The New York Times

Distributed with

The New York Times

Special Report Untapped resources a literal gold mine P.03

SHUTTERSTOCK/LEGION-MEDIA (3)

A Special Advertising Supplement to The New York Times

Money & Markets

Feature

Why save when you can spend instead?

Tourism sector gets a boost both online and off

P.05

P.08

This special advertising feature is sponsored and was written by Rossiyskaya Gazeta (Russia) and did not involve the reporting or editing staff of The New York Times.

Fast food Legislators set to slap restrictions on ads for high-calorie items including soda and chips

The Russian government’s new health program intends to starve producers and vendors of highcalorie foods of advertising revenue.

ANNA LIALIAKINA IZVESTIA

Russia’s Ministry of Health has announced plans to focus on public awareness about healthy eating — including restrictions on advertising for high-calorie foods — as part of a new plan to im-

high-calorie foods, the Ministry of Health intends to require producers of snack foods and prepared meals to place nutritional information about calories, fat, carbohydrates and salt on all packaging in easy-to-read lettering.

This year, the ministry expects to lay out the advertising restrictions in detail and then work with legislators to turn the measures into law in 2014. Consumer rights advocates, however, say that ad-

prove Russian health. According to recent studies by the ministry, obesity in children and young people under 25 is on the rise due to consumption of high-calorie foods, including chocolate, chips, fast food and sugary drinks. The findings give particular cause for concern because the study also found that middle-aged Russians often retain the dietary habits formed in their adolescence.

In addition to the introduction of advertising restrictions on

RUSLAN SUKHUSHIN

Advertisers Prepare to Go on a Diet While some fast food restaurants can rely on word of mouth to sell their products, others may face challenges after new restrictions on advertising of high-calorie foods go into effect.

vertisements for fast food, chips, and soda aimed specifically at younger audiences should be banned now.

Peter Shelisch, chairman of the Consumers Union of Russia, said that such a move “would not be unprecedented. In Britain, for example, it is illegal to target fast food advertising at young audiences, but in Russia children spend their pocket money on soda and hot dogs, and a trip to a fast food restaurant is a kid’s day out.”

Shelisch’s views are supported

by Olga Skorobogatova of the Consumer Rights Protection Society. She says that banners advertising sugary drinks, fast food, and chips should not be located near schools or preschools, and that TV commercials advertising such products should not be broadcast during children’s programs. Skorobogatova also said that advertising such foods and beverages should not be targeted at minors in general.

On the other hand, Vladimir Yevstafiev, an expert at the Association of Communication Agencies of Russia, said that his organization will oppose any bans and restrictions on such advertising.

“It’s not even the fact that advertising agencies are set to lose out,”Yevstafiev said.“TV stations, print media, radio and outdoor sites will also lose revenue.

Moreover, fast food chains and producers of sugary drinks are the main sponsors of many sports and entertainment events.” According to Yevstafiev, the consequences of advertising restrictions could be worse than any benefit they might bring. “Before slapping on restrictions,”he said,“the Ministry of Health should determine whether it can compensate for the losses.”

Innovation New phone from Russian developers launches new category of mobile devices

Twice as Smart as the Average Phone The YotaPhone is not yet available for sale, but the product, which recently won an award from CNET.com, already stands out from its competitors because of its two screens.

PETER PURTON, ARTEM LUTFULLIN SPECIAL TO RBTH

Two years ago, Sergei Chemezov, head of state-owned corporation Rostekhnologii, unveiled the model of yet another“iPhone killer” to then-President Dmitry Medvedev. A short video of this meeting immediately went viral: people laughed and discussed the

latest Russian gimmick, resulting in an embarrassing anti-climax for the developers who had hoped to build enthusiasm around their new product. Today, however, the makers of theYotaPhone hope to be laughing all the way to the bank.

Their idea has won a Best of Consumer E l e c t ro n i c s S h ow award from CNET.com.

The device is not available for sale yet, but already stands out from its competitors because it has two screens. In bestowing the

YotaPhone, the first smartphone from Russia, will be available to some consumers this winter.

award, CNET.com commented that the two displays give the user “the best of both worlds.”

The YotaPhone is based on the novel and somewhat quirky idea of putting two displays on one device: a battery-conserving e-ink display

for reading books or long articles, and a full-color LCD for viewing TV shows or flipping through photo galleries.

If all smartphones are more or less equal when it comes to ease of reading, then everything depends on the size and quality of the screen. Here the YotaPhone has a distinct advantage. The user can use the special e-ink display to read on this phone; the eyes may get tired of looking at it, but the text itself is just as clear as if it was printed on paper.

The e-ink display on the YotaPhone can also be used for other tasks — reading text messages, reading news feeds on Facebook, reading maps, browsing news sites. There are tons of apps that would be well-suited for an e-ink screen.

The Russian Ministry of Economic Development and the Russian Direct Investment Fund (R.D.I.F.) have signed a memorandum of understanding with Goldman Sachs, Russia’s deputy minister

of economic development Sergei Belyakov announced at the beginning of February. The investment bank will help to establish a dialogue with foreign investors and ratings agencies, said Paolo Zannoni, a spokesperson for Goldman Sachs in Russia. Goldman Sachs is said to be very pleased with the government’s expansion of the partnership.

The bank’s fee for consulting services over a three-year period

Tickets to the Sochi 2014 Winter Olympic Games went on sale online on Feb. 7, 2013, exactly a year from the opening ceremony. The prices for Sochi tickets will be slightly lower than for the London Games, but more expensive than for the 2010 Winter Games in Vancouver. Organizers say the construction of venues is on track, if over budget.

Current estimates have spending topping out at 1.5 trillion rubles ($50 billion), up from an initial budget of 320 billion rubles ($10 billion).

Russia world’s second-largest arms dealer

AP

In 2012, Russia shipped $15.13 billion worth of weapons — up $2 billion from 2011, despite the loss of contracts to supply arms to Libya, Syria and Iran. The number makes Russia the world’s second-largest arms dealer, behind the United States. This year the country has contracts to supply weapons to China, India and Venezuela. A report by the Congressional Research Service attributes Russia’s success to favorable payment terms, loans and offsets. The report also highlights Russia’s readiness to enter into licensing agreements for the production of arms in the key market of China, even given the risks of Chinese reverse engineering of the weapons systems.

Say “Cheesecake!”

California-based restaurant chain The Cheesecake Factory has announced plans to enter the Russian market. Company president Mike Giannini declined to say whether the company would establish restaurants on its own or through a franchise system, but the company worked with a franchisee when opening its first restaurant outside the U.S. last year, in Dubai. Russian industry experts are skeptical about the company’s chance of success as the name — and the dessert — are not well-known in Russia.

ONLY AT RBTH.RU

New ski resort puts Courchevel on notice

will be approximately $500,000.

Belyakov said that the polishing of Russia’s image will not be a substitute for improving the investment climate, but will help the country communicate with potential investors.

“Either no one knows about the improvements taking place, or the data gets distorted,” Belyakov said.

REUTERS

VEDOMOSTI

Countdown to Sochi 2014 reaches 365 days

CONTINUED ON PAGE 4

$500,000 Makeover Not Just Cosmetic MARGARITA LYUTOVA

NEWS IN BRIEF

PRESS PHOTO

Investment Government hires international giant to attract capital from abroad

In a new image campaign, the Russian government has hired investment bank Goldman Sachs to persuade investors and ratings agencies of the country’s appeal.

WEDNESDAY, FEBRUARY 20, 2013

Goldman Sachs will utilize a variety of techniques to attract capital to the Russian market.

CONTINUED ON PAGE 2

RBTH.RU/21847

Google hands over data to Russian government RBTH.RU/22377

ADVERTISEMENT

02

ADVERTISEMENT

Politics & Society

RUSSIA BEYOND THE HEADLINES

MOST READ Pussy Riot Appeals to the European Court of Human Rights rbth.ru/22663

SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

Startups Local projects find support online

Cigarettes Government bans smoking from most public places starting this summer

Web Directory Gives a Boost to Civil Society Once a blog about civic activism, today the Web site Gov2People is helping Russian e-government startups raise awareness and investment.

ALEXEY MOSKO RBTH

SHUTTERSTOCK/LEGION-MEDIA

Civic activism is on the rise in Russia. A wave of protests in Winter 2011 and Spring 2012 has pushed many people to take action, often in the form of small initiatives to make their neighborhoods better. The goal of Gov2People is to bring such civic initiatives together under a single directory: the service provides informational and P.R. support; it also helps raise investment for developers of Web sites and applications that monitor the activities of government officials and offer more effective solutions to specific social problems.

“The policy of ‘baby steps’ is a leading trend in modern Russian society,” said Olga Suvorova, head of the Gov2People center. “Web sites and mobile apps that help people deal with everyday problems — from cleaning the courtyards of their apartment building to avoiding getting stuck in horrendous traffic jams — are springing up in Russia every day. Many people have no idea what to do when a trash collection site pops up next to a preschool or industrial waste is regularly dumped into a river near their country house. Web sites for such civic projects will offer them complaint forms and even forward them to the municipal authority in charge. And they will also follow up on whether the problem has been resolved.”

Gov2People was launched in February 2011. Said Suvorova, “We started out as a blog about Russian and international initiatives on civic accountability, e-government and other social services.”

However, the project founders decided to go beyond simply educating people. The Gov2People project now actively promotes more than 100 startups. These include services to resolve issues with utilities, programs for recruiting and training emergency rescue volunteers, facilities to raise money for a wide variety of purposes, databases on Rus-

New Law Not Just Blowing Smoke On Feb. 12, the State Duma adopted a bill banning smoking in public places, giving smokers only a few months to adjust to the new rules or kick the habit.

Major provisions of Russia’s new anti-smoking law

OLGA DORONINA

have been exempted from the ban; the new law does not apply to tobacco products that are not smoked, such as snuff and chewing tobacco; and the digital cigarette sale tracking system will be based on the data provided by tobacco manufacturers.

