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Fare deal: authorities crack down on the con-man cabbies

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Notes from underground: the allure of the Moscow Metro

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Tuesday, September 27, 2011

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Technology After six failures this year, recent spaceflight successes point the way to a brighter future

Going in search of safer space Despite a good past record, recent problems with Russian spacecraft highlight the need for modernisation and to recruit younger specialists. anton makhrov russia now

Home again: three cosmonauts landed safely in Kazakhstan this month after a trip to the ISS

spaceship with cargo for the cosmonauts was to be launched on October 14, to be followed by a Soyuz craft delivering a replacement crew on October 28. But the launches have been postponed until November 1 and 14 because of the problems.

grammes, told the Interfax news agency.

The ill-fated Progress cargo spaceship was taken into orbit by an unmanned Soyuz-U rocket, whose thirdstage engine was the cause of the failure. Manned spaceships are launched by an updated version of the SoyuzU, the Soyuz-FG, but it shares Why the problems?

Russian and American space the same third-stage engine officials do not rule out the as the older rocket, which is worst-case scenario. “If, for a cause for concern. some reason, we fail to de- In defence of the rocket, the liver the crew before the end Voice of Russia radio comof November, all of the pos- mentator Andrei Kislyakov, sibilities must be considered. says: “The Soyuz-U rockets This includes running the have been launched more station in unmanned mode,” than 700 times. They have set Alexei Krasnov, the head of a record of a hundred sucRoskosmos manned pro- cessful launches in a row.”

The statistics for Progress in particular were even more impressive as it had not had an accident since 1978.

According to retired Major General Vladimir Dvorkin, the main problems are on Earth. He says infrastructure and production capacity are obsolete, and there is a lack of young qualified specialists (the average age of personnel is 50).

Future developments

A space industry source was quoted in Kommersant-Dengi as blaming the crises on the fact that there have been “no new developments”since Soviet times. But new developments are in the pipeline.

Nasa has allocated $270m to four firms that build private spaceships. The biggest – a $92m contract – was signed with Boeing, which is developing a capsule for a crew of seven for flights to the ISS and back. Roskosmos is doing similar work.

The head of Roskosmos, Vladimir Popovkin, said that the Energia Corporation was developing a six-seat spaceship specifically for supplying and servicing the ISS.The United States is planning to launch a new cargo spaceship in about 2016, and Russia has plans to launch one around 2018.

According to space expert Ivan Safronov Jnr: “The

accident rate of Russian rockets began to rise in the late Nineties and is now the same as that of India, China and Japan. American and European rockets have a much lower accident rate.

However, American carrier rockets are too expensive for clients, while Europe can produce only six Ariane-5 rockets a year.

“So the client who needs a satellite launched cheaper and faster uses Russian Protons, Soyuz, and Rockot rockets. New booster rockets, for example, Angara, are being designed. But they require new materials and technologies, which takes a lot of time and money.”

Russia now

The latest developments surrounding the abortive deal between BP and Rosneft have left the British company facing an enormous damages claim and pondering its future in Russia.

On August 31, the day after it was announced that American firm ExxonMobil would be developing the Arctic shelf instead of BP, a search was carried out at the BP Exploration Operating Company office in Moscow. The search warrant was issued by a Tyumen court and was based on a submission by the Siberian minority shareholders in TNK-BP, the third biggest oil producer in Russia, owned on a 50-50 basis by BP and Alpha Access Reno-

va (AAR), a consortium of Russian shareholders.

The confidential documents removed during the search concerned the Rosneft-BP deal. The claimants want compensation for opportunities lost because of the failed TNK-BP partnership with Rosneft. They say it was the British shareholders that wrecked the deal, which would have increased TNKBP’s capitalisation. The minority shareholders initially put their damages at 87.12bn roubles (about £1.75bn), but almost doubled their claim to 154.284bn roubles (£3.1bn) at a trial in Tyumen on September 21. The claims are addressed to the British BP plc and BP Russian Investments Limited.

The chances of the lawsuit succeeding are slim, according to experts. They believe the minority shareholders will find it hard to secure compensation from BP because the deal with Rosneft cannot be deemed effective.

vostock-photo

BP to stay in Russia despite lawsuit and raids igor vyuzhny

Speculation that Prime Minister Vladimir Putin would stand in next year’s presidential elections was finally confirmed on Saturday at a United Russia party congress. It was also announced that President Dmitry Medvedev will lead United Russia’s party list in December’s parliamentary elections and run for prime minister. Mr Putin said he had co-ordinated plans for the future with Mr Medvedev “a long time ago”. The correctness of this strategy had been proven over the years, added Mr Medvedev.

Opposition protest has been muted, with Gennady Zyuganov (Communist Party) and Sergei Mironov (Fair Russia) stating that the change came as no surprise. While some expressed concern about the fate of Russia’s democracy, others considered the news a sign of stability and felt it would provide reassurance to foreign investors.

Edinburgh honour for maestro Gergiev

Resources British oil giant faces £3.2bn damages claim over failed deal with Rosneft

BP’s Moscow offices were raided after its Arctic exploration deal with state oil giant Rosneft collapsed.

But other British companies have not been deterred.

Seat swap for leadership tandem

Read more comments and reaction at www.rbth.ru/elections

reuters/vostock-photo

This year has been one of the most dramatic for international space exploration in decades. Recent events are reminiscent of a Hollywood blockbuster.

On July 21, Nasa officially ended its Space Shuttle programme, saying it was not economically viable, and left it to Russia to deliver cargo and crew to the International Space Station (ISS). In March, Nasa had signed a $753m (£490m) two-year contract with Roskosmos to use Soyuz spaceships for flights to take crew to the ISS between 2014 and 2015.

But after the Russian cargo spaceship Progress was lost on August 24 after failing to reach orbit, flights were temporarily suspended. This was the sixth lost spacecraft this year, and the accident was a blow to the image of the Russian space programme.

In addition to the losses, a series of launches were postponed“for technical reasons”, which in most cases was due to malfunctioning equipment at the final stage of launch preparations.

But as with any Hollywood blockbuster, triumph followed disaster. Last week, a Proton-M rocket carrying a military satellite was successfully launched from Kazakhstan’s Baikonur Cosmodrome. It was a great relief, as the previous rocket, launched on August 18, was sent into the wrong orbit by a malfunction.

More relief came when three cosmonauts returned safely to Earth from the ISS on September 16. There are currently three crew left at the ISS who are due to return on November 22. A

News in Brief

Staying power: experts say BP is unlikely to leave Russia

But even if they win, the money will go not to the plaintiffs but to TNK-BP. After the searches, BP declared that its business had come under unreasonable pressure, while Exxon merely expressed its surprise at the searches. The US company, which has not previously worked in Russia, may get a juicy plum. Rosneft and Exxon are to explore three Arctic areas in the Kara Sea

with combined resources put at some 5 billion tons of oil and 10 trillion cubic metres of gas. No precise figures are yet available for reserves.

Exxon will also join the Tuapse Trough project in the Black Sea.The reserves in the Trough may be as much as 1bn tons, but that is a tentative assessment. The American company will get 33.3pc stakes in both the Arctic and the Black Sea projects, with

the remaining 66.7pc to be owned by Rosneft.

In return, Exxon offers Rosneft participation in American and Canadian projects, notably the Hibernia petroliferous province in Canada’s territorial waters nearly 200 miles south-east of Newfoundland and Labrador islands. Its reserves are estimated at 1-1.3 billion barrels (136-178 million tons) of oil.

Exxon has a 33.1pc stake in the project.

On September 13, Rosneft president Eduard Khudainatov announced that the companies would have a detailed plan in place for the joint projects before the end of the year. That same day, the Tyumen state arbitration court, on a petition from Rosneft, revoked its ruling authorising the removal of documents from BP’s Moscow office. This happened the day after the British Prime Minister David Cameron and a delegation of British businessmen, including BP’s chief

executive Robert Dudley, visited Moscow. The raids were raised by David Cameron at a meeting with Russian President Dmitry Medvedev, but no conclusions on the matter were reached.

This latest setback triggered rumours that BP might pull out of Russia. Yet this is an unlikely and highly undesirable scenario for the company: TNK-BP accounts for a quarter of the British giant’s production, a fifth of its reserves and a tenth of its earnings. Having invested $9bn in setting up TNK-BP in 2003, the British had received $16bn in dividends by 2011.

Other British companies, undeterred by BP’s setbacks, are anxious to enter the Russian commodity market. According to unofficial Kommersant data, the British Empire Special Situations investment fund, controlled by the Rockefeller family, is trying to gain access to two gas fields in Urengoy in Siberia.

The Russian conductor Valery Gergiev has been appointed honorary president of the Edinburgh International Festival Society.

Gergiev, artistic director of the Mariinsky Theatre in St Petersburg and principal conductor of the London Symphony Orchestra, is only the third person to take the role, his predecessors beingYehudi Menuhin and Charles Mackerras. Gergiev, whose links with the Festival go back to 1991 when he took the Kirov Opera there, said: “Artists come here with a tremendous sense of excitement. I hope it continues to flourish and I’m privileged to be part of its future.”

Porridge pot record is stirring stuff

kirill bychkov

Residents of Tula, a city about 125 miles south of Moscow, have beaten the Scots at their own game by cooking and eating the world’s biggest pot of porridge. The city celebrated its 865th anniversary on September 10 by cooking 865kgs (1,907lbs) of oatmeal in a pot suspended from a 20ft tripod on one of the city’s main squares. The previous Guinness world record was set at the Cupar Highland Games in Fife, Scotland, in July last year, when 690kg (1,521lbs) of oatmeal was cooked.

In this issue agriculture

itar-tass

Food for thought

A nation answers the call for self-sufficiency TURN TO PAGE 4

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Politics & Society

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Transport Legions of unofficial taxi drivers told: get licensed or get off the road

fares paid depend on your ability to bargain. Foreigners can find themselves paying more for a journey in a gypsy cab than they would in an official taxi.

But even local Russian speakDaria Kostina and Lara mccoy russia now ers don’t always get a barThe streets of Russia are to gain. For a basic three-mile be cleared of “gypsy cabs” ride into Moscow’s centre, under a new law that came which should take 10 mininto effect on September 1. utes in the evening, illegal It states that drivers must cabs now ask for 300 roubles have a permit and at least (£6.20) – which is the same five years of driving experi- amount an official cab chargence to drive a taxi. They es for the first half-hour of must install a meter in their any journey. cars, an orange light on the roof, and have checkerboard For and against the law stripes painted on the side Not surprisingly, Moscow’s of their cars to identify them official taxi companies are as legitimate taxis. Their cars strong supporters of the law. must be inspected every six months and each region has the right to require all taxis ‘We have met to be painted a particular many interesting colour. Drivers must also fill people who pick up out a report form for every passengers to make journey they are paid for.

While the legal requirements ends meet – it’s a for becoming a taxi driver of great way to get a Hackney carriage or other the inside scoop on private taxi firm are widely accepted in Britain, in Rus- how locals feel about sia the new law has been the current events’ source of frequent heated debate.Taxi drivers have staged “The anarchy caused by priprotest rallies and petitions vate cabs operated by peohave been submitted to the ple with no driving experiprime minister. ence and no knowledge of There are currently more the Russian language or the than 40,000 unofficial taxi city will come to an end,”said drivers in Moscow alone, ac- Felix Margarian, general dicording to the Moscow Trans- rector of the New Transporport Union, an association of tation Company, which opMoscow transport compa- erates taxis under the New nies. These illegal taxis are Yellow Taxi brand. estimated to earn more than “The illegal drivers who oc1 billion roubles in tax-free cupy the approaches to air income annually. In contrast, terminals, train stations and there are only around 9,000 parking places near retail official taxis in the capital. complexes will either gradIllegal taxis are often more ually legalise their activities widely available on the or leave the market.” streets and are generally But the law’s critics argue thought to offer cheaper fares that it ignores the interests than licensed cabs. However, of individual entrepreneurs.

According to Yaroslav Shcherbinin, chairman of the Russian Union of Taxi Drivers,“the list of requirements and documents to be submitted by carriers is still to be approved. Putting checkers on the side of the car and a lamp [on the roof] does not cost much. But a taximeter is a different story. Some say the device can be bought for 1,500 roubles; others say you can just install a program on the navigator. If colour restrictions are introduced, thousands of carriers will have to repaint their cars.

That is expensive.”

Private taxi drivers, though supportive of the law, are concerned that licences will be issued only to those who own their own cars. For example, drivers of pool cars would not be able to operate. And it is not clear what the medical check-up for drivers or the vehicle safety inspections will entail, where they will take place and who will administer them.

Going my way? Illegal cabs are more widely available than licensed ones, but they can often work out more expensive – especially for foreigners

THE numbers

40

thousand ‘gypsy cabs’ currently operate in Moscow, while there are only 9,000 legal taxis on the city’s roads.

Enforcement

Under the new law, taxis will be regulated by traffic police inspectors (GIBDD) and Rostransnadzor, Russia’s transport safety regulator. They will attempt to catch unofficial taxis by posing as a passengers and filming the transaction. Fines will not be imposed until January 2012, giving taxi drivers several months to prepare.

Many unofficial taxi drivers think the new law will be ineffective. Alexei Krikunov, who has 20 years’ experience as an unlicensed cab driver – and has no plans to go legal – says: “I often take passengers who are going my way.

If a traffic cop stops me, I can always say that I am driving a relative.”

