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News in Brief

Business Entrepreneurs bring the Russian incarnation of Cirque du Soleil to New York

C.I.S. Nominates Marchenko to head I.M.F. The Commonwealth of Independent States, a Russia-led bloc of former Soviet countries, has suggested replacing former I.M.F. chief Dominique Strauss-Kahn with Kazakh Central Banker Grigory Marchenko. Marchenko is credited by many for Kazakhstan’s remarkable near-double-digit economic growth following the collapse of the Soviet Union, however experts doubt his chances of actually being elected to the new job.

Moscow to Mediate Libya Talks

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The first joint venture between a Western entertainment company and the Kremlin Palace Theater debuts tomorrow at Radio City Music Hall.

tom of the Opera and anything by Tim Burton. This edgy story of creatures in an abandoned theater, told through acrobatics, lights and the European-inspired varieté, could not have happened without father-and-son partners George and Craig Cohon, the businessmen who first brought McDonald’s and Coca-Cola to Russia. Zarkana opens at Radio City Music Hall this month (with performances scheduled through October) and closes at the Kremlin Palace in 2012. Few of its other

Artem Zagorodnov special to rbth

Cirque du Soleil has contorted its way into a new, surreal drama called Zarkana, which is said to come from a combination of the words arcane and bizarre. Cirque has pumped up the volume on its sensational spectacle with a narrative somewhere between Phan-

venues will be large enough to carry the whole show, and will feature excerpts instead. The Cohons partnered with Cirque du Soleil in late 2008 to create Cirque du SoleilRus, a Russian company with exclusive rights to the Russia and Ukraine markets. The company is marketed as a Russian company led by Russians, for Russians. In two years, the company has invested $42 million dollars into the Russian economy, according to Cirque Web site. Another $12 million has been spent on sponsor and part-

ners. More significantly, it has employed 800 people and used 320 Russian suppliers. “Cirque du Soleil is amazing. It’ll be in NewYork; it’ll be in the Kremlin,” said Craig Cohon. “We’re the first Western entertainment company to partner with [the Kremlin].” The Cohons are applying the same principles to their entertainment venture, now said to be an investment of $57 million, that they used for McDonald’s and Coca-Cola.

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Cirque du SoleilRus Debuts in New York with Zarkana Performers practice for the debut of “Zarkana” in New York’s Radio City Music Hall on June 9. The show will then come to Moscow.

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Innovation Experts question whether a technology hub can shift the focus of Russia’s economy

Skolkovo Rises Outside Moscow This “city of innovation” on the outskirts of Moscow is derided by some as a pipe dream, but embraced by Russia’s leadership as an engine of modernization.

in seven or eight years. The promise of independent financing is important for Skolkovo Foundation members, who fear that the project will be viewed as yet another opportunity for graft by Russian government officials. Instead, the Skolkovo model is a bit of a utopian microclimate for investment in a country known as a big risk for investors, and hopes are high for its success. “Skolkovo should spawn a Gazprom of its own,” said Naumov, referring to Russia’s largest company. “[It] will become the conductor of an orchestra consisting of start-ups and investors.” Despite the ongoing tension over government involvement, Skolkovo is something of a pet project of President Dmitry Medvedev, who recently held a press conference at the center. “I hope the whole world comes to know this brand, not as the only place where investors should put their money,”he said,“but because any big development undertaking needs to have its main engines that drive the whole process.”

Alexander Vostrov, Dmitry rodionov

For months,“Skolkovo”has been a buzz word in discussions of the Kremlin’s modernization program — the best indicator yet that the country is focusing seriously on moving away from its traditional role as an exporter of raw materials. Founded in an area that was once a hub for the Soviet defense industry, it is intended to reflect the needs and hopes of Russia in the 21st century. Money is pouring into the project, from both government and independent sources. According to Skolkovo FoundationVice President Stanislav Naumov, the total budget for establishing the center — including construction, infrastructure and co-financing of projects — will be $1 billion. The state has provided two-thirds of this, but the center has promised to repay the government in full

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President Dmitry Medvedev visits an exhibition of Skolkovo projects in Moscow.

Continued on page 5

Senator Mikhail Margelov, the chairman of the Foreign Relations Committee in Russia’s upper house of parliament, has announced he will be traveling to Libya “in the nearest time” for talks on Colonel Moammar Gadhafi’s exit from power. Margelov is also due to visit the rebel stronghold of Benghazi to “help the Libyan elite find a national concensus.” At the G8 summit in May, President Dmitry Medvedev announced that Russia had been asked by its colleagues to help mediate talks with the Libyan leader, and Medvedev said Russia would use its contacts to help pursuade Gadhafi to step down.

Russia and E.U. step closer to visa-free travel After repeated calls by Russia’s leadership to establish visa-free travel with the European Union, the two sides are on the verge of signing an agreement that would significantly ease travel for lawmakers, businessmen, journalists and other professionals, reported The Moscow Times. The new agreement would allow for five-year multipleentry visas to be issued for both Russians and EU citizens. Russia and the EU are also on the verge of signing a roadmap of “common steps” to the eventual abolishment of visas following requests for such a move by Spain last year. A call by Prime Minister Vladimir Putin for abolishing visas with the U.S. earlier this year received a lukewarm response from American officials.

OPINION

Beyond Moscow Entrepreneurs discover new opportunities in the lesssaturated environment of Russia’s regions

Down in the Mouth Why are foreigners living in Russia more upbeat than the locals? page 6

Your source for news & Analysis about Russia www.rbth.ru

Politics, economics, business, opinions and culture

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most read Russian Election Cycle Opens With Medvedev Press Conference http://rbth.ru/12894

Tandem National parliamentary and presidential elections are less than a year away

The Art of the Possible Appearances by Medvedev and Putin suggest the election season has begun, but their actions seem designed to keep voters and pundits guessing. combined reports

Every man for himself? Some analysts see Medvedev’s actions as more proof that he is further distancing himself from Putin — a process that began with his criticism of the prime minister’s comments on the prison sen-

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Russia Beyond the Headlines

Slowly but surely, the 2011–2012 election season in Russia is getting underway. In recent weeks, both President Dmitry Medvedev and Prime Minister Vladimir Putin have made appearances that pundits described as the beginnings of an election campaign, and analysts are watching closely to determine whether the tandem will remain in place after March 2012. On May 6, during a congress of the ruling United Russia party, Putin announced the creation of the All-Russia Popular Front.This organization will be made up of trade unions, business associations, youth groups and Kremlinfriendly N.G.O.s and is intended to improve United Russia’s popularity by giving it more of a connection to ordinary people. The new organization will include “everyone who is united in their common desire to strengthen our country, united by the idea of finding optimal solutions to the challenges before us,” Putin said in his announcement. Medvedev immediately gave the pundits reason to speculate that there was discord between the president and the prime minister when he declined to endorse the Popular Front idea. “I understand the motives of a party that wants to keep its influence over the country. Such an alliance is justified from an electioneering point of view,” Medvedev said in televised comments. Medvedev also speculated that United Russia could not count on a landslide in December’s State Duma elections, saying that competition is vital in a democracy. “No one political force can regard itself as a dominant one, but any force should strive for maximum success,” Medvedev said. Medvedev promoted his own agenda during a massive press conference at the Skolkovo Innovation Center on May 18. Answering questions from an aud i e n c e o f m o re t h a n 8 0 0 journalists, Medvedev commented on topics ranging from modernization to gubernatorial elections to missile defense. His responses were mostly predictable, but the conference showed him to be comfortable, confident and in command of the issues — the kind of person who could head a successful presidential campaign.

Putin and Medvedev are both seen as contenders for the country’s top leadership position next year.

tences of Mikhail Khodorkovsky and Platon Lebedev and continued with the leadership’s differing of opinion over NATO intervention in Libya. “This is a major development, which marks an independent move by Medvedev,”said analyst Dmitry Oreshkin, discussing the situation with Bloomberg. The theme of Medvedev’s autonomy echoed in comments

way of returning to the presidency. “If they [establish this new grouping], then we can say that Vladimir Putin will be nominated precisely by this ‘popular front’ — that is, by all Russians who are for a better life,” said political scientist Grigory Golosov. Ekho Moskvy’s Alexander Venediktov agreed. “This story shows us again that Vladimir

about his reaction to the creation of Putin’s Popular Front. “Medvedev is trying to demonstrate his independence with those remarks,” said Alexei Makarkin, a political analyst with the Center for Political Technologies, in an interview with The Moscow Times. Analysts who believe the tandem is indeed splitting believe that the Popular Front is Putin’s

Vladimirovich [Putin] certainly has not said no to a third presidential term,”Venediktov said in comments to the BBC. Those who believe the tandem will continue past 2012 say that the recent appearances have given Putin and Medvedev the opportunity to define their different but complimentary personas — Medvedev the “modernist”and Putin the “traditionalist” — in hopes

that one or the other will appeal to Russia’s increasingly divided voting population. “Like before, Putin and Medvedev tend to occupy different political niches,” said independent political analyst Stanislav Belkovsky to Interfax.“Both continue to serve their common cause.” Opposition politician Vladimir Ryzhkov even suggested that Putin’s Popular Front initiative was in fact intended to shore up the tandem. “[Putin] is attempting to halt rapidly eroding support for the ruling tandem and the “party of power,’”Ryzhkov wrote in an editorial in The Moscow Times. Television analyst Nikolay Svanidze echoed these comments. “All this doesn’t necessarily mean that it is Putin who will stand for president next year. I believe that the tandem has not yet made a final decision regarding who is going to run. If such a front is formed, Dmitry Medvedev may use it just as easily. The new platform will make it possible for either of the two candidates to declare that he is backed by a considerable part of the people,” he said in an interview with RT TV. Any candidate for the Russian presidency in 2012 may have to pay more attention to the people than previously planned. According to an April Levada Center poll, 75 percent of Russians are interested in politics. But 83 percent of respondents believe that politicians work only to promote their own interests and ignore the needs of voters. Reporting by Business New Europe, Interfax, Kommersant and RIA Novosti was used in this report.