“The key victory for the Ministry of Healthcare was the introduction of ‘smoke-free’ prog r a m s fo r p u b l i c s p a c e s .

According to best global practices, this measure alone can reduce the number of heart attacks by 15 percent, while removing cigarettes from display counters can bring teenage smoking rates down by 10–15 percent,” said Khalturina.

smoking between cars.”

Retailers may also be reluctant to abide by the law, as cigarette sales are a lucrative business. The new laws prohibit cigarettes from being openly displayed at counters; customers will order them from a price list. Cigarette ads will be banned, as well as attempts to attract customers with discounts or special offers.

Nonetheless, according to Russian Anti-Tobacco Coalition cochair Darya Khalturina, tobacco lobbyists managed to make the law less stringent than officials had hoped. For example, the minimum price of cigarettes will be set by tobacco companies, and not the government; duty-free shops

Most Russians disapprove of a total ban on smoking in public places. A survey from the independent Levada Center shows that about 70 percent of Russian citizens support partial restrictions instead of a complete ban.

In particular, 16 percent of respondents believe smoking should be prohibited in bars, while 17 percent hold the same opinion with regard to restaurants. About 73 percent of respondents only want to limit smoking, whereas 10 percent think cigarettes should be allowed in bars and 7 percent are in favor of smoking in restaurants. Approximately 400,000 Russians die from smoking-related diseases every year.

The Essentials Name: Gov2People Website: Gov2people.ru Concept: Gov2People, a index of Russia’s best “Gov 2.0” projects.

Unique selling point: Creating an efficient communication channel between the government and the people.

Start date: February 2011 Development plans: Organizing contests for app developers, attracting commercial entities as sponsors, big monetization.

NIKOLAY KOROLEV

SPECIAL TO RBTH

Approximately 40 percent of Russia’s adult population smokes, according to a recent study by the country’s Ministry of Health. So partially in response to these findings and partially in fulfilment of obligations under World Health Organization Framework Convention on Tobacco Control, the State Duma passed a law that will ban smoking in public places — including hospitals, production facilities, public transport, suburban trains and government offices — as of June 1. A 50-footwide smoke-free area will be enforced around subway and railway stations and airports.

Residents of apartment buildings will no longer be able to light up in stairwells and elevators unless the property owner equips the building with a special ventilated smoking area.

As of June 1, 2014, smoking will also be banned in hotels, restaurants, cafes and bars, on passenger trains and cruise ships, and at commuter rail platforms. Cigarettes will not be available at railway stations and airports (except in duty-free).

Many people see the bans as just another opportunity for corruption. Said journalist Galina Padysheva, 55,“Prohibiting smoking on long-distance trains is next to impossible. I simply cannot imagine a smoker capable of surviving several days without a single cigarette. So, that will be another source of income for train conductors, who can always turn a blind eye to the ubiquitous

sian lawyers and judges, and environmental watchdogs.

“Our ‘charges’ include both very young startups and some wellestablished ones,”said Suvorova.

“For instance, the RosYama project, which specializes in resolving everyday social problems, has already proven its effectiveness by successfully working with government officials in different Russian cities. The Dnevnik.ru educational portal has won several prizes.

“People don’t really develop civic projects to make money,” Suvorova said. “The people who come up with them are fed up with seeing the same picture every day — a government that doesn’t fight corruption, or local authorities that don’t repair roads. Our goal is to turn civic initiatives into a business so that folks are not working on enthusiasm alone.”

Igor Barinov, C.E.O. of mobile app developer Hint Solutions, believes that Gov2People is a good starting point for those who are only beginning to dabble in civic initiatives, and getting on a directory such as Gov2People increases the chances that they will be discovered and hopefully funded.“Once you get your name out there, you can make money off of it in other, business-oriented projects,” said Barinov.

Ivan Begtin, an expert on projects in the area of open government, is not so optimistic about the outlook for Gov2People.“Gov2People has what in my view is a hopeless format that is totally geared towards searching for projects to invest in and to sell,” he said, “but definitely not towards civil society.”

Gov2People helps connect civil society projects with investors.

CONTINUED FROM PAGE 1

According to Belyakov, Goldman Sachs will coordinate the communication process with investors and participate in presentations and international trips.

The selection of Goldman Sachs was not the result of a tender; by law, such services can only be purchased from a single supplier. According to a government official who wished to remain anonymous, the bank was chosen for its global experience and influence.

To some observers, the choice of Goldman to carry out an image makeover for Russia was a strange one. As recently as December 2012, Goldman Sachs chief economist for Russia and the C.I.S., Clemens Graf, told the

Interfax news agency that the bank had stopped including the shares of Russian companies in the list of top emerging markets since the Russian market was “hard to forecast” due to seesawing regulation.

Kirill Dmitriev, C.E.O. of the Russian Direct Investment Fund (R.D.I.F.) said that Goldman Sachs will not be left entirely to its own devices. It will be advised by a working group that includes high-ranking Russian officials, managers of stateowned banks, and the R.D.I.F. At the January World Economic Forum in Davos, the R.D.I.F. also announced a new image campaign called “Invest in Russia.” The campaign’s main slogan is “Russia Is Growth,” and it touts the country’s impressive

AP

Hoping $500,00 Buys More Than a Facelift

Goldman Sachs will be advised by a working group made up of officials and managers of state banks.

macroeconomic performance over the period of 1999-2012.

Said Dmitriev,“Where else have international reserves increased by a factor of 44 in just 13 years?”

Sberbank President German Gref has complained publicly that Russia is underestimated in the international rankings. (In terms of financial sector development, Russia lies in 134th place in the World Economic Forum’s competitiveness ranking, below Albania, Armenia, Botswana, and Peru) And in its Debt Policy Guidelines report for 2013–2015, the Ministry of Finance argues that Russia’s credit rating is also below what it should be since Russia’s economic figures are better than those of many BBB-rated and even some A-rated countries.

To rectify the situation, the Ministry of Finance also intends to ask investment banks for assistance, according to press agency Finmarket. The department is not expecting overnight results, as the ratings are influenced by many fundamental factors. Nevertheless, some banks have already responded to the proposal, and potential consultants are being screened.

Consultants could help analyze the methods used by the ratings agencies to determine the basis on which countries are upgraded or downgraded and give advice on how to improve these specific indicators, said I.N.G. analyst Yegor Fyodorov. Fyodorov also pointed out that if one of the agencies were to give Russia an A rating, the yield on Eu-

robonds would drop by 25–50 basis points. Fyodorov added, however, that a rating is no more than a guide for investors and that ratings stem from the issuer’s ability to repay its debt, the likelihood of default and a host of other factors.

Fitch’s outlook for Russia is “stable,” with no foreseeable factors that could lead to an upgrade this year, said Charles Seville of Fitch. According to Seville, there are no quick fixes for Russia. In order to improve its rating, Russia must reduce economic dependence on oil prices, keep track of macroeconomic indicators, cut inflation, raise productivity, improve the investment climate and continue the privatization of state assets.

SPECIAL SUPPLEMENTS AND SECTIONS ABOUT RUSSIA ARE PRODUCED AND PUBLISHED BY RUSSIA BEYOND THE HEADLINES, A DIVISION OF ROSSIYSKAYA GAZETA (RUSSIA), IN THE FOLLOWING NEWSPAPERS: THE DAILY TELEGRAPH, UNITED KINGDOM • THE NEW YORK TIMES, THE WALL STREET JOURNAL, UNITED STATES • LE FIGARO, FRANCE • SÜDDEUTSCHE ZEITUNG, GERMANY • EL PAÍS, SPAIN • LA REPUBBLICA, ITALY • LE SOIR, BELGIUM • DUMA, BULGARIA • GEOPOLITICA, SERBIA • ELEFTHEROS TYPOS, GREECE • THE ECONOMIC TIMES, THE NAVBHARAT TIMES, INDIA • MAINICHI SHIMBUN, JAPAN • GLOBAL TIMES, CHINA • SOUTH CHINA MORNING POST, CHINA (HONG KONG) • LA NACION, ARGENTINA • FOLHA DE SÃO PAULO, BRAZIL • EL OBSERVADOR, URUGUAY • JOONGANG ILBO, SOUTH KOREA • THE SYDNEY MORNING HERALD, THE AGE, AUSTRALIA • GULF NEWS, UNITED ARAB EMIRATES • MORE DETAILS AT RBTH.RU/ABOUT.

ADVERTISEMENT

ADVERTISEMENT

MOST READ Russians in No Hurry to Invest in Gold rbth.ru/20795

RUSSIA BEYOND THE HEADLINES SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

Special Report

03

Metals Already one of the world’s largest gold producers, Russian firms are ramping up production in Siberia and the Far East

Russia Goes for the Gold

SHUTTERSTOCK/LEGION-MEDIA

VIKTOR KUZMIN SPECIAL TO RBTH

Last summer, a new addition was made to the world’s collection of unique gold ingots. A heartshaped gold nugget weighing 2.4 pounds was found in Russia’s Irkutsk Region. Irkutsk, located in central Siberia, is the fifth-largest region in Russia and is the country’s second-largest goldproducing area. It is home to onefifth of the country’s gold production facilities.

Were it not for the unique shape of the nugget, however, the find would hardly have made the headlines. The weight of the little heart is only a tiny fraction of the 250 tons of gold produced in Russia every year.

Russia is the fourth-largest gold producer in the world, after China, Australia and the United States, but it ranks second in the world in terms of proven reserves.

Although the sector is highly fractured — more than 600 companies work in gold production in Russia — the industry has its major players. The country’s biggest producer is Polyus Gold, which is also one of the top 10 gold producers in the world. According to the official statistics from Russia’s state statistics agency, Rosstat, in 2012 Russian companies increased year-on-year gold production by 8.3 percent.

