our work over this last week. I want to add to the above that there are a number of questions I think we need to sort out, and we ask you to give the according instructions. The first of these questions concerns Law 94 on bids and tenders at potentially dangerous sites, especially sites that could potentially threaten normal life and activity in a region. I think this law should be tougher and impose stricter regulations on the selection of companies working at such sites, especially those involved in ensuring these sites’ safe operation. Dmitry Medvedev: Am I correct in understanding that you said this so cautiously, since this is not an easy subject to discuss, because you think the usual tender procedures are not sufficient? Sergei Shoigu: I will try to explain what I mean with a simple example. When we want to build a nuclear submarine, the question does not arise as to who is going to do it. We don’t ask ourselves this question. We know that there is a company that works in this business from start to finish, designing the submarines, building them, and taking into account all the safety issues. The same should go for our big hydroelectric power stations, nuclear and thermal power plants. If we take the case of the Ulan-Ude thermal power plant, for example, where a critical incident in 2008 could have left 180,000 people without heating in minus 36 degree cold, companies that have absolutely no record to recommend them win tenders for safety systems. In other words, talking about the dam, there is a system that guarantees… Dmitry Medvedev: What I want to know is, these companies that win the tenders, what business are they involved in, exactly? Sergei Shoigu: In the case of the company that won the tender to install an automated control system at the Sayano-Shushenskaya Hydroelectric Station, it has no connection at all to power-generating machinery, to turbines, their production or design. Dmitry Medvedev: What is this company’s name? Sergei Shoigu: The company… Its name slips my memory… Response: Rakurs. Dmitry Medvedev: What is this company known for, other than what has happened now? Sergei Shoigu: I don’t know anything about it at all, and neither does the Ministry of Energy. I do not want to jump to conclusions about the final results, but I want to say that at this kind of potentially dangerous site, the company that made the machinery should also make the equipment designed to ensure its safe operation. That is the first point regarding this issue. The second point is that we request an instruction to have amendments made to Law 94 concerning all such sites. We need to be assured that these sites and their safety is in the hands of professionally qualified and properly trained people from companies with longstanding records of work in this area. This is simply essential in the case of facilities of such vital importance for life. In their case, going beyond the usual measures, taking extra steps to ensure their safety is justified. The second issue concerns stricter control over the reforms carried out in this sector. Let me explain what I mean. During the reform of RAO UES [Unified Energy Systems] fire-fighting and rescue units were done away with at many energy installations. Of course, this has left large energy facilities such as thermal and hydroelectric stations without cover in this area. We counted more than 30 such facilities at the end of last year. The ministry then intervened and this number dropped to 17. But I can say that the moment a dangerous situation arises at any of these facilities, everyone realises all of a sudden that the fire-fighting and rescue units should be restored. The fire-fighting and rescue unit at the Ulan-Ude thermal power station was restored a week after the incident there, for example. They found themselves facing danger, namely, a fire, and a week later the unit was back in place. Dmitry Medvedev: Who owns the Ulan-Ude thermal power station? Response: TGC (Territorial Generating Company) 14. Dmitry Medvedev: TGC 14? Sergei Shoigu: This concerns not just the Ulan-Ude thermal power station, but also a number of other sites around the country. What I want to propose is that you issue instructions on amending the laws on safety, and no doubt a number of technical regulations too, so as to guarantee that any reforms carried out make safety their top priority. All too often, when reforms are carried out, people try to save money on fire-fighting and rescue teams, safety equipment, alarm systems and much more. I think this is simply unacceptable. We probably either need to change the law, or issue some kind of separate instruction. Dmitry Medvedev: As far as amendments to the law are concerned, I said at the start that any amendments to laws or bylaws that need to be made will definitely be done so, and I have already given this instruction to the Government. The Presidential Executive Office will have to work together with the parliament on drawing up amendments, if they are needed, to the general laws and specific laws on safety and the relevant technical regulations. Unfortunately, until something tragic happens, no one lifts a finger. This is a national habit that has become a real problem and costs us very dearly. As for Law 94, I do not know whether changes should be made to the law itself, or some other way be found, but the selection criteria for companies working on such things should be as stringent as possible. This does not mean that only big companies with decades of experience should win every single tender, but