Russia and Greater China #6

Tuesday, June 26, 2012

Distributed with the

SPECIAL REPORT

RUSSIA

www.hk.rbth.ru

AND GREATER CHINA A product by

Monthly supplement from Rossiyskaya Gazeta (Moscow, Russia) which takes sole responsibility for the contents

Fortune favours the brave Hong Kong and regional investors have numerous opportunities to make lucrative profits, but there are many risks.

Photoshot/Vostock-photo

PAGE S 5 to 8

VOSTOCK-PHOTO

Childhood dream

Nuclear ambition

Queen of the court Maria Sharapova eyes Olympic crown

Mainland is ‘next in line’ for the advanced fast-breeder reactor.

PAGE 3

PAGE 9

2 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA EVENTS TO ENJOY

TREND OF THE MONTH

Summer of fun is a big hit with people

Property prices surge in past year Apartment prices in Russia surged 8.2 per cent over the past year, according to the latest report by Knight Frank. The growth in prices was the eighth highest in the world, a rate surpassed only

by Brazil, Estonia, India, Austria, Germany, Colombia and Turkey.

This is the highest percentage increase in Russia since 2009, and the highest Russia has been in the Knight Frank ratings. It had previously never been in the top 30. A year ago, Russia was 49th out of 50 countries. This trend goes against the political will of President Vladimir Putin’s government. He promised that property prices will come down by 20 per cent by 2018, through building more affordable housing for the middle class in urban areas.

ROUND-UP

R

ussia is embracing European-style summer festivals music, folk, art shows, picnics, raves, forums and “do nothing” events – to delight tourists. This month’s “White Nights in Perm” offers street theatre, a circus week, musical events, a graffiti festival and discussion groups in the Perm region. Next month features the “Nashestvie” (Invasion) rock festival (July 8-10, Tver region) and the “Arkhstoyanie” (Standing Architecture) festival (July 29-31, Kaluga region). “Gorodetskoye Gulbishche” (August 13, Sergiev Posad, Moscow region) is a spectacular reconstruction of the Slavic Middle Ages, in which participants in period costumes engage in fencing, archery, drinking honey and birch sap, arrange fights and make birchbark bracelets and baskets.

OBITUARY

Soviet crooner Mr Trololo dies at the age of 77 Eduard Khil, one of the leading Soviet performers of the 1960s and 1970s, has died at the age of 77. Khil had been in hospital in St Petersburg since a stroke in April left him with severe brain damage. Khil’s star faded in the 1980s.

However, his music enjoyed a revival in 2010, after a video of the crooner, best known as Mr Trololo, performing “I Am Glad, ’Cause I’m Finally Returning Back Home” in 1976 was uploaded onto YouTube and quickly registered more than 2 million hits.

People are embracing summer festivals in increasing numbers throughout Russia. Photo: Kommersant

TALK OF THE MONTH

PICTURE OF THE MONTH

Eduard Khil said his grandson told him about his revival after seeing him on the internet. Photo: Mikhail Mokrushin_RIA Novosti

Culture minister backtracks Shattered hopes on earlier call to bury Lenin Russia’s culture minister suggested burying former Soviet leader Vladimir Lenin and turning his Moscow mausoleum into a museum, but stressed that it was only his “private opinion”.

Speaking to Ekho Moskvy radio, Vladimir Medinsky said it was “absurd”

The Lenin Mausoleum is situated in Red Square, in the centre of Moscow. Photo: Lori/Legion media

that the Bolshevik revolutionary’s embalmed body was still on public display near the Kremlin walls. The founder of the Soviet state has been in the tomb since his death in 1924.

“The body of any person should be laid to rest,” said Medinsky, who was appointed culture minister last month, adding that “all rituals” of a state figure’s burial should be observed.

There has been a debate about what to do with Lenin’s body since the Soviet Union broke up in 1991. Last year, the administration of then-president Dmitry Medvedev said the decision rested with the nation’s “political leadership”. But Medinsky on Saturday insisted that mausoleum was an “indispensable part of the ensemble of Red Square”.

NUMBER OF THE MONTH

300,000 ROUBLES

Russian soccer fans watch their dominant team lose to Greece, 1-0, and be eliminated from Euro 2012 in Warsaw. Photo: Maxim Blinov_RIA NOVOSTI

Or HK$71,635. That is now the maximum fine Russians face for taking part in unsanctioned rallies. The bill that raises fines 150-fold was voted by both houses of parliament and signed by President Vladimir Putin this month.

The organisers of rallies could be fined up to HK$236,900. The legislation has been seen as a response to a series of antigovernment demonstrations and aims to discourage street protests challenging Putin.

RUSSIA BEYOND THE HEADLINES’ SUPPLEMENTS AND SECTIONS IN ASIA: GET THE BEST STORIES FROM RUSSIA EACH MONTH IN YOUR FAVOURITE NEWSPAPER In China Business News (China)

“SIBERIAN GAS TAKES ON CHINA’S SHALE” http://ezhong.ru

In Mainichi Shimbun (Japan) “WOMEN ENTER THE RING IN RUSSIA”

In The Economic Times (India) “MUMBAI EMBRACES THE RUSSIAN LANGUAGE”

http://roshianow.jp

http://indrus.in

SPECIAL SUPPLEMENTS AND SECTIONS ABOUT RUSSIA ARE ALSO PUBLISHED BY RUSSIA BEYOND THE HEADLINES, A DIVISION OF ROSSIYSKAYA GAZETA (RUSSIA), IN THE WASHINGTON POST AND NEW YORK TIMES (UNITED STATES), THE DAILY TELEGRAPH (UNITED KINGDOM), LE FIGARO (FRANCE), SÜDDEUTSCHE ZEITUNG (GERMANY), EL PAÍS (SPAIN), LA REPUBBLICA (ITALY), LE SOIR (BELGIUM), DUMA (BULGARIA), GEOPOLITICA (SERBIA), AKROPOLIS (GREECE), LA NATION (ARGENTINA), FOLHA DO SAO PAOLO (BRAZIL), EL OBSERVADOR (URUGUAY).

Tuesday, June 26, 2012 3

RUSSIA AND GREATER CHINA

Chasing a childhood dream Olympic gold is all Sharapova needs to complete her collection, writes Ekaterina Zabrovskaya

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t the age of 25, Maria Sharapova has the world at her feet. A tennis superstar, she is the world’s highest-paid female athlete and the only Russian among Forbes’ 100 of the world’s most powerful celebrities.

However, Sharapova vows that she is not content for her glittering array of accomplishments to stop here, since she is well on her way to fulfilling her ultimate childhood dream – winning gold at the Olympics.

“Well, it’s a long journey. It started from a very young age. It’s not over yet, you know,” Sharapova said after beating Italy’s Sara Errani, 6-3, 6-2, in the French Open final at Roland Garros this month. This completed her personal grand slam of the major tennis titles, following earlier titles at Wimbledon in 2004, the United States Open in 2006 and the Australian Open in 2008.

Sharapova is the first Russian and one of only 10 female tennis players in history to win the entire set of grand slam titles. However, she has her sights on the one trophy to elude her in her tennis career.

“For some reason, the Olympics immediately springs to mind,” Sharapova says. “To play at the Olympics has been my dream since childhood. I think everyone already knows that.”

So, just a couple of days to relax, then back to work - with the aim of triumphing in the Olympic womens’ singles title at Wimbledon on Saturday, August 4, a little less than a month after the Wimbledon championships are decided.

Sharapova’s path to success is an inspiring story, with all the elements necessary to be made into a blockbuster film. She was born in 1987 in western Siberia, where her parents Yuri and Elena moved from a region affected by the Chernobyl disaster the previous year. In 1994, her father, with a mere US$700 in his pocket, took Sharapova to the United States.

Neither could speak any English at that stage, but he recognised her talent early on and hoped she would be able to develop it more fully in the US. Visa restrictions prevented Sharapova’s mother from joining them for two years.

Sharapova certainly developed as a tennis player. She was admitted to the Nick Bollettieri Tennis Academy in Florida and won her first grand slam

Maria Sharapova has her personal grand slam of major tennis titles, with success at Wimbledon, the US, Australian and French Opens.

Photo: Photoshot/ Vostock-photo

SUPERSTAR Champion’s top 10 dislikes 1. Being patient, fine I’ll work on it!

2. Saying ‘you’re right’.

3. Figuring out electronics. Why can’t things be easy to operate?

4. Following someone’s directions because they make way too many mistakes, no excuses though, haha.

5. Packing less simply doesn’t exist in my vocabulary.

6. Saying no when it comes to buying shoes.

7. Icing! Trainers would know what I’m talking about.

8. Cooking. Actually, I can make cookies and they are good!

That’s about where it ends.

9. Hiding my emotions.

10. Sprints, the fact that I hate them doesn’t really help me!

Well, it’s a long journey. It started from a very young age. It’s not over yet, you know

Maria’s road to success

tournament – Wimbledon – in 2004, when she upset the top seed and defending champion Serena Williams.

She become the third-youngest woman to win the Wimbledon title, behind only Lottie Dod and Martina Hingis.

“I thought that, when I won Wimbledon at the age of 17, that would be the most treasured moment of my career,” Sharapova says.

She was only 18 when she became the world’s No 1, an achievement never before claimed by a Russian. Victories at two more grand slam tournaments followed. Sharapova was gearing up for the Beijing Olympics when, in August 2008, a recurring shoulder injury sidelined her for nearly a year.

She started dating Slovenian basketball player Sasha Vujacic, who has played for the LA Lakers and New Jersey Nets, around this time, and many pundits thought she was unlikely to return to tennis.

“I always listened to my own voice and it always told me that, for some reason, I was meant to be better,” Sharapova says. “I’m meant to succeed again. And I did.”

But Sharapova worked her way back up the rankings again, to become No 1 tennis player, three years later.

Sharapova will be Russia’s flag-bearer at the Olympic opening ceremony in London next month.

“I am so honoured as it will be the first Olympics in my career,” Sharapova wrote on her Facebook page.

“I have had to keep this hush-hush for two weeks and keeping secrets is not my best quality.”

Her Facebook fans now number almost 7.5 million, confirming her transformation in status from sportswoma n t o c e l e b r i t y thanks to he r outstanding looks, elegance and public persona. Nike, Sony Ericsson, Tiffany and TAG Heuer pay millions of dollars for the opportunity to use her image in their advertising and marketing campaigns. Prize money from tennis accounts for only 20 per cent of her income, the lion’s share of her wealth comes from advertising.

Forbes listed Sharapova among its 100 richest celebrities - at 71 with an income of US$26 million, up nine places on the previous years, in its rankings published early this year.

A big part of Sharapova’s appeal is that she excudes innocence and is ambiable. At Roland Garros, she revealed plans to launch her own line of sweets – not underwear or perfume. The sweets will be shaped as small tennis balls.

“Yummy, I needed to pump my stomach after that visit,” she wrote on her blog after visiting the factory in Spain.

Sharapova is also a goodwill ambassador for the United Nations and donates thousands of dollars to help regions affected by the Chernobyl disaster.

4 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

Moscow sets Apec priorities and asks firms to pitch ideas Sergey Vinogradov

Russian President Vladimir Putin and President Hu Jintao are about to begin SCO talks in Beijing.