Youth Vote With Cell Phones Young Guard, the youth wing of the ruling United Russia party, is urging people to vote with their wallets by sending text messages in support of candidates to run in the upcoming State Duma elections. Natalia Krainova The Moscow Times

“I am calling on you to fork out 1.50 rubles for a text message and vote for me,” Maria Butina, 22, a hopeful in the Altai region, wrote on her LiveJournal blog.“Together we can make the world better for the profit of all.” Another candidate wrote on Vkontakte.ru:“Please send a text message to 2420”because“to win, I really need your help!” An unprecedented open primary election is under way within Young Guard for candidates between the ages of 21 and 35 to

run on the United Russia ticket in December’s vote. The absence of a requirement that contenders be members of United Russia or Young Guard, the youth wing of the party, seems to have attracted some young people who don’t necessarily support United Russia, but are ready to use the party to get into power. “Of course, I have no illusions about the existing regime and the ruling party,” Butina wrote.“But if I want to change anything for the better, I must act in the only way possible today — within United Russia.” While eligible candidates are not required to joinYoung Guard or United Russia, they must support their policies and be Russian nationals, according to the Web site for the primary election, MP2011.ru. Mobile phone voting will be one

of the criteria by which a public commission will choose winners from the primary election, said Artyom Turov, who is coordinating the voting effort. The other criteria will be candidates’ election platforms, their meetings with voters, and the number of signatures they manage to collect in support of their candidacies, Turov said. TheYoung Guard primary election started April 27 and will end June 19. The winners will be chosen from June 19 to 25, and a portion of them will participate in United Russia’s primary election in July. Those who win United Russia’s primary election will be placed on the party’s list for the Dec. 4 Duma vote. A United Russia spokeswoman said the program for the July

primary election has not been finalized, so she was unable to coment on it at this time. Turov said Young Guard winners who do not take part in the Duma primaries would participate in primaries for 28 elections to regional legislatures that would also take place on Dec. 4. Young Guard’s primary election is being held in 75 of Russia’s 83 regions. In each region, two or more winners will be selected, depending on the number of voters in the region. United Russia first held a primary election to select candidates for the 2007 Duma elections, but only members of the party or Young Guard were allowed to take part. In the past five years, more than 10,000 members ofYoung Guard have become lawmakers at various levels of government, said

Young Guard senior official Timur Prokopenko, speaking to about 5,000 activists at a Moscow rally in late April where he announced the start of the primary election. The voting text messages, which will actually cost 1.44 rubles (5 cents) per vote, will generate a small profit for several mobile phone operators and the company that created the online voting service, but none of the proceeds will return to Young Guard, said Ivan Khmelevskoi, head of the public relations agency Vektor Rosta, which was hired byYoung Guard to develop the Web site for the primary election. He saidVektor Rosta was working for Young Guard free of charge, for self-promotional purposes meant to“show [future] clients that we successfully implemented a project.”

Human Rights Presidential commission indicates that security services officers fabricated Magnitsky charges

President Dmitry Medvedev’s presidential commission has decided that authorities exceeded their official powers in the case of slain lawyer Sergei Magnitsky. galina masterova, vladimir ruvinsky Special to RBTH

The metal cage used for prisoners in courtroom No. 14 at the Tverskoi regional court was empty during a recent hearing, its door wide open, when the court considered the arrest of Ivan Cherkasov, a senior executive at British investment fund Hermitage Capital. Cherkasov, who lives in London, said he has no intention of returning to face the charges of tax evasion he said are false. He said his arrest is revenge by rogue forces in the Russian security services. Just days before, an independent commission set up by President Dmitry Medvedev said that the charges in the case of Russian law-

yer Sergei Magnitsky were fabricated and that Interior Ministry and F.S.B. security service officers were at least partly responsible for Magnitsky’s 2009 death in prison. Magnitsky alleged tax fraud by the authorities and then was charged with the same crime. He died after 11 months in pretrial detention and after repeated requests for medical treatment. The findings of the presidential commission are in a preliminary report that was leaked to Russian newspaper Vedomosti and then confirmed by commission members. Magnitsky was working for Hermitage Capital when he uncovered what he claimed was a $230 million tax refund scam set up by a group of corrupt police and tax officials. “When Sergei Magnitsky testified against the police officers, the same officers put him in pretrial

detention, tortured and killed him,” said Hermitage Capital C.E.O.William Browder in a telephone interview from London. Magnitsky’s death became an international cause célèbre, and Medvedev has staked much on investigating the case. Kirill Kabanov, head of the National Anticorruption Committee, is working on a separate part of the report. He said pressure has been relentless. “There are several officials well known in politics who have stated openly that they don’t give a damn about our investigation,”said Kabanov. “This is wild, brutish arrogance. They aren’t puppets; they are players. And the [security service] isn’t prepared to surrender its employees, partially for the fact that they know a lot and could tell people. In addition, there is huge money at stake.” The final report is set to come out next month. Irina Dudukina,

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New Twist in Case of Lawyer Sergei Magnitsky

Kirill Kabanov, head of the National Anticorruption Committee

representative for the Investigative Committee of the Ministry of Internal Affairs said,“We cannot comment on the findings until we see the official conclusion of the [presidential] commission.” Officials from the Butyrka jail, where Magnitsky was denied medical help, were fired. But there have been no arrests or direct police investigation of the officials accused of corruption. Soured Relationship Hermitage Capital was once one of the most enthusiastic of

Kremlin cheerleaders. Since its head, William Browder, was refused entry to Russia in 2005, it has been a strident critic. Hermitage Capital has spent an enormous amount of time and money on its own investigation of the officials involved in the alleged tax fraud. A series of videos have been released, most notably documenting lavish purchases made by the officials. The most recent video created by the company accused a tax official who approved the tax refund of wiring millions

into a Swiss bank account opened in her husband’s name. It also chronicles the purchases of luxury property in Dubai and Montenegro valued at more than $20 million, although the official and her husband have an annual salary of only $38,000. Swiss authorities froze the account after complaints by Hermitage. At the end of the recent hearing, the court backed investigator Lieut. Col. Oleg Silchenko (who handled the Magnitsky case) and sanctioned the arrest of Cherkasov. Silchenko refused to comment afterward, but he did throw out the phrase, “Who knows where I will be soon?” — a fairly common remark in a country where people are not used to planning too far in the future. But it is a question with special resonance and poignancy in this case. “After this report [was leaked], we started to be pressured by security officials,”said presidential adviser Valery Borschev. “They call me and ask why we are attacking Silchenko, and I answered that we are simply laying out the facts. We are striving for real punishment for those who are guilty, and we have only touched the tip of the iceberg at this point. Important figures stand behind the investigators and tax officials. We hope to get to them.”

most read Moscow’s Green Office Space http://rbth.ru/12478

Special Report

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Green Technology Businesses — both big and small — are betting on Russia’s untapped potential to save power

Rachel Morarjee

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The Russian government’s $300 billion energy-efficiency program is designed to trim the fat from Soviet-era factories and buildings, signaling new efforts at a green-energy revolution. “The political winds have changed at the top, and there is a growing consensus that climate change is happening, [creating] a will to change and build a more efficient economy,” said Kevin James of the London-based investment adviser Climate Change Capital. The summer of forest fires in 2010 helped bring Russia to the realization that climate change may not be entirely positive. (Prime Minister Vladmir Putin once famously quipped that global warming meant Russians would spend less on fur coats). And President Dmitry Medvedev has taken a much tougher line on the environment, his ideas supported by a report from the World Bank, which said that improving energy efficiency will improve the country’s productivity and competitiveness. In the environmental sphere, the country lags far behind China, which is already the world’s leading manufacturer of wind turbines and solar panels and is on track to produce the world’s first completely battery-powered car. Russia’s lack of focus on green issues is partly due to the fact that it is the world’s biggest oil and gas producer, and cheap government-capped domestic energy prices have drained any motivation for energy conservation. Now, however, Russia has begun efforts to decrease its dependence on oil, from phasing out the use of incandescent light bulbs to state support for billionaire Mikhail Prokhorov’s project to build a hybrid car plant in Togliatti, Russia’s domestic auto capital. The state has also announced

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plans to build eight plants that will produce energy-saving lamps, and the first Russian solar plant is slated break thermal ground in the North Caucasus resort city of Kislovodsk this year. Rostovteploelektroproyekt, a Russian company specializing in the design of energy plants and equipment, also has plans to develop wind and solar power worth almost nuclear $300 million in the Krashydropower nodar region. The wind project could start as early as next year. Russian energy giant RusHydro already has plans to build a wind-power park in the city of St. Petersburg. Meanwhile, hydropower has also gained ground. Late last year, Italian energy giant ENEL and RusHydro signed a Most of Russia’s power comes from cooperation agreement to work thermal, hydro and nuclear sources. on renewable power projects, in- A miniscule 2 percent is from solar cluding tidal and geothermal and other renewable sources of enpower projects. ergy (excluding hydro power). Additionally, Russia’s Natural Resources and Environment Ministry has drafted a bill to promote recycling. The legislation would in figures require factories to recycle the material they currently throw away. There is still a long road ahead before Russia is truly green, and despite much recent hype, this place is taken by Russia in the prowould also not be the first time duction of renewable energy, even the Russian government has though it sinks to 56th place globdrafted laudable plans but failed ally when hydroelectric power is not to act on them. taken into account. Vladimir Chouprov of Greenpeace said there was “a big line of industrial companies wanting to modernize their operations and raise efficiency,” but that many at the top, including Vladimir Putin, remain skeptical of climate of Russia’s economically feasible rechange. “The government is not newable energy potential is currentgreen,” he said, “and many poli- ly realized (179 terawatt hours out cies are anti-environmental.” of a possible 1,823 terawatt hours). However, a grassroots environmental movement, fueled by local recycling activists, has emerged in Russia’s bigger cities, demonstrating that ordinary Russians are interested in environmental issues. The group No.More.Trash, of Russia’s energy is to come from which began in St. Petersburg in renewable sources by the year 2020 2004, now has thousands of vol- according to a state program anunteers involved in cleaning up nounced last year. Sources: RIA Novosti, NEFCO, Windfair.net 29 Russian cities.

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Where Does the Power Come From?