Polyus, for its part, increased pro-

THE NUMBERS

Russian gold production by region

2.4

pounds is the weight of a heartshaped gold nugget found last summer in the LenaVitim District of Siberia.

4.9%

is the increase in Russian gold production in the first 11 months of 2012 compared to the same period in 2011.

254

tons of gold was produced in Russia in 2012, making the country the world’s fourthlargest gold producer.

SOURCES: U.S. GEOLOGICAL SURVEY AND GOLD AND TECHNOLOGY MAGAZINE

From mine to market

In 2014, production is scheduled to begin at Russia’s largest gold deposit, Polyus Gold’s Natalka. Although Natalka was discovered during World War II, it sat idle for many years due to its remote location in the Magadan Region, in the northern corner of Russia’s Far East. Once production begins at the facility, Natalka will process 11 million tons of ore and produce 16.5–22 tons of gold per year.

A gold mine is also under construction at the neighboring Pavlik deposit. Another 7.3 tons of gold a year are expected to be produced at this site, which is under the management of the metals investment firm Arlan.

However, general market instability and the volatility of the gold market in particular have thwarted a number of major deals in Russia.The merger of Polyus Gold and Polymetal International, for example, failed to go ahead, and not a single mining or metals company issued an I.P.O. in 2012.

The government also shelved an auction for Sukhoi Log, one of the country’s largest undeveloped gold deposits.

Still, Valentina Bogomolova, a senior analyst for metals and mining at Uralsib Capital, said that the current financial climate bodes well for gold mining in Russia. The global price of gold has

QUESTIONS & ANSWERS in Canada the figure is 70 percent; in Russia, just 10 percent.

Why don’t foreign junior companies come to Russia?

In the 1990s, there were about 30–40 foreign juniors operating in Russia; but now there are no more than a dozen. Today, according to Russian law, firms more than 25 percent foreign-owned cannot be awarded licenses to large deposits. There are problems associated with converting exploration licenses into production ones, which also affect domestic companies.Therefore, such junior companies more often than not look elsewhere.

If nothing is done to reverse the trend, in 10–15 years production rates will have dropped significantly. As old deposits become depleted, increasing amounts of ore are required to maintain production levels.

ITAR-TASS

KOMMERSANT

What drives growth in the price of gold?

The main driver is investors at all levels. In times of instability, everyone buys the metal. Demand heats up further when exchange traded funds (E.T.F.) appear in the precrisis period, with shares

backed up by physical metal. Our Central Bank is also buying up gold: under its own internal regulation, at least 10 percent of foreign exchange reserves must be held in the form of bullion, and as of July 1, 2012, gold reserves stood at 936 metric tons (1,031 tons).

At the current rate of production, gold should last for more than 40 years. Why are Russian gold producers buying foreign assets?

There are no new licenses to be allocated. There is one strategic deposit at Sukhoi Log in the Ir-

of the main factors has been the increased use of the metal to pay for energy supplies between Iran and Turkey, as well as higher demand from India. Indian jewelry manufacturers are trying to increase their supplies of gold before the import tax is raised this year, according to analysts at U.B.S. Bogomolova said that demand for gold from Russian jewelry manufacturers is also likely to increase in 2013. According to Bogomolova, while Russian investors do not view pure gold as a way to accumulate capital, individuals consider jewelry to be a good investment while the dollar and the euro remain volatile.

Jewelry Buyers explore nontraditional looks

“We Need to Create the Right Conditions to Attract Investors”

Sergei Kashuba, chairman of the Russian Union of Gold Producers, spoke with Alexei Boyarsky of Kommersant-Money about what needs to be done to keep production rates up and how to attract investors to Russia’s gold industry.

increased steadily since 2000, and Goldman Sachs has predicted a rise in the price of one ounce of gold from the current $1,690 to $1,825 by the second quarter of 2013. As a result, it is likely that the percentage of gold held in international reserves is likely to increase as well. Russia, for its part, has been stockpiling gold as a hedge against international financial instability. In 2007, the Russian government held 443 tons of gold in its strategic reserves;

by Fall 2012, the number had increased to 1,028 tons.

In 2012, gold prices rose by 7 percent year-on-year, but some observers say that this level of growth is unlikely in 2013. One

kutsk region, but it hasn’t been distributed yet. Other new sites simply do not exist.

Over the past 25–30 years, the world has adopted the practice of division of labor. Large mining companies that develop ore deposits focus on production, gradually buying up more and more assets. But those same assets — prospected deposits with proven reserves and a ready development plan — are sold by minority shareholders called junior companies. In Mexico, for example, junior companies perform 80 percent of exploratory drilling;

We have huge untapped territories in Eastern Siberia. Could there be a new Klondike?

The word “suddenly” is not part of geologists’ vocabulary. Before every discovery comes exploration. We need to create the right conditions to attract investors willing to invest in junior companies. First, the regulatory framework needs revising, in particular the issue of converting exploration licenses into production ones. Second, in the absence of major venture capital funds, the government itself must fulfill the role of anchor investor by setting up a fund or creating a state corporation. Otherwise, Russian geology will see no investment at all, and domestic gold producers will start looking abroad.

Pink or White, It’s All Still Gold Russian gold traditionally has a pink tinge, but consumers are increasingly enamored of white gold, which is more common in other parts of the world.

ILYA SHVEDKOV SPECIAL TO RBTH

In recent years, jewelry stores have displayed gold of all kinds of different hues: yellow, pink, white, green, blue and even black.

To achieve the necessary color, jewelers carefully select the right combination of alloys.

For instance, to obtain a green tint, gold is alloyed with a small amount of silver, while a slightly larger proportion imparts a yellow-white shade. To obtain white gold, the composition of alloys includes nickel, platinum, or palladium.

Historically, Russian gold has a red or pink color, the result of its alloying with copper. However, according to Andrei Shenk, an analyst at InvestCafe, white and yellow gold more common in other parts of the world has made some serious inroads into the market recently, and the trend is likely to increase.

Shenk’s opinion is reinforced

by Svetlana Starodubova, manager of a Moscow jewelry store.

“In Russia, women customers like variety,” she said.

A spokesperson for Adamas, Russia’s largest jewelry manufacturer, said that Moscow is the first Russian city to follow the West-

REUTERS

duction of refined gold 12 percent and is anticipating even better numbers for 2013 — in particular, the company has said it expects to produce 1.8 million ounces of gold in 2013, up from 1.68 million in 2012.

The lion’s share of Russia’s gold comes from the extraction of mineral resources, which was up 6.3 percent in 2012 to 200 tons. Gold also comes into circulation through the recycling of scrap and waste.

In the past year, nearly all of Russia’s gold-producing areas reported growth in production.

Numbers were particularly strong in the Krasnoyarsk Territory and the Irkutsk, Magadan and Chelyabinsk Regions. There was a drop in output at the Kupol Deposit in the Chukotka Autonomous Region in the Far East, but the Prime news agency reported that the decrease was a result of a known reduction of gold content in processed ore there. Gold production is likely to increase throughout 2013, which could result in Russia overtaking the United States as the third-largest gold producing country in the world by volume.

Commenting on the numbers, Investcafe analyst Andrei Schenck noted that the increase in production was due to more output from existing facilities rather than new ones coming online, and that Russia’s potential for gold production is far from exhausted.“Some projects have been implemented, while others are still in the development stage,” Schenck said.

Increased production in 2012 made Russia the world’s fourthlargest gold producer, and many proven reserves are still untapped.

Moscow jewelry stores are starting to stock yellow-white gold.

ern fashion for lighter colored gold. The pink-toned traditional color is still the color of choice for buyers outside the capital.

Andrei Polyakov of Alrosa, Russia’s giant diamond producer, said that changes in Russian tastes are clear across the jewelry industry.

In the 1990s, jewelry sales in the country were split between inexpensive trinkets and name-brand pieces; today, however, the market is being driven by mid-range items. “A shift has taken place,” Polyakov said. “It’s already noticeable at international exhibitions, which now feature many professional jewelers from Russia in search of ornaments for their middle-class customers.”

ADVERTISEMENT

04

ADVERTISEMENT

Business

RUSSIA BEYOND THE HEADLINES

MOST READ Demand for Managers in Russia Grows in 2013 rbth.ru/22241

SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

about the user experience, and we are focusing on how to improve the user experience to make it much better.”

Commenting on the fact that his product won the prize without even being exhibited at the show, Martynov said that the company had arranged a number of press interviews on the first day and, by the second day, word about the new phone had spread like wildfire.

TheYotaPhone is a niche product — after all, not every consumer needs a smartphone with two screens — but the concept has the potential to pioneer a new category of smartphones and a new form factor in portable devices. According to the phone’s developers, they do not need to create demand for a phone with two screens: scenarios in which such a phone would come in handy are already clear. People already want to read books and news sites and surf the web. Now, all this can be done on a screen that is specially designed to make reading easy and comfortable for the eyes on a device that has lasting battery power.

Twice as Smart as Your Last Phone CONTINUED FROM PAGE 1

Coming to a store near you?

PRESS PHOTO

In addition, if the color display of the YotaPhone has a low battery after 24–36 hours of being used actively, then the e-ink screen can be used instead of the main screen.

A fully charged YotaPhone could hold its battery power for days on end.

This Russian smartphone is a 4.9-ounce, 0.4-inch-thick Android Jelly eBan smartphone based around Qualcomm’s 1.5G, dualcore, Snapdragon processor. It has state-of-the art fourth-generation Long Term Evolution capability and near-field communications incorporated. TheYotaPhone features 2 GB of operative memory and 32-64 GB of flash memory for saving user data.

The main color display is 4.3 inches, with a resolution of 1280 x 720 pixels; the second e-ink display is also 4.3 inches. As well as the two screens, the YotaPhone also has a unique gesture navigation control concept.