Photo: Photoshot/Vostock-photo

SCO talks drift towards finance Beijing proposes economic-integration initiatives, but diplomats delay plans, writes Alexander Gabuev

E

conomic issues gained importance at this month’s Shanghai Co-operation Organisation (SCO) summit in Beijing, and threatened to overshadow the six-member group’s traditional focus on defence and security.

The summit on June 6 to 7 generated a series of documents on security issues, the main focus of the 11-year-old organisation that includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan. But internal discussions on economic co-operation and integration became more significant as SCO members sought ways to shift the organisation’s focus.

China, which assumed the group’s chair this year, proposed large-scale integration initiatives. The body’s members have sought integration projects for some years and its secretariat has drawn up a list of almost 100.

“Not all [members] are eager to take part in all the projects, [so] we came up with the ‘two-plus’ formula, meaning that a project can be launched if at least two member-states are involved,” says a source in the secretariat.

The main obstacle has been financing, and China’s three solutions could have far-reaching consequences.

Beijing’s first proposal was to establish an SCO Development Bank, a concept that has been high on members’ agenda for some time. The bank would act as a counterpart to the World Bank by providing loans for development projects. Beijing would inject the majority of the funds and the institution would be based in China.

China also suggested the setting-up

ECONOMY of a special SCO account, and offered funds to replenish the group’s budget. It also proposed to create a free-trade zone within the SCO. Beijing’s ambitious plans may not materialise any time soon, partly due to Russian diplomats who have demanded repeated revisions to these proposals.

Russia is not opposed to creating an SCO Development Bank, but Moscow prefers to do so under the auspices of the Eurasian Development Bank (EDB), which was established in 2006 by Russia and Kazakhstan.

Moscow and Astana play key roles in the EDB, which was originally set up with US$1 billion from Russia and US$500 million from Kazakhstan.

“If we manage to create the SCO Development Bank on the basis of the EDB, we will have a better chance of keeping control,” says an SCO member’s economic official. “If we opt for establishing an all-new bank, the Chinese will dominate.”

Russia has also insisted that the freetrade zone initiative be revised, saying

that not all SCO members have joined the World Trade Organisation and that it is necessary to learn whether the concept would be compatible with the existing customs union.

These arguments convinced other members to postpone their decisions until the next summit, which gave Russia a tactical victory.

Sources within the Russian government say the main reason Moscow worked to block a substantive discussion of the initiatives was fear of losing its critical leadership position.

Not so long ago, countries in the region were concerned about China’s expansion and tried to diversify risks by building contacts with Russia, but access to Chinese money was a big incentive. It will be increasingly difficult for Russia to withstand China’s growing influence within the SCO, especially as Beijing can always lend to members on a bilateral basis, which is a more dangerous prospect for Russia than distributing money through a joint SCO mechanism.

“Eventually, we will have to look for some formula to engage China in the Eurasian integration, some formula for interaction that would suit China without jeopardising the economic independence of the other participants,” says a high-ranking Russian diplomat.

This process may have already begun.

Sources say China was given specific proposals in May to start negotiating participation in the EDB, and take a share in the development bank. China seems genuinely interested.

Published in Kommersant-Vlast.

Two months ahead of the 2012 AsiaPacific Economic Co-operation (Apec) summit in Vladivostok, Russia has made its chairmanship priorities clear: transport, regional integration, food safety and innovation-led development These priorities will be included in initial proposals that businesses will, for the first time in the organisation’s history, submit to Apec leaders during the summit. Final proposals to country leaders will be formulated during the closing meeting of the Apec Business Advisory Council (Abac) in Ho Chi Minh City next month.

One area in which Russia has made significant progress is food-safety partnerships, says a representative at the National Business Centre.

“Russia is a leading grain exporter globally, with more than 20 million tonnes a year, and plans to double its foreign deliveries by 2020,” he says. With about 600 million undernourished people in Asia, there are plenty of buyers.

The business sector is also interested in transport and logistics, important priorities for Russia. To promote commercial links and transit across Russia, bottlenecks impeding access to seaports must be removed, says Aleksei Bezborodov, general director of Infranews. He says: “Russian companies invest billions in port infrastructure, build grain, coal and container yards, but the low railway capacity holds back growth,” he says.

Another area of potential development is “green construction”. A proposal will include recommendations for developing urban areas in Apec that will be handed to President Vladimir Putin and other leaders during the summit.

On the initiative of the Russian Federation, experts from consultants Ernst & Young developed new standards for the construction of eco-cities with welldeveloped infrastructure, green smart homes, reasonable living costs and resident participation in city management.

Skolkovo may become the first such town in Russia. By 2050, about 70 per cent of the world’s population will live in urban areas, compared to about half today.

Ernst & Young’s standards would see residents actively involved in managing the city, well-developed infrastructure and communication with local authorities through the internet.

The urban environment would be comfortable and convenient with parks, pedestrian precincts and open spaces.

Cars should be limited and standards introduced to encourage environmentally friendly transport. Standards would also help business registration and support for smaller firms while living costs would not burden average-income residents. These “green” construction plans would require changes to regulatory frameworks across Apec.

“Eco-materials are always more expensive to buy, so producers and developers must be offered a framework encouraging them to make use of such materials,” says Ernst & Young. Many countries have introduced such schemes, including tax benefits, subsidies and preferential lending.

The Russian initiatives’ success depends on collaboration between the state and business sector. For the first time, Russian firms have assumed an active organisational role within the international business community and

With about 600 million undernourished people in Asia, there are plenty of buyers who want Russian grain offered specific and well-thought-out initiatives, says Apec Research Centre deputy head Gleb Ivashentsov.

Russian companies lack lobbying experience, however, so Abac 2012 chairman Ziyavudin Magomedov has pushed for the creation of the Apec National Business Centre along with Bank VTB, the Skolkovo Foundation, and other Russian and international firms.

Russia’s Apec chairmanship and the Vladivostok summit may be the start of the nation’s campaign to promote its business worldwide, experts say. Russia will co-chair Abac next year, the G20 in 2013, and the G8 in 2014, and then the BRICS group, which also includes Brazil, India, China and South Africa.

According to the programme director at the International Relations Council, Ivan Timofeyev, “further collaboration between the state and business in these institutions will help Russian companies boost their exports and create new jobs”.

Russia’s chairmanship of the Apec summit may be the start of a campaign to promote its business worldwide. Photo: Photoshot/Vostock-photo

Tuesday, June 26, 2012 5

RUSSIA AND GREATER CHINA

Emerging opportunities HK summit to inform delegates where to invest as nation looks east, writes Mark Zavadskiy

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s it worth investing in Russia?

Where should one invest? For how long?

Participants in the Russia and CIS Investment Summit will attempt to answer these questions. The summit will be held in Hong Kong on July 5 and 6 in the shadows of the euro-zone crisis, a slump in foreign investment, and domestic problems in Russia, such as rallies and a record fall of the rouble.

Major Russian and Asian players will participate, including VTB-Capital, Fesco, Rusal, Hong Kong Exchanges and Clearing (HKEx), Russia Beyond the Headlines, Rusnano, Transcontainer and Cros.

“President [Vladimir] Putin’s recent drive for international investment makes the Russia and CIS Investment Summit particularly relevant. This year’s summit focuses strongly on Russia’s increased links with Asia and the development of Russia’s Far East,” says Jonathan Hirst, publisher of Finance Asia and Asian Investor, organiser of the summit. “Apec 2012 being hosted in Vladivostok signals Russia’s push to develop its far-eastern regions. Other areas, such as Russia’s growth in the technology sector, are relatively new but offer a major growth opportunity, while areas such as natural resources remain everprominent.”

Recent statistics on foreign investment inflows in Russia paint a gloomy picture. In the first quarter of 2012, foreign capital inflows totalled US$36.5 billion, down 18 per cent, year-on-year.

INVESTMENT

The Russia and CIS Investment Summit in Hong Kong will highlight the country’s development of its far-eastern territories, trading links with its Asian neighbours, and prospects for business. Photo: Reuters/Vostock-photo On an annualised basis, net foreign investments in Russia shrank 8 per cent and net Russian investments in foreign projects 64 per cent. Foreign direct investment inflows edged down 0.7 per cent, year-on-year, to US$3.9 billion.

According to influential Russian magazine Expert, companies with foreign capital that used to account for 15 to 20 per cent of total investment inflows have

moderated their investment activity over the past six months. “They seem to be getting ready for the notorious second wave of the economic crisis, so it’s not the best time to invest in new markets,” says Expert’s Dmitry Sivakov.

The shortage of long-term capital is offset by inflows of venture capital. In the first quarter of 2012, portfolio investments grew more than eight times,

year-on-year, and short-term investments accounted for their majority. Investments in Russian shares and funds grew more than 15-fold during the first quarter.Russian companies are also stepping up efforts to approach international markets, especially in Asia.

This month, Lukoil announced plans for a secondary listing in Hong Kong next year. “We’ve seen growing interest

Foreign direct investment in Russia

in international companies looking to list in Hong Kong and tap both Asian and international investors,” says former HKEx chairman Ronald Arculli. “Hong Kong, as China’s international financial centre, is an ideal place for Russian companies ... to tap demand from China.”

Keeping up with changes in the regulatory framework is critical in Russia.

Laws on foreign investment may change this year and regulators may expand the number of companies that enjoy strategic investor status by adding internet firms that provide socially significant services. This means the acquisition of more than 10 per cent in the biggest Russian Internet companies could require approval from the foreign investment commission and the Federal Antimonopoly Service.

Interest in Russia’s natural resources could continue, however. In late April, Metals of Eastern Siberia Corporation, part of the Metropol Group, signed an agreement with China Nonferrous Metal Industry’s Foreign Engineering and Construction to jointly develop the Ozernoye deposits in the Republic of Buryatia, a project that is expected to attract US$1 billion in investment.

TIME TO INVEST A guide to investors’ best friends in the government p.6 Can Russia become far more business friendly? p.7 Do the homework before Investing in Russian stocks p.8

Moscow aims to boost business opportunities for investors at key forum XI INTERNATIONAL INVESTMENT FORUM SOCHI-2012 SEPTEMBER 20-23

Last year, 548 delegates from various countries and regions took part in the 10th forum, where 105 deals, worth HK$13.7 billion, were signed. Photo: Press photo

The Sochi Forum is one of three major economic events held in Russia, and its aim is to improve investment opportunities and establish ties between Russian regions and local and foreign businesses. Last year, Russia's then-prime minister and present President Vladimir Putin promised delegates that Russia would recover from the global financial crisis within a year and predicted that it would be easier for the country to cope with economic problems than for other,

more developed nations. Putin said: “The leaders [of other countries] can no longer serve as examples of putting together a balanced economic policy.

The debt crisis in Europe and the United States is aggravated by their economies being on the verge of recession.”

“The consequences of the 2008 crisis were less severe for Russia,” says An-

Russia Beyond the Headlines is a media partner of the forum.

drei Khazin, a professor at the Higher School of Economics in Moscow. “This is because our financial reserves helped stabilise the situation."

However, Ruslan Grinberg, director of the Institute of the Economy at the Russian Academy of Sciences, warned that Russia remained too dependent on Western economies.