if a company with no track record on the market wins the tender, the person who signs the tender decision should either be ready to answer with their own head that it will perform no worse than well-known players who also made bids, or should not accord contracts to such companies at all. As for this specific case, the investigators will have the final word. * * * Energy minister Sergei Shmatko: To begin let me just cite a few figures on the role of the Sayano-Shushenskaya plant in the electricity sector. In 2008, a year with little water, it generated 9 percent of all electric power generated in Siberia, 18.6 billion kilowatt hours. We must bear in mind that the power plant also fulfilled the important function of acting as a back-up for 20 to 40 percent of the necessary power in the event that thermal power in Siberia’s integrated power system experienced a failure. During the shutdown of the Sayano-Shushenskaya power plant in Siberia (very briefly, perhaps, but it nevertheless happened) there was an imbalance of power measuring 4,200 megawatts and the outgoing power lines were shut off. To maintain a stable regime for emergency alternatives, 1,000 megawatts destined for consumers were not delivered. In addition, because the 500 kilovolt power lines were disconnected, this diminished output to major energy consumers in the Republic of Khakassia by 1,500 megawatts. To speed up the reconnection of major consumers following the power outage, temporary restrictions of 840 megawatts were imposed in Western Siberia. We gave the instruction to urgently make all remaining energy reserves, amounting to 4,500 megawatts, available. I would like to emphasise that already by 4pm August 17, all restrictions that had been imposed were removed. And by the end of that day the entire amount of alternative energy resources was being deployed. What situation do we have today? The amount of backup power at power plants has been reduced significantly, by 5,000 megawatts. To have a stable transition to the autumn-winter period of 2009–2010 we must arrange for additional fuel supplies for thermal power plants in Siberia. I would like to report that all of this work has been completed. We calculated that the approximate amount of additional fuel required is 6.5 million tonnes of coal. We have already organized the necessary cooperation with the Ministry of Transport and Russian Railways to determine the schedules for the transport and delivery of rolling stock. The Prime Minister already gave the appropriate instruction and this work has been organised. (Then Minister Shmatko reported on prices in the electricity market. It was decided to smooth prices by introducing an upper limit to potential price increases. A draft Executive Order is being developed. The Prime Minister gave an instruction concerning the possibility of government regulation in certain instances, in accordance with the Law on Electricity. Mr Shmatko also spoke about other issues related to the security of energy supply, problems linked with the shutdown of Sayano-Shushenskaya power station). What must we do in the near future? Oversee the transfer to the autumn-winter period, remove the temporary restrictions I already talked about, and ensure the normal supply of fuel to power plants. Monitoring the implementation of investment programmes by power industry entities that have acquired new property now plays an important role. Why? Because before there was much discussion about how in a crisis it is possible to change timeframes and possibly delay the construction of given facilities. But because of the current situation we have taken the decision to be much more rigorous regarding previously concluded agreements concerning the supply of power within the Siberian portion of Russia’s Unified Energy Systems. We will complete this work. Dmitry Medvedev: This information is very important. First of all, I would agree with what Minister Shmatko just said: the transfer to alternative energy sources and generating the amounts of energy that were lacking following the accident at the Sayano-Shushenskaya power plant was quickly completed. That really did prevent unfavourable processes from developing. That is good. As for future work, in this respect and as was rightly just said, perhaps a key factor is the response time. If it is possible to imagine certain delays in decision-making in a normal regime, at present such delays could have very severe consequences. Therefore, all the structures responsible for this — the Government Cabinet and various companies — must work, in the first place, synchronously and, secondly, as responsibly as possible. This is simply the duty of those working there. Naturally, everything else should be rigorously monitored. Of course, as I said in my opening remarks, any unjustified rise in electricity costs is unacceptable, and because of this the decision we took to generally regulate prices is justified. But we must not react to this situation in such a way that it hits back at us from the other side, so to speak: it is the responsibility of the Ministry to follow closely all processes that occur. And finally, the last and most important thing. The interests of citizen-consumers should not suffer as a result of this accident. To ensure this we need to make every possible effort, and I directly told the Cabinet this, actually on the day the accident occurred when I signed the relevant instruction. This is the most important thing. * * * President of Russia Dmitry Medvedev: Now, I would like to conclude with