The YotaPhone is produced by the privately funded Moscow- and St. Petersburg-based Yo t a Devices. The smartphone spent two years in development with a team of 50 people, including former Nokia and RIM engineers along with home-grown Russian talent.

At the Consumer Electronics Show (C.E.S) in January 2013, CNET presented theYotaPhone with a Best of Consumer Technology award in the mobile phones category.The C.E.S, which takes place annually in LasVegas, is the world’s main forum for unveiling new and exciting developments in consumer tech.

The exhibition draws some 150,000 visitors and 3,000 or so vendors, covering fields as diverse as television, home cinema and

3

The list price for the YotaPhone is expected to be $660.

audio equipment, cameras, automotive electronics, home automation, mobile phones and Internet tablets.

Said Yota Devices C.E.O. and founderVladislav Martynov:“This show in Vegas is the first time we broadly tried to validate our idea.

REASONS TO CHECK OUT A YOTAPHONE

The phone’s main selling point — it has two displays: a battery-conserving e-ink display for reading books or long articles, and a full-color LCD for viewing TV shows or flipping through photo galleries.

1

Because of the two displays, a fully charged YotaPhone could hold its battery power for days on end. When the color display has a low battery, the e-ink screen can be used as a substitute.

2

ferring to wait to present their products independently as the peak buying season draws near.

As a result, the YotaPhone had virtually no competitors at the conference.

The only other stand displaying new smartphones belonged

And I’m really excited that it really does seem to resonate well with people.”

However, the company had a bit of luck going into the C.E.S: more and more often, big companies choose not to show their best products at exhibitions, pre-

In recent years, there has not been much innovation in smartphones, with companies simply upgrading popular models. The YotaPhone introduces a whole new category into the mobile device market.

3

to Sony, but the Japanese firm had little to offer besides upgraded versions of current models.

“There is not really that much innovation in smartphones in recent years,” said Martynov. “But we see a lot of scope for improvement in these devices. For us it’s

Yota is looking for international distribution and is already working on a second generation follow-up product with what Martynov describes as “quite interesting new technologies.”The company has not ruled out whitelabeling (selling under a reseller’s brand) the phone abroad, but it is proceeding with the YotaPhone brand in Russia. In Russia, Yota Devices plans to start selling its devices in the third quarter of 2013, around September. The preliminary price is set at $660. People in the company emphasize that their aim is not to produce and sell as many devices as possible to make a quick buck. The main task is to develop the product to its maximum potential.

Now, the company needs to begin selling the product and using the experience of real consumers to improve the idea further.

Energy Fusion reactor under construction with Russian help

project dates to 1985, when Evgeny Velikhov, on behalf of the Soviet Union, approached European, American and Japanese scientists with the idea of creating a joint thermonuclear reactor. One year later, an agreement was reached in Geneva on the design of a joint nuclear fusion facility that was later named

Russia’s nuclear agency, Rosatom, is making important contributions to the construction of an experimental nuclear reactor in southern France.

ANDREY REZNICHENKO SPECIAL TO RBTH

A new thermonuclear reactor — the product of years of negotiation and research among officials and scientists from around the world — is slowly being constructed at Cadarache, in southern France. Known as the International Thermonuclear Experimental Reactor (I.T.E.R.), it is the first large-scale attempt to create power from nuclear fusion, the same kind of thermonuclear reaction that takes place in the sun. Unlike traditional nuclear reactors, which consume rare and often hazardous resources, I.T.E.R. requires only two elements to operate: lithium and water. Additionally, the major byproduct of the fusion reaction is hydrogen.

The beginning of the I.T.E.R.

The technology behind I.T.E.R. is based primarily on the Russian tokamak reactor, which was developed in the 1960s.

I.T.E.R. In 1992, an agreement was signed by the four parties to begin developing the engineering project of the reactor. Construction began at the site in 2011 and the first construction phase is to be completed by 2020. At this time, the reactor is expected to produce its first plasma. It is expected to be operational for 20 years before being decommissioned.

Although I.T.E.R. is a joint project, the responsibilities and costs are not distributed evenly. The total cost of the project is approximately $10 billion. The E.U. contributes about 50 percent of the project’s financing, and other countries contribute about 10 percent each; Russia’s 10 percent share is contributed in the form of high-tech equipment. Russia is also responsible for much of the know-how behind the project; I.T.E.R. is based primarily on the Russian tokamak reactor, which was developed in the 1960s.

The most efficient fusion reaction to reproduce in a laboratory is the reaction between two hydrogen isotopes, deuterium and tritium. This reaction produces the highest energy gain at the lowest temperatures. At extreme temperatures, electrons are separated from nuclei and a gas becomes plasma — a hot, electrically charged gas. A tokamak reactor uses magnetic fields to contain and control the hot plasma. Fusion between deuterium

AFP/EASTNEWS

Rosatom Helping Build Experimental Nuclear Reactor Construction began on the I.T.E.R. reactor in 2011 and is expected to be completed in 2020.

and tritium produces one helium nuclei, one neutron, and energy.

The helium nucleus carries an electric charge which will respond to the magnetic fields of the tokamak and remain confined within the plasma. However, some 80 percent of the energy produced is carried away from the plasma by the neutron which has no electrical charge and is therefore unaffected by magnetic fields. The neutrons will be absorbed by the surrounding walls of the tokamak, transferring their energy to the walls as heat.

Although Russia developed the tokamak process, technological processes from every participating country were necessary to cre-

ate I.T.E.R. Russia agreed to produce 20 systems for the reactor, including part of the first wall, which is made from beryllium, a metal used in superconductors.

The main Russian supplier of superconducting materials for I.T.E.R. is Chepetsky Mechanical Plant, a subsidiary of Rosatom’s fuel company, T.V.E.L. Russia will provide around 20 percent of the superconductors required for I.T.E.R. The agreement that established the international consortium to construct the reactor stipulated that the project would make use not only of technologies currently in use around the world, but also new technological break-

throughs in the field that would be developed as the project moved forward.

“I.T.E.R. will have double benefits for each participant”said Leonid Bolshov, director of the Nuclear Safety Institute at the Russian Academy of Sciences.“On the one hand, they will have a reactor of the future and a power plant that will meet the electricity requirement of developed economies for many years to come.

On the other hand, while working on the project, which is unique in its complexity, the countries will share competencies and benefit from new technologies that could be used in different spheres.”

Brands As the U.S. and Europe continue to battle austerity and recession, Russian fashionistas are ready to buy the next big thing

It’s a Win-Win as Fashion Retailers Expand Into Russia As the European and American clothing markets fail to climb out of recession, the Russian market has become something of a ray of hope for fashion retailers. In Russia, they can count on a 6–7 percent growth in sales, while in other countries at the moment growth of 1–2 percent is considered very positive. No fewer than 15 new foreign clothing brands are set to appear in

ITAR-TASS

At least 15 international fashion brands are expected to take advantage of Russia’s booming retail market in 2013, to the delight of shoppers.

Fashion retailers promise more options for Russian consumers in 2013.

Russia in 2013. In 2012, 30 foreign brands made their Russian debut, including Michael by Michael Kors.

Nevertheless, few iconic brands entered Russia in 2012. In 2010, Banana Republic and Japan’s Uniqlo brand finally appeared and in 2011, consumers and industry players alike waited anxiously for the announcement that Victoria’s Secret would arrive in Russian shopping centers. They were disappointed to learn that the American retailer would only be selling its perfume and cosmetic products in Russia until further notice. However, the wait

may soon be over: Russia’s first complete Victoria’s Secret store is expected to open in 2013.

The biggest global clothing players — companies such as Spain’s Zara and Sweden’s H&M — established themselves in Russia some time ago, so today second-tier and medium-size companies are rushing to lay claim to their share of the Russian market, according to Daria Yadernaya, managing director of the consulting firm Esper Group. “At first the big companies — H&M, Zara and others — spent money researching the market, then they put it to the test and saw that profits were good,” said Yadernaya.“And now the market is stable and not as scary as they first thought, now there is more information about it and everything is more transparent, it’s possible for the smaller and more cautious companies to make their first steps into Russia.”

As usual, foreign retailers are mainly opening stores in Moscow and St. Petersburg, but as the markets of Russia’s two biggest cities are already becoming saturated, many brands have begun looking further afield to regional capitals. According to analysts from the commercial real estate industry group Magazin Magazinov, the management of the Spanish brand Mango is considering cities with populations of less than 100,000 for the opening of new stores.

In 2013 the Russian retail sector can expect to see more foreign players setting up shop. According to consultants from the real estate agency Knight Frank, of the 15 international brands that have announced their intention to enter Russia’s consumer market next year, there will be seven clothing stores and three accessories chains.

RBC Daily

ADVERTISEMENT

ADVERTISEMENT

MOST READ Despite Risks, Russians Keep Borrowing rbth.ru/22163

RUSSIA BEYOND THE HEADLINES SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

Money & Markets

05

QUESTIONS & ANSWERS

Banks Consumer lending may fall off in 2013, leaving banks with a lack of quality capital

Megaregulator, Privatization on Tap for 2013

Experts are expecting a decrease in the Russian banking sector’s capital — the result of several years of aggressive consumer lending.

ELENA SHIPILOVA RBTH

Experts warn that Russia’s banking sector is aggressively expanding lending — especially in the high-risk consumer segment — while the banking system’s capital adequacy is declining. In its Russian banking system outlook for 2013, Moody’s Investor Service predicted the share of problem loans held by Russian financial institutions to increase to around 11 percent by the end of 2013.This prediction is up from 9 percent in both 2012 and 2011. Meanwhile, Russian banks’ ratio of Tier 1 capital, which is made up of common stock and disclosed reserves, could decrease to around 7.5 percent by the end of 2013, down from 9.5 percent in mid-2012, due to a continued increase in lending, higher loan provisions and potential trading losses.