6 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

Friends in high places Moscow’s ministers are often key to projects. You can even talk to one on Twitter, writes Alexander Gabuyev

Prime Minister Dmitry Medvedev will play a key role in the new government, and has already begun to integrate Siberia and the Russian far east into the Asia-Pacific business community. Photo: Ekaterina Shtukina_RIA Novosti

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iven the extremely low level of institutional development in Russia, a foreign investor willing to finance projects there will still have to establish favourable relationships with senior officials over the next few years.

This is a relatively easy task for American or European companies, because their executives in Russia join large associations that arrange regular informal meetings with high-ranking Russian officials, and lobby for their members’ interests. It is a much tougher challenge for Asian businesses, though.

“There are no specialised associations of Asian businesspeople in Russia,” says the head of the Russian-Chinese Centre for Trade and Economic Co-operation.

There are some lobbies, business councils operating under the auspices of the Chamber of Commerce and Industry, or associations such as the Russia-Hong Kong Business Council. However, businesspeople often need to establish important contacts independently, and know which officials to approach in order to deal with specific issues.

The key figure in the new government is the prime minister. Former president Dmitry Medvedev, 46, is a lawyer who has repeatedly sought to shrink the state’s role in the economy and has promoted privatisation and foreign investment. As president in 2010, Medvedev voiced plans to further the integration of Siberia and the far east into the AsiaPacific and had numerous meetings with businesspeople, including in Hong Kong in April 2011. In the 1990s, he advised a number of commercial struc-

BUSINESS tures and is familiar with business logic.

Because of his rank, Medvedev has little time for individual meetings with businesspeople, so the best chance of meeting him is to become part of a big business delegation. Bear in mind that Medvedev’s English is not excellent.

First Deputy Prime Minister Igor Shuvalov is responsible for macroeconomic and financial issues, as well as the investment climate. In Putin’s government, Shuvalov was appointed Russia’s investment ombudsman, in order to help foreign investors solve their problems there. In the 1990s, Shuvalov worked as a lawyer at legal firm ALM, which catered to major Russian oligarchs and their foreign partners, so he understands big business. Shuvalov is busy but also a frequent guest of the World Economic Forum in Davos, where he participates in informal events, and is available to talk. He speaks excellent English.

Deputy Prime Minister Arkady Dvorkovich is a former economic adviser to

Minister for the Development of the Russian far east Viktor Ishaev has a reputation for developing rapport with Asian investors. Photo: ITAR-TASS

The Ministry for the Development of the Russian far east will enjoy colossal powers, including allocating land and granting tax benefits

the president. A Duke University graduate, Dvorkovich is responsible for a broad range of issues, encompassing the entire industrial sector, fuel and energy, and agribusiness. Dvorkovich has always advocated privatisation and foreign investment. He is often available for contact and maintains his own Twitter account (@advorkovich), where you can ask him almost any question.

Dvorkovich enjoys the complete trust of the prime minister and can resolve quite complicated issues, except probably in Energy, which is still controlled by the influential former deputy prime minister Igor Sechin, the head of state oil company Rosneft. Whether Dvorkovich will be able to control the energy

sector for real will become clear in the coming months.

The new Economic Development Minister, Andrei Belousov, has good personal rapport with President Vladimir Putin, and big “staff weight”. Foreign investors are formally supposed to address many issues through the Economic Development Ministry, however, in practice, Belousov is more of a macroeconomics specialist.

Asian investors should also take a closer look at Viktor Ishaev, who combines the posts of the presidential plenipotentiary envoy in the far east and the head of the newly created Ministry for the Development of the Russian far east.

Ishaev used to be the governor of Khabarovsk Krai and earned a reputation for building dialogue with East Asian investors. The new ministry will enjoy colossal powers, including allocating land and granting tax benefits.

Professional ministers open to dialogue with investors include the 29-yearold Minister of Communications, Nikolai Nikiforov, who headed a similar ministry in Russia’s innovative Tatarstan Republic on the Volga, and 43-year-old Minister of Transport Maxim Sokolov, who worked for many years in St Petersburg before heading the Infrastructure Department of the Russian government in 2009. The only problem is that their predecessors, Igor Shchegolev and Igor Levitin, remain informal supervisors of these two sectors, so in order to successfully invest in telecoms and transport, a foreigner needs to establish contacts with both these officials.

Oil chief Sechin takes charge of energy sector Oksana Gavshina Vedomosti.ru In a move that has been described as “unbelievable”, former deputy prime minister Igor Sechin is back in government.

Sechin, who is the president of stateowned oil firm Rosneft, is now the new executive secretary of a presidential commission for the strategic development of the fuel and energy sector, and environmental security.

Sechin, who was not appointed to Prime Minister Dmitry Medvedev’s new cabinet last month, will influence en-

Igor Sechin is in charge of the energy commission. Photo: ITAR-TASS

ergy policy. The commission will fully control the fuel and energy sector, from programme development to the legal framework and tax policy, tariffs, pricing and distribution of resources.

Its decisions will be binding on federal executive bodies and Sechin will have access to confidential information from its members, organisations and executive bodies.

“Unbelievable,” says a source close to the commission. “The head of an oil company will have access to confidential information from competitors, and can issue directives to ministers, the Federal Anti-Monopoly Service and the

Federal Security Bureau. How does that square with the law?”

A source close to Sechin says there is no conflict of interest because his role will be technical.

Major industry players asked for the commission to be set up at Sechin’s behest, say officials close to the commission.

“But nobody signed up to give Sechin such broad powers,” a source says.

Other sources, with knowledge of the commission’s operations, say Sechin’s role is not all-powerful, and he is not in charge of the body.

“The new commission is a setback

for Prime Minister Medvedev’s team.

Before they have managed to get their act together, 30 per cent of the Russian GDP has been taken away from them,” a source told Russian newspaper Vedomosti.

The new commission will have to work alongside a similar government body now headed by Deputy Prime Minister Arkady Dvorkovich. A Sechin source says the new commission deals with strategy, while Dvorkovich’s body controls day-to-day matters. The prime minister’s spokeswoman, Tatalya Timakova, says the government commission will play its role to devise strategy.

Tuesday, June 26, 2012 7

RUSSIA AND GREATER CHINA

A tough goal to achieve Government intends to make the country far more business-friendly, writes Dmitriy Butrin

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resident Vladimir Putin signed a decree on May 7, with the aim of raising the economy from the 120th place it occupies in the World Bank’s Doing Business Index to 20th place in a few years. Such a dramatic leap would be unprecedented, but Russia may be able to pull it off.

Russian officials consider the present ranking as “pathetic”. According to Russian Economic Development Ministry officials, the index is a reputable instrument for gauging the ease with which business can be done in a country.

The proposed “great leap” is one of the most discussed topics in government, alongside the technological package of key performance indicators, supervised by Deputy Prime Minister Vladislav Surkov.

Economists doubt Russia will make such speedy progress in the ranking.

Academics from the Institute of Development at Moscow’s Higher School of Economics say such a leap would be unprecedented. According to World Bank reports, it took Georgia - the regional leader for overall ease of doing business last year - a decade of regulatory reforms to climb to its present 16th spot, just behind Australia.

Georgian President Mikhail Saakashvili was not the first to employ the index as a promotional tool for foreign investment, nor was it Saudi Arabia, which ranks 12th, ahead of Germany, Japan and Switzerland. The idea of promoting targeted regulatory reforms to improve ratings belongs to the World Bank.

The bank applauds the idea of “working-up” ratings through reforms. In 2007, an International Monetary Fund mission to Azerbaijan offered advice on how to improve ratings in this manner, but that country did not progress rapidly.

However, some countries in the Commonwealth of Independent States, a loose association of former Soviet republics, have become the Doing Business Index celebrities. Belarus moved up 49 places in 2009-10 to 69th position, quite an achievement for a closed economy dominated by the public sector. Kazakhstan has climbed into the 50s, higher than Mexico or Turkey.

The World Bank’s ratings are quite easy to adjust, so insignificant regulatory changes have a major public-relations effect and long-term improvements in the local business climate.

The Russian government is aware of

BUSINESS CALENDAR

FIND MORE IN THE GLOBAL CALENDAR

at www.rbth.ru

Measuring the ease of doing business around the world

COMMENT Russia’s accession to the World Trade Organisation and its fresh Customs Union-related reforms will boost its standing in the “Trading Across Borders” component as early as 2013 to 2015.

However, the rating won’t improve much because of the high level of corruption in the customs sector and problems with cross-border capital flows.

Nevertheless, changes over the next few years will allow the country to jump 20 to 30 places in 2012-13.

The type of changes, which helped Belarus improve its status, are possible in three or four more index components, for instance, in “Registering Property”.

There are only two restrictive components – “paying taxes” and “getting electricity”.

The former is simply the tax level in Russia, which is higher than in members of the Organisation for Economic Co-operation and Development. The latter is a problem of suspended electricity sector reform.

When it comes to the other index components, changes are not so costly.

Efforts to “adjust” the Doing Business rating are positive for the economy. Only countries with problems in their business climates seek improvements, and any deregulation initiatives are interpreted as an invitation to invest.

Rapid improvements give opponents of deeper reforms reason to say: “That’s enough, everything is already fine.” This scenario may be the biggest challenge to Dmitry Medvedev’s government once the country “soars” in the ratings. Makeup can easily mask signs of fatigue and the symptoms of a serious illness.

Russia’s lowly position in the business ranking is considered ‘pathetic’ by most government officials who want to see a ‘great leap’

the danger of artificially improving the country’s rating. First Deputy Prime Minister Igor Shuvalov insists it will focus on promoting substantial regulatory amendments to enact the “great leap”.

A “surge” in the ranking is highly likely in the next few years as Russia’s lowly position is mainly due to three of the 10 components of the index. They are easily adjustable without major regulatory reforms.

Russia has a very low “Dealing with

Construction Permits” rating – these permits are so tough to obtain in the corruption-ridden construction sector.

Russia ranks 178th, lower than Afghanistan. Simple reforms would enable investors to get permits more easily.

“Protecting Investors” is even easier to fix. Russian legislation does not stipulate liability for managers for a company’s performance, leaving the owners to do all the worrying. A slight adjustment to the Civil Code would provide fuel for a surge in the ranking.

ANNUAL RUSSIA AND CIS INVESTMENT SUMMIT

INVEST HONG KONG MOSCOW FORUM

INVESTMENT FORUM SOCHI-2012

RUSSIA-SINGAPORE BUSINESS FORUM

JULY 5-6 HONG KONG

AUGUST 28 MOSCOW

SEPTEMBER 20-23 SOCHI, RUSSIA

SEPTEMBER 24-27 MARINA BAY SANDS, SINGAPORE

FinanceAsia and AsianInvestor’s Third Annual Russia & CIS Investment Summit views the trade and investment opportunities for Asian investors, across all asset classes, in a market that’s part-Europe, part Asia, and all-booming. The summit will attract 250 of the region’s most senior and well-respected asset owners, asset managers, investment chiefs, and Russian and Asian corporations, looking to understand opportunities, emerging trends, and regulatory policies for Russia and the CIS.

This event is designed to highlight the latest business opportunities and economic environment in Hong Kong and Zhuhai. Companies have benefited from establishing their regional headquarters in Hong Kong and making use of this strategic location at the centre of Asia to oversee their manufacturing facilities and sales operations. This is an excellent opportunity to network with high-level government officials and business executives from Hong Kong and Zhuhai.