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Carbon Trading Market Finally Takes Off After a slow beginning, Russia is finally learning to take advantage of the carbon credits it has been allotted by the Kyoto Protocol on harmful emissions. tim gosling

business new europe

When Kevin James at Climate Change Capital moved to Moscow in 2005, he hoped his company would be at the vanguard of a movement to make money out of cleaning up the country’s Soviet-era factories. Instead, the company pulled out of the country after just four years, frustrated by infighting among government ministries over whether the country should sell any of its carbon credits in return for reducing emissions. “We tried to pull off three or four environmentally friendly projects in Russia, but there was a policy morass at a national level, which held us up,” James said. However, it appears he may simply have been too early, with the country’s carbon trading market now finally starting to move. Last year, Russia gave the green light to 15 projects aimed at cutting emissions in sectors ranging from paper factories to chemicals to power generation. The 30 million tons of carbon

credits that the projects create among them could raise as much as $300 million on the open market. A second group of projects is currently awaiting government approval. Russia’s ratification of the Kyoto Protocol in 2004 committed it to the United Nations program to reduce global emissions of greenhouse gases. Carbon credits, in essence, are a carrot

“We tried to pull off three or four environmentally friendly projects in Russia,” said Kevin James of Climate Change Capital in Moscow. “But there was a policy morass at a national level.” to encourage countries to implement the targets by putting a monetary value on those emissions. At the same time, the program gives developed countries the opportunity to invest in reducing emissions in developing countries, which is seen as a cheaper alternative to fulfilling Kyoto targets at home. Thanks largely to the collapse of the Soviet Union and much of its heavy industry, Russia’s

carbon emissions have remained around 1990 levels. Meanwhile, many officials have held the belief that the country’s carbon credits should be reserved to allow future economic growth, rather than sold to investors in return for emissions cuts. Then came the financial crisis in 2008, when officials also struggled to see the value in raising money through emissions cuts when the country was awash with cash. That attitude changed once the cash stopped flowing. Bankers say the first tender to identify the 15 pioneers was a test run, and if it goes well, more projects will go forward. However, the original hopes of international investors that Russia could issue as many as 300 million tons of carbon credits and generate a market worth as many as $3 billion have faded, as the future of carbon trading beyond 2012 is uncertain. “Kyoto ends in 2012, so there’s limited time for additional projects, but there is still the chance to use the revenue they can raise for key priority areas in Russia.” said one banker working in the sector who asked not to be indentified. “The clear advantage of the carbon market is that it would provide additional financing for energy efficiency.”

Billionaire Mikhail Prokhorov demonstrates his company’s Yo-Mobile, Russia’s first hybrid, to reporters.

50,000 Preorder Russian hybrid More than 50,000 potential customers submitted advance orders for Mikhail Prokhorov’s Yo-Mobile hybrid in the first 24 hours after YoAuto, the joint venture developing the car, started accepting requests on its Web site. Unveiled to great fanfare in December, The Yo-Mobile will be Russia’s first hybrid, and has been lauded as an example of Russia’s innovative future. This joint project of Prokhorov’s Onexim Group and Yarovit Motors has benefited from a richly backed public-relations campaign, including an endorsement from Prime Minister Vladimir Putin, who drove a prototype

to a meeting with President Dmitry Medvedev. The interest does not necessarily reflect future sales, however. A preorder does not amount to a commitment to buy a Yo-Mobile, but prospective customers who register will be given priority if they want to sign a contract to purchase at a later date. The electric hybrid is advertised with a maximum speed of 120 kilometers per hour and the ability to go 100 kilometers on 3.5 liters of fuel. The Yo-Mobile is offered on the company’s Web site as a five-door hatchback, a “crossover” and a min-

ivan, all of which retail starting from 360,000 rubles ($12,800). More expensive versions are dual-fuel, allowing drivers to fill up on either gasoline or natural gas. Eighty-two percent of orders received in the first 24 hours were for the crossover version. Fifteen percent were for the hatchback, and only 3 percent for the minivan. The foundation stone for the new Yo-Mobile factory will be laid in St. Petersburg next month, and cars are expected to roll off the production line in the first half of 2012. Originally published in The Moscow Times

Harvesting the Sun’s Northern Exposure The use of solar energy in Russia, though still nascent, is considered a promising alternative power source. At least one region is tapping this potential.

most parts of Siberia have insolation levels [average exposure to the sun’s rays] comparable to the south of France and central Italy, where solar energy is currently booming, while the Zabaikalsky region gets more solar energy than Spain,”saidVasily Malakha, head of the environment monitoring department at the Electricity and Energy Council of the Commonwealth of Independent States. The Krasnodar region started paying attention to solar energy after it launched an energy-effi-

Irina filatova

the moscow times

Russia may be associated more with long, dark winters than sundrenched days, but that is not stopping private companies from tapping into a growing market for solar energy. “There was an opinion that it’s better to use solar energy in countries where there’s a lot of sun,” said Marat Zaks, chief executive of Solar Wind, a Krasnodar-based solar panel manufacturer. “But the fact is that there’s a lot of sun in Russia as well. Germany is the world’s number one solar energy consumer. But is Germany a sunny country?” Solar Wind produces panels mostly for export but hopes to see the domestic market grow. “If we get an order from a Russian customer, we try to complete it quickly to aid the market development in the country,” Zaks said. A number of Russian private companies are creating joint ventures with Rusnano, the state technology corporation, to address local needs. Solar Wind is starting a $160 million project, with Rusnano as a partner, in which it will make double-sided solar panels — which collect solar energy from both sides — for domestic use. Zaks said there are only a few companies making such panels. The plant, which is slated to begin production this quarter, will have an annual manufacturing capacity of 30 megawatts at the beginning, and will eventually ramp up to 120 megawatts per year. The volume of Solar Wind’s domestic sales is still much smaller compared to exports, Zaks said, though he declined to name the percentage. He said private firms and regional governments are his local customers. In addition, the company exports solar panels to more than 22 countries, including Germany, Britain and the United States. Industry insiders said solar energy could become a real alternative for traditional energy sources in a number of the country’s regions. “The Krasnodar region and

Solar power station construction is expensive compared to traditional power stations. ciency target program in 2006. The region is using solar panels not only for electricity production but also for heating water. The roof of the central hospital in Ust-Labinsk, a town northeast of Krasnodar, has been covered with 300 solar panels. The installation will heat water for the hospital’s daily needs year-round, said Alexander Kiselyov, deputy chief doctor of the hospital, adding that the solar panels have the capability to heat a daily water supply for the facility. Solar energy use has a future in Russia, but this kind of ener-

gy should be used only in combination with other renewable energy sources, said Brigitte Schmidt, a board member of Eurosolar Deutschland, the German division of the European Association for Renewable Energy. Solar energy has had difficulty establishing a foothold in Russia because of the country’s focus on oil exports. There are other obstacles as well, such as the high cost of solar power station construction compared to traditional power stations. The construction cost of a solar power station ranges from $10,000 to $17,000 per one kilowatt of installed capacity, said Malakha. In comparison, a kilowatt of installed capacity at a nuclear power station costs up to $3,000, while the figure for a hydroelectric power station is just $1,000. That makes building solar power stations less effective for Russia’s economy than construction of traditional power stations, said Yevgeny Nadezhdin, of Unesco’s Sustainable Energy Development Center, adding that hydroelectric and biofuel energy generation are the best options for the country. Despite the enthusiasm of entrepreneurs such as Zaks of Solar Wind, building solar electric power stations around Russia is unlikely to be economically viable over the coming 30 years, according to Nadezhdin.

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Every year, Russia wastes enough energy to power the French economy, but new evidence suggests that the Kremlin is determined to change its ways.

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Efficiency Inches Way into Energy Policy

A rare example of solar power usage in the Novosibirsk region

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Cirque du SoleilRus Debuts in New York With Zarkana

ECONOMY in brief Foreign carmakers to invest over $5 billion

After bringing McDonald’s and Coca-Cola to the “Wild East,” George Cohon (right) and son Craig are now focused on Russian entertainment.

itar-tass

In 1976, George Cohon, an American transplant to Canada, ran into a Soviet delegation to the Montreal Olympics. This was perfect networking for the chairman of McDonald’s Canada, who had an idea to bring the famous fries to the Soviet Union at the height of the Cold War. He didn’t anticipate it would take him almost a decade and a half to cajole a skeptical Communist bureaucracy into allowing him to open one McDonald’s. When his restaurant finally opened on Pushkin Square in the heart of Moscow in 1990, more than 30,000 people showed up on the first day, clamoring for a taste of capitalism. Years later, some Muscovites still recall the event fondly. Russians have a habit of saying they hate McDonald’s, but just try getting in line on a Sunday afternoon. From the beginning, George Cohon had the instinct to make it a people’s burger joint, starting his own revolution in service, cleanliness and, more controversially, fast food. “There were these restaurants back then that had long lines for customers with rubles and practically no lines for people with [dollars],”the 73-year-old Cohon recalled over lunch at the glitzy Ararat Park Hyatt hotel in Moscow. “We didn’t do it that way. We put the ‘rubles only’ sign outside.” Cohon now has 280 restaurants in Russia and 25,000 employees. And he notes that 80 percent of what he sells is domestically produced, an inconceivable statistic in Soviet times. Cohon’s son, Craig, worked as a top executive for Coca-Cola during its introduction to the newly opened markets of Eastern Europe in the 1990s. “It took 14 years to bring McDonald’s to Russia, four years to set up Coca-Cola distribution and production, and eight months to get Cirque de Soleil rolling,” said George Cohon. “I think that’s a good barometer for the ease of doing business here.”

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Risk Friendly The Cohons have been outspoken advocates of doing business in Russia and are dismissive of the concerns of more risk-averse entrepreneurs. “I was here when tanks shot at the [Russian] White House in 1993,”said Craig Cohon.“We continued business. I signed the latest deal in the Kremlin last month, half an hour before the bomb went off at Domodedovo [Airport]. That’s just a part of life.”

“I could easily picture myself as a Russian investor in the U.S. saying, ‘I was here during the Oklahoma City Bombing, 9/11 and the Arizona shootings and we continued business,” he continued. Said Dmitry Butrin, business editor at leading daily Kommersant,“Business is often far away from dramatic political events. As long as an owner is physically able to continue running a store or restaurant, he will do so

even in the bleakest times. This is true for all countries.” Craig Cohon said the key to success in Russia is three pronged: first, a commitment to the longhaul for real returns; second, cultivating personal relationships; and third, not managing from afar. “It’s a handshake market,” he added. The Cohons said they have never been asked for a bribe, a common complaint of both Russian and expatriate businessmen. “It could be because we have maintained our core principles from the start,”said Craig.“We’re here for the long term, we build relationships, we hire locals and we help develop other sectors like agriculture.” George Cohon emphasized that philanthropy is another critical component if you want to be taken seriously. “You’ve got to do charity,” he said. “A lot of my friends wanted to come to the opening of the first McDonald’s here. I said, ‘Okay.You pay for your own airfare, hotel and meals. And then you cut me a check for $10,000. All that money went to the first Soviet charity for kids. Now we’ve got our own charity that converts unused rooms in children’s hospitals to apartments so

parents can stay with their kids. It’s good stuff.” All in the Family At the end of the 2010 Winter Games in Vancouver, Craig Cohon’s two children, 10 and 12, participated in the ceremonial handover to the Russians organizing the next Winter Games in Sochi. Said Craig,“I think that’s the perfect archetype for the last 30 years of my life.” Both men said they are optimistic about Russia’s future at the moment. “By 2030,” Craig said,“I see four key points of development: the middle class learning to defend its rights via the evolution of strong political parties; business moving away from raw materials and investing into manufacturing and high tech, which is already happening; culture developing with a local base, as opposed to being imported from the West; and Russia becoming a leader in antiterrorism efforts together with the U.S. and India.” George, smiling, said he was looking forward to it all: “I’ll be 93 then.”

