Yuri SHAFRANIK

Chairman Board of Directors Interstate "Soyuzneftegaz" Oil Company

1. There has been no growth of the resource base in Russia for a whole decade. There have been no major discoveries at all for ten years. It has never been that way in our history. This grievous fact (the depletion of the resource base progresses as talks about Russia's overwhelming wealth of natural resources continue) stems from the politics which undermines the future of the country.

Now it will take us another decade to start developing deposits in new resource regions, to make up for the lost time, and to restore the resource base for Russia.

2. Areal recovery of the Russian economics can materialize via real projects only. There is no other way. The decumulation and redistribution of the Soviet inheritance, a process in which we got engaged, actually lead nowhere. Direct investments in new projects are necessary, and it does not matter (in this

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particular situation) where these investments come from and whether they are Russian or foreign. Currently, there is a lot of money in the country, really a lot. The Government can mobilize these funds quite easily (it is a matter of will). We are ready to provide the necessary guarantees to foreign investors from the West and from the East in order to incline major foreign and transnational companies to take part in our strategic projects.

Naturally, Russia and the Russian capital must keep full control of the preparation and the implementation of the most important projects.

3. President of Russia designated a number of national projects. These projects are of a predominantly or even exclusively social character. To prevent their turning into a mere disbursement of money and triggering inflation, we must add economic projects based on direct investments.

Mobilization and order are necessary for massive strategic projects, especially those carried out in the framework of the international cooperation. These projects (but not deposits) must be classed into international, federal, and regional depending on their economic significance. At present, we don't see such classing.

The Government must create special conditions for every project. If we intend to talk to strategic international investors on serious terms, the conditions of work in these projects should be stable. They must not change every year. Therefore the conditions established by the executive authority should be backed by the corresponding Parliamentary legislation.

4. The development of the territories and resources of the Russian East requires a complex approach like the one that was adopted when Western Siberia was developed. The 20^th century Russian history witnessed the saga of the creation of the oil and gas complex of Western Siberia in the 1970ies. It was a project of unequalled global economic and geopolitical significance. It comprised the use of enormous material, technical, and financial resources within an extremely short time in order

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to form a new region of hydrocarbon production, super-large not only on the countrywide, but also on the worldwide scale.

5. Now in the same context (the creation of premises for a breakthrough) we speak of the Eastern Project - a national economic, political, and demographic project of the complex development of Eastern Siberia and the Far East.

The most important things for a project of such proportions are, firstly, a complex approach to the development of the resource base, and, secondly, the orientation not on a mere extraction of natural resources, but on the processing industry and the manufacturing of the end product.

A complex approach will make it possible to attain a qualitatively new level in the regional politics and to direct funds to the regions where the national projects will be implemented.

6. No company in the world can accomplish the Eastern project on its own - such are the dimensions of the task. This can only be done with the participation and under the auspices of the state. The state must take control of the entire work in the East of the country via a specially established Administration (an agency, a corporation, or some other institution). A good example of a managerial decision of this kind is found in the history of the Soviet Union, namely the establishment in the 1930ies of the Administration of the Northern Marine Route. Similar examples of running vast territorial-production complexes are found in the history of Western countries - the US and Canada, which, in this respect, followed the lead of Russia.

7. The Eastern Project managing body must be headed by an individual who measures up to the level of the historical task and the challenges of the epoch. This is the way it was under A.N. Kosygin at the time of the West-Siberian saga. Certain state functions should be delegated to the administrative body of the Eastern Project. It must be provided with an adequate budget funding (a separate item in the state budget). Besides, this

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coordinating organization must be directly accountable to the President. Neither any of the ministries, institutions, or regional authorities, nor all of them together are able to fulfill this major state task.

8. There is room for the state-run, private, and mixed types of businesses in the framework of national projects.

At the same time, implementing the Eastern Project under the auspices of the state means that the state is to decide on the directions and extent of the participation of the corporate business in the Project. The state has a clear political objective: it must choose the project's partners. It is expedient to plan the international involvement in the development of our Eastern regions so as to create a continuous belt, or a "buffer zone", of strategic resource projects along the East-Siberian border together with the European, the US, and the Indian companies.

9. Apolitical decision on the complex development of Eastern Siberia and the Far East should be made prior to the establishment of the state institution coordinating the national Eastern Project. The program of developing the resources of this vast region is to become the most important element of the project which must be performed rapidly.

If we are not slow to find the political decision, a considerable "recovery" will follow on all the directions of the Eastern Project already by 2008.

10. As a conclusion, I would like to emphasize the following idea once again. What is being discussed in relation to the East of Russia, that is, to the extremely extensive territory of the Trans-Ural regions, is neither a raw commodities project, nor an oil and gas one, but a complex resource project embracing the most important aspects of the social and economic production and the reproduction of life.

This is a matter of our future. And Russia has no alternative.

RA

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