The forum opens, for the 10th time, a new business season in Russia’s southern capital, drawing into its orbit leading experts and analysts, businessmen and representatives of non-governmental organisations from many countries and the heads of government authorities. The agenda includes topical 1 of implementing investment strategies and improving the business climate in the Russian regions, and effective development of co-operation and partnership links.

The Russia-Singapore Business Forum continues to gather momentum each year. From a simple objective to “demystify” Russia in 2006, the forum has developed into a more complex and sustainable platform from which to forge B-to-B linkages business connections; launch business projects and tie-ups; and bridge pan-regional and global business across CIS, Asia and beyond. In 2011, RSBF cemented its position as the most significant international forum on the CIS and emerging markets.

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Dmitriy Butrin is the head of the economic research department of Kommersant.

8 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

It pays to do the homework Considered approach and knowledge of the market can reap rewards, writes Svetlana Borozdina

EQUITIES

A significant advantage of Russian stocks is that they are undervalued. Photo: Getty images/Fotobank

F

oreign stock investors are often biased against Russian securities, believing that Russia is an unpredictable country with a commodity-based economy and a stock market that is immature, narrow and with few investment options.

On the surface, their concerns may seem to be an accurate assessment of the Russian equities market. However, a considered approach and sufficient knowledge of the market could generate handsome profits for the astute investor.

A government campaign to turn Moscow into a global financial hub included moves to build the investment infrastructure at the unified Moscow MICEX-RTS stock exchange, which trades stocks, bonds, currencies and derivatives - futures and options. More than 3,000 non-residents from 100 countries trade in Moscow. The MICEX Trading System has in excess of 808,000 clients. Last year, US$700 billion-worth of stocks were traded in 136 million transactions, half the turnover of Hong Kong’s stock exchange.

Foreigners can invest in Russian stocks and bonds directly on world stock exchanges or though mutual funds.

Foreign investors wishing to create independent portfolios acquire Russian securities in the exchange of their choosing, says Arsen Ayvazov, CEO of FINAM Investment Company, one of the larg-

Stock market’s performance

est Russian investment companies.

Many stocks traded in Russia are also listed on the London Stock Exchange, New York Stock Exchange and Nasdaq, although only Rusal is also listed in Hong Kong.

Some Russian companies are only listed on foreign stock exchanges, among them are major players on the internet, Yandex and Mail.ru.

Nearly all brokers work with foreign stock exchanges although, when it comes to the Moscow exchange, it is best to turn to the local offices of Russian investment banks such as VTBCapital and Renaissance Capital. Russian investment banks allow investors to trade on the rouble market, which is more liquid than the dollar market.

The second option for investing in Russian securities is to invest in equity funds. These can be mutual funds (and their Russian counterpart, called “unit investment funds”) or exchange-traded funds (ETFs).

Michael Hanson-Lawson, CEO of East Capital Asia, says investors can purchase different funds in Hong Kong. Retail in-

vestors can only buy authorised funds but institutions and high-net-worth individuals can buy non-authorised funds.

They also can buy mutual funds and ETFs through private banks and stockbrokers.

Buying into Russian mutual funds is not always easy. Few are traded on the MICEX and they typically have very low liquidity.

“What is more suitable – stocks or funds – depends on how familiar the investor is with the Russian market,” says Hanson-Lawson. “I would have thought that the average investor in Hong Kong would not be that familiar with the Russian market and that is why it would make more sense for them to buy a fund.”

Another concern is Russia’s high tax rate, 30 per cent for private non-residents for stock market transactions.

The fact that the rouble is not a hard currency and quite volatile is another major risk.

There is also a country risk. “Russian state-run companies are not transparent enough and can make decisions depending on the interests of the country’s leadership rather than business interests,” says Matthew Maly, personal investment adviser at AVC Advisory.

“At the same time, private companies are not shielded from interference by state authorities, including corruptionrelated interference. These factors might affect stock prices.”

A significant advantage of Russian stocks is that they are undervalued, which means they have huge upside.

Neither foreign nor domestic investors have been particularly interested in the Russian stock market in the past year, which has led to a slump in stock prices, an increase in profits, higher dividend payouts and mass buy-back transactions worth billions of dollars.

Oil company Surgutneftegaz is a good example of an undervalued asset. Its present capitalisation is lower than the amount of money in its accounts, despite the fact that the company reports high profits, regularly pays dividends and pursues a development strategy.

Russian companies will sooner or later close the gap with foreign competitors and fair stock prices, rewarding patient investors with huge profits.

But keep in mind that in Russia you can never say for sure when your investments will pay out.

However, strategic investors continue to hold and acquire new stocks in Russia, hoping to profit from the expected recovery.

Country’s top-performing stocks Sberbank of Russia (MICEX-RTS: SBER): Eastern Europe’s largest bank; Central Bank of Russia owns 60.3 per cent of ordinary shares.

Gazprom JSC (GAZP): top natural gas extractor and Russia’s largest firm; 50.002 per cent state-owned.

VTB Bank OJSC (VTBR): Russia’s second-largest bank, with 85.5 per cent of shares owned by the state.

Rosneft Oil Co (RNFTF): integrated oil firm, majority owned by the state.

Lukoil JSC (LKOH): Russia’s secondlargest oil company.

Norilsk Nickel OJSC (GMKNS): world’s top nickel and palladium producer.

Uralkali OJSC (URKAS): Russian potash fertiliser company, and traded on the London Stock Exchange using the symbol URKA.

Unified exhibition improves regional approach Eugene Solovyev Russia’s decision to send its largest contingent to the 23rd China Harbin International Economic and Trade Fair this month paid off with the signing of contracts worth a staggering US$15.7 billion.

The 85 delegations comprised 4,000 people. Within the first six days, they had signed contacts worth US$4.5 billion, including 19 trade contracts worth US$3.9 billion and six investment agreements worth US$516 million. By the end of the fair, that figure of economic and tourist projects, reflecting the “Year of Russian Tourism in China”, had risen to 140 contracts.

Oleg Govorun, Russian Minister of Regional Development, says: “The Year of Tourism will boost our mutual investment and strengthen understanding and friendship between our nations.”

Russia revealed its biggest investment projects, such as infrastructure for the Asia-Pacific Economic Co-operation (Apec) forum in Vladivostok from September 2 to 9, and the Winter Olympics in Sochi in February 2014.

The ministry organised a single exhibition for the second year running.

Denis Travin, director of the ministry’s investment project department, says: “A unified large-scale exhibition of the Russian Federation, rather than isolated stands of separate regions, makes

The Year of Tourism will boost our mutual investment and strengthen understanding Russia’s participation more effective.

The Russian exhibition focuses on tourism. We decided to show Russia’s rich tourist potential.”

China benefits substantially more from tourism between the two countries than Russia. About 234,000 Chi-

nese tourists visited Russia last year, while more than 1.5 million Russians travelled to China.

“We hope that the Russian exhibition will provide the Chinese people with a full and clear picture of Russia’s tourism opportunities and that many tourists will soon be able to visit the Volga and, for example, the Ryazan region, as well as the ski resorts in the Caucasus and the museums of the Ivanovo region,” Travin says.

Border areas received particular attention, due to their convenient location for Chinese tourists. “The projects presented are among the most interesting in Russia,” he says. One of them is the Lake Baikal cluster. In the vicinity of the lake, there are two special tour-

ist areas: Baikal Harbour (Buryatia) and Baikal Gate (Irkutsk), where ski resorts, spa resorts and hotels will be built.

The ministry also showed off the facilities for the 2014 Winter Olympics and upcoming Apec summit.

Travin describes the Olympic preparations as the biggest construction project in Europe.

“This will also be the most compact Olympic Games ever held,” he says. “The Olympic Park, consisting of six stadiums, can be surveyed on foot in just 20 minutes. It will take 30 minutes to get from the Olympic Park to the sports venues in the mountains.”

Vladivostok will be the first Russian city to host the Apec summit in September.

Tuesday, June 26, 2012 9

RUSSIA AND GREATER CHINA

Russia’s State Atomic Energy Corporation is discussing building a fast-neutron reactor with Chinese partners, according to its chief Sergey Kiriyenko. Photo: Photoshot/Vostock-photo

Beijing eyes super reactor Fourth-generation nuclear plant may be constructed in China, writes Alexander Yemelyanenkov nuclear research centre in Idaho, in 1951. The USSR launched a similar facility in Obninsk, in the Moscow Region, four years later.

In 1956, a consortium of American companies started building the demonstration 65-MWe breeder-reactor Fermi-1. The plant was shut down 10 years later after a partial meltdown and American interest waned.

Germany tried its luck in 1974, when it launched a trial reactor, which remained operational until 1994. A more powerful version, built between the early 1970s and late 1990s, was never launched.

The BN-600 is the only industrial-scale reactor of this type in the world. It’s the third unit at the Beloyarsk Nuclear Power Plant France spent US$5 billion to build a full-scale nuclear power plant with the Superphenix fast-breeder reactor (FBR), but the facility has been suspended.

Japan is yet to issue a licence for the operation of the experimental Joyo reactor, completed in 1977. Monju, a large demonstration FBR launched in 1994, was halted a year later due to a sodium leak.

The Soviet Union’s first commercial fastbreeder reactor, the BN-350, was built in the Caspian Sea town of Shevchenko (Aktau in present-day Kazakhstan) and provided power for water demineralisation units until 2000.

The only operating fast-breeder reactor is the BN-600, the third unit at the Beloyarsk Nuclear Power Plant. It is not only the sole operational reactor of this kind, but also the world’s most powerful sodium-cooled fast reactor.

What are its advantages?

The sodium used as coolant does not dissolve when it is exposed to radiation, which is why there is no need to drain the coolant to remove the dissolved absorbent every time fuel is replenished.

Furthermore, sodium binds radioactive iodine into non-volatile compounds, which rules out leaks of iodine via ventilation systems during normal plant operations.

As a result, BN-class reactors produce relatively small amounts of radioactive waste and have a less aggressive carbon footprint compared to other reactors. Loaded with sodium, the Russian BN-600 holds the global record in terms of length of service – it has operated accident-free since 1980.

A more advanced and powerful BN800 is being built next to the BN-600.

Both were developed by the Afrikantov Experimental Design Bureau.

OKBM scientific supervisor Fyodor Mitenkov was awarded the international Global Energy Prize in 2004 for his contribution to the fundamentals of physics and technology and the development of fast breeder reactors.

OKBM’s leadership maintains that the BN-800 project incorporates a package of measures to increase the operational reliability and safety of fast-breeder reactors. The CEFR was designed, constructed and equipped based on this experience. Two years of successful operation is the best argument for building a similar but more powerful unit.

This will be a fourth-generation reactor with high safety levels and capable of providing a closed fuel cycle.

Joint projects attract interest

ENERGY FAST FORWARD

PHOTOSHOT/VOSTOCK-PHOTO

R

ussia hopes to build an operational, full-scale, fast-neutron reactor for China.

During President Vladimir Putin’s June visit to China, the director general of Russia’s State Atomic Energy Corporation (Rosatom), Sergey Kiriyenko, said the corporation was discussing the project with Chinese partners.

There is only one industrial-scale reactor of this kind in the world – the BN600 at the Beloyarsk Nuclear Power Plant in the Sverdlovsk region. A more powerful reactor is now being built there.

China would be the next in line for such a project.

“Economic entities could sign protocols for the initial phases of the project” as early as this summer, Kiriyenko said.