Moody’s also identified uncertainties surrounding oil prices and capital flight due to an intensification in the eurozone crisis as potential problems for Russian banks in 2013.

Said Olga Ulyanova, vice president and senior analyst of Moody’s Moscow office:“There is a possibility that a sharp drop in oil prices would trigger a repeat of the 2008 crisis: the ruble would

Record profits for Russian banks in 2012 In 2012, the Russian banking sector managed to get through the year without any huge bankruptcies or serious shocks. In fact, most of the country’s commercial lending organizations are showing growth in the important indicators.

The largest deal in the Russian banking market (and the only one involving privatization) was the Central Bank’s sale of a 7.6 percent stake in Sberbank for the sum of 160 billion rubles ($5.3 billion).

Meanwhile, Sberbank made its pres-

ence felt on foreign markets: It acquired Austria’s Volksbank International and won a battle for Turkey’s Denizbank — at a cost of 3 billion euros ($3.9 billion). This was the largest sum ever spent by a Russian bank on the purchase of foreign assets. V.T.B. Bank, on the other hand, used 2012 to examine its assets. In 2013, it plans to close TransCreditBank and further develop the Bank of Moscow.

Read more at rbth.ru/21727

THE NUMBERS

11% 38% 6% of loans held by Russian banks are predicted to be considered problem loans in 2013.

is how much the consumer loan portfolio of Russians banks grew in 2012.

suffer a devaluation, the solvency of companies and individuals would decrease and capital flight would intensify. The banking system would thus experience an increase in problem loans, a liquidity crunch and a falling demand for loans.”

The expansion of high-risk, unsecured consumer lending, which according to the Central Bank of

is how much Tier I capital banks are required to hold under Basel III rules.

Russia grew by more than 40 percent annually in 2011 and 2012, should slow down in 2013 for several reasons.

First of all, experts believe that a natural process of market stabilization will kick in.

Mikhail Losev, editor of the banking and finance section of RBC business magazine, said: “Growth of retail lending has been

© IGOR ZAREMBO_RIA NOVOSTI

Quality Rather Than Quantity of Capital a Concern in 2013

Retail banking remains dominated by state-owned Sberbank.

radically outperforming the growth of personal incomes and savings. Russians will be cutting down on bank-financed shopping next year. As a result, banks’ retail loan portfolios will be growing at half the rate of 2012.” Interest rates could rise as a result.

Natalia Orlova, chief economist at Alfa Bank, thinks that banks will also try to increase rates.“It’s hard to say by exactly how much,” Orlova said, “but banks will try and increase the risk premium.”

Secondly, the overheating of consumer lending worries the Central Bank of Russia, which introduced a number of new reserve and capital regulatory measures in 2012 for banks operating in this segment.

Poor capital quality remains the main problem for Russia’s banking sector, according to Moody’s.

“The Central Bank has unambiguously indicated that it would implement the Basel III international requirements,”said Ulyanova, although no measures have been taken thus far. Basel III, which was negotiated and agreed upon by members of the international Basel Committee on Banking Supervision in 2010– 2011 requires banks to hold 4.5 percent of common equity and 6 percent of Tier I capital. Even without the Basel requirements, Ulyanova believes that 2013 will see an increase in both capital adequacy and quality of Russian banks as they will find it more difficult to increase lending. In this regard, privately owned banks will experience the strongest pressure, due to their limited ability to raise capital compared to stateowned banks and subsidiaries of international financial institutions.

What is megaregulation all about?

Why was the Ministry of Finance so keen to redistribute its powers in favor of the Central Bank?

When the question arose regarding the effectiveness of the accumulative part of the pension fund, one of the just complaints about the existing system was the lack of supervision and financial regulation. In that regard, we already have a harmonized system of bank supervision. A regulatory framework is in place, plus the qualified personnel of the Bank of Russia — something that the financial market does not have.

From 2005 to the present day, the volume of deposits has increased by 11 trillion rubles ($365 billion) to a total of 13 trillion rubles ($432 billion); while, in the same period, deposits by members of the public in the nonbanking sector have risen by just 1.3 trillion rubles ($43 billion) to 1.56 trillion rubles ($51.6 billion).

The difference in terms of public involvement is almost a factor of 10, partly because financial regulation and supervision have not been correctly tailored.

In the circumstances, our opinion is that it would be wiser not to carry out a complete reform of the activity of the government regulator, but to hand control over to the Bank of Russia. The Central Bank is, after all, an established financial institution. What is more, international practice has shown consolidated supervision over the entire financial market to be far more effective when carried out by a single entity. That is why the government drafted a set of proposals to create a single regulator, and we believe that this will help citizens select the right investment tools for their savings.

Is the financial market ready to innovate?

The Russian financial market has not developed as we would have liked. Russia’s share of the global stock market has steadily declined and is now only 1.5 percent — less than the country’s 2.7 percent share of world G.D.P. Without financial market development, the task set by the president to increase the investment to G.D.P. ratio from 20 percent to 25 percent by 2015 and to 27 percent by 2018 is unachievable.

PHOTOSHOT/VOSTOCK-PHOTO

Finance Minister Anton Siluanov spoke with business daily Kommersant about why Russia needs a financial megaregulator and plans for this year’s round of privatization.

But a lot has been done already.

For example, we are ready to start up the Central Depository, and GKO-OFZ government bonds will be able to be cleared via Euroclear from 2013. Stock, commodity and currency market services are nowV.A.T. exempt. Investment income is due to be released from personal income tax.

But there is still an awful lot to be done. An important task is to complete the capitalization of the central counterparty: its effective operation would resolve many issues, including those related to the liquidity of the financial markets and the development of derivatives trading. It is important to launch the T+2 model for trade settlements, which would make stock exchange operations much more convenient.

We need to finish work on setting up an institution of individual investment accounts, for which taxation will be unified with other individual investments.

Attention needs to be paid to the status of non-government pension funds which limits their efficient operation. It is important to introduce investment products differentiated by the degree of risk involved for future retirees, making such products dependent on age and, perhaps, willingness to take a risk.

There is much to do in the field of insurance. Every year sees up to 100 insurance companies file for bankruptcy, which undermines public confidence, especially in regards to life insurance.

Industry experts say that, provided public confidence increases, savings in the sector could reach 1 trillion rubles ($33 billion) by 2020, up from today’s level of 22 billion rubles ($727 million).

Petr Netreba Kommersant

Savings Recent studies show that Russians continue to spend most of what they earn and do not put much stock into investing

Still Living Paycheck to Paycheck Less than one-third of Russians have any kind of savings. Experts say that low incomes coupled with a lack of confidence in the future are to blame.

EKATERINA SHOKHINA EXPERT

Only 30 percent of Russians have savings of any kind and this number has remained almost unchanged over the past two years, according to a study released by the Russian Public Opinion Research Center (VTsIOM) in December 2012.

The study shows that the people most likely to have savings are senior citizens (35 percent), those with a university education (36 percent) and those who live in Moscow or St. Petersburg (47 percent). Some 67 percent of those polled had no savings at all, and this figure increases to 77 percent in rural areas.

According to VTsIOM, when

Russians do save, it is usually because they plan to buy an apartment or house; twenty-nine percent of those who said they had savings said they were saving money for this reason. Twentyfour percent said they were saving for a rainy day, and 23 percent said they were saving for medical treatment.

Most Russians (55 percent) still consider real estate to be the most reliable investment. The number of those investing in gold and jewelry has decreased from 27 percent to 24 percent over the past few months, while opening an account in rubles at state retail banking giant Sberbank has increased in popularity from 25 percent to 29 percent.

Some 9 percent of Russians prefer to invest “extra” cash in purchases of foreign currency while 7 percent invest in stocks and 3 percent in mutual funds.

Dmitry Miroshnichenko, an ex-

What, if anything, do Russians save for?

RUSSIAN PUBLIC OPINION RESEARCH CENTER(VCIOM)

pert with the Center of Development Institute at the Higher School of Economics, gave just one reason for the phenomenon in Russia.“Poverty is the key reason why most Russians have no savings, which leads to complaints about underdeveloped capital markets,” said Miroshnichenko.“This also helps explain the growth of consumer lending, when people buy basic items — an iron, a phone or a vacuum cleaner — on credit.”

Miroshnichenko added that problems with saving are by no means limited to Russia, pointing out that the United States had a negative savings ratio (with debts exceeding incomes) before the global financial crisis.

A recent poll conducted by market researchers TNS Emnid, however, showed that only one quarter (around 27 percent) of Germans have no savings at all.

Anton Soroko, an analyst at

Finam investment holding, agrees that Russians tend to save less than citizens of other countries, particularly in Europe, but he believes the reason behind the lack of savings in Russia is not so much low incomes as it is the Russian mentality.

“Russians tend to ‘spend to the last ruble,’ whereas Germans are a thrifty nation, with savings being a very important part of their lives,” Soroko said.“What’s more, prosperity growth is only weakly correlated with the desire to save, and under certain circumstances those two variables tend to become completely independent of one another.”

In Soroko’s opinion, increasing wealth is not enough to expand the share of Russians who save.

“It’s necessary to boost the confidence of end consumers in the future,” he said,“and to build an economic system where saving pays more than spending.”

ADVERTISEMENT

06

ADVERTISEMENT

Opinion

RUSSIA BEYOND THE HEADLINES

MOST READ 2013 to Be a Make-or-Break Year for Russian Economy rbth.ru/22013

SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

KEEPING TRACK OF CAPITAL OUTFLOW Andrei Movchan RBC DAILY

apital outflow from Russia features prominently among the economic indicators bandied about in the media and at conferences. It supposedly demonstrates the weaknesses of the country’s economic policy. Yet net capital outflow is a complicated economic concept and cannot be simply distilled into the formula“the bigger the worse, the smaller the better.”