300

roubles (£6.20) is the average fare for the first half-hour of a ride in an official Moscow taxi.

Prices vary from city to city.

10

thousand roubles (£200) will be the fine for drivers of non-licensed taxis carrying passengers in Moscow.

And many passengers are supportive of unlicensed taxis. Darya Boldyreva says: “I use [unlicensed] taxis to get from my home to the office. There are always a couple of cars parked at the same place. I know the drivers well,” she said.

Even taxis that are legal are still likely to carry passengers without documenting them, according to Anton Zaboronov, a frequent traveller in unlicensed cabs.“Half the cars that stop to pick up illegal passengers now are legal cabs,”he said.“The driver is working for a company getting orders from the call centre, but he is still tempted to get 300 roubles more by taking an undocumented passenger. I cannot see how new laws will change that.”

Nevertheless, Stanislav Krivosheyev, the leader of the All-Russia Movement of Taxi Drivers and editor-inchief of the web portal Taxis News, has decided to go legit.

“Getting a licence in Mos-

Last week for the first time in Russian history, a woman was elected as Speaker of the Federation Council. But there’s still a long way to go before Russian politics shakes off its macho image.

The Valentina Matvienko story

veronika dorman russia now

kommersant

When Lenin famously said: “Every cook must learn to govern the State,” he was allowing women to be represented in the organs of power in the USSR. Their place in government, which was guaranteed by special quotas, is now history. In fact, you can count the top women on the political scene on one hand.

Currently, the only Russian female politician in the national arena is Valentina Matvienko, the former governor of St Petersburg, who has been elected the Speaker of the Federation Council (the upper house of the Russian parliament). “She is the only one with real political stature; a vision. She is an extremely experienced and effective manager,” says Olga Kryshtanovskaya from the Institute of Sociology at the Russian Academy of Sciences.

There are currently two types of women in politics, she says: those who have been put there by a man who wants to look at a pretty doll; and those who have got there by sheer talent. Ms Matvienko falls into the second category.

When elections became free and the Soviet quotas were abolished in the early Nineties, women disappeared from the political scene. They no longer presented themselves as candidates, according to Ms Kryshtanovskaya. A pa-

Wonder woman: the politically prominent Ms Matvienko

triarchal mentality, now devoid of Communist voluntarism, has become the norm.

Today, the social and political system has a traditional view of gender relations, exacerbated by a growing obsession, at state level, with a future demographic disaster, and the urgency of making babies to prevent it. It is becoming more difficult to be a working mother. Nurseries and pre-schools are diminishing in numbers, while those that remain are not always free. New family laws tend to push women towards staying at home, and a macho mindset only serves to compound the problem.

Irina Khakamada, a presidential candidate in 2004 and an

emblematic female politician in the post-Soviet era, has retired from state affairs with a disillusioned view of women’s potential in politics. “A woman, regardless of her sta-

Women tend to be relegated to promoting laws on family, education, health and sport tus or the qualities she possesses, shall always be subjected to mistrust,” she says.

“For 13 years, I spent 70pc of my time and energy proving I am a politician with equal rights. I only had 30pc left to

During the Seventies and Eighties, Valentina Matvienko held various positions in the Leningrad Communist Party.

She was elected a deputy of the Supreme Soviet in 1989, when it had been granted real powers during Gorbachev’s perestroika. She later served as the Russian ambassador to Malta (1991-1995) and Greece (1997-1998). On her return, she became the deputy prime minister with special responsibility for welfare and occupied this position until 2003 when, with Prime Minister Vladimir Putin’s support, she was elected governor of St Petersburg. She resigned from this role last month to stand for speaker of the Federation Council.

Her candidacy was backed by President Dmitry Medvedev.

actually pass laws,” she told Ekho Moskvy radio station.

However, she is fiercely opposed to quotas which discriminate positively for women, as she feels they do not constitute real progress.

“We must reform minds and the environment,” she says.

In a political system based more on cronyism than on democracy, the charisma and talent of a man are less important than his allegiances to those in power, and the backing those allegiances guarantee in return.

Women struggle when it comes to making an impression.“Politicians in Russia are often pale and insignificant, because the system works for

ness and tourism destination.

Foreigners in Russia have found the lack of official taxis in the city to be a problem. Businessmen used to New York or London expect the centre of Moscow to be full of legal, easily identifiable taxis. Tourists, many of whom do not speak or read Russian and feel intimidated by the Metro, often prefer to sight-see by taxi.

But some of the more adventurous foreigners have enjoyed the experience of taking gypsy cabs. Tamara Smith, an American who has lived in Moscow for seven years, said that she began

using illegal taxis out of necessity, despite her initial misgivings. Overall, she has enjoyed the experience.

“We have met many interesting people who pick up passengers to make ends meet, including surgeons and scientists. Riding with them has been a great way to get the inside scoop on how locals feel about current events,” she said.

But she is not opposed to reform: “Knowing Russian is a must if one has to use gypsy cabs, so a system more like those of New York or London would be much more desirable and safer.”

PM gets a free ride Last month, the participants in the first National Congress of Taxi Drivers held in Russia conferred on Prime Minister Vladimir Putin the right to free taxi rides. Motoring group

Better for foreigners

The law may help to improve Moscow’s image as a busi-

Svoboda Vybora (Freedom of Choice), the conference organiser, presented Mr Putin with a certificate to this effect. The prime minister said it would come in handy.

Elections Web becomes campaign tool as polls approach

Equality Former governor Matvienko bucks the trend in her rise through the ranks

Women losing out in ‘man’s world’ of politics

cow took less than 20 minutes, the car was not inspected, and I simply produced the papers,” he said.

“I chose a taximeter, a certified software utility, and installed it on the navigator.

The procedures took a monthand-a-half and cost 10,000 roubles. I went about this business thoroughly. But I think most taxi drivers will find it easier to go on working illegally.”

This is especially likely to be the case for the many cab drivers who are illegal migrants. “Those guys are already illegal – their cars usually have no technical certificate,” said Mr Zaboronov. “Imposing uniform regulations for each player in the market is always good; it makes business more transparent. But it doesn’t change anything in the way illegals do their business.”

them. They can be completely uninteresting yet be leaders,” says Ms Khakamada.

“But a woman goes against the current, she must make herself be noticed. She must be extraordinary.”

Women account for 12pc of deputies in the Duma. However, they tend to be relegated to promoting laws on family, education, health, sport, and so on.“They are not politicians in the true sense of the word, with an ideology and a broad vision, but rather hired professionals,” says Ms Kryshtanovskaya.

Nonetheless, some stand out from the crowd, like the Olympic speed skating champion Svetlana Zhurova. Although she does sit on family, education, culture, physical education, and youth committees, she is also Vice-Speaker of the Duma and a member of the Russian Olympic Committee. She says there is a need for her female colleagues to participate more actively in major decisions.

Ms Kryshtanovskaya is optimistic about Ms Zhurova:“At first, it was said she was yet another sporting minx who would make up the numbers.

But she has proved she has real political skills.”

Olga Kryshtanovskaya is not only developing theories on the place of women in the corridors of power. The sociologist has also been an active member of the United Russia party since 2009, and president of a new NGO, the “Otlichnitsy”(“First in the Class”), which aims to see a woman elected president in 2018.

And why not, as a trial run, support the candidacy ofValentina Matvienko in 2012? The fight will be difficult. A recent survey by VCIOM revealed that a quarter of Russians believe that there are plenty of women in politics already and in the same breath, that Ms Matvienko would lose a presidential candidacy contest simply because of her sex.

Candidates learn to blog for victory Politicians are brushing up their online images and fighting off trolls as the election campaign battles get under way. anna redyukhina

special to russia now

With the elections just over a couple of months away, the internet is increasingly being used in the struggle to win political power. Russian politicians have turned social networks and their own websites into virtual soapboxes or town hall meetings.

Russian politicians have quickly learnt how to market themselves online. According to Maxim Mishchenko, a State Duma deputy and leader of the Young Russia Movement, politicians need to come across as real people, which is not a simple task. “In the Nineties, it was fashionable to hire PR managers and press secretaries to communicate with the public,”he says.“In 2011, politicians have to conduct direct communication with voters via the internet.”

The online audience loses interest if it detects the work of a brand manager instead of a politician. “You have to write exclusive pieces yourself, give your assessment and provoke comments,” says Moscow City Duma deputy Kirill Schitov.

Alyona Popova, an e-government specialist, advises clients to monitor closely their online presence and watch out for “trolls”, who create fake profiles with the aim of discrediting public figures.

According to Valery Sidorenko, an internet PR consultant: “The blogosphere is one of the favourite playgrounds of ‘black PR’ [nega-

kommersant

Visitors to Russia are less likely to be ripped off by taxi drivers thanks to a new law that requires drivers to install meters and record journeys.

kommersant

New law puts brake on illegal cabs

Net gain: Dmitry Gudkov’s blog-organised rally was a success

tive PR used to discredit a rival] in Russian politics.”

Spam technologies such as bots, mailings and fake bloggers were all used in black PR campaigns.

LiveJournal is the most popular social network for bloggers in Russia. It has four million subscribers and 20 million monthly visitors.

“There is a scramble to get

‘If the authorities shut down someone’s blog, it becomes even more popular’ into the top 10 to15 pages of LiveJournal,” says Dmitry Gudkov, leader of the youth wing of the Just Russia party.

“Phoney bloggers, who did not exist before the elections, top the ratings, but they command no public trust.” This spring, LiveJournal was attacked by hackers, and many blogs, including that of President Dmitry Medvedev, were unreachable.

Many observers stress that regulation should be the next step in online politics – blogs

and social networking sites are the least regulated areas.

The Russian government is working on measures to enforce Russian law on the internet, according to Ilya Ponomarev, co-chairman of the Information Policy, Communication and Technology Committee. A bill is expected to be finalised soon.

But Mr Gudkov argues that attempts by the government to control what is happening on the internet are doomed. “If the authorities shut down somebody’s blog, the blog becomes even more popular,” he says.

Indeed, Mr Gudkov’s own blog is obviously extremely popular. In May, he used it to organise a rally demanding that the authorities deliver on a promise to provide apartments for military officers and their families after reports that some were homeless. A thousand people turned up to make their point in Pushkin Square, and they received a swift response.

“The head of the Defence Ministry’s housing department had to apologise and promise to rectify the situation,” says Mr Gudkov.

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International relations Critics say military alliance must have power to act against uprisings in Central Asia

Civil unrest on the agenda The chair of the CSTO rotates but Russia has always been the real leader. Which is why the Russian Institute of Contemporary Development (Insor) has produced a report dedicated to the reform of the CSTO. The head of the institute’s board of trustees is President Dmitry Medvedev, and this is by no means the first report that the organisation has delivered to the Kremlin.

Insor’s 66-page document boils down to three key points. First, it proposes reforming the decision-making

ROMAN VOROBYOV

SPECIAL TO RUSSIA NOW

The Collective Security Treaty Organisation (CSTO) was formed in 1992 with the main aim of protecting its members, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia,Tajikistan and Uzbekistan, against external threats and international terrorism.

Nearly 20 years on, experts say it no longer fully satisfies any of the organisation’s member countries.

The issue of reform has been on the agenda at every CSTO summit. But following last year’s revolution in Kyrgyzstan, the discussions have gained momentum.The main question is whether, in the event of a similar uprising, the organisation should defend the existing regime and intervene directly in the conflict. But the organisation does not have such powers.

Leaders of the CSTO were reminded of the need for reform in the midst of the Arab spring. At the August summit, Belorussian president Alexander Lukashenko, who is the current CSTO chair, confirmed to journalists that the leaders had spent most of the time discussing how the CSTO might help them avoid the experience of their colleagues in Tunisia, Egypt and Libya.

‘Some members perceived the CSTO as a burden, then the events in Africa sobered them up’ process at the CSTO. At the moment, decisions are made by consensus. Insor suggests that decisions should be made by a simple majority.

As the Institute’s head, Igor Jurgens, told the newspaper Kommersant: “The CSTO will be worthless if it remains just a club where people go to babble. In Russia, we understand this and our partners are beginning to understand this as well.That is why we need a new decision-making system.”

Second, Insor proposes radically transforming the CSTO’s relationship with Nato.

Initially, the organisation was set up as a counterweight to

THE FACTS

A fast and effective reaction The Collective Security Treaty Organisation consists of seven states: Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.

The Collective Rapid Reaction Forces in the CSTO total about 20,000. According to the charter of the organisation, the CSTO may use force to repel direct military aggression, for counter-terrorist operations, and to combat

drug trafficking and organised crime. From September 21 to 26, CSTO forces conducted large-scale strategic exercises, involving armoured vehicles, aircraft and warships. Commenting on the training exercises, Russian chief of general staff Nikolai Makarov said that the CSTO forces were working with crisis situations similar to the recent events in the Middle East and North Africa.

Nato. But now the CSTO should be seeking actively to rebuild relations with the West. “An important task is to provide at least partial interoperability between CSTO and Nato Rapid Reaction Forces,” the report says.

Finally, the CSTO should endeavour to become the main peace force in Central Asia and its neighbouring regions.

The Insor report n o t e s t h at t h e CSTO “should have systems in place to monitor potential conflicts that might threaten the security of its member states”.This includes “taking into account the colour revolutions (civil resistance) in former Soviet states, the events in northern Africa and the Middle East, and the likely rise of extremism when coalition troops withdraw from Afghanistan”.