China and Russia have already worked well on such ventures. In 2009, Ukrainian Alexander Selikhov was awarded the awarded medal of Hero of Labour of Jiangsu Province for his supervision of the construction of the Tianwan Nuclear Power Plant.

Two years ago, the China Institute of Atomic Energy in Beijing used a design by the Nizhny Novgorod-based Experimental Design Bureau of Mechanical Engineering to build and launch the China Experimental Fast Reactor (CEFR).

China first looked at fast reactors, or fast breeders, in the 1960s. Fast breeders generate more fuel than they consume, an idea first put forward in 1943

by Leo Szilard, a nuclear scientist in the United States.

The Soviet Union picked up on the idea in 1949, and started extensive research led by the academic Alexander Leipunsky.

The first experimental 0.2-MWe breeder was launched in the US, at a

Fast-breeder reactors are the backbone of our competitiveness. These are fast sodium reactors that operate and are developed at the Beloyarsk Nuclear Power Plant, lead-bismuth cooled reactors, lead-cooled reactors and various liquid-metal coolants. They enable us to use Uranium-238, which is virtually unlimited in nature, and which is not properly used now.

SERGEY KIRIYENKO, DIRECTOR GENERAL, STATE ATOMIC ENERGY CORPORATION

Russian President Vladimir Putin’s official visit to China, where he signed long-term bilateral agreements on nuclear power co-operation, coincided with Moscow hosting Atomexpo 2012.

The key topic at the major international forum was “Nuclear Power Industry Worldwide: One Year After Fukushima”.

The delegation from the China National Nuclear Corporation was one of the biggest of the 50 participating nations.

Joint Russian-Chinese nuclear projects attracted plenty of interest.

These included the fourth phase of a uranium-enrichment facility built in China with unique Russian gaseous centrifuge isotope separation technology; a modern nuclear fuel plant for which Russia handed the relevant design and construction documents to China; an experimental fast-neutron reactor for the Chinese Academy of Sciences; and supplies of isotopes to various Chinese industries, including the national space programme.

One exemplary joint project was the Tianwan Nuclear Power Plant in Jiangsu Province. Since its first two reactors were launched in 2007, it has generated more than 76 billion kilowatt-hours of power, meeting the expectations of its builders who dreamed of turning it into a “moneyprinting machine”. Routine refuelling maintenance now takes 39 days (down from 108), a new record.

10 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

Opposition takes heart Konstantin Eggert Ria Novosti

A

s dusk started settling in Moscow on June 12, I felt a huge sense of relief. Only a few hours earlier, the atmosphere was tense in the city.

As Muscovites gathered for the “last big rally of the political season”, as one commentator put it, expectations of violence between the police and antigovernment demonstrations were high. The previous week, President Vladimir Putin signed a law approving new harsh measures against those who break the rules of conducting public gatherings, which in Russia means pretty much what the Kremlin-controlled police and prosecution decide constitutes breaking the rules. The law imposes tough fines on organisations and individuals, and is clearly aimed at snuffing the protests out through fear of financial reprisals.

When the law was adopted by the Russian parliament, I wrote that it would have the opposite result to that intended, and that it would spur the protests on rather than halt them. Only a week later, I am happy to say that I did not mislead anyone.

The June 12 rally was the biggest and possibly the best organised since the protests started in December last year. This was remarkable, bearing in mind the fact that the day before, armed police raided the homes of the leading opposition figures, officially as part of the investigation of the May 6 rally, during which protesters clashed with police. Anticorruption crusader Alexei Navalny, TV diva Ksenia Sobchak, radical Left Front leader Sergei Udaltsov and Solidarity movement frontman

Ilya Yashin were among those targeted.

Even their relatives were not spared. Computers, iPads, mobile phones and flash storage devices were confiscated. When I called former vice-prime minister Boris Nemtsov (his apartment was also searched) later in the evening to inquire about his condition, he laughed: “Kostya, you won’t believe it - they took all the gadgets from the apartment.” But instead of frightening their supporters, these clumsy actions seemingly only made public anger flare up. Having talked to

the regular folks who hit Moscow’s Boulevard Ring - spouses, children and dogs in tow one could not escape the impression that for many of them these raids and searches were the turning point, the moment they decided they had to participate.

The police behaved exemplarily and this made me think that President Putin was still not prepared to follow the approach of his neighbour and ally, Belarusian dictator Alexander Lukashenko, and ban all the rallies. He was wise not to do this. June 11 and 12 signified a new stage in Russia’s unfolding political crisis.

The protests haven’t died down, as many observers claimed would happen after Putin returned as president on May 7.

He has lost Moscow, and this is irreversible. There was no attempt to organise a counterrally in support of Putin, and even the restless pro-Kremlin youth movements were invisible.

This bodes badly for the Russian leader. No Russian ruler has ever been able to run the country for long, having forfeited the confidence of the capital’s population. Moscow turned into a political battleground. It will be increasingly difficult for the Kremlin to keep it under control.

Popular Russian fiction writer Boris Akunin remarked on June 13: “Something else, something new has to be done.”

This brings me to a third point: the protest movement is maturing quite visibly. During the rally, a joint opposition manifesto was adopted which is a product of the three main political

OPINION forces forming the opposition – the liberals, the leftists and the moderate nationalists. It sets out a definitive programme on which all political forces agree: Putin’s resignation, changing electoral laws and holding new elections, cleaning up the judiciary and the police.

What is probably most important, the manifesto explicitly states that the opposition will employ only peaceful and legal means, and calls for roundtable talks with the “reasonable representatives” of Russia’s political regime. The call is clearly addressed to those civil servants and functionaries who suspect that the system Putin has built is unsustainable. The suggestion that these people cross over the lines to the protesters will not please the Russian president and in fact should worry him.

As autumn approaches, the opposition is becoming more focused and will start fielding candidates in local elections. On October 7, it promises to open a “new political season” with the biggest rally ever. The choice of date is not accidental. On this day Putin will turn 60.

Konstantin Eggert is a commentator and host for radio Kommersant FM, Russia’s first 24hour news station. In the 1990s, he was diplomatic correspondent for Izvestia and later the BBC Russian Service Moscow bureau editor.

Beijing’s power and prestige draw suspicions Fyodor Lukyanov Any event involving China draws maximum attention. The country is the second biggest global economy and it boasts a modern military. The nation is an enigma and many countries are suspicious of the Chinese mentality.

There are no doubts that Beijing is flexing its economic muscle. Nevertheless, just as the world has been trying to figure out how to deal with it, Beijing has been trying to find ways to foster friendly ties with many nations.

It was inevitable that China’s development started to be perceived as a global threat.

The size of its population and the scale of its economy were enough to propel China as a global power. The Chinese, however, are keen to portray the country as a world leader without any expansionist ambitions, arguing that their way of thinking is profoundly different from the Europeans.

Beijing is at pains to convince the rest of the world that it wants to live in peace, and it does not want to widen its sphere of influence.

Therefore, world leaders should not be concerned, as no matter how high China might

rise or how strong it might become politically and economically, it can never rise to dominate the world since it lacks a cultural and ideological aim that is universally applicable, gently or otherwise, on others. China’s appeal as a model of living and development is limited to eastern and Southeast Asia.

China is limiting its focus to its own region.

But, in claiming a regional leading role, China finds itself confronting the United States, since control over the Asia-Pacific is a guarantee of maintaining global dominance.

There are more spots where the direct interests of the two clash. Previously, Taiwan afforded the only potential justification for a possible war. China’s territorial disputes with its neighbours threaten to escalate, something the US will not tolerate.

The containment policy the US has started applying envisages deployment of America’s allies along China’s borders.

New allies, Vietnam, India and Burma, alongside traditional ones, such as Japan, South Korea, the Philippines, Singapore and Australia, are emerging.

Washington knows it faces two scenarios. Either, as China grows, the US will be able to

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convince all China’s neighbours of its support and extend security guarantees or, if they are still doubtful, China’s neighbours will rush to improve their ties with Beijing. Washington

China can never rise to dominate the world since it lacks a cultural and ideological aim that is universally applicable has to be prepared to make a stand against China on any of the disputes. The tensions are exacerbated by the stand-off in the South China Sea. America’s strength as a naval power relies on its control of navigation routes. China’s claim to be the dominant power in the South China Sea can, therefore, evoke nothing in the US but rejection. The trend towards open confrontation is obvious. Hopes that the

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economic interdependence, tying Washington and Beijing, would reduce tensions have fallen short. However, China is not ready for military or political confrontations. Beijing shuns using any leverage. China has taken the lead from Russia on all Middle East issues in the UN Security Council.

Beijing voted in favour of sanctions against Iran and did not oppose military action against Libya. Global developments in the past 18 months have made Beijing quite nervous. The global turbulence multiplies the risks, including the possibility of external instability enhancing domestic instability.

On the eve of the Communist Party congress this autumn, which will see generational change in the top ranks, even the smallest shocks can be fraught with consequences.

The government has managed to find ways out of the most difficult situations, though not without damage.

However, China has never before been on the centre stage, or so dependent on others as it is now.

Fyodor Lukyanov is the editor-in-chief, Russia in Global Affairs magazine.

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Tuesday, June 26, 2012 11

Trio out to protect film sector

Photo: Press Photo

RUSSIA AND GREATER CHINA

Pirate Pay’s creators say they can prevent movies from being copied online, writes Elena Shipilova

I

n 2009, brothers Andrei and Alexei Klimenko and their friend Dmitry Shuvaev created a file-sharing, traffic-management solution for an internet-service-provider (ISP) network. Shortly afterwards, the three twentysomethings realised that their application had some unintended but potentially significant opportunities for intellectual property protection.

“After creating the prototype, we realised we could more generally prevent files from being downloaded, which meant that the program had great promise in combating the spread of pirated content,” says Andrei Klimenko, now the chief executive of the trio’s Perm-based company, Pirate Pay. The technology prevents file sharing in torrent networks. These peer-to-peer (p2p) file-sharing solutions allow large amounts of data to be transferred between individuals. After the first user uploads a file to an accessible network, the file does not live in any central location, but is accessible only from people who have already accessed it. In order to download a file, however, these secondary users must know the internet protocol (IP) address of a computer that has the file. Without the data, the connection terminates and the file cannot be downloaded. Shuvaev and the Klimenko brothers found a way to prevent these secondary downloads from taking place, even when the IP address is known.

“It was not so hard to do from inside an ISP’s network. But to turn the technology into a global service, we had to convince all ISPs to acquire our solution.

This is, what someone could call, mission impossible. So to create a global service, we had to find the way to do it from the cloud,” Andrei Klimenko says.

Dmitry Shuvaev

INTERNET “So we needed money for development.”

The partners quickly found that obtaining the financial support needed to refine the technology into a successful venture was not a simple task, but after taking part in many grant competitions, their efforts began to pay off. The Microsoft Seed Financing Fund has invested US$100,000; the Bortnik Fund, which assists small innovative enterprises, contributed approximately US$34,000; and, perhaps most significantly, the Skolkovo Innovation Center accepted the company as a resident, which will result in certain tax benefits and interaction with other innovators. The trio have recruited four programmers, expanding their staff to seven people.