For more information about Zarkana, visit cirquedusoleil. com/zarkana.

Investment Chinese investors explore resource-rich Russian territory

China Invests in Russia’s Far East China’s insatiable demand for raw materials is driving infrastructure development in Russia’s most remote regions.

der economic cooperation, but the benefits of trade and investment are beginning to erode old enmities. Chinese investors have set up special economic zones in places such as the Amur Region and the Primorye and Khabarovsk territories, as well as the Jewish Autonomous Region, investing $3 billion in various new projects. According to Russian press reports, that compares with less than $1 billion in direct state investment allocated for the same areas by Moscow in 2011. The

Rachel Morarjee

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Business New Europe

Serving up Chinese food with lashings of mayonnaise for his Russian clients, restaurant owner Liu Yanzhao is one of many Chinese entrepreneurs hoping to make money in Russia’s Far East. “In the old days, Russia was like China’s big brother,”said the 26-year-old owner of the White Nights restaurant in the Russian border town of Blagoveshchensk. “We all looked up to Russia, but the relationship has changed.” Liu is one of the many Chinese businessmen who are hoping to make money in the resource-rich expanses of Siberia and the Far East. With thousands of miles of unexplored forest and tundra, and only 6.7 million people, Russia’s Far East is sparsely populated. But what it lacks in populations, it makes up for in natural resources — with rich seams of iron ore, rare metals, gold and coal, which China needs to feed its economic growth. Relations between Russia and China, which fought a border war in 1969, were marked by mutual suspicion for a period of time. In the past this hampered cross-bor-

Russian government has said that it wants to invest $100 billion to develop the region over the next five years, and that China will be a key partner in building roads, railways and ports. Said Boris Krasnojenov, metals and mining analyst at Renaissance Capital, “We know that Russia needs to cooperate with another country to open up the Far East, and the natural partner is China, which has far more financial resources than either Japan or South Korea.”

Workers prepare to enter a mine in Russia’s Khabarovsk region, near the border with China.

The economic crisis of 2008 forced China to look at ways to diversify its supply of raw materials, from iron to coking coal, much of which it had imported from Australia and Brazil. Russia was a natural alternative. The economic crisis made Russian companies aware of their need for foreign investment, as well. The K&S iron ore project at Birobidzhan, the capital of the Jewish Autonomous Region, is a good example of Chinese and Russian cooperation in action. The Kimkhan mine, which is the first stage of the K&S project, is currently producing about 1.2 million tons of ore, which is now being exported to China. Russian iron ore producer I.R.C., which runs the K&S project, plans to export 10 million tons a year to China once a bridge is built to connect Birobidzhan with its largest market just across the Amur River.“This area is a hugely exciting one for companies like us,” said Jay Hambro, executive chairman of I.R.C.,“and we would welcome new companies in the region, which would increase investors’ comfort.” The region’s key challenge, in common with other isolated mining projects from Africa to Mongolia, is infrastructure, and China has the funds to solve the problem. “China has never been interested in acquiring controlling

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stakes in Russian companies,”said Krasnojenov.“What they want is to secure a steady supply of the raw materials they need and build the infrastructure to get it back to the home market.” It’s not surprising then that financing for the K&S project was arranged by China’s I.C.B.C. bank and the China National Electrical Engineering Company (C.N.E.E.C.). The K&S mine is also providing jobs for Chinese citizens. “We use Chinese workers to develop the mine,” said Svetlana Kostromitinova, a mining analyst with Petropavlovsk, which owns a controlling stake in I.R.C. “It’s a win-win for everybody.” Enthusiasm for the Chinese presence is not universal; many locals are wary of the gradual penetration. “The growth of China so close to our borders is really frightening,”said Svetlana Ivanova, a secretary in Blagoveshchensk. “I know they want to invest, but many of us fear they will then want to control things here.” Those looking at the bigger picture, however, say that the climate is generally receptive.“Chinese investment is quite welcome in this area,” said Krasnojenov. “All big projects in the Far East and Eastern Siberia require very significant infrastructure, and China’s role will be vital.”

The Russian government has signed four car assembly agreements with a total investment of over $5 billion, including $1.1 billion which Fiat plans to invest in the expansion of a local automobile factory and the creation of a factory to produce engines.“Up to 100,000 modern car models will be produced in the volume of up to two million a year,”Dmitry Levchenkov, head of a special economics zones and project finance department of the ministry, told reporters. He said the investment would be made within three or four years. Russia was about to overtake Germany and become Europe’s biggest car market before the 2009 crisis halved its annual sales. They recovered last year aided by a government-sponsored cash for clunkers scheme, and industry analysts now expect Russia to become the sixthlargest global auto market by 2020, up from its current position as No. 10.

Russia Moves Beyond Emerging Market Status Russia is no longer an emerging market according to the cash-strapped European Union (E.U.), which wants to get rid of the preferential trade terms implemented in the 1990s to support Russia’s transformation into a free-market economy. The E.U.’s executive body has announced plans to exclude middle-income countries such as Russia and Brazil from special rates, according to the E.U.’s General System of Preferences (G.S.P.). The decision to cut benefits is viewed as the most significant revamp of the trade system since the preferences scheme was first introduced. “Global economic balances have shifted tremendously,”E.U. Trade Commissioner Karel De Gucht told reporters. “If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits.”

GLOBAL RUSSIA BUSINESS CALENDAR 14th Semi-Annual Russian-American Innovation Technology Week june 23–30, Mayor’s Reception Room at Philadelphia City Hall

Russian-American Innovation Technology Week (RANIT) brings together entrepreneurs, scientists, venture capitalists and established corporations within the American and Russian technology industries. The 2011 conference will be designed to highlight increased involvement by key Russian and American policy makers, including the Health and the Business Development Working Groups of the U.S.-Russia Bilateral Presidential Commission. ›› bftp.cal.basecampbusiness.com/ node/19365

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Russia BEYOND THE HEADLINES

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Money & Markets

MOSCOW BLOG

Stocks “Russia’s Google” debuts in highly successful I.P.O. on Nasdaq

Abroad or At Home, Russia Benefits from Investment

Yandex C.E.O. Arkady Volozh (third from left) celebrates his company’s launch on the Nasdaq exchange this May

Ben Aris

Special to RBTH

ussia’s leading companies are falling over themselves to invest abroad, striking deals from America to Africa in the last year. Russian companies have always been keen on investing overseas, but have usually held themselves to the countries of the former Soviet Union. Now, however, nervousness ahead of the upcoming elections combined with sound business practice has caused the

reuters/vostock-photo

Yandex Overcomes Risk Telling investors just how dangerous it is to work in your country might seem a funny way of selling shares, but that is what Russia’s leading search engine did ahead of its highly successful I.P.O. Tim Gosling

business new europe

By the timeYandex closed its listing on NewYork’s Nasdaq on May 24, the company had raised $1.3 billion by selling 52 million shares. The company delayed the sale by a day to raise the price and reopen the bid book after it was reported that the offer was oversubscribed by as much as 1,000 percent.“Russia’s Google”also increased its offering price from an initial range of $20–22 per share to $25. The last-minute price hike was largely driven by an accelerating wave of global sentiment for Internet-sector stocks. Demand for exposure rose dramatically through May on the back of hugely successful I.P.O.s by Chinese social media site Renren and U.S. company LinkedIn, as well as Microsoft’s $8.5 billion purchase of Skype early in the month. However, appetite for Yandex was already rampant according to reports, with investors believing that specific risks were already included in the price. Announcing its I.P.O. in early May,Yandex went out of its way in its 2,000-page prospectus to highlight political risks and the

allow the F.S.B., Russia’s main security service, to attach a black box to their servers that can monitor e-mail traffic. In April, the F.S.B. raised the stakes, requesting bans on Skype and Gmail, claiming they pose a serious security threat. President Dmitry Medvedev, known for his Web savvy, dismissed the request, but the discussion throws into relief the state’s uneasy relations with the information superhighway. Opposition figure Boris Nemtsov claimed in an interview that the state has forced most I.S.P.s to exclude opposition Web sites from their services. Things took an ugly turn at the start of May, when Yandex announced the F.S.B. had forced it to hand over details of users of Yandex.Dengi, its money transfer system. Specifically, the F.S.B. asked for information on financial contributors to well-known blogger and anticorruption activist Alexei Navalny. Just over a week later, Russia’s Investigative Committee, the country’s top investigative body, opened an investigation into Navalny, claiming he used his position as an adviser to a regional governor to force a timber company into an unfavorable deal. Still, investors shrugged off the risks. One fund manager, who asked for anonymity, said ahead of the listing: “Russia risk is always there, so most are used to it. As long as the pricing and

danger of a takeover bid from oligarchs close to the authorities.“High-profile businesses in Russia, such as ours, can be particularly vulnerable to politically motivated actions,”Yandex stated in the prospectus, adding that“other parties”may also perceive Yandex’s news service “as reflecting a political viewpoint or agenda, which could subject us to politically motivated actions.” Yandex says it accounts for 64 percent of all search traffic in

The price offered a significant discount compared to Yandex’s peers in other emerging markets. Russia — compared with Google’s 22 percent — and is the largest Russian-based Internet company by revenue. That puts it at the top of a segment likely to develop swiftly as broadband is rolled out across the country and advertising spending grows on the back of accelerating economic recovery. Even so, the price offered a significant discount compared to Yandex’s peers in other emerging markets due to the risk of investing in a company that many consider particularly ripe for takeover. Under Russian law, all Internet service providers have to

strategy are right, then appetite should remain.” Hungry for exposure to Russia’s booming Internet sector, investors have been waiting forYandex to offer up its equity for close to three years. However, they still expect a discount for taking on the risk of working in Russia. “The political risk for Yandex is already priced in via the more general Russian discount, which we factor at 37 percent to the [emerging market] aggregate,” said Otkritie Financial Company strategist Tom Mundy. “Look at the risk-free rates on Russian corporate debt versus sovereign; the spread between the two suggests strongly that the market is pricing ‘intangibles’ for Russian corporates.” With those ‘intangibles’ priced in, investors were left in no doubt that Yandex’s story is a compelling one. AlexanderVengranovich, a media and I.T. analyst also at Otkritie Financial, agreed. “The investors we’ve been speaking with aren’t paying much attention to the political risk story,”he said.“They’re more interested in the Yandex growth story.” Yandex shares join Mail.ru — which in November recorded the only really impressive Russian I.P.O. result in the last three years — as the sole names offering exposure to Russia’s Internet sector segment, which is expected to exhibit rapid and sustained growth. Konstantin Chernyshev of Ura-

lsib suggested that Yandex is an even better bet than Mail.ru.“Unlike Mail.ru,Yandex offers a clear investment story,” he said.“Mail. ru benefited from being the first to offer exposure to the sector, and the backdoor it offered to Facebook shares. It looks like it will lose both of those advantages in the near future.”

in figures

million

Russians, or over 40 percent of the population, use the Internet, making up the seventh-largest audience in the world.

billion

is the size of Russia’s Internet advertising market, which has experienced double-digit growth for the last decade.