Experts note that it is the events in the Middle East that have hastened talks on reforming the CSTO – and the leaders of the union are not, in this case, detached observers. Half of the organisation’s heads of state have been in power for a long time – which gives them something in common with the former Tunisian president Ben Ali, deposed Egyptian dictator Hosni Mubarak, who is now awaiting trial, and the former Libya leader Col Gaddafi, who is believed to be seeking refuge from Nato bombs in a bunker.

Nursultan Nazarbayev, the Kazakh president, has been in power for 20 years; Emomalii Rahmon has ruled Tajikistan for 19 years, and Alexander Lukashenko has headed Belarus for 17 years.

The parallels are obvious enough to make the leaders of the former Soviet republics think hard, a source in diplomatic circles told Kommersant. “In the past, some members perceived the CSTO almost as a burden, then the events in Africa sobered them up”, the paper reported.

It is possible that Moscow might also have an interest in this case, says the Mosko-

Shared history and a mutual understanding SPECIAL TO RN

T

Rapid reaction: Kyrgyz soldiers during the CSTO strategic training exercises this month

vskiy Komsomolets columnist Mikhail Rostovsky. In his opinion, reform of the CSTO would strengthen Moscow’s influence in Uzbekistan, Tajikistan and other Central Asian republics. The leaders of these countries have always been interested in maintaining and strengthening their power, and, if Moscow gives them the tools to do this, local leaders will be tied to Russia even more tightly, Mr Rostovsky believes.

However, the editor-in-chief of Russia in Global Affairs, Fyodor Lukyanov, is not convinced that this will be the case.“If the Collective Rapid Reaction Forces of the CSTO are able to intervene in internal conflicts, the CSTO will be just like the Co-operation Council for the Arab States of the Gulf led by Saudi Arabia, which acted as the main fire extinguisher of the revolutionary movement. But it is a double-

edged sword and many Central Asian countries, as well as Belarus, are unlikely to want to give Russia an opportunity to interfere in their internal affairs.”

At the moment, the CSTO is commenting only cautiously about the forthcoming re-

forms. According to the organisation’s secretary general, Nikolai Bordyuzha: “Nobody is talking about a profound reform to the CSTO”.He says that the documents just need to be adjusted slightly by changing “one or two sentences”.

THE QUOTE

Dmitry Rogozin PERMANENT REPRESENTATIVE OF THE RUSSIAN FEDERATION TO NATO ON THE CHALLENGE THE CSTO IS EXPECTED TO FACE AFTER AMERICAN TROOPS LEAVE AFGHANISTAN

“We will be ready for any eventuality. Russia understands it must not only protect itself but also extend the scope of this protection to the countries of Central Asia. It is precisely in these countries that Islamic radicals need to be stopped, so they do not come to Russia and commit more atrocities.

I think it will be a ‘moment of truth’ for the CSTO.”

Technology British and Russian firms join forces to develop a tough e-reader for schoolchildren that bends like a book

The flexible e-textbook of the future Students’ schoolbags will be several kilograms lighter thanks to a new digital reading device weighing less than 500g that can store the equivalent of 40 books.

INNA LEONOVA

PRESS PHOTO

SPECIAL TO RUSSIA NOW

A new electronic reader for schoolchildren was unveiled at the Moscow Planetarium this month, which can store around 40 textbooks – about a year’s worth of reading.

The Plastic Logic 100 is designed for learning – the device does not support games and cannot connect to the internet. Weighing less than 500g, the e-reader is easy to carry and like a typical textbook in size – less than 8mm thick and measuring 27cm diagonally.

The British company Plastic Logic, which produced the device in co-operation with Russian technology firm Rusnano, calls it “the textbook of the future”.

It uses the company’s PlasticPaper technology, which allows the user to bend the device, like they would a book.

Anatoly Chubais, director of Rusnano, described the technology as a replacement for paper. Importantly, bearing in mind the target

OPINION

Alexander Yakovenko

RIA NOVOSTI (2)

Events in the Middle East force Russia and the former Soviet Republics to consider reforming the CSTO, which was set up in another era.

DEVICE TYPE: E-BOOK DISPLAY: 27CM DISPLAY TYPE: PLASTICPAPER WITH ELECTRONIC INK

RESOLUTION: 1280 X 960 DIMENSIONS (MM): 216 X 280 X 7.65 PROCESSOR: MARVELL 800 MHZ

PRICE: 12,000 ROUBLES (£250) BATTERY LIFE: ABOUT ONE WEEK, ALLOWING SEVERAL HOURS OF READING DAILY

Children can draw images, type in characters, underline and erase anything from the screen

About 1,000 of the e-readers have been sent to schools in six regions of Russia free of charge

market, the Plastic Logic 100 is shatterproof, as well as fingerprint resistant. The gadget has no screen glare and the text is visible even in bright sunlight, meaning it is as easy to read as a printed page.

Children can draw images, type in characters, underline and erase anything from the screen. They can also select and annotate snippets of text, make bookmarks and use the device’s search engine.

New books can be uploaded to the device using the micro USB port, but students will not be able to download or delete their own books, as internet access is not provided. The reader needs charging only about once a week. Under the soft-touch plastic exterior there is 4gb of storage, an 800MHz processor and Windows CE. Russian children will be the first to get to try out the new product thanks to the significant investment made by Rusnano, which owns 25pc of Plastic Logic. Around 1,000 electronic textbooks have been sent to schools in six regions, free of charge.

Steven Glass, senior director for product marketing at Plastic Logic, said: “Nobody in the world has been able to create such a model and we are offering the Russian educational system the opportunity to test this device, which may then be used in other countries.”

Britain’s Minister of State

for Trade and Investment, Lord Green of Hurstpierpoint, attended the launch and said he hoped that it would eventually play a similar role in the British education system. However, at a cost of around £250 per reader, it might be some time before this happens.

There are some limitations to the e-reader. A major drawback is that the screen is black and white, so it cannot display the colour images important in the study of biology, history or art. Another weak point is the relatively slow “paging” speed; the device’s electronic ink technology runs at a rate of three frames per second.

The response so far, however, has been more positive than negative.“The product is quite exceptional in carrying out the tasks for which it was designed,” said Eldar Murtazin, columnist for the website Mobile Review.

The technology looks set to be developed further in Russia. A factory for the manufacture of next-generation screens and devices is currently being built in Zelenograd on the outskirts of Moscow and, when complete, it will be the largest factory in the world for plastic electronics.

03

he relationship between our countries originated in hard times for both Russia and Great Britain – during the rule of Ivan the Terrible and Mary I. That time happened to be bloody for the two countries in their own ways.

Since then, we have been together virtually at all critical junctions in European and world history. Whatever differences might have divided us in the past have either been resolved or have faded into insignificance. I am sure that this is also going to be the case now that we are witnessing the birth of a new world.

At the start of the 19th century, England was waging war on the peninsula, defending not only her interests but also the right of the European states to determine their own destiny.

The same was true of Russia acting in the east of the continent, which Dominic Lieven gave a brilliant account of in his recently published Russia against Napoleon. We were also allies in both the world wars.

The other day in Arkhangelsk, we marked 70 years since the arrival there of the first Arctic convoys in Operation Dervish.

We know the price for internal upheavals; the universal truth that nothing positive can originate from chaos, violence and rampant anarchy; that the most productive way of development is evolution, the gradual build-up of positive change. Which, in its turn calls for moderate, I’d say, conservative policies, insofar as they are guided by common sense.

We understand the urge for the restoration of traditional moral values in society, too, including common decency and responsibility.

It is the honest policies of the Coalition government in socio-economic matters that appeal to us. They are based on a realistic assessment of the situation, free of pretence and self-deceit, upon the realisation that the only way to a decent independent national existence lies through living within one’s means.

I am convinced that the global crisis, which is far from over, puts all the priorities in national and global politics in their proper places. The issues of ensuring domestic progressive development as a “vital strategic resource”come to the forefront, as was recalled in this year’s Global Strategic Review by the International Institute for Strategic Studies. The complex and profound nature of the changes that are brewing indicate that we are all facing a transformational challenge.

Under these circumstances it is only natural that the most dynamic area of Russo-British co-operation is economic ties through trade and investment. They not only secure the stability of our relationship as a whole but also make us partners in fostering the prosperity of our respective nations according to the dictates of our time, first and foremost by way of co-operation in the sphere of innovation.

This is why Prime Minister Cameron and President Medvedev signed the declaration in Moscow on a knowledge-based partnership for modernisation on September 12.

Russia and Great Britain also actively engage in international co-operation in various multilateral forums, being two of the five permanent members of the

UN Security Council, members of the G8, G20 and many other international organisations. We have achieved mutual understanding on many pressing issues on the global agenda.

Our opinions on tactics may diverge, but we rarely fail to agree when it comes to the vision of strategic goals of the international community in specific matters.

One is glad to realise that as the Arab protests continue, we are witnessing a considerable convergence in our approaches to a host of Middle East issues, including the Israel-Palestine settlement and Libya.

It is hard to overestimate the role of our countries in European and Euro-Atlantic politics, including Russia’s relations with the European Union and Nato. Of no less importance is our mutual contribution to countering global challenges and threats.

Our long-standing ties have a sound cultural dimension to them. Among the names that personify the profound mutual enrichment of our cultures are those of Charles Cameron, who built Pavlovsk for Catherine II. Cameron’s Gallery entered Russian poetry (for instance, it is mentioned by the Russian poet Anna Akhmatova in “Poem without a Hero”), becoming a symbol of the influence that the great styles of European culture had upon Russia. The whole of the city of St Petersburg is an eloquent testimony to that influence.

Thanks largely to culture,

Whatever differences divided us in the past have either been resolved or faded into insignificance The most dynamic area of RussoBritish co-operation is economic ties through trade and investment. They help us to foster the prosperity of our respective nations the intellectual and political tradition of Anglophilia was born, which was not only rooted in our admiration for British common sense. Adherence to Anglophilia in Russia gave the world such a literary phenomenon asVladimir Nabokov (who was well known for his mastery of the English prose style). It was always a two-way influence. We admire Shakespeare as if he were a Russian author thanks to the brilliant translations of his works.

The almost two-centurylong love affair of many British people with Leo Tolstoy and Fyodor Dostoevsky, as well as their appreciation of Anton Chekhov and his plays, testifies to a profound mutual influence of our cultures that have been able to transcend time in their panhumanism.

I am convinced that our bilateral relationship, cleansed of old-time suspicion and ideological prejudice, and underpinned by enlightened self-interest, is consonant with the spirit of the times and has a bright future. Its further strengthening will not only serve the interests of our two nations, but it will also benefit the whole of Europe and the rest of the world.

AlexanderYakovenko is Ambassador of the Russian Federation to the United Kingdom. Prior to his appointment to London he was deputy foreign minister of Russia for five years.

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04

Business & Finance

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Agriculture After the Nineties crash, production rises again, but Russia remains dependent on foreign suppliers despite grain export boom

Food: the new growth industry? and vegetables. More than half of Russian beef comes from private slaughter, and more than 90pc of potatoes come from smallholders.

The state provides subsidies, particularly for keeping animals. The 7bn euros (£6bn) subsidy from Moscow for farming is significantly less than subsidies enjoyed by European Union farmers: Brussels pays farmers 100bn euros a year. But according to Mr John, Russian agriculture is capable of being competitive even without subsidies. “In Russia, you can already produce at world market prices,” he says.

Russia currently imports one million tons of pork from the EU states every year. Experts predict that in 10 years, Russia will become self-sufficient in pork. In recent years, production of the meat has risen by 8.6pc, and poultry has seen a 10pc rise. But milk, soya and beef will still need to be imported for a long time, according to agricultural experts.

Grain and canola are already produced in abundance and exported. In 2009, 97 million tons of grain were harvested. There was a lower harvest in 2010 of 60 million tons because of drought and wildfires, but a good harvest is expected this year, as the 1990 level of 117 million tons has almost been reached.

HEIDI BEHA

SPECIAL TO RUSSIA NOW

A lonely black-and-white cow grazes beside a road in south-western Russia, 100km (60 miles) from Kursk. Farmers Klaus John and Sergei Yarovoi are on their way to a farm belonging to their employer Prodimex, which produces sugar. Pasture, sunflower fields and harvest-ready grain surround the bumpy country road. Mr John points to the lone cow and says: “That’s what the Russian dairy industry looks like.”

Russia is one of the world’s largest food importers. When the Soviet Union collapsed there were a total of 42 million cows; now there are just 11 million. In villages, children round up cows and take them to pasture.“Like Peter, the shepherd boy, shepherding goats in the Alps – it looks idyllic, but doesn’t feed a country of 147 million,”says Mr John.

Self-sufficiency goal

Managing growth

Those investing in the Russian agricultural sector are forecasting a high yield. In July, a Czech-Dutch trust purchased the RAV Agro-Pro c o m p a ny, w h i ch ow n s 4000,000 acres of land in the fertile Black Earth region of south-west Russia. The trust is counting on increasing the value of its produce by 400pc in the future.

Russian trade magazines for agribusiness report on large investments in both new and existing Russian agricultur-

£284

million of foreign investment went into agriculture in 2010.

77.9

million hectares of Russian land were cultivated as of 2010.

£24

billion: the total value of all the agriproducts produced in Russia from January to July 2011.

108

million tons: the amount of grain produced in 2008 – the highest figure in post-Soviet times.