“The underlying technology of Pirate Pay has no analogues in the world,” says Alexander Turkot, executive director of the Skolkovo Information Technologies Cluster. Potential residents at Skolkovo, Russia’s government-supported answer to Silicon Valley, are assessed according to several criteria, including scientific in-

TITLE: DEVELOPMENT DIRECTOR AGE: 27 STUDIED: MANAGEMENT

Dmitry Shuvaev completed his studies at the Perm branch of Moscow’s Higher School of Economics in 2004, specialising in developing IT start-ups. He later worked with a commercial design studio and a telecom company.

novation and the prospect of commercialisation.

A solution for a pressing problem The problem of copyright infringement in Russia is extremely serious, and there is significant international pressure on the government to crack down on what is seen to be rampant piracy. Foreigners in Russia find they can obtain foreign films before their release dates in the United States. According to various estimates, filmmakers lose about US$500 million a year to piracy. Hundreds of thousands of gigabytes of illegal content are downloaded every day through filesharing services, including computer

Andrei Klimenko TITLE: FOUNDER, CEO AGE: 29 STUDIED: PHYSICS

Alexei Klimenko TITLE: FOUNDER, CTO AGE: 28 STUDIED: PHYSICS

Andrei Klimenko was a physics teacher before he joined a Permbased telecom company as a sales manager in 2002. Three years later, he launched Perm’s first network of Wi-fi hot spots. He also founded another local start-up before launching Pirate Pay.

After earning a degree in physics at Perm State University, Alexei Klimenko worked as an engineer before his stints in sales and management in the local telecom sector. Before Pirate Pay, he was involved with implementing services for telecom clients.

software, music and films. Threatening internet users with legal liability or appealing to their consciences has largely failed, and, as a result, the company has attracted attention. In December last year, the film Vysotsky. Thanks to God I’m Alive came out in cinemas and, for a month after its opening, Pirate Pay protected the film on torrent networks.

“We used a number of servers to make a connection to each and every p2p client that distributed this film. Then Pirate Pay sent specific traffic to confuse these clients about the real IP addresses of other clients and to make them disconnect from each other,” Andrei Klimenko says. “Not all the goals were reached. But nearly 50,000 users did not

complete their downloads.” This company’s successful defence of the film brought in its first big payday. Company officials will not discuss exact earnings, but say that projects would cost clients between approximately US$12,000 and US$50,000, depending on the resources needed to mount a defence.

“We try to conduct deals with a profit margin,” Andrei Klimenko says. “However, significantly more is currently being spent on development than what we are earning, and thus there is not yet an opportunity to recoup our expenses.”

In the next two years, the company plans to consolidate its place in the Russian market and gain an international foothold from Skolkovo.

Nation’s online presence booming, McKinsey says Anna Andrianova Russia’s established internet players are now competing with global giants, and their success could pave the way for investor interest in new start-ups.

A new report by global management consulting firm McKinsey & Co suggests Russian players will see significant growth over the next few years, partly thanks to the rapid growth of Russian applications.

Russian is the second-fastest-growing language on the internet, after Arabic.

“Within the next two or three years we’ll witness quite a bit of growth being driven essentially by the infrastructure being rolled out as well as huge investment going into the internet sphere,” says Aigool Khalikova, an associate principal with McKinsey. Speaking during the Digital Life Design Conference in Moscow, Khalikova said the “number of large budget e-commerce start-ups started within the past year is huge, each driving [online] penetration, traffic and revenues”.

Last year, Yandex, Russia’s leading

search engine, launched a facility for Turkish users, offering search, news aggregation, local maps, images and videos. The company announced that it had hit 100,000 visitors per day in Turkey earlier this year. Yandex leads in the Russian market with 59.60 per cent, followed

by Google with 25.9 per cent, according to LiveInternet data for 2012. One of Yandex’s new innovations is social search, which aggregates feeds from Twitter, Facebook, and Russian networks like VKontakte, Odnoklassniki and LiveJournal.

“Social networks will [increasingly]

penetrate into other businesses, like music, video and e-commerce,” says Ilya Shirokov, vice-president and head of social networks business units at Mail.ru Group. Social network Odnoklassniki, part of Mail.ru group, entered Uzbekistan with a project tailored for Uzbek users as part of a test to brand itself among non-Russian speakers. Some internet businesses in Russia are focused only on Russians, such as Ostrovok, a hotelbooking service. Last year, Ostrovok received a first round of investment of US$13.5 million from backers such as

General Catalyst Partners, which also funded Kayak, the US online search service for travellers. Deputy Prime Minister Arkady Dvorkovich, said that “the internet and digital technologies make life easier and the Russian government has to provide an infrastructure for innovation”.

He cited the Skolkovo Fund as a catalyst for development. Skolkovo aims to open an innovation centre near Moscow, and already has partners such as IBM, Intel, Microsoft and General Electric.

12 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

Capital trip can be affordable Handy tips to ensure that your money goes much further when visiting the city, writes Maria Bakhareva

E

very year, Moscow makes it to the top of all sorts of rankings for the most expensive cities in the world.

A cup of coffee in the capital could set you back US$10, while a loaf of bread could easily cost US$5.

Transport The fastest – and the cheapest – way of getting around Moscow is the metro. A ride costs 28 roubles (HK$6.6 regardless of distance, but you can save by buying a travel card, which will give you several trips.

If you are not afraid of Moscow’s traffic jams and are going to take taxis, you would do well to install the free application Yandex Taxi on your phone - iPhone and Android versions are available. The app will help you call a taxi and inform you about the price of a journey, and whether the driver smokes or not.

Groceries Most foreigners shop for groceries at upmarket stores such as Azbuka Vkusa or Globus Gurme (Globe Gourmet), while budget-conscious consumers would normally go to “people’s” supermarkets, such as Pyaterochka, Kopeika and Dixy. Surprisingly, prices in both types of supermarkets can be equally high.

It is no wonder, then that most thrifty Muscovites prefer Auchan and Perekrestok retail chains, that offer the best price-to-quality ratio.

For food lovers, markets are a genuine paradise, and these are not just the Dorogomilovsky and Tsevnoi markets hyped by the media.

Personally, I prefer the market in Moscow’s suburb Preobrazhensky, where you can find the cheapest seasonal fruit and vegetables, an excellent choice of freshwater fish, honey and dairy products.

Towards the centre of Moscow, you can buy inexpensive products from farmers at so-called weekend markets, but there are great variations.

Those at the Prospekt Mira and Kitai-Gorod metro stations are great, while those at the Sukharevskaya and Tishinskaya Proshchad stations are small and

costly. Bargaining is expected, but you are unlikely to find an English-speaking retailer.

Eating out Everywhere else in the world, the Chinese and Indians run the cheapest restaurants with the best food. In Moscow, this niche is taken up by north Caucasian and Central Asian outlets.

I’d recommend two cafes: Khurma (at 15/1 Sadovaya-Samotechnaya Street, Tsvetnoi Bulvar metro station, offering mostly Azerbaijan cuisine) and Gagra (4 Vasilyevskaya Street, Mayakovskaya metro station, offering Georgian cuisine). Restaurants offering reasonably priced Russian cuisine are difficult to find, but Ukrainian food is a good substitute. One such option is the Taras Bulba restaurant chain.

Clothing Moscow is expensive as all the famous brands are priced well above those in Europe or Asia. Inexpensive garments can be found in small secondhand shops, for instance at Paradox (73 Novoslobodskaya, building 3, Novoslobodskaya or Mendeleyevskaya metro stations), or Nichego Pogobnogo (Nothing of the Kind, 2 Fadeyeva, Mayakovskaya metro station).

Read more at Moscow travel site: en.travel2moscow.com

Moscow has many places of interest. Photo: Photoshot/Vostock-photo

Moscow’s metro system is a safe, cheap and reliable form of transport to get around the city. Photo: Alamy/Legion Media

TOURISM

The fastest - and cheapest way - of getting around is the metro. A ride costs 28 roubles

Tourists are spoilt for choice as Moscow has numerous historic places to see and areas to relax. Photo: Lori/Legion Media

Enjoy Moscow on a budget Phoebe Taplin Budget hotels and hostels make it easier for adventurous travellers who want to discover Moscow.

Many hostels around Moscow’s suburbs have dormitory beds for as little as 400 roubles (HK$95), even if conditions are often grim, locations inconvenient and staff often only speak Russian and can be grumpy. On the other hand, there are some pleasant surprises to be found.

The “biggest and best-known” hostel in Moscow is Godzillas (www.godzillashostel.ru), which opened in 2005. It has dorm rooms from about 900 roubles - or less if you can get one of its limited “discount beds” or double rooms from 2,500 roubles. English-owned and American-run, big and centrally located, this is a top choice.

Another centrally located option is the Day ‘n’ Night Hostel (www.daynighthostel.com) just “five minutes’ walk or two minutes’ run” from the Kremlin.

Spaces in a six-bed dormitory start at 800 roubles and a twin room goes for 2,400 roubles. The English-language version of its website has detailed instructions about how to reach the hostel, which is surrounded by cheap bars and restaurants and is near the Mayakovsky museum.

The funky new hostel and “art space” Fabrika (fabrika-hostel.ru) opened in the old Red October chocolate factory, across the river from the Christ the Savior Cathedral. It has everything from bed spaces for 550 roubles to en-suite doubles for 3,000 roubles in one of Moscow’s trendiest areas. Artists can sleep free in exchange for a painting.

The only internationally-branded budget hotel in central Moscow is the

Visitors to Moscow, who want a bit of adventure, can have a great time in the Russian capital for a modest outlay. Photo: Photoshot/Vostock-photo

new Ibis near Paveletsky station (www. ibishotel.com). Rooms from 3,500 roubles a night could be attractive for those who want a step up from a hostel.

Many cheaper hotels are a little out of the centre but close to Moscow’s efficient metro.

In Sherstone’s “Number 1 Hostel” (sherstone.ru) you can get a bed in a dormitory for 650 roubles. The Sherstone, claims to be “the oldest surviving hostel in Moscow”. It also has private rooms from 2,200 roubles.

The three-star Yunost Hotel has basic single or double rooms with a bathroom from 3,200 roubles (www.hotelyunost. ru/eng). The surrounding Luzhniki area is well-connected Izmailovo Gamma-Delta hotel (www. izmailovo.ru/en), built for the Moscow Olympics in 1980, claims to be the largest hotel in Europe. It has en-suite singles/doubles from 3,700 roubles (less at weekends) and free Wi-fi.

The Golden Wheat-sheaf hotel (www. zkolos.ru/eng) dates from the 1950s refurbishment of Moscow’s fabulous VDNKh exhibition grounds. En-suite double rooms start from 3,000 roubles and rooms with four beds for the same price if you are prepared to share the bathroom. Close by, the Hotel VVTs (www.hotelvvc.ru) has double rooms from 1,800 roubles (with shared bathrooms). You can also pay 500 roubles per bed. Both these hotels are steps away from the VVTs park. Here you can see extravagant architecture, sample cognac, dried fruit or a good lunch in the Armenian Pavilion or watch an IMAX projection of a journey on the TransSiberian express.

Tuesday, June 26, 2012 13

RUSSIA AND GREATER CHINA

A dark world of fantasy Spellbinding tales of magic in post-Soviet Moscow are a big hit, writes Phoebe Taplin

L

ong before Stephanie Meyer’s Twilight series and less than a year after the first Harry Potter book, Sergei Lukyanenko conjured up a Russian supernatural world. The first novel in Lukyanenko’s Night Watch series was published in 1998, becoming a best-seller, a cult movie and a magnet for magic fans. Witches, warlocks and werewolves, sorceresses, succubi and vampires inhabit a gloomy Muscovite world.