just a few remarks on certain issues that I have not yet commented on, but which I find important. A note regarding personnel. Colleagues, governors, we have agreed that a talent pool should be set up in every region. I would like it to be an operating talent pool, rather than a formality before the Presidential Executive Office. Why is such a pool created? Definitely not for reporting to the Presidential Executive Office. A talent pool should be made of the people you personally know and actively promote. I can tell you that out of the presidential pool of managers I have already appointed nearly a dozen people to various positions. Let me know how many have you appointed. I would like to see such appointments. The next issue relates to university graduates and new personnel. If they graduate from a mining academy or some other university in St Petersburg or Moscow but are reluctant to return to Siberia, then I think this is a sign of defective policies, including those followed locally. I believe regions should make contracts with and pay tuition for local students in order to get at the end the specialists they need. Under such contracts, the graduates undertake to return to Siberia and work locally on the terms and conditions specified. Should they decline to do so, they shall reimburse their tuition. It is quite obvious that there should be contracted education. We no longer have assignment of graduates in the country. We all remember the days it was a customary practice when graduates, including ourselves, were just obligatorily appointed to Kuzbass or wherever else. Such practice is gone and will never be back, and the graduates these days can not be ordered to take the position they do not wish. But we certainly can use financial leverage. We should make contracts with prospect specialists on a condition they will repay their tuition in case they fail to honour the contract terms. Today, we discussed the environmental aspects relating to Lake Baikal. This is an ongoing, complicated issue. Still, I agree with the governors and business representatives who said that to a certain extent, we locked ourselves into a fairly difficult position. First, we made a lot of decisions, knowing beforehand they would be unenforceable; then, in accordance with our national habitudes, we did not bother to implement those decisions. This is a perfect illustration for a well known saying that the strictness of our laws is counterbalanced by their loose observance. I therefore believe that we need to review the statutes and regulations applying to Lake Baikal in order to separate the effective and beneficial statutes from the inexecutable and useless ones. Otherwise, their enforcement will only concern ecologists amid everyone else’s indifference with even prosecutors supervising environmental problems failing to make them work. Statutes must be enforceable and adequate to the current level of economic development and our ideas about Baikal’s future, they are not a mere mix of optations. I have to agree with Mr Deripaska and others that some recent amendments to the Forestry Code are not having their intended effect. Such opinion is also shared by large businesses represented here today, and small and medium-sized businesses, the people I have met. They all say that this document has led to confusion. So let’s be realistic and let’s think about ways to improve it. It is not a big deal. If we do something wrong, then let’s correct it. This is better and fairer than trying to pretend that a given law is being applied when that is not the case. And finally, after the accident at the Sayano-Shushenskaya Hydroelectric Station, there have been many apocalyptic comments both in our country and abroad. The synopsis of such comments is simple: it is a disaster, the beginning of Russia’s technological demise, the Chernobyl of the 21st century. Those who are not happy about seeing Russia within its current borders or are displeased with its role on the global arena are getting excited. However, we here understand that despite the tragedy of what has happened and despite the death of our people, all this is hooey. The only part that is true is this: our country is lagging technologically. This is not representative of a specific dramatic catastrophe, but rather, the fact that we really are very far behind, and if we do not step up to this challenge, then all the perils those people are talking about may actually come to be. Still, we have every opportunity to overcome our technological underdevelopment. Let me remind you that at the beginning of the 20th century, the majority of Russia’s population was simply illiterate, but we overcame that problem. We did not have electricity or national industries then, but we dealt with that, too. The challenges before us now are as difficult as those of the past, but we can see that today, we have a well educated society that has come to some advanced level of development. Thus, we simply need to roll up our sleeves and join our efforts – this applies to the government, to state businesses, and to private businesses. We should be together. This is not a time to put on airs or compete over who has more assets and who has done more for our nation, as the crisis has put us all on even ground. Private businesses have come to understand that life is not so simple, while government companies see that their opportunities are not unlimited. Only by working together, we can create a modern nation — the result we all expect. Thank you for participating in this meeting.