Rich harvest: Russia exports its surplus wheat, but other farm sectors are less productive

War, revolution and collapse of Soviet Union leave scars on the land Around 1900, Russia was the largest grain exporter in the world: almost a third of the grain exported worldwide came from the Russian Empire.

The First World War, revolution and years of civil war lead to the depopulation of villages and long periods where agricultural production was reduced. Only in the second half of the Twenties did crop yields grow again. In 1929, Stalin decided to create new farm structures: Kolkhozes were collectivised peasant farms, while sovkhozes were set up on land confiscated

ITAR-TASS

In an attempt to reduce Russia’s reliance on food imports, President Dmitry Medvedev said that he wanted Russia to become more self-sufficient.The Food Security Doctrine states that by 2020, the country should be 80pc selfsufficient in basic foodstuffs.

This includes 85pc of meat and meat products, 90pc of milk and 95pc of grain. This would represent an overall increase of 20pc in what is currently produced.

Small producers with personal plots play an important part in Russian agriculture. Many Russians produce only small quantities of food at their dachas, but en masse they produce significant amounts. Many produce milk and grow their own herbs

THE NUMBERS

GETTY IMAGES/FOTOBANK

Russia is reducing its reliance on imported food and aiming to become self-sufficient.

But finding skilled local workers is a challenge.

from large estates. Many farmers slaughtered their horses, cows and pigs rather than give them to the state. This disrupted agricultural production, especially in livestock. In 1940, with the increased use of machines, grain production again reached pre-war levels. But the Second World War halved meat and grain production.

By the start of the Eighties, the Soviet Union was the world’s largest producer of wheat, rye, barley and cotton. But the kolkhoz and sovkhoz farms collapsed along with the Soviet Union in the early Nineties. In

1998, Russia produced only half as much grain as it did in 1990. This decline was only reversed in 2008, when the harvest produced 108 million tons of grain, the highest since 1990. In animal production, the decline was even more drastic. In many places, entire herds were slaughtered in order to make a quick profit for their owners. The sector has still not recovered.

Today, only 10pc of the Russian population is employed in agriculture.

Revenues in 2009 came to a total of 1.53bn roubles (£31m).

al enterprises. Even businesses surrounding agriculture are trying to position themselves advantageously. For example, in 2008, five German seed producers joined to form the German Seed Alliance, with a regional focus on Russia.

their children on the land.

Her son, who grew up on a farm, is going to study in the city. “He should become a manager,” says his mother.

Agronomists for large companies complain about the ageing population in rural regions.“We can’t find enough skilled people that can work with agricultural machines Careless workers But there is a long way to and the newest technology,” go, as much of the Russian says Alexander Musnik from countryside is still unculti- the agrarian business Soldatvated, and according to Mr skaya near Kursk.

Yarovoi, most enterprises are After their studies, few want not as efficient as they could to return to the country. Mr be: “The Black Earth area Yarovoi is a college graducould [potentially] generate ate who now works in Voro40pc more than it is doing,” nezh and he only returns he says. He blames careless to his rural home town at and lazy workers: he often weekends.“There aren’t even see areas where pesticide cinemas there, and there are spray-truck drivers have only a few restaurants. All missed a row where every- our friends live in the city,” thing then sprouts up, except he says. for sugar beets. Around Even agrarian university lunchtime, he says, the com- graduates cannot be temptbine harvester sits motion- ed with higher pay to leave less for hours while the driv- the city centres for the periphery. Those living in viler has a break.

A combine harvester costs lages are disparagingly remuch more in the Russian ferred to as derewentschina Federation than in central (hillbillies) or kolkhozniks.

Europe, but it only harvests half as much on average. But Profits for all even taking these efficiency That is why searches for losses into account, business skilled agricultural workers is still profitable. are both national and interThe sheer size of some farms national.“Going abroad isn’t also makes them hard to financially worth it to wellmanage. On holdings with educated Russians,” says Mr vast fields, it is difficult to John. However, it is interestcontrol each division or to ing for foreigners to work in manage large revenue fluc- Russia – not just because of tuations. Publicly traded the money. Torbjörn Karlsholdings distribute their son, a Swedish farmer, says: gains to the stockholders, so “I came because life is just there is no cushion left for more exciting here.” hard times.

The Swede is not alone: in This became especially clear the evenings, agricultural in the 2008 financial crisis professionals from Germany, and its repercussions. Some South Africa and Switzerholdings could not pay wages land meet for a beer after for months. This is why ag- work. Topics of conversation ricultural experts are push- include grain prices, soil ing for stability by encour- moisture levels and turbuaging small self-supporting lent experiences with the farmers to form medium- Russian police. They all work sized family enterprises and for different holdings, but the market their products. competition is not great.

Many parents, like OlgaYuy- There seems to be enough ukina, do not see a future for land and profits for all.

Organic farming Home producers with a passion for wholesome food bring taste and variety to the market

Small-scale producers are discovering the joy of producing high-quality vegetables, milk and meat for discerning consumers.

sell their goods. Demand for organic food is increasing, and Russian organic farmers get good prices for their produce through online grocery stores.

These stores peddle an image of rural bliss, with happy farmworkers gathering potato beetles by hand and feeding curds to young chickens.

As yet, there are no legal standards or certified labelling schemes for organic produce in Russia. Farmers define it in their own ways – but essentially, the main principle is that people know where their food comes from and that it has not been intensively produced.

In a half-built dacha kitchen in the Ramenskiy district of

VASILY KORETSKY

RUSSIAN REPORTER MAGAZINE

This summer Russia’s chief medical officer, Gennady Onishchenko, called on smallscale farmers and home producers to take their cucumbers, milk and eggs straight to the market, cutting out the commercial middlemen.

For your average Russian dacha owner, this can be a valuable source of extra income, but many small-scale producers are favouring the internet as a more profitable place to

the Moscow region, Natalia Ivankevich, a French-Russian translator, is making a traditional peasant salad from cheese, bacon, and various freshly cut leaves. She says: “One day a French friend asked me,‘which salad do you like best – iceberg lettuce, Batavia or endives?’ I suddenly realised that something had been missing in my life!”

Now Natalia has more than made up for what was lacking in her culinary options.

Salad has become her speciality, and she grows a wide range of leaves, including rocket and lesser known varieties such as “the fat lazy blonde.” From a dozen vegetable beds, Natalia harvests

between three to five kilograms of salad a week which, although quite a lot for one dacha owner, is clearly not enough for one town. Natalia also grows other vegetables, including the Petrovskaya turnip, which originated in Berlin, and the petit gris cantaloupe melon from Brittany.

She sells her produce through an online store.

“On the Lavka website, I concentrate on selling two things – regional vegetables and the heritage sort. On the one hand, Russia has many unjustly forgotten domestic varieties, but we have criminally impoverished our vegetable repertoire by turning down European varieties.”

Microsoft Rus increased its business by 20pc during the financial year that ended on June 30, 2011, according to the company’s president, Nikolai Pryanishnikov.

Microsoft’s total global earnings amounted to almost $70bn in the same period.

ter of 2012, according to Paolo Scaroni, the chief executive officer of Eni, one of South Stream’s shareholders. Mr Scaroni also confirmed the underwater section of the pipeline, which will transport gas under the Black Sea, will cost $10bn (£6.4bn), news agency RIA Novosti reported.

A shareholder agreement was signed this month. Russia’s Gazprom gas export monopoly will have a 50pc stake in the project, Électricité de France and Germany’s Wintershall will each have 15pc and Eni will have 20pc.

Russia plans to launch the

OLYA IVANOVA FOR "RUSSIAN REPORTER"

Small is beautiful for dacha farmers who sell online

Fresh vision: Olga Vankov plans to produce caviar at her farm

BUSINESS IN BRIEF

Microsoft earned more than $1bn in Russia in the last financial year and its market share is rising at a “fantastic” rate, according to Kevin Turner, its operations director.

Mr Turner told Interfax news agency that the company now had revenues of more than $1bn in both Russia and Brazil, and business in the two countries was growing faster than in

VOSTOCK-PHOTO

Business booms for Microsoft in Russia

any other emerging markets.

Mr Turner also praised the quality of the company’s staff in Russia.

Microsoft has never before disclosed absolute figures for its earnings in Russia, but

South Stream partners prepare investment plan Partners in the South Stream gas pipeline project will present their investment plan to banks in the second quar-

South Stream pipeline in 2015. The pipeline will transport up to 63bn cubic metres of gas to central and southern Europe, diversifying Russian gas routes away from transit countries such as Ukraine, which is currently at odds with Russia over the price of gas.

Currently, a total of 80pc of Russian gas is sent via the neighbouring former Soviet country to European Union states. But frequent conflicts with Moscow over the price of gas sometimes culminate in Kiev switching gas supplies off in the middle of the winter.

Sergei and Olga Vankov are also passionate food producers who farm livestock. Four years ago they went fishing in Mozhaisk, in the Moscow region, and were captivated by the scenery. The next day Sergei bought a few dozen hectares of hayfields as a present for his wife Olga and a cow was thrown into the bargain. Now, they have four cows, plus goats, birds and 144 pigs, and there is also a fishing complex in the pipeline, where the couple are planning to rear sturgeon and produce black caviar.

Pork priced at 200-260 roubles per kilogram seems excessively expensive to local people, so the Vankovs sell

their produce through the online store Ferma, which takes orders from wealthier customers in Moscow. To help boost sales in the long term, they are turning the farm into an ecotourism centre, and have created a lakeside village with eight guest houses.

“You know how we can afford all this?” Olga says. “It’s because we have another business that I’m able to buy the equipment, to build a barn.

But making a living from this alone? A peasant farmer would never think of doing this: it’s 100pc unprofitable, there is no proper way of marketing it… and so in Russia the land lies abandoned, uncultivated…”

GLOBAL RUSSIA BUSINESS CALENDAR INTERNATIONAL TOURISM FORUM ‘VISIT RUSSIA’ OCTOBER 20–21 YAROSLAVL, RUSSIA

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Business & Finance

Consumer rights Former stock market regulator targets financial firms that defraud small investors

MOSCOW BLOG

The man with the plans to take on the scams

Foreign investment is flowing back into Russia Ben Aris

SPECIAL TO RUSSIA NOW

A ILYA VARLAMOV

HIS STORY

Igor Kostikov

The Kremlin hopes that Moscow-City, the capital’s financial district, will become a global financial hub

BEN ARIS

BUSINESS NEW EUROPE

Igor Kostikov, former chairman of Russia’s stock market regulator, believes that protecting small investors from pyramid schemes masquerading as legitimate funds should be just as important to the Kremlin as developing an international financial centre (IFC) to attract a broader investor base.

The schemes are widespread in Russia, says Mr Kostikov.

There are no laws to stop them, and no one in government is responsible for overseeing these so-called funds.

Russia needs to develop a much broader investor base, but recent reforms to the investment infrastructure have failed to build trust among individuals who might invest directly into stocks.“Creating an IFC is not just a question of having a state-of-the-art stock exchange,” he says.

“More important is building a relationship with the small investors [so that] they trust the markets and funds to look after their money.

“That is still missing in Russia. Here, people invest once, get ripped off and walk away, never to return.”

In his mission to improve this situation, Mr Kostikov estab-

lished the Union of Financial Services Consumers (FinPotrebSoyuz) in February this year. Its role is to help support people who have been ripped off by investment scams, and those who have been sold financial products that they can’t afford by aggressive sales people.

The pyramid scams

As with pyramid schemes that operate in the UK, they attract investors by advertising their “international investment club”in the press, promising handsome returns to small investors. Investors then get in touch with their “Russian office” and sign a contract before handing over their savings. When they come to withdraw their money, they are told that the club has made some mistakes and lost all its money. If the investors start inquiring why the fund went bust, they will quickly hit a brick wall.

“The investor can’t sue the Russian office, which turns out to be nothing more than a PO box and has no legal connection with the club,”explains Mr Kostikov.“The Russian end of the operation acts only as an ‘agent’ and resells the services of the fund that is usually registered in Cyprus, the British Virgin Islands or somewhere else.

“The Russian office is closed down when it has collected enough money. For most people, to pursue a claim against the company overseas is too expensive. And, even if they

‘Here in Russia, people invest once, get ripped off, and walk away, never to return’ Financial salespeople push products on customers who can’t afford them simply to earn a bonus did, the contract that they signed in Russia probably has no standing overseas.”

No one is sure how much money retail investors have placed in these funds. According to Mr Kostikov, the scams are already generating tens of millions of dollars, but the state has done nothing to regulate the business; there is still no organ or laws to oversee or license investment clubs. In the meantime, the sharks are left to operate with impunity, and can even run high-profile advertising campaigns in the local media.

What makes these scams so insidious is that the operators don’t sting everyone.The bigger clubs make some real returns to pay back the bulk of investors, but they bolster the bottom line by simply stealing some of their investors’ money and using it to pay the rest. Moreover, this practice of padding profits by simply helping yourself to a small

portion of investors’ money is seemingly widespread.

Aggressive selling

Slightly less egregious, but still unethical, are overly aggressive sales people in established banks who sell more traditional products, such as mortgages and car loans.

Salespeople push these products on customers – even though they know many can’t afford to pay them – simply to earn a bonus. And nothing is done to clamp down on these practices. Even the giant state-owned Sberbank is prone to this sort of selling.

