OREANDA-NEWS. February 20, 2009. V.V. Putin:   Vladimir Alexandrovich (addressing V.A. Dmitriev), at the end of the last year we introduced an amendment into Vnesheconombank’s Memorandum on Financial Policies. Earlier the Bank’s priorities did not include support for agriculture. Now it is in place. I know that there are many interesting projects in the Bank’s loan portfolio. Suffice it to recall the Rostov region, the Orenburg region. Here I mean production of poultry in both regions. In the first case the project is worth 100 million euros, in the second one – about 30 million dollars. In Ramenskoye of the Moscow region they have a good project to construct a milk-processing complex and in the Tambov region - a project to construct a beet-processing factory. They have also a good project in Omsk. The Bank’s loan portfolio for agriculture is 60 billion rubles.

Today, I would like to talk in more detail about how these projects are being implemented and about each project’s prospects. And how do you assess potential results of this line of activity?

V.A. Zubkov:   Vladimir Vladimiovich, in fact, with a view to increase the production of agricultural products, foodstuffs, last year, we discussed a number of top-priority projects and we approved them at a meeting of the Commission for the Development of Agricultural Complex. You’ve already mentioned some of them. I would like to dwell on two projects that are highly instrumental in providing people with quality products.

Three years ago, a state-of-the art turkey meat production complex was built in the city of Shakhty of the Rostov region. This meat is in high demand among people – it is highly nutritional but it is in short supply on the market. For this reason, a project was developed, which was approved at a meeting of the Commission for the Development of Agricultural Complex. Vnesheconombank was right in making a decision to finance the project in order to increase the production of turkey meat from 20 to 30 tons. Moreover, despite the fact that we used to import turkey eggs for this complex from abroad, now a decision has been taken to produce eggs at the complex and then raise poultry thus completing a closed production cycle. This is a very good project. I think it would help to stock our food stores with quality products.

V.V.Putin:   Are regional budgets allocating funds working with us? Are they involved in co-financing ?

V.A. Zubkov:   Yes, they are. The second project I would like to discuss is aimed at building a beet-processing factory in the Tambov region. In fact, a lot of beet is produced in the Tambov region. For this reason, we discussed an issue of building a beet-processing factory at a meeting of the Commission for the Development of Agricultural Complex. Basically, Vnesheconombank made a decision to start the construction of the factory this year. The Tambov region Administration is taking an active part in this project and it is co-financing it too. In our opinion, this project will be of great importance both for the region and Russia as a whole because the factory’s capacity will be 9 tons of products per day. This is going to be a very good modern factory and it will enable us to substitute imported sugar. Nowadays, we have to import sugar and so we sustain huge losses. It is a very good project and we believe that it is a very effective investment of capital. This product will be delivered to our food stores.

V.V.Putin: Vladimir Alexandrovich, recently we have taken a decision on the additional capitalization of Vnesheconombank and on extending a long-term subordinated loan. Could you tell us how Vnesheconombank is working with the real sector of the economy and let’s talk today about agriculture.

V.A. Dmitriev: Projects related to agro-industrial complex account for about 60 billion rubles in Vnesheconombank’s loan portfolio. All the projects have been agreed upon with the Commission for the Development of Agro-industrial Complex headed by Victor Zubkov. To my best knowledge, in total, we have 866 billion rubles of agreed investments to be provided by major Russian state and commercial banks.

As far as Vnesheconombank is concerned, we, of course, intend to step up our cooperation with agro-industrial complex with due regard to the fact that since the end of the last year, as provided for in the Memorandum on Vnesheconombank’s Financial Policies, agriculture, became one of core lines of our activities, one of our main sectoral priorities.

Victor Zubkov has mentioned the turkey meat production project in the Rostov region, in the Orenburg region they have a broiler production project. You were absolutely right in asking a question about local authorities’ participation in co-financing these projects. Both projects received National Project Status. With this Status, the projects enjoy subsidized interest rates and are provided with infrastructure to be built with the use of funds from local budgets and by infrastructure I mean heat, power and water supply and road construction.

I would like to draw your attention to the fact that in its credit and investment activity Vnesheconombank places much emphasis on introducing advanced modern technologies in agriculture. In this respect, I would like to mention a project, which is being implemented by the Group “Titan- Agro” in the Omsk region in the total amount of 200 million rubles. This is a project aimed at creating a bio-chemical cluster with closed cycle production. Closed cycle feature of this production facility means that it is going to be a waste-free production process. One of its end products will be bio-fuel. This project is one of the most advanced one in this sector. The company is not starting from scratch; it introduced a similar project in Kazakhstan, which was supported by the country’s leadership. So, we can see that this sort of projects aimed at introducing the most advanced modern technologies in the agro-industrial complex are spreading around our country’s territory.

V.V. Putin: Victor Alexeevich, Vnesheconombank is far from being our leading financial institution responsible for agricultural sector, although this line of VEB’s activity is one of its priorities as provided for in the Bank’s Memorandum. Nevertheless, we established a specialized agricultural bank several years ago. Other banks are also involved in this activity. It’s mid-February now and spring- field work is close at hand. In some regions they are practically getting down to it. In the most immediate future we have to assess the way we have prepared for spring –field work – directly on the ground and financially. I would like you to prepare a comprehensive, relevant report in the near future.

V.A. Zubkov: I can tell you about our leading bank, namely, Rosselkhozbank, which was additionally capitalized last year, and this year the Government has contributed another 45 billion rubles into the Bank’s charter capital. In order to fund spring-field work, since the beginning of the year, the bank has already provided the real sector of our economy, the agriculture sector, with 58 billion rubles in credits, which are already being used for purchasing mineral fertilizers, diesel fuel, seeds and other required resources. We are exercising control over this activity. Moreover, you ordered to hold a special meeting of the Government at the beginning of March to discus issues of preparations for spring sowing. At the moment we are very active in working with ministries and departments discussing issues of providing mineral fertilizers, fuels and lubricants for spring-field work and we are discussing not only volumes but also prices. I think that at a meeting of the Government, these issues will be dealt with properly and fully and that this year spring-field work will be performed in an organized and timely manner. And this is going to be a guarantee that this year’s harvest will be good.

V.V. Putn: Let’s discuss all these issues at a meeting of the Government in early March.