80%

of Russian Internet users prefer Yandex, making it one of few countries with a local search engine more popular than Google.

Skolkovo, “City of Innovation,” Rises Outside Moscow The president announced the project in February 2010, just before leaving on a tour through the United States. During that trip, Medvedev made a point of stopping in California’s Silicon Valley, to see what elements could be borrowed for his “innograd” — Russian slang for “City of Innovation.” Medvedev also enlisted big names from both Russia and the United States to help guide the project. The former chief executive of Intel, Craig Barrett, and Nobel laureate Roger Kornberg have been appointed the Skolkovo center’s co-chairmen; billionaire Viktor Vekselberg co-chairs a council responsible for overseeing the project; and Nobel laureate Zhores Alferov will be a co-chairman of the Skolkovo center’s scientific council. At the moment, the Skolkovo center hosts companies working in pharmacology, physics

and I.T., and is recruiting more businesses. The plan for Skolkovo envisions more than 40,000 people living on the center’s 914 acres, working for a variety or both Russian and international companies. Designers used the latest technology and ecological principles in creating the center. Innovative businesses interested in getting into the center apply online for space at Skolkovo, and may receive

All Skolkovo residents are eligible for tax exemptions, including an exemption from paying income tax. grants from a special commission to make their start-up easier. While not all companies will receive funding, all Skolkovo residents are eligible for tax exemptions, including an exemption from paying income tax.

amount being invested to soar. Russian companies invested $19 billion abroad during the first three months of 2011. At the same time, only $9 billion of foreign direct investment (F.D.I.) came into Russia. F.D.I. was up to $41.2 billion in 2010, but still down from 2008’s peak inflows of more than $80 billion. Analysts were additionally disappointed, since this figure was less than half of the country’s outbound F.D.I. of $19.4 billion. “The huge difference between the two figures suggests that Russia has to focus on improving its investment climate,” said Natalia Orlova, chief economist with Alfa Bank.“It will be hard to attract more foreign investment while Russian business is actively investing abroad despite the huge need for domestic investment.” Russia has been plagued by capital flight. The country lost hundreds of billions of dollars to offshore havens in the 1990s, although much of that money returned once the economic boom started in 2000. Since September 2008, however, the flow of capital has once again reversed. In 2010, $35.5 billion left the country, $22.7 billion in the last quarter of the year. Those losses were followed by $21.3 billion in the first quarter of 2011, despite the clearly improving macroeconomic situation. Why is the money leaving? Clearly, domestic businessmen are nervous. In April, Deputy Economic Development Minister Andrei Klepach put on a brave face, saying that the government expects zero capital outflow over the course of the year. But in a May speech, Presidential economic advisor Arkardy Dvorkovich admitted that local investors are jumpy. The power in Russia is so vertical that any potential change at the top would

Unlike the capital flight in the 1990s, this time Russians are buying foreign companies. cause huge disruptions in how the country is run, and business doesn’t like uncertainty. Oligarchs and mini-garchs alike are salting away a little something in other jurisdictions just in case everything blows up this winter. But unlike the capital flight in the 1990s, which was simply cash put on deposit, this time Russians are buying foreign companies, and in the long run, this will actually be good for the economy. The Kremlin is in the middle of a huge P.R. campaign to improve Russia’s image and attract more F.D.I., although Russia doesn’t need the money. The country has plenty of cash thanks to the high price of oil, but it desperately needs management skills and modern technology; F.D.I. comes with these valuable assets. It doesn’t actually matter if the investment is foreign firms investing into Russian projects or Russian companies buying foreign ones — at the end of the day, Russia still gets access to these precious resources, regardless of where they are located.

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Any potential change at the top would cause huge disruptions, and business doesn’t like uncertainty.

The campus of Skolkovo School of Management outside Moscow

Founders claim that projects developed in Skolkovo have already been used in resolving transportation issues, among other things; as an example, they cite a biotechnology project dealing with the safety of people commuting by public transportation. Skolkovo will be the home of a scientific university as of 2014, but already boasts the Skolkovo School of Management. The school, which offers a unique M.B.A. focusing on emerging markets, graduated its first class last year. The group included students from the United States and India as well as Russia. To get the whole country ex-

cited about the project, the Skolkovo Foundation has hired renowned director Timur Bekmambetov produce an animated series based on stories by the famous Soviet sci-fi writer Kir Bulychev. His protagonist, Alisa Selezneva, will live in modern Skolkovo and make scientific discoveries together with her parents, according to Stanislav Naumov. Intel C.E.O. Barrett has said that linking business and research is Russia’s real chance at a technological leap forward.“It’s necessary to be confident in the righteousness of one’s cause,” Barrett said,“even if stable guarantees are lacking.”

Stanislav Naumov wants to limit state involvement in Skolkovo.

Ben Aris is the editor in chief of Business New Europe magazine.

Opinion

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business moves beyond moscow Darrell Stanaford

the moscow times

niyaz karim

oscow has historically absorbed the bulk of investment and development in Russia — no one was surprised to learn that more than 90 percent of domestic investment wound up in Moscow in 2010. But there are several signs that this trend is coming to an end. Moscow’s overloaded infrastructure, new authorities with a different set of priorities, and exorbitant costs of doing business all are factors that are prompting businesses to explore Russia beyond Moscow. Due to a combination of market forces and prudent policies, by 2020 the Russian economy will be far more modern, expanding more evenly across the regions. The capital itself will become a far more livable city — and thus more competitive as a global financial center. New York was once the dominant city for business in the United States. But it became so crowded and expensive that many industries left it for New Jersey or Los Angeles. In the 1990s, Los Angeles went through the same process. Today the U.S. economy is spread out across more than 20 major cities, many of them hubs for specific industries. In Russia, the move beyond Moscow has already begun, led by the economy’s most innovative sector: Information technology (IT). At least 12 major IT companies have developed or relocated their research divisions to regional cities, including Accenture in Tver; Hewlett-Packard in St. Petersburg; Oracle in St. Petersburg, Novosibirsk, Tolyatti and Ryazan; and Intel in St. Petersburg, Nizhny Novgorod and Novosibirsk. The key factor is the ability to hire and retain workers who have

Over the next 10 years we expect a drastic reduction in the influx of labor from the regions to Moscow. the training and education that the business needs. Human resource experts already know that the best hires often come from strong institutes in the regions. These schools turn out specialists with skills to match their Moscow counterparts — but with initially lower salary expecta-

tions. Once they’re in Moscow, however, the competitive nature of the market makes retaining them an expensive prospect. It is much cheaper for a business to set up in a regional city, next door to the institute that produces the specialists it needs— with no competitors nearby and cheap real estate. How does it look from the employee’s standpoint? The traditional path to success for talented young Russians is to move to the big city — Moscow — because there are no good jobs available at home. But the employee’s housing

prospects significantly improve once industry moves to his home region. With 70 percent of a Moscow salary, an average college graduate can afford a mortgage in his hometown, where an apartment is a third of the price of one in Moscow. Kaluga, for example, has a market of more than 125,000 creditworthy buyers, including 25,000 employed at the region’s growing modern industrial parks. Many businesses locate in Moscow to be near their clients. For the financial services, legal and consulting industries, most clients will always be in Moscow.

Tatarstan > Moscow Jonathan Fianu

Special To Rbth

hen I saw the Ernst & Young report that concluded Tatarstan was a better place to do business than Moscow, I had a feeling of justification. Actually, Anton Struchenevsky, an analyst at Troika Dialog, said it best:“It’s nice to have ‘proof of something that we could sense.’” I have been to Moscow several times, but I have never done business there. For me, Moscow is very reminiscent of London, and both cities hold little interest to me from my perspective of an emerging market investor. Beyond my own personal interests and requirements, the report details many aspects of Moscow that are simply unattractive for business owners. In fully formed centers like Moscow, you tend to get a lot of bloat. This translates into higher prices, taxes and a general feel-

ing of not getting value. By contrast, in emerging centers like the Republic of Tatarstan, everything is much leaner. This is mainly because the local area can’t afford to be anything else. If the prices are too high, or the business process wildly complicated, people will simply establish their businesses elsewhere. I have been based in Chistopol, which is in the Republic of Tatarstan and an hour outside the regional capital Kazan, for the past two and a half years. Since I arrived, I have only seen positive change. Surveys like the Ernst &Young report and a 2009 World Bank survey that showed similar results are very encouraging, as they validate my feelings and experiences. That said, there are still a lot of issues that appear when conducting business in Tatarstan. If I were filling out the survey, I think the focus of my complaints would be on staff and partners. The mindset is still immature in the Russian regions. Certainly

there is a burgeoning group of internationally minded, homegrown entrepreneurs, but there is still a lot of Soviet-era thinking, as well. This mentality, combined with the fact that the consumer power is stronger in places like Moscow, may give potential investors pause when considering the Republic of Tatarstan as a place to do business. However, I feel that over time the mindset will change, and at the moment, places like Kazan are hungry for more goods and services while the market for these goods and services in Moscow is close to saturated. Another positive factor is that the Tatarstan government is exceptionally progressive. There is a genuine desire by the regional government to improve the business climate in the region and create foreign partnerships. One of the most recent examples of this was the Kazan Venture Fair, at which sessions touched upon relations between Russian and west-

ern investors; the role of government in developing the business sector; and the importance of improving business education in the Russian regions. The local authorities also went out of their way to attract participants from outside Russia and to make the event as meaningful as possible for them. As a venture capitalist in an emerging market, I found the event much more useful than the sessions I attended during London Business Week, which was a bigger and more prestigious event, but lacked the interest in my ventures that I found in Kazan. But what I found most inspiring about the Kazan event was seeing the passion for growth, change and success echoed by the regional government. For me, it was just further proof that when it comes to doing business Russia, Tatarstan has a lot to offer. Jonathan Fianu is the C.I.S. director of Blue Sky Laboratories, a U.K.-based startup incubator.