In these cases, FinPotrebSoyuz takes consumers’ complaints back to the banks and fights for their rights.“Sberbank has been one of the few banks that has fully co-operated with us,” says Mr Kostikov. “The consumer complains to the regional branch, but if they don’t get anywhere, they come to us.We take these cases up with the head office here in Moscow. And in each case, the consumer has been refunded their money in a matter of days.”

dealing with problem loans: the account is passed to a special department, which then offers to restructure the terms and pesters the clients with calls. As the average personal debt in Russia is in the order of $900 (£575) – equivalent to more than one month’s average salary – the recovery rate is fairly high, as most people can raise this sort of money from friends and family.

However, if a loan is deemed “irrecoverable”, the banks often sell it to a debt collection agency.“There is nothing in the personal bankruptcy law that covers debt collectors. They are completely illegal,” says Mr Kostikov.

“But almost everyone is unaware of this fact.”

Raising the levels of awareness of consumers’ rights regarding financial services and debt collectors is another challenge that Mr Kostikov hopes to take on. He also wants more legislation to fully protect consumers.

At the moment, FinPotrebSoyuz enjoys no state recognition, but Mr Kostikov is lobbying hard to win govern-

KOMMERSANT

In an attempt to build trust between investors and the market, Igor Kostikov is helping to protect consumers from fraudulent investment schemes and aggressive debt collectors.

AGE: 53 HOMETOWN: ST PETERSBURG STUDIES: ECONOMICS

Igor Kostikov headed the Federal Securities Market Commission (as the stock market regulator was then known) between 2000 and 2004. In February 2011, he established FinPotrebSoyuz, a financial services consumer rights group.

Funded by private donations, FinPotrebSoyuz has no official standing. Its job involves supporting people who have been cheated by investment scams or sold products and services they don’t need by aggressive financial salespeople.

ment support for his agency under the IFC programme.

And, as the former head of Russia’s stock market regulator, it seems certain he will at least be taken seriously.

Consumer rights

Part of the problem is that the average Russian is almost totally ignorant of their rights when it comes to financial services. Financial companies prey on debtors and intimidate them when they cannot pay back loans.

Most of the established consumer credit banks have a well-established routine for

THE NUMBERS

8pc

The average maximum interest rate for deposits in roubles, according to the top 10 Russian banks in September.

10.5 trillion 45pc roubles were deposited in bank accounts by Russians as of July 1, 2011, according to the Russian Central Bank.

of Russians use plastic bank cards, while 44pc do not plan to get one, according to a survey

by Levada Centre.

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Sochi Putin predicts recovery next year but experts say struggling Western economies could hold Russia back

Debt crisis: we’re all in this together, forum told

Prime minister says Russia is well placed for an economic upturn while the West’s ‘inflexible’ economies will hamper their recovery.

ALEXANDER KILYAKOV SPECIAL TO RUSSIA NOW

Economics Institute: “One has to bear in mind that, unfortunately, we are hostages to the state of affairs in other countries; our well-being depends on their well-being. If economic growth slows down dramatically, we will immediately feel the effect because we depend on oil prices.”This explains why the prime minister asserted that uncertainty about the state of Western economies does not bode well for Russia.

According to Mr Putin, the internal situation in Russia will stabilise by next year because the country’s foreign debt is no more than 3pc of GDP and Russia’s gold and currency reserves are the world’s third biggest.

Even so, there will be major changes in the economy that will have an effect that is hard to predict, according to the experts. They say that the state is going to ease itself out of business. In big corporations, bureaucrats have already been replaced by managers and the authorities are planning to sell off part of their stakes in these companies in order to both Business class: the Forum’s main aim is to improve the investment climate in Russia raise money and to transfer tems – they had far fewer re- to by the prime minister dur- were curtailing programmes. most sectors of the economy sources and less untapped ing the Forum. He added: We did not plunge in so deep into private hands.

“The consequences of the and so we are coping with Prof Khasin agreed that the potential than Russia. leading role of the state in Professor Andrei Khazin of 2008 crisis were less severe the aftermath faster.” the Higher School of Eco- for Russia than one might But this was no reason for the economy is a hangover nomics said Russia had suf- have anticipated. This is be- talking about a “decaying” from the past and needs to fered much less from the cri- cause reserves created in ad- West and a“burgeoning”Rus- be eliminated.“Russia inhersis than the West. Russia vance helped stabilise the sit- sian economy, said Ruslan ited a dire legacy from Socould easily reach the growth uation and increase public Grinberg, director of the Rus- viet times: more than half of rate of 4pc of GDP referred spending as other countries sian Academy of Sciences’ the GDP is generated by MICHAEL MORDASOV

The Russian economy will recover from the crisis next year, according to Prime MinisterVladimir Putin, who told the Investment Forum in Sochi that it was easier for Russia to cope with economic problems than for Europe and the United States.

He added:“It is obvious that the recent leaders are losing ground and can no longer serve as examples of a balanced economic policy, something they only recently were teaching us. Moreover, the debt crisis in Europe and the US is aggravated by their economies being virtually on the verge of recession. There is still no clarity regarding their recovery, which is unfortunate for all of us.”

Mr Putin said it was more difficult for Europe and the US to recover because of their inflexible economic sys-

05

state-owned companies,” he said. “Clearly, this impedes competition, spawns corruption and causes inefficiencies in running corporations.

“In my opinion, we need a massive privatisation of the economy, including the basic sectors. Many companies in the natural monopolies sector must be privatised.”

This may be true, but it is difficult to predict what the outcome of a new round of privatisation will be.

The place to do business The annual Sochi Investment Forum is one of the three major economic forums held in Russia. Its main aim is to improve the investment climate and establish ties between the Russian regions and local and foreign businesses.

In addition, it is a venue for many regions and enterprises to present their products and projects. This year’s Forum saw the unveiling of the Marusya supercar, a private helicopter made in Bashkiria and a passenger ship made in Tatarstan.

The Forum was attended by representatives from 47 countries and 55 Russian regions. Thirteen regions presented investment offers to business leaders.

s one of the few fully functional economies left in Europe, Russia has foreign investors jumping in with verve. In July, the Russian market took in $87.7bn (£55.7bn) of fresh investments – triple the amount of a year earlier, according to Rosstat, the state statistics agency. So, is the tide turning?

Well, it makes a good headline, but the numbers are deceptive. Much of this money is profits reinvested by existing foreign investors, which is counted by Rosstat as fresh foreign investment. Similarly, a certain portion of it consists of foreign loans for M&A deals and the re-registering of Russian businesses to foreign domiciles.

Nevertheless, the result is indicative of a general increase in foreign investment in the Russian market.

More than half of the general investment was in short-term credits (180 days or less) that accounted for $46.5bn of the total – almost all of which were credits taken from banks.

This number is confusing, since much if not all of it was probably rich Russians lending to their own companies as a way of getting money into the country to support their assets now, while leaving the door ajar to get the cash back out as soon as things get better.

However, even this trend shows improving sentiment among Russia’s rich.

Starting in the last quarter of 2010, Russia experienced a sharp outflow. A total of $31bn left the country in the first half of 2011. In July, the tide turned and investments began to return.

What appears to be happening is that those oligarchs whose businesses are dependent on politics are

salting away a little something, in case the elections bring surprises. No one is expecting a change at the top but changes further down the chain of command could be damaging to them. As politically tainted businesses rely heavily on relations with bureaucrats, changes can lead to an oligarch losing control of his business entirely. Indeed, President Dmitry Medvedev has started a campaign to remove state officials from the boards of stateowned companies, and more of the same can be expected in the next year.

At the same time, asset prices are getting lower. The average price-to-earnings ratio on stocks fell to a ridiculously low 4x during the worst of the recent sell-offs by the last week of August. However, the economy continues

The economy will bounce back, as has been expected, albeit at a slower pace than anticipated to grow at around 4pc, and the state’s forward-looking forecasts for oil remain around the $100-per-barrel mark. At the same time, lending by banks was up by more than a quarter in the first seven months of this year. All this suggests that the economy will bounce back, as has been widely expected, albeit at a slower pace than anticipated thanks to the debt crisis in the rest of the world.

For those doing “real” business, the investment climate is improving. The bolder individuals are going back to investing in their businesses – since the long-term goal of most businessmen remains to capture as much market share as they can while it is still up for grabs.

Ben Aris is the editor and publisher of Business New Europe.

LONDON BLOG

On the right track: a train to New York, via Siberia Stephen Dalziel

SPECIAL TO RUSSIA NOW

R

ussia’s size is a blessing and a curse.

Geographically, Russia is by far the world’s biggest country. It sits awkwardly across Europe and Asia (roughly 70pc of the population in Europe, 70pc of territory in Asia).

I long ago subscribed to the view that we should say there’s Europe, Asia and Russia. Let’s face it, the country is big enough to be thought of as a continent.

But for now, Russia remains a country. An enormous and very diverse country. Over the years I’ve been present at a number of presentations from Russia’s regions. Too often, they’ve gone along the lines of:“We come from the wonderful region of X. We have beautiful nature. Come, see; and invest.”

Er, sorry guys, but business needs something a bit more concrete to go on than that.

Invest in what? Are there serious projects? And what are the guarantees?

In August I visited Yakutia, the biggest “subject” of the Russian Federation.The territory compares with India in size. Yet the population, at fewer than one million, is just under one-thousandth of the population of India.

But what Yakutia lacks in population, it makes up for in the mineral wealth beneath its near-frozen surface.

(Yakutsk, the capital, is one of the largest cities in the world to be built on permafrost.The first couple of metres beneath the surface are frozen solid).

Because of the permafrost, even drilling foundations for buildings is a challenge, let alone drilling for minerals.

But when you are sitting on one of the world’s largest deposits of diamonds (among other valuables) it suddenly seems worth it.

The delegation from Yakutia is coming with some concrete proposals for co-operation (go to www.rbcc.com and click on theYakutia reference in the “Events”>“London Events” section for more details).

On the far eastern tip of Russia, a fantastic project, which might grab the world’s attention, is a plan to build a tunnel under the Bering Straits which separate Russia’s easternmost tip from Alaska. The Trans-Siberian Railway is already being extended north to service Yakutia and other remote regions of Eastern Siberia and the far north east of Russia. There aren’t so many roads in that part of the world, so the potential for expansion is great.

If the railway is taken to the suggested limit, it will enter the tunnel a few miles south of the Bering Straits, and the

What Yakutia lacks in population, it makes up for in the mineral wealth beneath its near-frozen surface tunnel will emerge in Alaska.

The main aim of the tunnel is to carry freight. Instead of goods being sent across the Pacific Ocean by ship from the Far East, including China, it would be more economical to put them on the train. It’s estimated that 3pc of the world’s freight traffic could travel on this route.

Of course, for those who still see a certain romanticism in rail travel, it opens up the possibility of the journey of a lifetime: board a train in London and you could go all the way to NewYork, via Siberia. Absurd? That’s no doubt what they said when the first explorers set out to show that the world wasn’t flat, or to put a man on the Moon.

Stephen Dalziel is executive director of the Russo-British Chamber of Commerce.

06

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a waiting game found wanting

Who pays the piper?

Ben Aris

The moscow times

I

Konstantin von Eggert

special to rn

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andrew tkalenko

magine this: the cashstrapped Ukrainian government realises it can’t afford to buy oil at $100 a barrel so it starts lobbying Saudi Arabia to sell oil to Ukraine at $80 per barrel instead. What would happen?

Everyone would laugh at Kiev and sell the oil elsewhere.

But that is in effect what Kiev has been saying to Russia’s energy giant Gazprom. The big difference between oil and gas, though, is that oil can be delivered by supertanker via any route, while in Russia – with the exception of the Sakhalin II liquefied natural gas plant – gas can only be delivered through a pipe to a fixed destination. And because the gas pipelines pass through Ukraine, Russia is dependent on that country for its transit. This monopoly on supply that Ukraine has over Russia is the only reason there can be any negotiation over the price it pays Russia for gas.

But that monopoly has come to an end.The newly launched Nord Stream gas pipeline runs from Russia’s Arctic gas fields to northern Germany via the Baltic Sea, breaking Russia’s total reliance on Ukraine for the export of its gas to Europe.

Tensions between Moscow and Kiev over gas prices are rising. Former Ukrainian prime ministerYulia Tymoshenko signed a contract in 2009 which obliges Ukraine to pay $388 (£250) per 1,000 cubic metres. PresidentViktor Yanukovych wants to reduce this price to match the price that Germany pays, minus a $70 transit fee. In July, the cost of Russian gas at the German border was $403 which, minus the transit fee, implies that Yanukovych wants to pay $333 per 1,000 cubic metres.

Kiev is unhappy with the contract that Tymoshenko signed, saying that it was unfair – and with some good reason. Gas prices dropped after the contract was signed and the charge that Tymoshenko exceeded her authority in signing the deal – she did not seek the approval of the

The monopoly of supply that Ukraine has over Russia is the only reason there can be any negotiation at all over the price it pays for gas. But that monopoly has come to an end

Naftogaz Ukrainy says it has already stored enough gas for the winter season so if the gas taps are turned off, at least the Ukrainians won’t freeze – even if the rest of Europe does

parliament and was not entitled to act on her own – seems to be valid, according to Ukrainian reports.

Yevgeny Bakulin, the chief executive of Ukraine’s national gas company Naftogaz Ukrainy, said on September 5 that he considered $230 per 1,000 cubic metres to be a fairer price – even less than the $333 President Yanukovych is asking for.

But Gazprom argues that Ukraine is already paying less for its gas than customers in Western Europe; it has a valid argument, because, as

gas is a commodity, it should be sold at the market rate.