The problem with capital outflow starts with the definition. To begin with, the data that comes from the Russian Central Bank is produced using a complex methodology that incorporates dozens of line items reflecting fund and asset movements. The methodology used by the Central Bank is different from that used by the World Bank, which results in an approximately 50 percent difference between the capital outflow figures produced by the two institutions.Yet even if there were an agreement on the methodology, economists would be hard pressed to identify a relationship between the amount of capital outflow and the quality of a given country’s economy. The world’s biggest capital exporters include some quite successful countries, such as Germany, Switzerland, the Netherlands, Norway, China and Japan. The biggest importers include not only crisisridden Italy and Spain, but also successful countries like the United States and Canada, as well as the rapidly growing economies of Turkey and Brazil.

Therefore, the net capital outflow indicator means little if taken out of the economic context.What is vitally important for the economy is an adequate level of investment and money supply. The key word here is “adequate,” as overheating can be just as dangerous, and net capital outflow is just one small channel for measuring that level. It would also be wrong to say that countries with insufficient levels of investment are encouraged to have a net capital inflow. Internal sources, including increased fund turnover and flow redistribution, can be much more effective.

Capital outflow is determined by examining three components.

First is foreign investment by domestic economic agents, which is is generally beneficial for the economy.Then there is the amount of capital that is exported, particularly yield from a local investment. This is generally bad for the economy because capital

C

IORSH

HOW RUSSIA CAN LEAD THE G-20 Jingdong Hua, Janamitra Devan THE MOSCOW TIMES

ussia has taken the helm of the Group of 20, and with that honor comes a unique opportunity: to lead the international community toward sustainable, inclusive growth and shared prosperity in 2013.

The Russian government has pledged to focus its G-20 presidency on practical solutions to stimulate growth and jobs, manage government debt and regulate the financial sector. Russia could lead in advocating yet another G-20 priority: strengthening local capital markets.

Deep and efficient local capital markets contribute to global financial stability. They are the foundations for long-term economic growth. They provide resilience against volatility in capital flows and reduce dependency on foreign debt. They offer investment alternatives for social security funds, pension funds, insurance companies and other institutional investors that provide safety nets.

Local capital markets provide access to local-currency financing, which is essential for developing the infrastructure and housing sectors that underpin economic growth and long-term development. This enables small and medium-size enterprises to borrow in their own currencies, protecting them from foreign-ex-

R

change risk so they can grow.

Without strong domestic capital markets and access to localcurrency financing, the private sector cannot thrive. A thriving private sector is necessary to give people the opportunity they crave most: to improve their lives.

Russia wants to become an international financial center, and it recognizes that strong, deep domestic capital markets are needed to achieve that role. This year,

International financial institutions such as the International Finance Corporation and the World Bank can be valuable partners to countries as they seek to strengthen their domestic capital markets. For example, just last month the I.F.C. issued its first Russian-ruble-denominated bond in the domestic market. The I.F.C. ruble bond is innovative because it offers inflation-protected returns to investors. The bond

Russia could lead in advocating yet another significant G-20 priority: strengthening local capital markets.

Without domestic capital markets and local-currency financing, the private sector cannot thrive.

the country implemented a number of reforms to strengthen its domestic capital markets and increase the participation of foreign investors. The Central Bank is putting in place measures to facilitate monetary flows and enhance market liquidity. The securities supervisor approved reforms that better support cross-border transactions and better protect international investors. In parallel, as it looks to boost its ranking in the I.F.C./ World Bank“Doing Business”report, Russia is working to improve its investment climate and stimulate growth. All these reforms leave Russia well-positioned to lead the G-20 agenda on developing domestic capital markets.

should encourage greater investor participation and pave the way for future inflation-linked issuances in the Russian market.

The World Bank’s recent report on Russia’s capital market recommends various reforms that will support market development, such as creating more benchmark government bonds, reducing the cost of private issuance and improving securities distribution networks to increase participation by small and medium-size enterprises and small investors.

International financial institutions can also help increase the availability of local-currency financing to the private sector. In Russia, the I.F.C. has invested more than 40 billion rubles ($1.33

billion) since 2005 to support important sectors such as small and medium-size enterprises, health care and infrastructure. To meet the growing demand for longterm local-currency finance in the country, part of the proceeds from the I.F.C.’s debut ruble bond will be invested in the domestic private sector.

Developing local capital markets is a long-term task. Countries must implement sound macroeconomic policies, achieve price stability and realize fiscal prudence. Local regulatory and legal obstacles must be overcome.There is an urgent need for reforms in capital markets, such as the introduction of primary dealer systems, which allow firms to act as market makers of government securities. Also needed are regulations that encourage marketmaking in government and corporate bonds, repo facilities that help finance dealer inventories of securities, and derivatives and hedging instruments for market and credit risks.

The I.F.C., the World Bank and other international financial institutions are helping countries overcome some of these challenges, and Russia can use its influence in the G-20 and similar forums to make a compelling case for encouraging domestic capital markets to thrive.

As the impact of the global financial crisis continues to spread and as large developing economies experience slower growth rates, the need to support development of local capital markets takes on a new urgency. Collaborative efforts among international finance institutions continue today, and Russia is well-positioned to provide further impetus to their efforts.

Jingdong Hua is vice president and treasurer of the I.F.C. Janamitra Devan is vice president of financial and private sector development at the I.F.C.

RUSSIA’S ECONOMY COULD HANDLE A U.S. DEFAULT Stanislav Mashagin SPECIAL TO RBTH

I

LETTERS FROM READERS, GUEST COLUMNS AND CARTOONS LABELED “COMMENTS” OR “VIEWPOINT,” OR APPEARING ON THE “OPINION” PAGE OF THIS SUPPLEMENT, ARE SELECTED TO REPRESENT A BROAD RANGE OF VIEWS AND DO NOT NECESSARILY REPRESENT THOSE OF THE EDITORS OF RUSSIA BEYOND THE HEADLINES OR ROSSIYSKAYA GAZETA. PLEASE SEND LETTERS TO THE EDITOR TO US@RBTH.RU

IORSH

n general, it is senseless to discuss the likelihood of the United States defaulting on its obligations, as it is impossible to assess. While the initial shock of such a default would mean temporary stock market closure and vanishing chunks of the world’s wealth, Russia’s economy — armed with experience from past crises — would weather the storm.

The early consequences of a total default would be the suspension of settlements in the government bond sector and payments in U.S. dollars. This would be followed by a U.S. stock market slump and its closure for several days. The fall of other world indexes would be automatic.

World G.D.P. would plummet and demand for raw materials would evaporate. Nobody would buy oil, gas or steel over a certain period.

A halt in settlements in U.S. bonds and a drop in stock exchange indexes would inevitably and inexorably bring about the

total bankruptcy of the majority of world banks and funds. A huge chunk of the world’s wealth would simply disappear.

Russia today is more vulnerable to a global economic shock than it was in 2008 — in particular, because the Reserve Fund has been depleted and the budget is more dependent on oil.

Before the crisis, the Russian budget was balanced, with oil prices at $50–60 per barrel. To balance the budget today, however, the price of oil would have to be $120, according to some estimates. About 40 percent of government revenue is generated by oil and gas, and the Russian budget as a whole depends on commodity prices.

Following a U.S. total default, budget revenues would fall proportionally to fallen commodities prices, and the Finance Ministry would have to cut spending. Social spending would decrease if not temporarily cease altogether, further weakening demand.

Next, all export-oriented business activity would fall. Producers oriented toward internal de-

Russian companies and government bodies would feel very comfortable in this catastrophic economy.

mand would get a temporary respite (as was the case in 1998), and the food industry might increase its turnover somewhat. In the internal market, the situation would depend heavily on the payment of wages and pensions, as no other sources of demand —

THIS SPECIAL ADVERTISING FEATURE IS SPONSORED AND WAS PRODUCED BY ROSSIYSKAYA GAZETA (RUSSIA) AND DID NOT INVOLVE THE REPORTING OR EDITING STAFF OF THE NEW YORK TIMES. WEB ADDRESS HTTP://RBTH.RU E-MAIL US@RBTH.RU TEL. +7 (495) 775 3114 FAX +7 (495) 988 9213 ADDRESS 24 PRAVDY STR., BLDG. 4, FLOOR 7, MOSCOW, RUSSIA, 125 993.

EVGENY ABOV EDITOR & PUBLISHER LARA MCCOY MANAGING EDITOR EKATERINA ZABROVSKAYA EDITOR OLGA GUITCHOUNTS REPRESENTATIVE (U.S.A.) ANDREY SHIMARSKIY ART DIRECTOR ANDREY ZAITSEV HEAD OF PHOTO DEPT MILLA DOMOGATSKAYA HEAD OF PRE-PRINT DEPT MARIA OSHEPKOVA LAYOUT AN E-PAPER VERSION OF THIS SUPPLEMENT IS AVAILABLE AT HTTP://RBTH.RU.

such as credit and state expenditure — would exist.

To some extent, Russia would benefit from the fact that direct and portfolio investments in the country were at a very low level; the net outflow of capital (currently $80 billion a year) might even diminish because of uncertainty. Thus, Russia already has an insurance cushion consisting of “bad news,” so that a possible decline would be less destructive.

However, after the initial shock wore off, Russian companies would continue to supply gas, oil and metal to the European Union and China on tougher terms of settlement in various currencies.

This is because there would be no consensus on the universal equivalent and market value. Accordingly, budget revenues would gradually recover. The Russian Central Bank’s currency exchange policy would most likely be as follows: it would choose a new currency to which it would peg the rate of the ruble. Obviously, it would be the currency that remained most stable during the period of turbulence. Perhaps a “shrunken”dollar or the euro, but it could also be a basket of currencies, including some new ones.