down in the mouth Ben Aris

Special To Rbth

im Ash and his colleagues at the Royal Bank of Scotland were in Moscow in March for a look-see. Russia is the “flavor of the quarter”: The economy is doing far better than expected and the budget deficit could disappear completely this year, four years ahead of schedule, among other things. And it is one of the few places in the world taking in new money, with some even suggesting it could emerge as a possible safe haven in the face of instability in the Arab world and Japan’s woes. But Ash says he was surprised to find the locals so pessimistic about their prospects. “In terms of overall impressions from the trip, we were actually taken aback by the generally downbeat views of locals on the economy. While accepting that high oil prices would provide a short-term boost to the economy, there was concern that this would likely just discourage policymakers from addressing deeper-seated structural weak-

nesses revealed through the crisis over the past three years,” Ash wrote in a note on the trip. Ash’s comments on the pessimism among locals is poignant. I have often noticed this: Russians in general tend to be a lot more downbeat about the future of their country than the foreigners who live and work here. I’m not sure exactly what the cause of this is. One factor is surely war fatigue. Russians have literally been battling to build a new country for two decades now, and it has been really hard work.What little progress was made in the 1990s was almost all destroyed in the ruble crisis of 1998, and most had to start again and rebuild their businesses. But they did, and under Vladimir Putin, stability and an economic boom emerged. And in 2007, there was some real optimism about the future. But the 2008 economic crisis knocked everything down again. If you ask me, Russians are simply tired of struggling. The foreigners love the dynamism of Russia and the opportunity it presents, as it stands in sharp contrast to

the ossified social hierarchy of home. However, as one of my Russian colleagues said to me: “You are already an adventurer simply because you are here, so this all suits you. And you have the option of leaving anytime you want. Me, I have to put two kids through Russian schools. I rely on the Russian medical system. And I will be dependent on the Russian pension system. That is a totally dif-

Russians in general tend to be a lot more downbeat about the future of their country than foreigners. ferent deal to yours.” The recent crisis has depressed everyone, but I was surprised at how well most of my friends took this crisis compared to the black pall that fell over Russia in 1998. But that’s not to say they are happy. Moreover, with Duma and presidential elections looming, there is more uncertainty on the near

horizon. The crisis undid Putin’s implicit promise — “don’t meddle in politics and I will fix the economy”— and people are angry because they can see that the state is only pretending to listen to them. When profit margins were fat and wages soaring, it didn’t matter. But now they are thinking more about politics and feel betrayed by the government. Personally, I think this is a temporary thing and that everyone will cheer up after the elections are over and the economy is moving again. After all, things are getting better in Russia pretty quickly, despite the big bumps in the road. And Russians don’t give up, regardless of how depressed they are. One of my favorite Winston Churchill quotes is from a trip he made to Moscow during World War II. As he was being driven to see Stalin, he saw a group of Russians standing in the snow eating ice cream. Said Churchill, “These people will never be defeated.” Ben Aris is the editor in chief of Business New Europe magazine.

For other industries, including oil, natural gas and pharmaceuticals, the government is either a partner or regulator, or both. For most businesses, each function has its own set of factors that determines its optimal location. Most manufacturing functions need to be near abundant, costeffective labor, not near the customer — except where logistics costs represent a high proportion of total product cost. Some need to be near cheap raw materials. Almost all need access to cheap, reliable utilities. Accounting and finance, customer service, repair, training and

many human resources functions do not have to be near their internal or external clients. Thus, in 2008 Alfa Bank acquired a former factory building in Ulyanovsk and redeveloped nearly 81,000 square feet for support functions. Citibank purchased 65,000 square feet in Ryazan. Historically, the shift from overgrown cities to the regions has taken place when changing conditions create a better business and living environment there. Clearly, today the factors are there to push business out of Moscow, and now the government is realizing that endless growth is bad for the city and Russia as a whole. Indeed, for Moscow to perform effectively as a modern financial hub, it will benefit from less demand on its infrastructure. Regions that are delivering a transparent process free of corruption are winning the investment of businesses in Russia. Kaluga has become the leading example. Four industrial parks combined with the transparent, hands-on approach of the team led personally by Governor Anatoly Artamonov have attracted more than $5 billion in investment and created a pipeline of more than 25,000 new jobs. New business has created demand for higher standards of infrastructure, including housing, hotels, education and medical care. These are the things that improve the quality of life for talented professionals and their families — and will make them choose places such as Kaluga over Moscow. Companies should not wait for Russia to modernize before they take the plunge into the regions. It’s their plunge that will accelerate the modernization of Russia. Darrell Stanaford is managing director for CB Richard Ellis in Russia.

LETTERS TO THE EDITOR Reactions to May 11 Issue I was in Omsk, Siberia, from April 26 through May 2, attending the opening concerts at the newly renovated Omsk Cultural Center. The facility used to be a 1967 Soviet-era barn with appalling acoustics. Britain’s premier acoustician, Nicholas Edwards, was brought in by the Omsk Region’s Minister of Culture Vladimir Televnoy and Omsk Philharmonic Executive Director Sergey Bannikov to overhaul the existing facility. They chose Edwards on the strength of his work at the hall in Kazan, which they heard in a tour of Russia’s major concert halls. Edwards is the acoustical designer of the renowned Meyerson Symphony Center in Dallas and Birmingham’s [U.K.] Symphony Hall. He also did the acoustics for the recently renovated Royal Shakespeare Center in Stratfordupon-Avon. All those facilities, in addition to Edwards’s and his international firm Acoustic Dimensions’ other halls, have received excellent reviews. Edwards’s renovation in Omsk is a triumph. Valery Gergiev concurred when he and the Mariinsky Theatre Orchestra performed at the new hall on Apr. 30 with Denis Matsuev. In addition to the excellent musical options the city offers, we also visited the Shebalin College of Music, whose faculty are educating and preparing young musicians for professional careers in the Russian Federation and abroad. Many of their current students sang in the choir for Alexander Nevsky; many of their alumni play in the orchestra and in other Russian ensembles of note. A highlight of our visit was an

audience with the governor of Omsk Region, Leonid Polezhaev, who is doing so much to promote the Omsk Region’s rich cultural history. I wish that Ameri c a ’s g o v e r n o r s w e r e a s committed to the arts as he is — and I have taken his important message back with me to the United States. The Omsk Philharmonic rehearsals and concerts that I attended were a highlight of my trip, my first to Russia, as was the rehearsal I heard of the splendid Omsk State Folk Choir, which includes dancers, singers and a small orchestra of mostly Russian instruments. They were superb. You would do well to expand your cultural horizons outside Moscow and St Petersburg for your next supplement. Russia is a vast country with a splendidly rich cultural history. That cultural life lives in Omsk — that came through to me and to my colleagues loud and clear. You will find tremendous interest in the West if you celebrate this rich trove. I hope you will do so in your next supplement to The New York Times. Dr. Laurie Shulman

Dallas, TEXAS

The overall effect of your first supplement was a very coherent statement that if you have money or skills, you better put Russia into your future. It also called attention to the battle Russia also has with radical Islam and the patience in dealing with it. That is a point that Americans are not very aware of no matter that it is far worse in Russia than in the U.S.A.

Joe Dart

Fairbanks, ALASKA

Letters from readers, guest columns and cartoons labeled “Comments,” “Viewpoint” or appearing on the “Opinion” and “Reflections” pages of this supplement are selected to represent a broad range of views and do not necessarily represent those of the editors of Russia beyond the headlines or Rossiyskaya Gazeta. Please send letters to the editor to US@rbth.ru This special advertising feature is sponsored and was written by Rossiyskaya Gazeta (Russia) and did not involve the reporting or editing staff of The new york times. web address http://rbth.ru E-mail us@rbth.ru Tel. +7 (495) 775 3114 fax +7 (495) 988 9213 ADDRESS 24 Pravdy STR., bldg. 4, floor 12, Moscow, Russia, 125 993. Evgeny Abov Editor & publisher Artem Zagorodnov executive Editor lara mccoy guest editor (U.S.A.) olga Guitchounts representative (U.S.A.) andrei Zaitsev head of photo Dept Milla Domogatskaya head of pre-print dept mikhail apakin layout e-Paper version of this supplement is available at www.rbth.ru. Vsevolod Pulya Online editor To advertise in this supplement contact Julia Golikova, Advertising & PR director, at golikova@rg.ru. © copyright 2010, ZAO ‘Rossiyskaya Gazeta’. All rights reserved. alexander gorbenko chairman of the board. Pavel Nigoitsa General Director Vladislav Fronin Chief Editor Any copying, redistribution or retransmission of the contents of this publication, other than for personal use, without the written consent of Rossiyskaya Gazeta is prohibited. To obtain permission to reprint or copy an article or photo, please phone +7 (495) 775 3114 or e-mail us@rbth.ru with your request. Russia Now is not responsible for unsolicited manuscripts and photos.

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Theater Plus

Underground Provocative art group urges radical reform

Are Russians and Americans Really the Same?

Looking for Trouble

John Freedman

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Pictured left-to-right: Oleg Vorotnikov, Natalya Sokol, Casper (child) and Leonid Nikolayev of the art group “Voina” (“War”).