Not only did the West encourage the emerging former Soviet states to adopt a freemarket model, it insisted on it. In the Nineties, America went as far as withholding its market economy status from Russia (which affects trade tariffs) because it was not charging enough for gas; now it is charging so much that it is accused of bullying its neighbour.

This battle, which has been running for many years, hit the headlines in 2006, when

Russia cut Ukraine off on New Year’s Day for not paying its bill. And, according to reports, in a repeat showdown, Ukraine cynically cut off deliveries to some European countries in 2008 to put pressure on Russia.

The Nord Stream pipeline, which has appeared in an amazingly short time for a Russian infrastructure project, has changed the game. Gazprom says it expects to export a total of 155 to 158bcm (billion cubic metres) of gas to Europe this year. The first phase of the Nord Stream pipeline has a capacity of 27.5bcm, and the second phase, which will be ready next year, will increase this to 55bcm by next winter. Russia can thus avoid exporting around a third of its gas to Europe via Ukraine.

The Russian deputy prime minister, Igor Sechin, is already talking about a third phase of the pipeline, which would mean Nord Stream could carry 75pc of the gas

currently delivered via Ukraine as early as 2015.

Anticipating the worst, Naftogaz Ukrainy says it has already stored enough gas for the winter season, which means that if this year’s gas war gets really nasty and the gas taps are turned off again, at least the Ukrainians will not freeze – even if the rest of Europe does.

Ukraine also wants to reduce the amount of gas it is obliged to buy from Russia. In the 2009 contract, Ukraine agreed to buy 33bcm but it is now asking for a reduction to 27bcm. But with Ukraine’s supply monopoly gone, Kiev’s bargaining power with Russia is considerably weaker. Better that Kiev start concentrating on reducing its famously wasteful energy use – the worst in the world – and start developing its domestic gas fields, such as they are.

Ben Aris is the editor and publisher of Business New Europe.

we’ll survive this crisis Vladislav Inozemtsev

the moscow times

W

andrew tkalenko

hile it might seem that the current economic downturn could have the same impact on Russia as the events of 2008, the opposite is more likely. As that crisis quickly spread around the world in early 2008, Russian officials claimed that the country was an“island of stability”.They simply did not believe that the global financial crisis was going to affect many in Russia. But they got it wrong.

In the current crisis, people are less confident that they will escape unscathed. Everyone is talking about the possible impact it will have on Russia. However, this time round, Russia really is more likely to escape the effects and to remain stable.

The 2011 crisis is fundamentally different from the one in 2008. Now, there is no shortage of liquidity on the markets; the main problems are connected with excessive government borrowing. While politicians take steps intended to win the public’s trust, economists increasingly realise the need to maintain a very loose monetary policy and allow inflation to increase to help restructure debt.

These economists have got it right. The United States and Europe cannot extricate themselves from the current situation without accelerating inflation. By simply allowing

prices to rise while maintaining near-zero interest rates, their citizens can be induced to spend again, and companies to invest.

The inevitable convulsions of the world’s stock markets will also be felt in Russia, of course.

But as major currencies devalue, investors will favour commodities, such as gold, that provide some protection against shocks, given their steady increase in price over the past 18 months.

The manufacturing sector will begin a steady recovery, although it might initially suffer some problems. Thus, the new crisis is unlikely to cause a drop in the oil price, which continues to be the bedrock of Russia’s economy.

The possible outflow of investment from foreign currency

Letters from readers, guest columns and cartoons labelled “Comments”, “Viewpoint” or appearing on the “Opinion” and “Comment & Analysis” pages of this supplement are selected to represent a broad range of views and do not necessarily represent those of the editors of Russia Now or Rossiyskaya Gazeta.

Please send letters to the editor to UK@rbth.ru

markets in Europe and the US will not cause the rouble to substantially appreciate. Unlike the Canadian and Australian dollars, the rouble has not risen in price, nor has it declined like the US dollar and the euro. It is not a convertible currency, so it does not attract speculators, even though Russia’s economy depends more on raw materials than Australia or Canada.

What’s more, the extremely high level of capital flight that hampered Russian markets in 2008 and 2009 is unlikely to be repeated this time, because a large portion of debt held by major private companies has been refinanced by the state. In addition, most investors who wanted to leave Russia have already done so.

The main risks for Russia

are from internal factors rather than external. First, Russia has not had to make budget cuts since the early 2000s. The austerity measures that governments in Greece, the US and the UK are implementing have never been considered in Russia.

The economic stability achieved by Vladimir Putin in his decade in power allowed for budgetary spending to grow by 18pc to 23pc annually since 2000.

But if Russia remains dependent on commodity exports, it will be unrealistic to maintain that path of growth in state expenditure over the next five to six years. Such growth would depend on oil prices being well above the $110 a barrel mark, which looks like a long shot now,

given the overall slowdown in economic growth.

It can also be expected that Russia will increase imports by 30pc to 35pc annually, even while export value will grow only 10pc to 12pc. This negative trade balance is likely to continue to grow through 2014-15, even with all other factors being favourable.This will encourage growth in the country’s national debt, and because Western countries will find ways to lighten their debt burden in the coming years, the perceived risk of borrowing will decrease, sparking rapid growth in Russia’s debt load.

All of these factors will make it possible for Russia’s leaders to maintain a semblance of stability through to 2018.

Even if they are successful, however, Russia will emerge from this period more dependent on commodity exports and less competitive in the global economy.

In five to seven years, the West will have resolved its current economic problems, and the energy efficiency measures it implemented in 2006-08 will have already started to shift the energy balance.When this happens, Russia will be faced with a major test, but thankfully for Mr Putin and his circle, that day of reckoning is still years away.

Vladislav Inozemtsev is a professor of economics, director of the Moscow-based Centre for Post-Industrial Studies and editor in chief of Svobodnaya Mysl.

This eight-page pull-out is produced and published by Rossiyskaya Gazeta (Russia), which takes sole responsibility for the contents.

Internet address www.rbth.ru Email uK@rbth.ru Tel. +7 (495) 775 3114 fax +44 (20 3070 0020) ADDRESS 24 Pravdy STR., bldg 4, Floor 12, Moscow, Russia, 125 993 evgeny abov Editor & publisher konstantin fets executive editor alena tveritina editor Olga DMITRIEVA editor (UK edition) shauna massey guest editor (uk) Paul Carroll, sean huggins subeditors (uk) Andrey zaitsev head of photo dept milla domogatskaya head of pre-print dpt ilya ovcharenko layout e-Paper version of this supplement is available at www.rbth.ru. Vsevolod pulya online editor.

hen David Cameron, the British Prime Minister, a n d Wi l l i a m Hague, his Foreign Secretary, flew to Moscow this month, they were seen by many Russians as the triumphant winners of the war in Libya. This created extra respect for them from the public during the difficult talks they held with the Russian leaders, President Dmitry Medvedev and Prime MinisterVladimir Putin, as the Russians have a high regard for military prowess.

Messrs Medvedev and Putin must have felt some degree of jealousy. Moscow could easily have been on the winning have side in the Libyan campaign, but instead suffered the indignity of having its Gaddafi-era contracts with Tripoli effectively suspended by the transitional government.

I am still baffled. Why did the Kremlin commit such a gross error of judgement which led to such a visible humiliation?

From the moment Russia chose to absent itself from the vote on the UN Security Council’s Resolution 1973 (which formed the legal basis for military intervention in Libya to protect its civilians from attack) Gaddafi’s game was up.

He had the world’s most powerful military alliance against him and hardly any support even among fellow Arab nations. Moreover, Jordan, Qatar and United Arab Emirates supported the allied operation in the Libyan skies. Had Moscow even supported the resolution by sending a symbolic frigate or two to Libyan shores – it could have secured a place of honour among the winners with little effort. Still, abstention gave Russia a free hand to adjust its attitude later.

It was quite clear that Resolution 1973 gave a green light to the allies to root out the Gaddafi regime. No other outcome would have satisfied

them. But instead of keeping a quiet distance, Moscow almost immediately rushed to condemn the Nato-led operation and, in doing so, was seen to be implicitly supporting Gaddafi. It soon found itself in a difficult position: Gaddafi did not trust Russia as it chose not to veto UN Resolution 1973, while the rebels felt Russia was against them because it had condemned the intervention. President Medvedev’s special representative Mikhail Margelov had talks with the Transitional National Council in Benghazi in June. Sadly, the Russian leadership did not follow up his mission with any concrete

Moscow could easily have been on the winning side in Libya, but instead had its Gaddafi-era contracts effectively suspended by the transitional government steps. But, in a humiliating climbdown, Moscow had to recognise the rebels as Libya’s legitimate government.

So why did Medvedev, Putin and their foreign policy advisers miscalculate the situation? I think the roots of this mistake lie in Russia’s internal situation and mentality.

Post-Cold War humiliations, some real and some perceived, created an ideology based on anti-Western attitudes, as well as denial that values and ideas, as opposed to self interest, play any role in international relations. For values read “Western values”.

Moscow’s decision-makers and the Russian public view global politics as a zero-sum game: one person’s gain is another’s loss. It is at the same time the consequence of, and the reason for, Russia’s tortuous post-Communist transi-

tion. The country is no longer a Soviet empire or a global superpower and not yet a fully fledged nation state. This makes the Russians uncertain and defensive. They worship sovereignty – understood as a sort of pre-First World War right of governments to do what they want within their national boundaries – because they saw the Soviet Union disappear overnight.They are unwilling to accept such concepts as “humanitarian intervention” and “responsibility to protect”, which underpinned the intervention in Libya.This means Russia repeatedly finds itself on the wrong side of history, trying to prop up dictators who are long past their expiry date. This happened with Milosevic, Saddam, Gaddafi and one has to wonder if it is also the case with Syria’s Bashar Assad.

Global politics today are an interplay of interests and values, opportunism and idealism. Missing this very real point leads the Russians to believe that any event over which they have no control – such as the Arab revolutions – is by default a sinister conspiracy, usually a Western one, and involving oil.

This belief is by no means an exclusively Russian phenomenon. But among the G8 nations it is only in Russia that such attitudes are so widely spread among politicians and leading civil servants. It might take quite some time for Russian people to start adapting to the reality of the 21stcentury. But it is in the power of the Russian leaders to speed up the process and finally get real themselves.

Konstantin von Eggert is a commentator and host for radio Kommersant FM, Russia’s first 24-hour news station. He was a diplomatic correspondent for Izvestia and editor-in-chief of the BBC Russian Service Moscow bureau. He was also vice-president of ExxonMobil Russia.

emerging realities for the investor Alexey Zabotkin

special to rn

P

opular opinion over the past five to seven years has had it that emerging markets are more appealing for investors than developed Western economies, not to mention Japan. This is substantiated by significantly higher economic-growth rates, national currencies garnering strength, higher interest rates and manifold stock-market index growth in the past decade.

The 2007-09 economic crisis, which paralysed the United States and the European economies but left developing markets relatively unscathed, clearly showed the advantages of investing in emerging markets.

Emerging markets get their greater financial elasticity from a noticeably lower aggregate debt to GDP and, in many cases, more soundly balanced budgets than in developed countries. On top of that, emerging markets could become a palpable fall-back for investors who are increasingly nervous about a possible second wave of the credit crisis and a double-dip recession in the US and Europe.

The MSCI EM (Morgan Stanley Capital International for Emerging Markets) index, however, clearly shows that stocks in emerging markets have been playing catch-up with the MSCI ACWI (All Country World Index) for almost the entire year. The rev-

enue gap between the two indexes starting from the beginning of the year is 6pc, with the MSCI EM having sunk 17pc as opposed to 11pc for the MSCI ACWI; the median gap for the entire year is four points.

So what does this tell us? Do we have on our hands an unfounded drop in share value that is making it even more appealing to continue to shift one’s portfolio assets towards the emerging markets? Or has the appeal of emerging markets become less irrefutable than it was thought to be in recent years?

Has the appeal of emerging markets become less irrefutable than it was thought to be?

Any asset’s investment appeal hinges on the ratio of two factors: currency flows related to this asset, and how much it costs. Instant high growth rates and the potential for expanding domestic consumption thanks to a low baseline, a paltry amount of debt for local economies and demographic trends in emerging markets paint a more rosy picture for future currency flows than that for the developed economies.

Do not forget, however, that sales growth does not necessarily transfer automatically into commensurate profit growth for corporations. Cost inflation (for instance, from

the higher-than-anticipated growth in salaries or a strengthening national currency), ill-advised investments or direct state intervention (through taxation or regulating individual sectors) can significantly hamper corporatesector profit, even if greater than expected growth rates are preserved.

Corporate management, which is still of a decidedly lower quality in emerging markets than in the developed economies, piles on additional restrictions on how currency flows reach the investor as dividends and how creditors are protected when a company is in danger of going under.

For example, the expected average weighted profit share, split up among shareholders as dividends, for companies from the MSCI Russia index is 15pc. This is less than half of the same figure for the MSCI World index, which currently stands at 36pc. Moreover, the expected growth rates for corporate profits in the coming two years for the Russian index come out at 5.7pc, while the MSCI World’s figure is 8pc.

Alexey Zabotkin is head of investment strategy at VTB Capital. In 2011, he was ranked first in the “Equity Strategy” category in the Institutional Investor 2011 AllRussia investor survey. He also took first place in Thomson Reuters Extel Survey 2011 overall Country Analysis vote for Russia.

