Interfax's Interview

 Asked what conclusions could be drawn following the recent economic forum in Davos, Gref said there are at least two different types of foreign investors in terms of their perception of Russia.

 “First, this is the perception of Russia held by investors working inside the country, which is positive as a rule. An overwhelming majority of these investors are satisfied with how they work here and how their businesses grow in Russia. I have had quite a lot of meetings with the managers of major international corporations, and they said that 2006 was a milestone for them, because Russia is becoming the prime market for them in terms of growth, and with some corporations also in terms of sales of goods and services, even in comparison with China,” Gref said.

 The second category of investors, “do not work in Russia, and the volume and, what is even more important, the nature of their information on Russia is limited by the current reports in European and other media. When there is a stream of negative opinions, they as a rule form negative attitudes themselves,” he said.

 “However, it is precisely these investors that we are working with to explain our positions, the prospects of our policy, our goals and targets. This is exactly why we use such forums as Davos, and the St. Petersburg and Krasnodar economic forums for this purpose,” Gref said.

 Asked about how he sees the economic situation in Russia developing, Gref said it should not change after the presidential elections in 2008.

 "I am optimistic about the continuation of the economic policy after the elections in 2008. This is primarily because I trust my intuition and the responsible policy of the incumbent president," Gref said.

 "Simply to praise this president is not my goal. I can say that I will not be a government member in the upcoming political cycle," he said.

 The government needs rotation. "A sufficient number of skilled and highly professional people have been trained during recent years. It is possible to choose a worthy candidate for my current position," he said.

 Speaking about privatization plans in Russia, Gref said the further privatization of Rosneft will depend on the company's investment plans.

 "Such a sale is possible in theory with the goal of raising investment for the company. However, this is not an end in itself. Everything depends on the company's investment plans," he said in answer to a question on the possible sale of 25% of Rosneft.

 "If it becomes obvious that there are sufficient serious plans to develop the company and there is a lack of other sources and possibilities of raising investment, then such a method is possible," Gref said.

 "It's too early" to talk about the timeframe for such a privatization, he said.
 Federal Property Agency (Rosimushchestvo) head Valery Nazarov earlier told Interfax that Rosneft could sell up to 25% of its shares on the market during a second IPO.

 "The main way for distributing Rosneft shares is to implement the second phase of a public placement on the market. Rosneft could place up to 25% of its shares," he said.
 Nazarov did not rule out that the placement could take place in 2007. "It depends on market trends and on a government decision," he said.

 Rosneft held an IPO in July last year and raised around $10.6 billion by selling 15% of its shares. The company placed both existing and new shares during the placement. The state-owned Rosneftegaz owns 75.16% of Rosneft. Yukos is the second biggest shareholder with 9.44%.

 Gref also said the Russian government is not rejecting plans to privatize Aeroflot.
 Asked whether the government had finally decided not to privatize Russia's flagship airline, Gref said: "No, it's not final, though we are planning to privatize Aeroflot."

 "Of course discussions are being held on the size of the stake, the ways and forms of privatization," he said.

 Definite proposals on the privatization could be discussed after the completion of the Sheremetyevo-3 terminal, Gref said.

 The government owns 51.1% of Aeroflot. The National Reserve Corporation, in which Alexander Lebedev is the main owner, controls around 30% of the airline.

 As regards the establishment of an airline alliance based on KrasAir, Gref said, “It is possible to say that the documents have reached the final stage of clearance at the Russian government.”

 “As for the Svyazinvest company, our ministry, along with the Information and Communications Ministry, a consultant, and new stakeholders who recently purchased a minority stake in Svyazinvest [Comstar-UTS incorporated in AFK Sistema], are looking for the most efficient ways for the company’s further development.

 “I do not think there are reasons to say that Svyazinvest will be privatized or reorganized in the near future. No decision has yet been made. Something definite could be said only after we work out the further strategy of the company’s development,” Gref said.

 The minister suggested that Russia could reduce value-added tax to 15% in 2009 from the current 18%, simultaneously doing away with a privileged VAT rate for certain taxpayers.

 "Goal number one is to resolve VAT issues. We could well move toward reducing the VAT rate and annulling the privileges. I believe that if we move the rate toward 15%, this will be quite appropriate. This could be done starting from 2009, and the privileged rate could be scrapped simultaneously," Gref said.

 Gref objected to replacing VAT with a sales tax. "The introduction of a sales tax in place of the VAT seems impracticable. It is a good thing that we are developing various approaches toward the resolution of the VAT problem, but I deem this transition unrealistic at present," he said.

 The unified social tax rate is unlikely to be lowered because of deficits in the Pension Fund, Gref said.

 "As for the unified social tax, unfortunately I do not see a lot of opportunities for optimizing this rate, although this should probably be done. However, I don't see any chance to do so within the next few years," he said.

 Gref also said that he is confident that progressive income taxation will be reintroduced in Russia, although this is unlikely to happen earlier than 2010.
 "Progressive income taxation will be reintroduced, this is obvious. The question is when," Gref said.

 "In my view, the introduction of a flat rate was fully justified, and from the fiscal [point of view] - from the standpoint of motivating people to leave the black economy and to join the open economy and to pay taxes into the budget, and from the point of view of marketing, or rather the PR of Russian reforms. Now I can say that it was conceived in advance, and it has worked," he said.

 "However, it is also obvious that at some point in the future a progressive system is sure to return. How much it will change, and when, I cannot say at the moment. I can say that our plans up to 2010 do not include this goal. But after 2010, it will probably happen, but when - this is a question for a new government and a new president," he said.

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