As soon as the system of currency coordinates emerged, the driver of the Russian economy — commodity exports — would be back with a vengeance. Commodity exporters would get a chance to become real world players.

starts working for another country. Finally, there are payments made to balance prior transactions, such as repaying existing foreign loans. Clearly, not all forms of capital outflow can be considered negative, even in theory.

It is no secret that Russia’s economy is massively underinvested. Russia lacks trillions of dollars in investment in infrastructure, communications, efficient technology and production of added value. Under these circumstances, the“type one”capital outflow is a negative factor.

Yet its size is insignificant in terms of the economy’s needs. Losses to outflows over the past six years have amounted to less than 8 percent of Russia’s international reserves — approximately $33 billion according to the World Bank’s methodology. Of course, this sort of outflow comprises illegally accumulated capital (mainly originating from corruption) being moved abroad, as well as capital saved from excessive risks. Naturally, it hurts, because it is graphic proof of how well the country is run. But “hurt” and “economic relevance”are two different things.

There are capital inflows too, generated mainly by foreign investment — though these can also be different. Cynical foreigners do not invest in the areas where the country is in most need of investment, but rather those where they can earn (and repatriate) the maximum profit. Foreign capital in Russia, even if it comes into the country in amounts exceeding the current levels by an order of magnitude, will focus on debt instruments issued by stateowned corporations and banks, as well as on currency speculation, without helping the country’s development in any way.

To increase investment, Russia needs an independent new judicial system, substantially amended legislation, an efficient system for protecting ownership and minorities’ rights, a new government investment strategy (to replace investment in U.S.Treasuries with simultaneous raising of expensive debt by private companies), a considerable acceleration of cash turnover, demonopolization and a new privatization, as well as many other measures, both internal and external, required for real investment growth. Moreover, it is far from certain that capital outflows will decrease, even as investment grows on a large scale.

Andrei Movchan is a Managing Partner at the Tretiy Rim (Third Rome) Investment Company.

The Russian banking sector would revert to the Soviet model where, after the bankruptcy of the entire sector, 100 percent of the assets of the remaining banks would be cleansed and consolidated within 2–3 state banks not involved in world financial markets: Sberbank, Gazprombank and Rosselkhozbank. Perhaps the state corporation Vneshekonombank would be preserved to deal with nonstandard transactions.

The Russian budget and the state-owned companies would try to mitigate the consequences of the fall of household incomes; the country would see“new jobs”and payments to households from the modest budget, as in previous times during the most difficult economic years. Government spending, in addition to pensions and state company spending, would, with the exception of partially reduced tax and wage payments, be terminated instantly.

This would preserve some liquidity in the first month.

On the whole, Russian companies and government bodies would feel very comfortable in this absolutely catastrophic economy. The experience of the worst crisis years of 1992, 1998, 2004 and 2008 has equipped them with some useful tools consisting of rules and schemes of operation.

Stanislav Mashagin is president of the Personal Strategies investment fund.

TO ADVERTISE IN THIS SUPPLEMENT, CONTACT SALES@RBTH.RU. © COPYRIGHT 2013, FSFI ROSSIYSKAYA GAZETA. ALL RIGHTS RESERVED. ALEXANDER GORBENKO CHAIRMAN OF THE BOARD. PAVEL NEGOITSA GENERAL DIRECTOR VLADISLAV FRONIN CHIEF EDITOR ANY COPYING, REDISTRIBUTION OR RETRANSMISSION OF THE CONTENTS OF THIS PUBLICATION, OTHER THAN FOR PERSONAL USE, WITHOUT THE WRITTEN CONSENT OF ROSSIYSKAYA GAZETA IS PROHIBITED. TO OBTAIN PERMISSION TO REPRINT OR COPY AN ARTICLE OR PHOTO, PLEASE PHONE +7 (495) 775 3114 OR E-MAIL US@RBTH.RU WITH YOUR REQUEST. RUSSIA BEYOND THE HEADLINES IS NOT RESPONSIBLE FOR UNSOLICITED MANUSCRIPTS AND PHOTOS.

ADVERTISEMENT

ADVERTISEMENT

MOST READ Sorokin First Russian Shortlisted for Man Booker Prize rbth.ru/22261

Culture

RUSSIA BEYOND THE HEADLINES SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

THEATER PLUS

INTERVIEW JOHN FREEDMAN

Politics as Performance Art, and Vice Versa

This Is Not My Home, But It’s My World

John Freedman THE MOSCOW TIMES

OKSANA MYSINA

HAS SPENT NEARLY A QUARTER CENTURY IMMERSED IN RUSSIAN THEATER sian critic. Therefore, on the contrary, it captivates me and keeps me going. I will say openly that life in Russia is not easy, for many reasons — from weather to politics. But when you live in a place with such amazing theater and such astonishing people, say, Alexander Bakshi, Dmitry Krymov, Kama Ginkas and her band,Yuri Muravitsky Maxim Kurochkin, Pavel Rudnev and at least 200 others, then life is richer.

In February, an organization called PopUp Theatrics is going to stage a unique performance of modern plays in New York via Skype, including one of your plays. How is that possible?

It’s part of a multicultural festival held once a year called“LongDistance Affair.” The salt of the project is to get people from different countries to fall in love with each other creatively, without having to leave their towns.

The festival will run the whole of February. My play is called “Five Anecdotes from the Heart of Buenos Aires.”Oksana Mysina [a Moscow actress and Freedman’s wife] is also taking part.

It’s all the rage in America now.

NewYorkers come and buy a ticket, but don’t enter a theater, rather a room with 20-40 computer screens. They sit down at a screen for about 10 minutes and watch a short play, starring, say, Oksana Mysina. Her performance ends, the viewer get ups and moves to the next screen, and so on, for a half hour.

Do you remember your first impressions of Moscow nearly a quarter century ago?

I came here to live in 1988, but that was by no means my first time in Russia. I arrived in the middle of perestroika. The first thing that caught my eye was that nothing had changed. In 1988, everything was exactly the same as it had been in when I lived here in 1979, discounting a few kiosks selling fried chicken.

Since then, I’ve witnessed a staggering amount of change. I’d say this is the fifth, sixth or seventh Russia I’ve lived in since coming here. It’s forever shedding its skin and reinventing itself as a country.

Was there ever a moment when you felt like ditching everything and moving closer to Hollywood?

The theatrical world that Oksana and I inhabit is so rich – we both know we wouldn’t find it anywhere else. It’s our strength and raison d’être. If we left, we’d go crazy in three months. Life is meaningless without Moscow, without Moscow theater.

Is Russian theater in its current form really worth uprooting for?

For me, it was definitely worth uprooting from the States for the sake of Russia’s great theater tradition and my love for Oksana Mysina.

Has theater ever let you down here in Russia?

How could Russian theater, with its stunning diversity and richness, ever disappoint? Russian theater can only disappoint a Rus-

Your Russian is excellent. Do you think in the language?

I began way back, even before I arrived in 1988. The first 5–7 years... I used to get dreadfully

HIS STORY NATIONALITY: AMERICAN STUDIED: RUSSIAN LANGUAGE AND LITERATURE AGE: 58

John Freedman has written or edited and translated nine books about Russian theater, including “Silence’s Roar: The Life and Drama of Nikolai Erdman” and “Provoking Theater: Kama Ginkas Directs” (co-authored with Ginkas). His play “Dancing, Not Dead” won the Internationalists’ Global Playwright Contest in

tired by the end of the theater season. But, by the eighth year, it was second nature. It’s not an effort anymore.

How do things stand regarding citizenship?

I’m still a U.S. national, but I have a Russian residency permit, which allows me to work and travel.

AnyadvicefornewarrivalsinRussia?

It’s very individual.

Let’s stick to the world of acting that we know and love.

First, I’d tell them to get immersed in the culture of the place – the arts. Museums, literature, theater ... I’d immediately suggest going to a contemporary stage work in Moscow. In the last eight to 10 years in particular, theater has been the medium through which to explore and uncover the society and politics of the new Russia. So, naturally, I would say to not look only at the news. Do not look only at what is happening in the political sphere — take a look at what’s happening in the arts. That’s Russia’s greatest asset,

ob Dylan said it way back in 1989, in a song called “Political World”: We live in a political world Wisdom is thrown into jail It rots in a cell, is misguided as hell Leaving no one to pick up a trail.

The song as a whole sounds like a brief of recent developments in Moscow cultural life.

One of these was the latest installment of an ongoing project conducted by director Varvara Faer at Teatr.doc. Titled “Theater of Witnesses. Pussy Riot,” it is a mix of theater, film, journalism and reality show crammed into a single event, whose purpose is to keep attention focused on the plight of Nadezhda Tolokonnikova and Maria Alyokhina, the two women sentenced last year to two years in prison for their punk rock protest against President Vladimir Putin at Moscow’s Christ the Savior Cathedral.

Faer mounts these evenings from time to time, inviting as participants activists who are close to Tolokonnikova and Alyokhina. Most of what could be called a theatricalized press conference focused onYekaterina Samutsevich, a Pussy Riot member whose conviction was overturned in October, and Taisia Krugovykh, an activist, video artist and friend of the Pussy Riot women.

Krugovykh, who often travels to visit Tolokonnikova and Alyokhina in prison, showed video footage of the penal colonies, and described her experiences with the authorities and the prisoners.

“There is nothing in these towns,”Krugovykh declared as seemingly endless footage of a cement wall topped by curled barbed wire ran on a makeshift screen.“Just people working at the prisons. You can drive two hours and see nothing but walls.”

B

AMERICAN CRITIC, PLAYWRIGHT AND COLUMNIST

John Freedman spoke to Adilya Zaripova, Anastasia Keizerova and Irina Korneeva of Rossiyskaya Gazeta about his love for Russian theater and what keeps him coming back for more.

2011. He has been the theater critic of The Moscow Times since 1992; a columnist for Plays International since 1994; the editor of the Russian Theater Archive for Harwood Academic Publishers (1992-2002); and is a frequent contributor to American periodicals.