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Comment & Analysis

cameron visit revives the relationship

time to stand tall together Irina Yasina

vedomosti.ru

SPECIAL to RN

W

hen I read the invitation dated September 9, announcing that a high-ranking official was to make a speech on RussianBritish relations at Lomonosov Moscow State University on 12 September, it was not hard to guess who the unnamed official was.

British Prime Minister David Cameron lived up to the occasion. He made his speech at the university the highlight of his Moscow visit. In what was, in fact, an informal press conference, Mr Cameron explained why he had come to Russia. In his opinion, Russia and Britain still regard their relationship as a zero-sum game – when one country strengthens its security the other feels less secure. Mr Cameron believes that this approach is anachronistic in the 21st century.

But isn’t it rather late to be reaching this conclusion now?

The British have long been watching America and then Europe reset its relations with Russia in all areas, from foreign policy to economics, but they have made no move in this direction themselves.

Cameron wanted to know whether London would be able to make up for the losses due to the sharp cooling of relations between our countries over the Litvinenko mur-

Robertson, non-executive chairman of Rolls-Royce Group, which produces energy systems, gave a strong signal that he was serious about doing business.

Many of the documents signed in Moscow were aimed at improving the business climate for trade and investment.The declaration on partnership based on knowledge for modernisation includes, among other things, support for freer movement of students and scientists, and interaction between the Skolkovo innovation centre and the planned technology hub East London Tech City. In his speech to the Medvedev and Cameron avoided the students, Cameron identified the areas in which Russia and word ‘differences’, Britain must co-operate.They preferring to call are the creation of a good inthem ‘difficult topics’ vestment climate for business, science and innovation, and ferent views on the legal as- maintaining stability and pect of the Lugovoy case – the world security. chief suspect in the Litvinenko Memoranda on co-operation murder. And they do not see in creating an international eye to eye on the question of financial centre in the Rusintroducing sanctions against sian capital were signed. The Syria. Even so, Medvedev and state nuclear corporation RoCameron studiously avoided satom signed an agreement using the word “differences”, of understanding with the preferring to call them“diffi- Rolls-Royce Group. Several cult topics”when mentioning new contracts were signed to the tune of £250m. All this their diverging views.

Clearly, it is too early to gave Russian analysts strong claim any reset of the rela- grounds for claiming the visit tions between Russia and had yielded many practical Britain. But the fact that results as well as an impetus Cameron arrived with a del- for increased co-operation. egation of 20 top-ranking And, let’s not forget, there is businessmen, which includ- already a solid grounding of ed BP’s chief executive Rob- co-operation in business beert Dudley and Sir Simon tween the two countries that

W

der, or whether relations with Moscow had reached a point of no return, with neither side able to forget its grievances or start negotiations from a clean slate. Cameron’s visit showed that both countries were unwilling to forgo their principles.The differences between Russia and Britain were not smoothed over but the negotiators had not set out to achieve this.

David Cameron and President Dmitry Medvedev made it plain that they have very dif-

NIYAZ KARIM

Yevgeny Shestakov

tries amounted to $10.3bn (£6.6bn). Russia has shipped to Britain $7.2bn worth of commodities and energy resources, receiving $3.1bn worth of machine tools, chemicals and consumer goods.

Even so, does this provide a sufficient economic foundation for giving a fresh start to the relations between Moscow and London?

In spite of the visibly friendly atmosphere that marked the visit, neither side was ready to make concessions, let alone unilateral ones. The British Prime Minister’s visit

The Prime Minister’s visit resuscitated Moscow-London relations from the coma they were in can be built on. Today, Russia is in third place in terms of the number of British visas that are issued to its citizens.

Britain remains the sixthbiggest investor in the Russian economy. In the first six months of this year alone, trade between the two coun-

e’re accustomed to thinking of Russian civil society either as something that’s completely non-existent or as something marginally unpleasant. It is portrayed as a world full of city-dwelling mad people wearing jumpers covered in fluff, who set their own objectives and fulfil only themselves, often using Western grants to do so.

It was quite by accident that I ended up as one such civil activist. When the now imprisoned Mikhail Khodorkovsky asked me to work with him on his corporate philanthropic foundation, Open Russia, in 2001, I had no idea what was about to happen – his arrest, having my office searched, or the fact that I would end up as a human rights activist.

I wouldn’t say I liked everything at the beginning. It felt though, did manage to resus- like our group was a kind of citate Moscow-London rela- sect. And it was sometimes tions from the prolonged coma true about the grants. But I they had been in. Russia has got used to it and ended up long been waiting for this step as something of a ringleader on Britain’s part. because of my restless char“Together we are stronger”, acter. I tried to change the said Cameron, in his speech image and reputation of about Russian-British rela- human rights activists by tions at Moscow University. holding seminars with jourBut only time will tell if Brit- nalists, regional students, hisain will seek to reset relations tory teachers and volunteers with Russia without ultima- and raising awareness of istums or preconditions. sues. But nothing changed, or so it seemed to me.

Yevgeny Shestakov is editor Ten years passed and things of the international desk at have changed now. Maybe I’m the Rossiyskaya Gazeta. just an optimist and an idealist, but I think that there are now some great campaigning and charitable movements doing really positive things in Russia.

Judge for yourself. The journalist Olga Romanova, whose husband is an imprisoned businessman, asked me to sionately. The point is that help her stage a peaceful the gulf between those who demonstration event called watch films and those who Plant a Tree for My Husband. move cinema forward is in- I suggested planting apple creasing.When someone asks: trees and berry bushes that “What is Faust like?” more the old folk in a residential often than not the answer is: care home could enjoy, then “Great, but you probably called Liza, a leader of the don’t want to see it.” And Make Old Age a Joy movethere’s nothing you can do ment and asked her to find about the fact that cinema a suitable establishment. is increasingly being divided The fruit trees were used to into films for specialists and draw an analogy between films for people. At festival “planting” prisoners and planting trees.

Take another example, involving friends of mine who are disabled people in wheelFilm festival awards involve competitions chairs. One of them, a mother with a little girl, organised between movies a movement of disabled that simply cannot parents. If you have an ablebodied child but you have to be compared get about in a wheelchair, showings, the loudest ap- like any parent you still have plause will go to the dark hu- to do simple things like pop mour of William Friedkin and into the kindergarten, then Roman Polanski, but at the to the school, then buy someclosing ceremony the awards thing in a shop for the new go to those who film the sub- school year, and so on. But ject of eternity. This is all hy- when you are in a wheelchair, pocrisy, of course, but what the obstacles are immense.

There are lots of people can you do? struggling to get by, and The author is editor-in-chief they’re getting together to of the Russian version of improve their situation.

If you hear about Tatyana Empire magazine.

eternal truths of cinema Lyolya Smolina

I

vedomosti.ru

NIYAZ KARIM

t is easy to appreciate why Alexander Sokurov’s Faust, the last film in the director’s tetralogy about power and the nature of evil (following Moloch, Taurus and The Sun) has been found worthy of the Golden Lion at the Venice Film Festival (see feature, page 8). Sokurov’s picture is complex, profound and alarming, with an almost magical effect on the viewer.

It repels, unsettles, torments and finally rewards.

But Faust, which seems to be saying all the way through that there is no soul, ends up being irritating, upsets your spiritual equilibrium and fills you with a sense of disaster: souls are now so cheap and it’s not easy to find a buyer, so perhaps it was not the best decision to sell it?

Before presenting Sokurov with the Golden Lion, Darren Aronofsky, chairman of the Venice jury, said Faust was a picture that changes your life forever. And that’s probably right. At least, the

more time that passes after a showing of Faust, the more clearly its images are stamped on your memory: Margaret’s reflection in the smooth surface of the lake, the bloodstained suffocating homuncu-

lus, the sinister nude form of Mephistopheles.

The fact that the jury’s decision to confer the award on Faust put many other films into a difficult position is another matter.The main weak-

07

ness of film festival awards is that they involve competitions between movies that simply cannot be compared.

Tinker, Tailor, Soldier, Spy by the Swede Tomas Alfredson, which is worthy although not

great, naturally won nothing, as did George Clooney’s The Ides of March and Roman Polanski’s Carnage, which had been leading in the press ratings. But Tomas Alfredson is no worse at storytelling than Sokurov is at reflecting on the eternal. Steve McQueen’s Shame – which seemed to be the best film in the festival – won only the Coppa Volpi, for Michael Fassbender as best actor, and the Fipresci prize.

But Shame, for all its provocativeness, was shot by McQueen in a way that can appeal not only to specialists in the area of cinema language, but also to others (so long as they are prepared and at least minimally versed in cinema).With Faust it’s a radically different story. This is an uncompromising, difficult picture, which runs for more than two hours. Many viewers without a cinematic background had a hard time watching Faust.

Obviously this does not mean the jury should have pandered to non-professionals, nor that non-professionals should have forced themselves to like Sokurov pas-

Krasnova, a teacher in the Moscow State University journalism faculty, and a scheme she runs called The Little Envelope of God which helps fund health care and operations for people in CIS (Commonwealth of Independent States) countries, you’ll hardly doubt that there is such a thing as civil society in Russia.

When people in places like Dushanbe need treatment for cancer, they’re always sent to Moscow. That’s how it was under Brezhnev and Gorbachev, and it’s the same now.

Krasnova makes announcements on the social networking site LiveJournal about the operations she is collecting for, and asks people to raise money for them. Then, once a month, she sits in the Drova restaurant on Nikolskaya Street in Moscow to collect all the donations.

Some people sit there for the evening, others just dash in and out with whatever money they can donate. Some bring a hundred roubles, others a couple of hundred euros.

But, of course, civil society is not just about people helping the sick, disabled or old.

It’s also about people being responsible citizens, who volunteer to do things that ben-

There are now some great campaigning and charitable movements doing really positive things efit society as a whole – for example, to count the votes at elections, to help out in schools, attend public meetings and so on. The ability to come together, which can grow out of helping a cat shelter or helping wheelchair users, doesn’t end just like that. It is only the first important step for building a civil society.

It’s impossible to fight for your own rights while denying the same rights to others. In America, almost all minorities fought for their rights at more or less the same time. First it was the African Americans, then disabled people, then gays. Russia is a long way from that point, but we can see the way things are going. And if a lad from a democratic movement shouts: “What right do they [for example, gays] have to get together on our streets?” in what way is he different from the religious man recently in the headlines for punching a lesbian girl in the head at the unofficial gay pride event in Moscow?

We’re at the start of a journey. Our inheritance and our history are of no help. But things have changed during the years of stagnation. Not everyone gives up, if one individual takes a stand, others will follow.

IrinaYasina is a human rights activist, leader of the Regional Journalism Club and author of Clinical Story.

The wrong man for the right cause Eugene Ivanov

I

special to Rn

t seems there is almost nothing money can’t buy in today’s Russia. The abundance of material goods – ordinary and luxurious, domestic and imported – is a given. And if there is an urge to indulge in matters that aren’t materialistic, people of means can always buy their way into politics.

The wealthiest can even purchase a political party and play the exciting game of “Duma elections”. But they have to play by the rules – the one thing money can’t buy is the ability to change the established rules of Russian politics. This power rests solely with the Kremlin.

The billionaire Mikhail Prokhorov learnt this lesson

the hard way. Last week, the congress of the Right Cause party, which Prokhorov has led for the past three months, rebelled and stripped him of the leadership. Faced with the mutiny, Prokhorov chose not to fight; instead, he left the party and promised his supporters he would start a new one.

In an unprecedented move, Prokhorov publicly accused the deputy chief of staff of the presidential administration,Vladislav Surkov, of orchestrating the putsch.

Prokhorov called Surkov“the puppet master” of Russian politics and promised to force his resignation.

The Kremlin’s selection of Prokhorov to lead the moribund Right Cause party in May was driven by a desire to have a “liberal” party in the next Duma, which would

be formed after the elections scheduled for December 4.

Prokhorov’s candidacy as party leader looked attractive. He had a raw charisma and undeniable media appeal. More importantly, as one of Russia’s wealthiest men, Prokhorov was willing to assume the financial burden of the election campaign expenses, thus allowing the Kremlin to create its liberal party for free.

Naturally, agreements were made between the two parties. The Kremlin, having promised Prokhorov a Duma seat, expected him to behave.

But Prokhorov, having promised not to explicitly criticise the United Russia party, was apparently left with the impression that his wealth gave him more room for manoeuvre than is normally granted Russian politicians.

Looking back, it’s now obvious that both sides made a miscalculation. The Kremlin didn’t anticipate how many mistakes the bold, energetic Prokhorov, who was completely inexperienced in the game of politics, could make

his dictatorial leadership style was blatantly unfitting for the supposedly “liberal” party that he was trying to build. These mistakes helped to rapidly alienate Prokhorov from the party top brass and regional leaders, thus creat-

The Kremlin, having promised Prokhorov a Duma seat, then expected him to behave himself

It’s deeply troubling that Russian liberals will, yet again, be unrepresented in the Duma

in such a short time. Right Cause’s election platform, released in haste, was a joke: Prokhorov’s claim that he would become the next prime minister of Russia (a position that, incidentally, is not vacant at the moment) was completely over the top, and

ing the fertile ground for the September coup d’état.

But Prokhorov’s biggest mistake was his inability to accept just how little real decision-making power he would realistically enjoy as the leader of a political party – which was never going to

be anything like the power he had as the leader of a big corporation.