Anton, the novel’s hero, is a Light Mage in the Night Watch who patrols the activities of Dark Others (capitalisation is a big feature of Lukyanenko’s prose). While riding the Moscow metro in search of vampires, he notices a dark spinning vortex above the head of a pretty, young woman in a stylish fur coat.

Lukyanenko’s skill is to weave supernatural imagery into a recognisable landscape. One minute, the characters are passing McDonald’s, factory canteens or the TV tower at Ostankino, and the next minute, one of them is drawing a Book of Destiny with fiery threads, extracted from “the deepest levels of the twilight.” The powerful combination has sold millions of copies worldwide, won dozens of awards and created a committed international fan-base. The fourth book in the series, The Last Watch, set in Scotland, was published in English in 2009 and Lukyanenko has just delivered a fifth book, The New Watch, to his publishers.

Lukyanenko was born in Kazakhstan in 1968. He trained at the National Medical Institute in Almaty (then Alma-Ata), but a poorly paid job as a child psychiatrist was less appealing than trying his luck as a novelist. He started writing science fiction as a student and began to make money from his stories and novels, editing a sci-fi journal in the early 1990s and moving to Moscow in 1996.

The publication of Night Watch was a breakthrough, but it was the 2004 movie adaptation that made Lukyanenko into a Russian literary celebrity. The film broke records in the emerging post-Soviet film industry and was so successful that Hollywood bought up the rights to the third instalment.

Impossible to imagine Director Timur Bekmambetov said in a 2005 interview with the BBC: “Night Watch is a very Russian movie. It’s impossible to imagine this kind of movie somewhere else: a movie with a depressing ending, a lot of inexplicable storylines and strange characters.” Bekmambetov started out making commercials, and claims the techniques

he learned there were invaluable in making this a box-office hit. He also credits the American film director and producer Roger Corman for teaching him “a lot of secrets in making movies look bigger than their budget”. Corman, who shot The Little Shop of Horrors in a few days, is best known for his Edgar Allen Poe film series starring Vincent Price.

One of the exciting features of the novels and films is the use of Moscow as a location. The neo-gothic skyscrapers and domed churches feel like an ancient country straight out of a fantasy. Bekmambetov describes it as “a very cinematic and mythological city” with a simple style that is “ready to be discovered”.

FICTION

Scores of novels The Night Watch series are the only books by Lukyanenko available in English, but he has written scores of novels and short stories. His early science fiction for children prefigured recent trends in young adult literature. His 1990 novel, Knights of Forty Islands has a similar plot to Suzanne Collins’s successful novel, The Hunger Games (2008), and now a movie. In Lukyanenko’s novel, a group of teenage children are similarly locked into a controlled scenario, where they have to fight to the death. Only the winner, who has conquered all the islands, can go home.

In portraying children as capable of brutality, Lukyanenko was departing from the more optimistic role models of his fellow creator of young sci-fi, Vladis-

Sergei Lukyanenko makes use of Moscow’s neo-gothic skyscrapers and domed churches to portray images of an ancient country. Photo: Kommersant lav Krapivin, for whom “childhood is a fairy tale that can be told every time in a new way.”

Urban fantasy Mikhail Bulgakov’s famous tale of diabolical mayhem in Moscow surely influenced Lukyanenko - especially in Cold Shores, which, like Bulgakov’s The Master and Margarita, describes an alterna-

tive version of the life of Christ, in which Jesus dies in infancy. American sci-fi veteran Robert Heinlein and master of horror Stephen King also influenced Lukyanenko’s edgy brand of fantasy.

In November last year, Nicholas Seeley wrote in the magazine Strange Horizons about the 1990s shift in fantasy genres “away from sword and sorcery, and towards stories with futuristic urban settings.” Explaining that it was more than just a change of scene, “it was a shift to-

ward greater moral complexity”. Seeley described Lukyanenko’s novels as “seminal works in the rise of urban fantasy”.

Lukyanenko says: “What draws me to science fiction is mystery. The possibility of what if …”.

Lukyanenko was fond of Terry Pratchett, a light-hearted writer of comic fantasties, and explains the grim social realities behind the Night Watch series.

He told Seeley of the bewilderment and despair that accompanied the collapse of communism. “I don’t think that everyone in the [United] States realises what a tragedy the fall of the Soviet Union was for many ordinary people: how many bloody conflicts ignited all over the country, how crime, corruption and unemployment levels rose. These were tough years, when all of the advantages of the fall of the Soviet Union were cancelled out by economic and social dramas. This feeling of catastrophe is, of course, present in the book.”

Lukyanenko’s prognosis for the human race is optimistic. “Humanity is getting better, century by century,” he says. “Perhaps, one day we will even stop fighting one another.”

Brutal novel raises spectre of civil war Vladimir Ruvinsky Dmitry Bykov’s latest novel Living Souls, which was translated into English last year, portrays a Russia that has descended into civil war. Imagine the chaos ensuing from the discovery of a new fuel — one that renders Russian oil irrelevant. That is what happens in his brutally ironic novel.

Fictional ethnic groups, the northern “Varangians” and southern “Khazars” battle for dominance and for their own version of history, while the true natives,

the gentle “Joes” and “Wolves”, are caught in the crossfire. In the Varangians, Bykov satirises mindless belligerence and nationalism, but the opposing Khazars liberals, Jews and revolutionaries - are also power-hungry and duplicitous.

Bykov, who is Jewish, has referred to his own ironic work as “anti-Semitic”.

Bykov has written several novels and a prize-winning biography of Pasternak, but Living Souls is the first to be translated into English. The complex and varied use of language, morphing between folk tale and contemporary political tract, laced with songs and prophecies, occa-

Dmitry Bykov Photo: ITAR-TASS sionally comes closer to surrealist poetry than narrative. The four groups of characters, whose destinies form the crux

of the story, all become wanderers, travelling across Russia’s vast land in search of love, freedom, safety and meaning.

The fact that their journeys are often circular is symbolic.

Russian history is portrayed as an endless cycle of tyranny and terror, followed by thaw, chaos and revolution. Bykov’s characters question the ancient epics, while native peoples have their own secret versions of events. This ambitious novel perhaps attempts too much, though there is a comic element that saves the novel from perishing under its own burdens.

Russians’ fascination with the dark side of a fantasy world has contributed to the book and subsequent film success of Sergei Lukyanenko’s cult Night Watch series. Photo: KINOPOISK.RU

14 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

High-flying legend back at her best form Double Olympic gold medallist Yelena Isinbayeva could be a strong contender in London, writes Nikolai Dolgopolov

M

any commentators predicted this year that five-time world pole-vault champion Yelena Isinbayeva would retire after a spate of injuries and poor performances. But the 29-year-old defending Olympic champion has found her form and now seeks a new world record and another gold medal at the London Games.

She suffered setbacks with three failed vaults at the 2009 Berlin World Championships, and her failure to win gold at the Doha Indoor World Championships in the following year. What went wrong?

Everyone needs a rest from time to time, but Isinbayeva seemed to need more than a break to return to form.

She shocked many sports fans when she dismissed her coach of seven years, Yevgeny Trofimov, after she won the 2004 Olympic gold medal in Athens. Isinbayeva wanted to learn a new jumping technique with new coach Vitaly Petrov, however. Offered two foreign managers who committed her to lucrative contracts, Isinbayeva would compete one day and then rush to a remote part of China to fulfil contractual duties the next, only to face another commercial tour a couple of days later.

Moving from Volgograd to Monaco to be closer to her tournaments, Isinbayeva trained all year under an azure sky but missed her family, friends and other Russian athletes. All that loneliness brought rewards, however.

Under Petrov, Isinbayeva perfected the new jumping technique. Having set her first world record of 4.82m in 2003, she took an Olympic gold in Beijing,

Russia’s pole-vault legend Yelena Isinbayeva says the only thing that can stop her winning a third successive Olympic gold medal in London is ‘herself’.

Photo: Imago/Legion Media

The man who had turned her into a young champion believed he knew what was missing, and what could be done to help her rediscover her winning ways

SPORT five years later, with another world record of 5.05m.

Then came the setbacks. After Doha she said she would take “an indefinite break”, and returned to Volgograd in the spring of 2011. On Shrove Sunday, the Russian Orthodox day of forgiveness, she contacted Trofimov. They met in a small, deserted restaurant and Isinbayeva did most of the talking. She was crying: she had left Monaco, and she wanted Trofimov to be her coach again. If he refused, she would retire from the sport. Trofimov said he would think about it.

On March 8, International Women’s Day, a popular holiday in Russia when women traditionally receive gifts, Isinbayeva was sitting at Trofimov’s dining table with her parents. The man who had turned her into a young champion believed he knew what was missing, and what could be done to help her rediscover her winning ways Isinbayeva’s form has improved. This year she set a world indoor record of 5.01m in Stockholm, and won gold at the World Championships in Istanbul. Some Russian sportswriters say she can triumph in London, but she faces tough competition from Britain’s 20-year-old Holly Bleasdale, who recently smashed the British indoor record in Lyon with a clearance of 4.87m to become the second-highest female pole vaulter in the world – after Isinbayeva.

So, Isinbayeva could make three attempts in London. The first jump with a pink pole will be a warm up, challenging the stronger of her rivals. She will come out a with her blue pole when only a few of the strongest rivals remain.

And, God willing, she will come out with her golden pole when it’s time to beat the world record.

Sports experts look back at China’s, the United States’ and Russia’s results and make their predictions for next month’s London Olympics.

Teen gymnasts leap Anna Kozina Accusations of severe and cruel treatment of athletes have cast a shadow on the reputation of the Soviet artistic gymnastics training school, an institution that has often been regarded as the best in the world.

But coaches and officials say the allegations are untrue, even as Russia’s top gymnasts prepare for London.

“Soviet gymnastics training targeted technical skills, while also making use of cutting-edge scientific findings – in physiology, medicine and recuperation.

This is what we are trying to do now, drawing on expertise and experience, above all,” says Alexander Alexandrov,

senior coach of the Russian women’s artistic gymnastics team.

“We are trying to bring up-to-date techniques into play as well ... there were even tougher training systems, for instance in Romania.”

On any given day, Russia’s women gymnasts at the training camp at Lake Krugloye get up at 7.30am, perform some warm-up exercises, and then go out for a walk or jog. Half an hour later, they have their breakfast. The first twoand-a-half-hour training session is at 10am. This is followed by a break, recovery procedures and some personal time. A second training session lasts from 5pm to 7pm, followed by a massage and personal time. There is no second training session on Thursdays, and

Russia has high medal hopes for its champion gymnast, Aliya Mustafina (above). Photo: AFP/Eastnews

Tuesday, June 26, 2012 15

RUSSIA AND GREATER CHINA

‘AK-47’ ready to shoot for gold at London Olympics Pavel Petrovsky

Kirilenko’s flair and optimism recall the glory days of the Soviet Union’s basketball prowess, when it defeated the US in 1972

at bid for glory Sundays are free. The Russian team secured its ticket to London during the World Artistic Gymnastics Championship in Tokyo last year. Now, shortly before the Olympics, the athletes and coaches are working on a competitive line-up.