The art group Voina (War), whose work includes a 213-foot phallus and overturned police cars, has received a state prize for its efforts. anastasia gorokhova

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For the St. Petersburg police, the night of Jun. 14, 2010, turned out to be far from quiet. Nine young people — dressed entirely in black, wearing masks and armed with canisters of white paint — stormed the Liteiny Bridge in the very heart of the Northern capital.The bridge is raised every night and lowered only at dawn. The raising of the bridge takes exactly 40 seconds. The stunt planned by the nine artists took only 23 seconds. As they fled into the night, they left behind on the raised bridge a 213-foot-tall painted phallus — staring straight into the windows of the St. Petersburg headquarters of the FSB. Dubbed “The FSB’s Captive Member,”the act was planned and carried out by the activist art group Voina. If the group’s previous stunts — which include group sex in the Zoology Museum (“Orgy”) and a“Feast”in the Moscow Metro — went unnoticed by some, this time the whole country took notice. Created in 2007, Voina has an estimated 60 members or more, but its driving force is a triumvirate: the philosopher OlegVorotnikov, his physicist wife Natalia Sokol and Leonid Nikolaev, also known as Lyonya Choknuty (Crazy Lyonya), who was most recently employed by a company that manufactures heating equipment.

prize was given by one of their archenemies — the Ministry of Culture. For their part, bureaucrats from the ministry wrote an official letter saying they had nothing to do with the decision. According to heated debates on the Internet, not all Russian artists share Banksy and Erofeyev’s opinion of Voina. Painter Ilya Glazunov, whose studio is located a stone’s throw from the Kremlin, said:“To paint a sexual organ on a bridge, what sort of art is that? That has absolutely nothing to do with art!” Art historian Iosif Bakshtein, however, disagrees: “Not all of Voina’s stunts are synonymous. Many are intended to create a scandal, which for Russia today

“Voina is merely reflecting popular opinion,”said Voina member and philologist Alexei PlutserSarno. Voina’s most effective stunt to date was directed against insufficient reforms inside the Ministry of Internal Affairs. Voina turned the public discussion into a performance, which took place on Palace Square in St. Petersburg. At night the square is patrolled by police, while patrol cars are stationed on all adjacent streets. Vorotnikov and Sokol’s two-year-old son rolled a ball under one of those patrol cars, then four activists turned the car over. No one is saying just how many patrol cars were overturned by Voina that night, but the importance of the act lies in quality, not quantity. The activist artists wanted to set an example and show how badly Russia’s police force needs radical reform. This stunt, known as“The Palace Coup,”landed Voina in court. The police did what some people said they should have done long ago: They pressed charges of vandalism against Voina.Vorotnikov and Crazy Lyonya spent the next four months in prison. If British street art Banksy had not posted bail, they would be there still. ThenVoina won the Innovation state prize for contemporary art. Andrei Erofeyev, curator of the exhibition“Religion! Watch out!, who has also appeared in court to defend his artistic sensibilities, said: “Gigantic graffiti as a symbol of protest deserves a prize.” The Voina activists boycotted the award ceremony since the

is a rarity. Voina is sending society important impulses.” Indeed, this is Voina’s aim.“We want to stir people up,”said Oleg Vorotnikov. “And we don’t need a government; that’s an obsolete form of social system.” His wife was still more specific.“We want to overthrow Putin’s regime,” Sokol said. Despite these loud political declarations, both Vorotnikov and Sokol still consider themselves only artists. Activists from the pro-Kremlin youth movement Young Russia think otherwise. Group members protested Voina’s state prize outside the Ministery of Culture. In their opinion, Voina members are not artists but extremists. In the case of Voina, it seems especially hard to determine where art ends and politics begin.

The Art of “War”: Stunts by Voina Aug. 24, 2007. Feast. Voina held a wake for the poet Dmitry Aleksandrovich Prigov in the Moscow Metro after the dean of Moscow State University’s philosophy department forbade the joint Voina-Prigov stunt be held in a student dormitory. Shortly after that, the poet died. Jul. 3, 2008. A Cop in Vestments. Oleg Vorotnikov donned a policeman’s uniform over which he put a priest’s cassock; then he strolled into the upscale Sedmoi Kontinent supermarket, picked up five of the most expensive items and walked out.

Nov. 7, 2008. Storming the White House The night before the anniversary of the 1917 Russian Revolution, a Voina brigade broke onto the grounds of the White House in Moscow (seat of the Russian government) and, using a laser, painted onto the façade a skull-and-crossbones 12 stories high. Jun. 14, 2010. The FSB’s Captive Member. Voina painted a gargantuan phallus on the Liteiny Bridge in St. Petersburg. Sept. 16, 2010. The Palace Coup. At night, near Palace Square in St. Petersburg, Voina overturned several police cars.

nora fitzgerald special to RBTH

Plisetskaya was not allowed to dance in the United States until 1959, and then only a few times before the Soviet Union collapsed. Dance students like myself followed Soviet dance careers, and the occasional defection, with keen interest. But Plisetskaya and her beloved husband, Rodion Shchedrin, never came to stay. We saw her mostly on grainy films. When she came to Hartford, Conn., in the 1970s, my inexhaustible dance teacher was the first in line to buy tickets. It was pouring rain the night she performed for us. The moment I saw Plisetskaya’s grand jeté, the jump split that is the proper noun of the ballet vernacular, I gasped. My fellow students and I were convinced she jet-propelled from a diving board offstage. She stayed at the highest point for a moment, defying both gravity and time. It was then I realized there was no chance for me, with my round tummy and parallel legs.Yet a vi-

AFP/eastnews

My Maya: A Life’s Dance, A Life’s Music sion of her beauty fortified me. When I finally gave up dancing in my twenties and began to write about dance, she was the ultimate vision of perfection in my head. Her Carmen was too sensuous for the censors, her dying swan only more perfect in repetition, her Anna Karenina utterly original. Maya Plisetskaya is arguably the most important ballerina of the 20th century, kept under the closest watch. Her six-decade career stands in contrast to her childhood. Her family was Jewish, well known as artists, dancers and actors. During the Great Terror, her father was arrested and killed, her mother sent to the gulag. Plisetskaya’s aunt had the vision and determination to continue Maya’s daily ballet training in wartime. In 2006, I saw Plisetskaya dance a three-minute Bejart solo created for her 80th birthday. Her fans joyfully waited hours outside the Kremlin Palace as passports were checked. The piece was called “Ave Maya.”Bejart had created a metaphor for her: These arms can still make this body fly. Five years later, I may get a glimpse of her again. Plisetskaya will be in New York next month with Shchedrin for the opening of the Mariinsky Ballet at the Lin-

Maya Plisetskaya celebrated her 80th birthday on stage in Moscow.

coln Center Festival July 11–16. The Mariinsky will perform the signature Plisetakaya/Shchedrin ballets: “Anna Karenina”; “The Little Humpbacked Horse”; and “Carmen Suite.” In her autobiography, she explains why she did not defect. Defection would have meant leaving her husband as well, as the K.G.B. did not allow them to travel together. Instead, she won her

the moscow times

have lived in Moscow for nearly 23 years and I have heard this comment so many times my head hurts: “Russians and Americans are identical”; “We Russians and you Americans are exactly alike.” I don’t believe it for a minute. But I continue to hear it. I most recently heard it at an evening of readings of short American plays in Russian translation. The event — which was called just that: “An Evening of Short American Plays” — was organized by Georg Genoux of the Joseph Beuys Theater in Moscow. It was held downstairs in the club at the ArteFAQ café. I had a hand in it, too, as the plays came to Georg’s attention through me. After a bit of vetting, the plays that I delivered to Georg were the following: Erik Ramsay’s “Traction,”K. Frithjof Peterson’s “Gun Metal Blue Bar,” John Walch’s “Aisle 17B,” George Brant’s“Clipped,”Samuel Brett Williams’“Missed Connections” and David M. White’s“Enough.” Each is a dramatic sketch that takes roughly 10 minutes to read. That’s when the surprises began.Yury Muravitsky, the director to whom Georg entrusted the work on the readings, told me that he was knocked out by the plays. Very funny, very clear, he said. Very clear? Very funny? Okay, the old geezer dying in “Enough” might be like old geezers dying in many places in the world, but the lunatics in “Traction” who appear to see religion in the notion of the tire gripping the road? The sadistic middle-aged farmer snapping pigeons’ necks to keep the flock pure in “Gun Metal Blue Bar?” I was taken aback. Even after living in Russia for 23 years I still never tell jokes in Russian. Never. Ever. And when I do, they fail. Period. After the readings, I went

battles with the censors and danced better than anyone else. The Mariinsky Ballet will perform July 11–16 at the Metropolitan Opera House. Valery Gergiev, the pre-eminent interpreter of Shchedrin’s music, will conduct the ballets, with choreography by American Ballet Theater artist-in-residence Alexei Ratmansky.

stalking. I was curious to find out what people thought. I was encouraged by the fact that approximately 120 people had crammed into a space that supposedly holds 85. I was encouraged by the fact that the standing-room-only audience listened intently and often laughed when you might expect it. I was buoyed by the fact that, following the final reading, the place burst into — as the official Kremlin chroniclers used to put it — an “intense, sustained ovation.” But maybe they were just being polite. I sidled up to Varvara Nazarova, a fabulous young actress. “Amazing,”she said with a big grin lighting up her face.“Astonishing how you Americans are just like us Russians! You’ve got that same, like, boldness and, uh, arrogance.” I asked a stranger about the translations. What sounded

Even after living in Russia for 23 years I still never tell jokes in Russian. Never. Ever. And when I do, they fail. rough? Was there anything that sounded un-Russian in the texts? “Excellent translations,” she said.“They all had a perfect flow as if they were written in Russian. Very funny.” I moved on to Yelena Kostyukovich. She is the literary director at the Saratov Youth Theater. “Those were fabulous plays,” she said, her eyes shining happily. “It’s like they were Russian. Their sense of humor is exactly like ours. Very funny, very acerbic on the surface, and devastatingly tragic underneath.” There’s a Russian phrase that sort of goes,“Don’t leave behind good to go in search of good.” I’m a big fan of Russian wisdom. What else could I do then, but believe what people were telling me?

bIBLIOPHILE

The Powerful Yet Unsung Icons of Soviet Design Nora Fitzgerald

Ballet Plitsetskaya and Shchedrin return with Mariinsky

Maya Plisetskaya, 85, will be on hand, with husband and composer Rodion Shchedrin, to open the Lincoln Center Festival next month.