The formal reason given for the clash between Prokhorov and Surkov was Prokhorov’s intention to includeYevgeny Roizman, the leader of the City without Drugs fund, on Right Cause’s candidate list for the forthcoming Duma election. Roizman had a past conviction for theft and fraud and the presidential administration has a policy to keep people with a criminal past out of the Duma. Surkov demanded the removal of Roizman, reportedly saying to Prokhorov: “Either him or you.”Prokhorov’s refusal, arguing that he could not break his public promise to Roizman, sealed his fate.

It’s hard to believe, though, that the “Roizman problem” could not have been resolved

in a different way. For example, Surkov could have simply pressed the delegates of the party congress to vote down Roizman’s candidacy – Prokhorov would have been unable to overrule the decision. Surkov’s unwillingness to look for a compromise reflected the widely held opinion that President Dmitry Medvedev, who had initially been very supportive of Prokhorov, had become disillusioned with him.

Mr Medvedev’s decision to terminate the “Prokhorov project”might have been part of a deal he struck with the leadership of United Russia, a deal that may eventually pave the way for his second presidential term.

It’s hard to feel sorry for Prokhorov. He has enough expensive toys to keep him busy for the rest of his life.

But it’s also deeply troubling that Russian liberals will, yet again, have no representatives in the Duma.

A few years ago, Speaker of the Duma Boris Gryzlov famously gaffed that the Russian parliament was not “a place for discussion”. It still isn’t, given that the concentration of political power in the hands of the executive branch has reached extreme levels. The questions that the “Prokhorov affair”raises are: does Russia have any public place in which to discuss, in a constructive and civilised way, the problems facing the country? And if money can’t buy you a way into politics, then what can?

Eugene Ivanov is a Massachusetts-based political commentator. He blogs at The Ivanov Report.

08

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Design The Moscow Metro’s 182 stations take you on a journey through Russia’s past, with styles ranging from Stalinist grand baroque to modern metal and glass

A fine line in underground art The Moscow Metro is a lesson in the nation’s history and architecture, where you can meet Lenin, Dostoyevsky and Pushkin on your travels.

THE NUMBERS

11

ALENA LEGOSTAEVA

SPECIAL TO RUSSIA NOW

km: the length of the track when the Moscow Metro first opened in 1935. It then had only 13 stations.

As you travel on Moscow’s Metro, the history of the city’s past eight decades unfolds before your eyes. The stations range in design, from palatial baroque marble and granite structures to modern iron and glass, revealing the tastes, ideas, hopes and disappointments of the times in which they were built.

300

km: the current length of the track, which serves a total of 182 stations on 12 lines.

41.6 Slide Show at www.rbth.ru

The past: the Komsomolskaya station, opened in 1952, is in the grand baroque style of the Stalinist era

wooden seats in trams). The first Metro line – running from Sokolniki to Dvorets Sovetov (now Kropotkinskaya) – was 11km (seven miles) long and had 13 stations. The Metro now has a track of more than 300km with 12 lines and 182 stations, which vary in depth from five to 80 metres. The city plans to add another 120km of track by 2020.

The Lenin rebrand

For the first 20 years of its history, the Moscow Metro was named after Lazar Kaganovich, the“Iron Commissar”and Stalin’s right-hand man, who was in charge of construction of the first stage of the Metro (he blew up the Cathedral of Christ the Saviour in December 1931 as part of the Proletarian Capital project).

In 1955, the Metro was re-

named after Vladimir Lenin.

Although Russia has long since changed its political path, you can still find the images of Lenin at more than 10 stations, including busts of Lenin at Belorusskaya and Komsomolskaya stations, impressive mosaics at Baumanskaya and Kievskaya, and a tile panel in the passage between the Borovitskaya and Biblioteka Imeni Lenina.

All aboard the culture train for art and history in motion

AFP/EAST NEWS

If you go to a Sokolnicheskaya (Red) Line station, you might be lucky enough to catch a themed train.

The Aquarelle Train, right, is painted with flowers and fruit on the outside. Inside, it is an art gallery featuring art reproductions from the Vyatka Apollinary and Viktor Vasnetsov Art Museum. The Reading Moscow Train carries extracts from illustrated literary works

kmh: the average speed of a Metro train. Trains can run every 90 seconds.

ITAR-TASS

The Moscow Metro dates back to 1931, when its construction began, although engineers Pyotr Balinsky and Evgeny Knorre submitted their first designs to the Moscow City Duma as far back as 1902.

The Duma, which was then made up of wealthy people, was not convinced at first: after all, they lived in the centre of the city and didn’t have to travel in the overcrowded trams. But after five failed proposals, the Duma finally approved the plans and building began.

On May 15, 1935, 18 years after the Bolshevik revolution, the Metro threw open its doors and carried its first passengers down its escalators and on to its new wagons with padded seats (unlike the uncomfortable

GETTY IMAGES/FOTOBANK

First steps underground

for both adults and children.

The Poetry in Metro Train carries an exhibition, updated this year, dedicated to Italian poets. All of the poems and biographies are featured in two languages, Russian and Italian. The Sokolniki Retro Train looks exactly like the first Moscow Metro train, both inside and out. Painted brown, it has padded seats, wall decorations of the period and retro lamps.

The future: kaleidoscopic effects at Sretensky Boulevard station, which was opened in 2007

architecture”.Things were the same above ground, where entire cities were built of identical five-storey apartment blocks, nicknamed “Khrushchevkas’’ after the then leader, Nikita Khrushchev. Stations built between the Sixties and Eighties such as Tverskaya, Kitay-Gorod and Kolomenskaya are typical of this period.

Images of Stalin, which were omnipresent on the Metro in the late Forties, were gradually removed after his death in 1953 and the subsequent denunciation of his legacy.

Deineka and assembled by the mosaic artist Vladimir Frolov, who also created the wonderful mosaic icons in St Petersburg’s Church of the Saviour on Blood. The Ploshchad Revolutsii station was decorated with 76 bronze Architectural eras The first Metro stations, up sculptures of workers, soldiers, until the mid-Fifties, were farmers, students and other conceived and built as luxu- Soviet people. People rub the rious“palaces for the people”, nose of the dog with the frongreat architecture for a great tier guard for good luck. state. Art historians say the According to the chief archirichly decorated underground tect of the Moscow Metro, was a deliberate ideological Nikolay Shumakov: “Archimove to eulogise the young tecture developed along the Soviet country. Stations built same lines, both above and between 1937 and 1955 are below the surface.”Indeed in characteristic of this first ar- 1955, the good times for Russian architecture – both unchitectural period.

Everything completed at this derground and above ground time is worthy of special at- – were over after the Commutention. For example, the mo- nist Party decreed that extravsaic pictures on the ceilings agance in design and conat Mayakovskaya station s t r u c t i o n w e r e t o b e (called the 24-hour Soviet eliminated.

Sky) and at Novokuznetskaya Dull stations, without any station (called Heroic Labour stucco work, mosaics, columns of the Soviet People on the or other“unjustified”elements, Home Front) are based on de- were built under the slogan signs by the artist Alexander “Kilometres at the expense of

A return to design

In 2002, with the reconstruction of the Vorobyovy Gory station, which offers commuters a splendid view of the Moskva River, the Luzhniki Olympic Complex and the Academy of Sciences building, attractive design returned to the Metro. Architectural styles of the Thirties and Forties were reintroduced and artists were once again involved in decorating the stations. Sretensky Bulvar has silhouettes of Pushkin, Gogol, and the scientist Timiryazev along with scenes of Moscow; Dostoevskaya is decorated

with black-and-white panels featuring the main characters from Dostoyevsky’s novels The Idiot, Demons, Crime and Punishment, and The Brothers Karamazov, and the Maryina Roshcha station has pastoral mosaic landscapes.

In 2004, Russia’s first monorail transport system was launched – an elevated track running six to 12 metres above the ground – in the northern part of Moscow, linking the All-Russian Exhibition Centre and the Timiryazevskaya Metro station.

The evolution of the Moscow Metro continues. It is still a work in progress, with ambitious plans to move the network even closer to passengers over the next 10 years – and not just by adding an extra 120km to the track.“We want to strip the stations of everything we can,” says Mr Shumakov.“We are trying to show the passengers the framework – what the Metro is made of. Cast iron and concrete are beautiful.”

Film Russian director takes Golden Lion for Faust, his interpretation of the German legend with lessons for today’s politicians

Judges praise Faust, the last film in director Alexander Sokurov’s series on the corrupting effects of power, as a ‘life-changing’ movie.

GALINA MASTEROVA

SPECIAL TO RUSSIA NOW

though Sokurov is a festival legend, he claims not to enjoy the festival experience. In an interview in his home town of St Petersburg just before the festival, he said: “I have been to many festivals, to Cannes, toVenice. I don’t like being there. I don't like the system of competition. How can you say I am better than someone else? Directors with a name should not compete with young cinema people... we should give up our place for the young.”

With the exception of the late Susan Sontag, whom he says provided a unique view about his films which added something to his own understanding, Sokurov generally dislikes what the critics say.“No one is going to be harsher than me in criticism,”he says.

“I know what I wanted to do and what didn’t work better than anyone. Once I start to talk about the faults of Faust, you will never stop me.”

But the critics and judges at Venice clearly did not see

these faults as they lavished praise on the movie.

Sokurov has a reputation for being difficult, uncompromising, and unafraid to offend the authorities. His early films were banned by the Soviet authorities, which brought him international attention.

His film Mournful Unconcern, which was made in 1983, was banned by Soviet authorities until perestroika, and was finally released in 1987.

PM-backed project

Initially, Sokurov did not receive any funding from the Ministry of Culture to make Faust and the film almost wasn’t made. But money appeared after Prime Minister Vladimir Putin said the film should be made.

Mr Putin’s reasons for supporting the film remain a mystery to Sokurov, who met the prime minister and has acknowledged the importance of his support for the project.

But he believes the fact that his film is about Faust was an

“In a Russian circus tradition, if they blow a trick, they have to do it again. Sometimes they make mistakes on purpose just to tease the audience and remind them that what they do is very complex.”

“Most of my classmates study economics or law.

But Russia will soon need engineers rather than people with humanities degrees.”

Power play: the highly praised German-language movie was filmed in Spain and Iceland

THE RISE OF A LEGEND

Alexander Sokurov At VGIK, the Moscow film school, Sokurov gained both recognition and a reputation for being difficult. His professors rejected his diploma film but allowed him to graduate as an external student. Yet the school officials also awarded him the highest marks; the Sokurov story had begun.

Catch the vibes of Moscow www.rbth.ru/blogs

VOSTOCK-PHOTO

Alexander Sokurov’s muchanticipated Faust – inspired

by Goethe’s interpretation of the legend – was awarded top prize at the InternationalVenice Film Festival this month.

Head of the jury Darren Aronofsky, best known for Black Swan, said: “There are films which make you dream, make you cry, laugh and think, and there are films which change your life forever. This is one of those films.”

The film, which beat 22 contenders to the prize, has reaffirmed Sokurov’s place at the table of great Russian film directors. Sokurov, 60, is the fourth Russian director to win the Golden Lion, after it was awarded to the director Andrei Tarkovsky for Ivan's Childhood in 1962, Nikita

Mikhalkov for Urga (Close to Eden) in 1991 and Andrei Zviaguintsev for The Return in 2003.

Faust tells the story of a professor, played by Johannes Zeiler, who craves knowledge and sells his soul for the love of Margarete, played by Isolda Dychauk. It is the final instalment of Sokurov’s series about the corrupting nature of power – Moloch, Taurus and The Sun featured Hitler, Lenin and Hirohito respectively.

Sokurov says his obsession with dictators and with Faust goes back 30 years:“It’s amazing so little attention is paid to Faust. If any politician reads Faust everything is there. It’s as if it is written in the 21st century, not the 19th century.”

A huge amount of historical research went into the movie, which is scripted in German but filmed on location in Spain and Iceland, where replicas of early 19th-century German cities were built. Al-

PRESS PHOTO

Sokurov cruises to main prize at Venice festival

important factor. At a news conference following theVenice award ceremony, the film director appealed for governments to continue funding the arts. He said: ‘‘Culture is not a luxury. It is the basis for the development of society.”

Sokurov has long been a campaigner for the preservation of his home city’s historical architecture. His fierce criticism of the St Petersburg government resulted in an opera he was staging at the Mikhailovsky Theatre being shelved after he signed a letter attacking the theatre’s pol-

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icies. “They phoned me and asked if I wanted to remove my signature, [asking] did I not think it was a mistake?”

Sokurov refused to remove his signature: the next day the production was cancelled and he was fired.

He is also is at the forefront of a campaign to save the St Petersburg film studio, Lenfilm, the second-most famous Russian film studio after Mosfilm.

The studio has long had a reputation for being more supportive of art-house directors like Sokurov than its rival Mosfilm. But Lenfilm makes only a few films a year and is in dire straits. The studio may be taken over by the media holding of the huge conglomerate Sistema Financial Corporation, a consumer services company which is headed by the oligarchVladimirYevtushenkov. Sistema’s promises to preserve the studio have been greeted with disbelief by a number of Russian directors, who have spoken out against the move and gained support from the Ministry of Culture.

Sokurov began his film career at Lenfilm after he was recommended by Tarkovsky, whose films include Andrei Rublev and Solaris. Sokurov told the radio station Echo of Moscow that he hoped winning the Golden Lion award would help change the destiny of Lenfilm studios.

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