Three of the five spots on the team have been assigned. Head coach Andrei Rodionenko announced that Viktoria Komova, Aliya Mustafina and Anastasia Grishina – Russia’s top artistic gymnasts – have been confirmed.

Mustafina, 17, was the world artistic gymnastics champion in 2010. Komova, also 17, was the all-around silver medallist last year, and the 16 year-old hopeful Grishina, a relative newcomer to the adult gymnastics team with her

16 YEARS The age of newcomer Anastasia Grishina

We can’t afford to be equal to our competitors. We have to be head and shoulders above them

recent elevation, has also entered the spotlight of the international gymnastics world.

At a tournament in Italy, Grishina led the way after performing on three apparatus, before making a mistake. To perform well she needs to build up competition experience.

Russia’s more celebrated athletes are far from their peak, since numerous victories brought about injuries as well. Still, they have promised to return to form in time.

State coach Valentina Rodionenko says the gymnasts need to be much better than their rivals to win. “We can’t afford to be equal to our competitors,” she says. “We have to be head and shoulders above them, otherwise judges may bring us down. In 2010, they tried to underscore Mustafina at the all-around competition. But the attempts fell through.”

The United States, China, Romania and Russia are the most likely contenders for medals, with the Americans being Russia’s main rivals, Rodionenko says.

She adds: “I can assure you, you will not be ashamed of us at the Olympics.”

The rivalry within the national team promises to be as exciting as the competition with foreign teams. Both Komova and Mustafina say they have not watched each other during training sessions, focusing on their individual programmes instead. They have yet to face each other at any sporting event. “Mustafina and Komova are already the talk of the town,” Alexandrov says. “Only talented, hardworking, outstanding gymnasts have a chance of becoming champions.”

Andrei Kirilenko carried the Russian flag at the opening ceremony of the 2008 Beijing Olympic Games. Photo: ITAR-TASS

Russia’s hopes of reviving its basketball glory rest on the 31-year-old shoulders of Andrei Kirilenko. Better known as “AK-47” for his initials, Utah Jazz shirt number and his birthplace, Izhevsk, where the famous assault rifle is made, Kirilenko is bracing for tough competition at the London Olympics. He is upbeat about putting Russia back on the global basketball map, however.

“Russia is strong enough to make it to London and to fight for medals there,” says the 2.06-metre-tall former Utah defender.

Kirilenko’s formidable skills are Russia’s best bet in London, and the fortunes of the nation’s basketball team are inseparably linked to his career.

He became the youngest player in the history of the Russian basketball championships when he debuted for Spartak St Petersburg at the age of 15.

After a two-year-stint with Spartak, Kirilenko moved in 1998 to CSKA Moscow, where he played for three years.

In 1999, he became the first Russian to be picked in the first round of the NBA draft, when he was selected by the Jazz. In 2003, Kirilenko became the team’s leader, and was one of the league’s best defenders and blockers. He helped the Russian national team beat Spain in the EuroBasket 2007 final and earned Most Valuable Player honours. At the 2008 Beijing Olympics, Kirilenko carried the Russian flag at the Games’ opening ceremony. “Being in the mind of the whole country, representing a Russian team full of stars is a great feeling. I felt touched, amazed and inspired,” says Kirilenko, who is married to Russian pop singer Masha “Marina” Lopatova, the daughter of CSKA and Russia basketball star Andrei Lopatov.

After the Beijing Olympics, Kirilenko left for the NBA, but since last year has held dual Russian and US citizenship, and played for CSKA Moscow.

His flair and optimism are reminiscent of the glory days of the Soviet Union’s basketball prowess. The Soviet team defeated the United States in a last-second win, 51-50, in the Munich Games of 1972, and at the 1988 Games in Seoul, Alexander Gomelski led the Soviets to defeat the American machine, 82-76, in the semi-finals.

The Soviet Union also won eight European Championship titles in a row between 1957 and 1971, but the Russian team has yet to produce any outstanding results. It won silver at the World Championships in 1994 and 1998, and only won its first gold in the European Championships in 2007.

The Russians beat Iran in the first game of the 2008 Olympics, but were beaten

by Croatia, Lithuania, Australia and Argentina, finishing fifth.

However, Russia’s fortunes could change dramatically in London if Kirilenko’s confidence is any indication.

IN BRIEF Millions offered to Games medallists Medal winners at the London Olympics could get millions in bonuses.

A new decree awards 4 million roubles (US$130,000) for Russian gold medal winners, 2.5 million roubles for silver and 1.7 million roubles for bronze.

Coaches and specialists working with the winners also receive bonuses Russian regional authorities may also hand out awards.

Chelyabinsk Governor Mikhail Yurevich says the region would pay Olympic champions from the Southern Urals US$1 million, but only if they have lived there for at least two years.

This is the second time cash bonuses have been increased since 1996. Before the Beijing Olympics, athletes were awarded US$50,000 for gold, US$30,000 for silver and US$20,000 for bronze.

‘Nyet’ to vodka at athletes’ parties Russian House hospitality centres in London will entertain Olympic guests without vodka when athletes are present.

“Olympic values are incompatible with drinking alcohol,” says a spokesman of Deputy Prime Minister Dmitry Kozak, who will head the Russian delegation.

However, one federal official has argued that Russian House organisers could hold parties with alcohol for corporate sponsors, but without the participation of athletes and members of official delegations.

“The athletes are keen on this, but sometimes there are sponsors [who] insist that the athletes follow their conditions to the letter,” says a Sports Ministry official. Authorities recall the complaints of loud parties at the 2010 Winter Olympics, where Russia won 15 medals instead of the expected 30 to 50.

British security ban riles bureau chief

AFP/EASTNEWS

The head of Russia’s Federal Security Bureau (FSB) is concerned for the safety of the country’s Olympic team after security services were barred from working at the London 2012 Games.

“Under far-fetched excuses, the British side has denied the FSB an opportunity to take part in the arrangements for ensuring the safety of the Olympic team and the whole of the Russian delegation, guests and other subjects,” FSB director Aleksandr Bortnikov told the RIA-Novosti news agency. The 2012 Games will be the biggest security operation in Britain in decades. About 23,500 personnel will join a deployment costing £553 million (HK$6.64 billion).

16 Tuesday, June 26, 2012

RUSSIA AND GREATER CHINA

Standing the test of time Paranormal and science-fiction authors are the nation’s latest literary figures, writes Shirley Lau

B

ooks about Russia are a niche market in Hong Kong and are not the kind that the city’s annual book fair singles out.

Nevertheless, it’s not hard to find books related to Russia at local bookshops. Hit the foreign classical section of any shop and you can easily find the translated works (in English or Chinese) of Leo Tolstoy, Fyodor Dostoyevsky and other great writers from a nation with a literary tradition dating back to the first century. Practical books such as travel guides and phrase books are also permanent fixtures.

A new crop of fiction writers has gained widespread recognition outside Russia. They may not be household names in Hong Kong, but they have a following.

“Russia has seen paranormal and science-fiction writers rise to prominence, such as Sergei Lukyanenko with The Night Watch series and Dmitry Glukhovsky with Metro 2033,” says Matt Steele, retail operations and buying manager of Dymocks. Night Watch, the first of a five-book series, has been critically acclaimed and inspired a video game. Metro 2033, the English version of which was released last year, is a postapocalyptic story set in Moscow. It has had phenomenal success and inspired a first-person shooter game released two years ago. Both books sold reasonably well, Steele says.

Outside the sci-fi domain, there is no shortage of rising stars from Russia.

Boris Akunin and Gary Shteyngart being two of them, says Peter Gordon, editor of The Asian Review of Books.

“Akunin has been a best-seller in Rus-

CITY sia for a long time. His fiction translates very well. It is a lot of fun and he writes very well,” he says. “Shteyngart is completely different. He went to New York after the fall of the Soviet Union and some of his books are about the Russian emigrants. But you don’t have to be interested in Russia to read these books.”

But it has always been Russia’s literary titans who pull the biggest crowds.

Steele says Dostoyevsky is one of the most well-read, particularly his 1866 novel Crime and Punishment. Tan Ning-hin, of the popular Greenfield Bookstore in Mong Kok, says people rarely come to his store just for Russian literature, but Tolstoy remains an all-time favourite.

Gordon reckons it is not necessarily Russia the country that draws people to read the classics, but “because they are great books”, and in reading them, the reader unwittingly gleans an understanding of the country.

“I first went to Russia in 1987 and I found all the reading I had done in Russian classics to be a tremendous help in understanding what was going on,”

Georgian-born writer Boris Akunin (Grigory Chkhartishvili) is best known internationally for his historical mystery novels featuring Fandorin, a fictional 19th-century Russian detective. Photo: Photoxpress he says. “If people would like to read Russian fiction or travel to Russia, I would say one of the things to do is to start with the classics.

“These have gone through the test of time, and they’re excellent books, anything from Tolstoy to [Nikolai] Gogol would be a good place to start. I don’t think one novel will do it. But several will. And you begin to understand where people are coming from.”

MEET US AT THE HONG KONG BOOK FAIR HONG KONG CONVENTION AND EXHIBITION CENTRE (INTERNATIONAL CULTURE VILLAGE) JULY 18-24

We will display interesting books on Russia in Chinese, English and Russian. We will also show cool videos. Write to hongkong@rbth.ru if you would like to show your Russia-related products with us.

Perfect occasion to celebrate Olga Kozlova

This month’s Russian Language Day celebrations at the Helena May drew many guests who enjoyed a fun-filled day. Photo: Alexander Medvedev

Members of the diaspora in Hong Kong, foreigners learning the language and those attracted to all things Russian gathered at the Helena May club on June 9 for the annual Russian Language Day celebration.

The event, which is staged close to the anniversary of the birth, on June 6, 1799, of Alexander Pushkin, considered Russia’s greatest poet and the founder of modern Russian literature, was jointly staged for the fifth time in Hong Kong

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by the Russian Language School, the Russian consulate and Russkiy Mir Foundation.

“Every year, we see a consistent increase in the number of guests, which is probably to do with the rising numbers of Russians coming to Hong Kong,” says Reverend Dionisiy Pozdnyaev, the director of the Russian Language Centre. “We hope that everyone enjoyed themselves.”

The day saw a party for children in the afternoon, followed by a buffet for guests. The long-awaited lucky draw – the first prize being a round-trip tick-

Discover a whole new world

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et to Moscow - captured everyone’s attention.

A Russian Market became the centrepiece of the celebrations, showcasing traditional arts and crafts, sweets, home-baked pies, folk dolls and embroidered bags. There were also stalls containing design jewellery, Russian books and Chinese calligraphy, along with a photo competition, wine tasting and a ballroom-dance master class.

The Russian Language Centre presented an episode from a Russian arthouse movie, Moscow, I Love You, with English subtitles.

Copies of the June supplement are available at: Russian Consulate in Hong Kong (2106-2123, 21/F, Sun Hung Kai Centre, 30 Harbour Road, Wanchai)

Russian Language Center (701, Arion Commercial Centre 2-12 Queen’s Road West Sheung Wan)

Sun Studio (Unit3, GF, Westley Square, 48 Hoi Yuen Rd, KwunTong)

Red Square Gallery (11 Yuk Sau Street, Happy

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Valley )

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