Special to RBTH

n his irreverent, quirky and loving book, “Made in Russia: Unsung Icons of Soviet Design” (Rizzoli), editor Michael Idov brings in a team of heavyweight writers and artists to explore Soviet life, art and kitsch. Together, they reminisce and rediscover the hardscrabble, ineffable designs that helped to shape Soviet life. They chose 50 of the most evocative icons to riff on. Recalling one of the Soviet Union’s brightest moments, when Sputnik-1 orbited the earth in 1957, Idov quotes Claire Booth Luce, who called the spider-like orb“an inter-continental outer-space raspberry to a decade of American pretensions that the American way of life was a gilt-edged guarantee of our national superiority.” Inevitably, Idov writes, Sputnik “jump-started a number of design trends.” He also readily acknowledges that many Soviet designs were clumsy rip-offs of Western inventions.“Made in Russia”manages to focus on the most inspirational emblems, the best of a“crazed, Modernist pastiche,” Idov writes. “It jumbled together wartime know-how, space-age aesthetics, accidental shabby chic, Slavic motif and warped dreams of the West.” Most of the items, then — chosen by Idov and described by Bela Shayevich — are not feats of Soviet engineering. More intriguing, they are the flotsam and jetsam of a dead society, from the ubiquitous 12-sided drinking glass to the loot-revealing fishnet shopping bag. “Made in Russia” offers dueling memories. One of the most

powerful images is that of a street-side soda dispenser with a single communal glass. Pathetic, intimate and warm-hearted, the image does evoke some eerily simple life. “The book started out as an antidote to nostalgia,” Idov said in a phone interview. He found a recent tome by acclaimed Russian journalist Leonid Parfyonov, called“Our Era,” “omnivorous in its nostalgia.” Idov said he worried he had gone too far in the other direction. He decided to balance the hipper, ironic tone with personal essays. The essays are written by the likes of artist Vitaly Komar and Russian Jewish émigré writer Gary Shteyngart.The result is a bit chaotic — the book is at times a raw mix of essays, text, description and images — but packed with emotional power. Lara Vapnyar’s recollection of her school uniform, which awkwardly resembled a blocky version of a French maid costume, conjures an archetypal scene of an adolescent whose stirrings are stanched by a Soviet mother. The epic question: At what point does a school uniform fit? For a daughter, when it fits her form. For a mother, when it hides her growing daughter. But the most visionary essay is written by Vitaly Komar, the preeminent founder of the Sots Art movement. Not only does he deconstruct the hammer and sickle, he recalls a limerick, what he calls an “infamous folk ditty of the 1960s.” Here’s the hammer, here’s the sickle Our nation’s proud symbol Forge your steel, cut your hay You’ll be buggered either way.

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Culinary Arts A new service complements Moscow’s restaurant scene: cooking with a professional chef

Finding a New Home in the Kitchen Taking lessons in gastronomy has become a popular trend among Russians, who are becoming more interested in good food. DMITRY ALEXEEV

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Guests of the Baltschug Restaurant inside Moscow’s Hotel Baltschug Kempinski can hire a chef to accompany them to a local food market.

nation of food and wines as well as the recipes, design and origin of certain foods.” Interest in such food has prompted restaurateurs to expand the variety of ways people can develop their tastes and learn more about what they eat. These efforts have included tastings of food from different parts of the world, tours by foreign chefs, workshops on cooking national dishes and culinary courses. “When I opened my first Italian restaurant in Moscow 10 years ago, our clients weren’t familiar with basic Italian foods, such as Parmigiano-Reggiano, prosciutto or balsamic vinegar,”said restaurateur Gayane Breiova. “Therefore, we held workshops at the La Scaletta osteria and eventu-

International Influence of Local Cuisine Few would associate Russia with a strong gastronomic heritage or the culinary arts. At the same time, the world uses many traditions that draw on Russian cuisine, including the basic principle of serving food one dish at a time, which is referred to as service à la russe and replaced the popular service à la française, in which all dishes were brought to the table together. Russia played a considerable role in the global gastronomic arena prior to the Bolshevik revolution. The Soviet period was characterized by stagnation in agriculture, a shortage of food and lack of official interest

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Once a week,Yury Gusev, the coowner of a large information technology company, puts down his mobile phone for three hours so he can enjoy himself in a restaurant. But he doesn’t sit down at a table; rather, he puts on an apron and moves into the kitchen. Under the guidance of a chef, he learns the secrets of preparing béchamel sauce, cooking borshch and chopping carrots. “I’ve tried everything in my life, including the most extreme types of outdoor recreation,”Gusev said. “Over the last 10 years, my friends and I have traveled half the world and spent six figures on entertainment. But it turns out there is only one thing that truly fascinates me — cooking. I never thought that I would pay money to chop onions or peel potatoes. But one hour in the kitchen for me is like a week of vacation. I shut myself off from everything, distract myself from daily life and feel happy.” People like Gusev are becoming more and more common in Russia. Back in the 1990s, dinner at an expensive restaurant or an abundance of exuberant gourmet food on the table was seen as a symbol of financial success and social status. Today, Russians are interested in mastering the culinary trends themselves. “Some five years ago, wealthy Russians dining out were guided by one desire — to spend as much as possible,”said Pierre Gagnaire, a famous French chef who owns restaurants bearing his name in Paris, London, Tokyo and Moscow.“Today, judging from the clients at my Moscow restaurant, Russians still haven’t learned how to understand food, but they are actively interested in the combi-

in cooking considered “bourgeois.” This time period largely erased many centuries of gastronomic traditions.

ally launched Italian cuisine courses. A year ago, we started children’s culinary courses. We are completely booked on the weekends.” Some restaurants working inside hotels have taken things a step further. Baltschug Restaurant, inside the five-star Hotel Baltschug Kempinski in Moscow, recently introduced a new service: Guests can now visit the Dorogomilovsky market, one of the best food markets in Moscow, accompanied by a chef. “The restaurant’s chef, Elmar Basziszta, teaches our guests how to distinguish the qualities of the original product and compile a menu depending on the existing product variety,” said Nico Giovanoli, the director of the hotel’s

public catering service. “They then prepare dinner from the groceries they bought after returning to the hotel.” Preparing desserts with a pastry chef is another in-demand service among this restaurant’s regular clients. There are always people who want to decorate and bake Tula gingerbread, a traditional Russian delicacy. Another fashionable trend is centering teambuilding events around food preparation. Lately, many companies have been interested in gastronomic restaurants, even though only recently sporting events such as paintball were primarily used for teambuilding,” said Vadim Palazhchenko, the chef at the deluxe Lotte Hotel Moscow. “People are interested in a format that brings the staff together and enables people to create new knowledge and experience while at the same time having dinner cooked by a famous chef at a fancy restaurant.” The latest trend features a food market with premium groceries, a high level of service and a restaurant where people can cook the food they purchased and receive recommendations from a professional chef. One of the most interesting projects of this kind opened in Moscow in midDecember 2010. The seven-floor Tsvetnoy Central Market was set up in the style of London’s Liberty and Harvey Nichols department stores. It hopes to become the go-to destination for Moscow foodies. Although all the facilities have not opened yet, eventually the top three floors will house the Farmer Bazaar farmer’s market, restaurants, a café and a bar, managed by the restaurant operator Ginza Project. The market offers beef raised in the Moscow suburbs, milk from Ryazan, cottage cheese from Lipetsk, honey from Altai and eggs from local villages as well as vegetables, fruits, seafood, spices and artisanal delicacies from around the world. “All the food can be prepared and sampled here in the restaurant. This is a free service,” said BorisYaroslavtsev, the general director of Farmer Bazaar.“We have ingredients for different culinary tastes, and the clients receive help in the restaurant from chefs who cook the most popular national cuisines — Italian, French, Japanese and, of course, Russian.”

After a sharp turn from massproduced cafeteria food to expensive restaurants focused on price, Moscow’s dining scene today is focusing on quality. EMMA BURROWS SPECIAL TO RBTH

One of the most noticeable ways in which Moscow is starting to feel like Europe’s biggest capital is in its rapidly changing restaurant scene. During the Soviet era, food was generally standardized and mass-produced for cafeterias in schools and office buildings, or home grown at the dacha. It was hard to get foreign products, and imitations were of poor quality; Ivan Shishkin, co-owner and chef at Delicatessen bar and restaurant in Moscow, said that Soviet coffee had a reputation for being almost

undrinkable, and that “burgers” were made with ground beef that had been dissolved in water. The changing expectations of restaurants in Moscow may have started with the first McDonald’s. It had a line stretching down the street, and its success resulted in the appearance of other fast food chains. In the late 1990s, luxury restaurants began to appear, as New Russians and oligarchs needed a place to show off their success. Restaurants such as the popular Café Pushkin and, later, Turandot (both from Russian restauranteur Andrei Delos) enticed the nouveaux riches with their elaborate 19th century-inspired decor and traditional French and Russian cuisines. Although these restaurants were successful, Shishkin says the 1990s

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and early 2000s were a time when there was “a lack of understanding about good food,”and the most important things were showing off and spending money. Today, all that has changed. Said Muscovite Ekaterina Drobnina,“Putting on all your jewelry and flashing your money is considered to be very vulgar.” Now, Russians are more interested in different cuisines and wellcrafted meals. Restaurants such as Delicatessen cater to well-traveled Russians who know about food. According to Shishkin, these places are informal and intimate, where customers come to relax and feel good. Delicatessen, he said“caught the wave”of new dining in which couples, families and businesspeople all mingle together over food and drink. He believes that today’s customer is more discerning and is not prepared to pay for a bad experience. At Delicatessen the four owners work with the staff to serve customers. The food is tasty, but reasonably priced. According to Ian Zilberkweit, Executive Chairman of Le Pain Quotidien/Khleb Nasushniy (Our Bread) bakery group in Russia, increased competition between companies has also improved the restaurant culture in Moscow. He says that with more products and restaurants available, Russians are

ITAR-TASS (2)

Moving from Cafeteria to the Sushi Bar

The Moscow branch of the restaurant Nobu, which is co-owned by Robert De Niro, openned in 2009.

able to choose between establishments, which drives up quality as businesses compete for customers. Furthermore, he pointed out that establishments such as Le Pain Quotidien have actually benefited from the recession: Le Pain Quotidien has seen growth of more than 30 percent as Russians, rather than wasting their money on inexpensive restaurants, sought out high-quality products in order to treat themselves. “We’ve also seen an increase in the number of businesspeople who come in to our cafes — they want good food, a casual place to hold a meeting and they want it to be

reasonably priced,” Zilberkweit said. In order to attract this new type of customer, establishments are seeking to improve quality. At the Le Pain Quotidien factory just outside of Moscow, production is centralized to maintain standards, and all the bread products are made by hand by chefs and bakers who have been trained using traditional artisan techniques. At Delicatessen, Shishkin says that he spent months developing the perfect kind of burger. However, something that is difficult to change is consistency and service.“This is the single most difficult thing in Russia,” said Zil-

berkweit. Le Pain Quotidien interviews four people for every one position, but even then it is possible to be served by a dour waiter or to have to wait too long for service. The old adage “the customer is always right”is something that has yet to reach Moscow. Shishkin says that, in this regard, Moscow is still behind Western Europe.“In the West, you can be fairly certain that wherever you go to eat, you will have good food and service. Here you can never be certain. It is like a lottery; just because somewhere is good twice, it doesn’t mean that it will be good the next time,” Shishkin said.

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