Freedman received his Ph.D. in Slavic Languages and Literatures from Harvard University (1990), his M.A. from George Washington University (1983) and his B.A. from the University of California, Irvine (1980).

and its wealth is unparalleled.

Every country has its treasures, but Russian art, Russian theater, Russian music, Russian literature are sublime. I’ve lived here for 24 years, and I never cease to admire the artistic accomplishments of the past 300–400 years, and today’s artists continuing that tradition. This is not my home, but it’s my world — the world in which I live.

PLAN YOUR VISIT

The multicultural theater festival Long-Distance Affair will take place on Tuesdays and Thursdays from Feb. 5 through Feb. 28. Only 30 tickets are available each night.

Tickets are $25 and can be purchased at OvationTix.com or by calling (866) 811-4111. All performances take place at The Gershwin Hotel, 7 East 27th Street.

Protests Art directors and curators take to the streets to protest changes

Employees of the Gogol Theater, the ZIL House of Culture and the Mayakovsky Museum argue that the current slate of reforms are threatening their institutions STEPAN IVANOV

PHOTOXPRESS

COMBINED REPORT

Anatoly Beirak (center) has criticized changes at the Gogol Theater.

Culture is in the midst of reorganizing several establishments, including the Gogol. The takeover was deemed necessary because the theater’s regular attendance numbers had dwindled to 30 percent of its capacity – and the majority of even this audience was made up mostly of schoolchildren attending performances as a group. In August, Sergei Yashin, a distinguished actor who ran the theater for 30 years, was dismissed and replaced by

Kirill Serebrennikov, one of Moscow’s most popular directors.

Serebrennikov promptly disbanded part of the troupe, began renovating the building and made other unpopular decisions.

At the protest, Gogol Theater stage director Anatoly Beirak said that the theater has gone into a serious decline. Beirak said that he doubted Serebrennikov’s competence and, moreover, he suspects that the current reconstruction of the theater is in fact

Putin was almost right about everything he said, but, in fact, he was wrong on every single point of his commentary.

There were no effigies hung, but rather live activists played the parts of bodies killed by hanging. There were no calls to “free Moscow of Jews,” although one of the activists, known as Seroye Fioletovoye, is Jewish. Finally the slogans berating gays and guest workers were not put forth by the protesters at all, but were included in a larger protest action calling attention to nationalist youth groups who, indeed, often put out calls of this nature. In short, as Samutsevich pointed out, Putin was almost right about everything he said on the topic, but, in fact, was wrong on every single point of his commentary.

It was an often moving, chilling and funny evening. For someone like myself, who came of age reading the Gulag literature of Alexander Solzhenitsyn andVarlam Shalamov, it was a distressing reminder of how some things have not changed in Russia. And yet the fact that the performance took place at all clearly suggests that there are individuals committed to not letting the present slip into the past.

Take an Impossible Trip

New Collection Reveals an Intimate Portrait of Nabokov SPECIAL TO RBTH

Department of Culture Holds Firm on Reforms

Samutsevich took the stage to describe a Pussy Riot protest action that caught the particular attention of Vladimir Putin in an interview he gave to the RT television channel. Putin declared that a “couple of years ago” the group hung effigies at a supermarket bearing slogans such as “free Moscow of Jews, gays and guest workers,”and suggests that authorities should have taken action against them back then.

It was one of the evening’s most interesting moments as it illustrated well the difference between having, and almost having, a command of the facts.

As Samutsevich described it, the event took place not a “pair of years ago,” but four years ago.

BIBLIOPHILE

Phoebe Taplin

Although the gathering didn’t attract the thousands who turned out to protest the ban on adoptions of Russian children by Americans, the small group of people who met in the middle of January to demonstrate against the policies of the Moscow Department of Culture prided themselves on the quality rather than quantity of their group. Actors from the Gogol Theater marched along with curators from the Mayakovsky Museum and the ZIL House of Culture.

The protest, organized by the Angry Citizens Movement with the support of the Communist Party, took issue with theater reforms, the reconstruction of museums and the establishment of new houses of culture. The group called for the resignation of Sergei Kapkov, head of the Moscow Department of Culture, and criticized changes in personnel made by the Culture Department, including the replacement of the director of the Gogol Theater.

The Moscow Department of

07

preparations to raze the building. “Our theater is a pilot project,” said Beirak.“Other cultural establishments will be reformed along the same lines.”

For its part, the ZIL House of Culture, located on the site of a gigantic former automobile plant, has become a more modern space.

An announcement on its Web site reads: “As of Fall 2012, the activities of this center will focus on five principal areas: creative development, performance arts, public lectures, a public center (library) and dance programs.”

These are the same areas that were offered in Soviet times; nevertheless, a former employee said that in the last nine months it had ceased to exist as a center for public creativity, adding,“The new leadership is putting a new system of administration in place.

Soon everything will be on a commercial basis.”

Concerns also exist about the future of the Mayakovsky Museum. Currently it is home to a modernist exposition devoted toVladimir Mayakovsky, the early 20th century Russian poet and founding member of the Russian Futurism movement. However, the Moscow Culture Department has announced plans to close the museum for reconstruction. “They tell us that the building is unsafe, but there have been no commissions of experts, no confirmations to this effect,”said Irina Mamontova, a former museum employee. Meanwhile, Kapkov has denied the rumors.“The museum is not in any danger, except from its worn-out pipes and wiring,” Kapkov said.

TITLE: COLLECTED POEMS AUTHOR: VLADIMIR NABOKOV PUBLISHER: PENGUIN

ovelist Vladimir Nabokov, celebrated for masterpieces in Russian and in English including “Lolita” and “Pale Fire,” was ashamed of his juvenile attempts at poetry. He referred, in his 1970 collection“Poems and Problems” to“the steady mass of verse which I began to exude in my youth … with monstrous regularity.”

Judging by a new book that surveys six decades of Nabokov’s poetic output, he was right to be embarrassed about his early works.

Most teenage versifying is best forgotten, and to open the volume with “Music,” which Nabokov wrote when he was 15, gives a ridiculous impression of the writer’s skills, and of his son Dmitri’s powers of translation. The repetition of archaic verbs like “plashing” and clichéd similes“like diamonds” must have made the older Nabokov wince.

Ten years later, Nabokov still offers lines like“fleetingly shimmered ineffable echoes/ of a vibrant nightingale,”but the mature novelist’s pitch-perfect ear for tone and metaphor becomes evident in the playful, later poems, especially those written in English; even here he is hamstrung by strict rhyme-schemes and a formal conservatism at odds with the radical originality of his novels.

Dmitri Nabokov’s translations don’t always do justice to the Russian poems.To dispense with

N

rhymes is excusable (even necessary), but to translate into lines that do not scan distorts the aural grace of the original.

Despite all this, the autobiographical intimacies in this book will fascinate Nabokov’s fans. He writes movingly and perceptively about language, memory, identity and exile.

In “Poems and Problems,” he identified the different stages of his own early poetic career, moving from verses of love and politics through nostalgia to narrative. Examples from each of these phases are represented, together with the robust style of his later poems.

“The University Poem,” written in 1926 and published here for the first time in English, recalls Nabokov’s student years in Cambridge. It uses the meter and verse form of Pushkin’s “Eugene Onegin” to produce an ambivalent evocation of a rainy market town, and an ironic parody, reminiscent of “Pale Fire.”

Language, as a theme, haunts both the Russian and the English parts of this anthology. Nabokov was a prolific translator and there are several poems that play on his bilingualism. In his parodic poem about translating“Onegin,” he laments“Elusive Pushkin! Persevering, / I still pick up Tatiana’s earring.”

In the brilliant“Evening of Russian Poetry,” the narrator talks about customary rhymes in Russian: “love automatically rhymes with blood, / nature with liberty, sadness with distance …”

Poetic Nabokov at his best achieves a subtle sublimity. He explores the writer’s dual existence, as fallible human and as immortal creator. In these poems, Nabokov reveals his creative strengths and his all-too-human weaknesses.

ADVERTISEMENT

08

ADVERTISEMENT

Feature

RUSSIA BEYOND THE HEADLINES SECTION SPONSORED BY ROSSIYSKAYA GAZETA, RUSSIA WWW.RBTH.RU

MOST READ Expats Give Advice on a Winter Trip to Moscow rbth.ru/22141

Travel The popular Web site is growing its Russian-language community, but advice about Russia itself is hit or miss

VIEWPOINT

TripAdvisor’s Coverage of Russia Gets Some Mixed Reviews

Learning to Sell Snow

Reviews on Russian cities and businesses are growing on TripAdvisor, but users say they miss reviews from locals about out-of-the-way places.

PHOEBE TAPLIN

The travel Web site TripAdvisor launched in Russia just over two years ago, but already it has more than 1.5 million visitors per month. TripAdvisor spokesman Angus Struthers is proud of the site’s success. “The site seems to resonate with Russian travelers as they come to research their holidays or business trips. There are more than 12,000 Russian businesses on TripAdvisor,” Struthers said. He added that the site’s philosophy is the same no matter in which country it operates —“to help travelers plan and have the perfect trip.”

TripAdvisor’s strength has always been its huge number of reviews: More than 75 million travelers have given opinions about more than 1.6 million businesses worldwide, and the number continues to grow. Said Struthers: “We are the world’s largest travel Web site, and the sheer volume of reviews on TripAdvisor allows travelers to get the complete picture of a business, and make an educated decision based on the opinions of many, before they book their trip.”

But while the numbers show that the Web site is growing in popularity among Russian travelers, English-speakers who want to research travel in Russia have mixed feelings about the site’s coverage of the country.

Mireille Rochard, a native of France who lived for several years in Moscow, has used TripAdvisor to research everything from restaurants in Paris to hotels in Morocco. She praises the site’s speed and comprehensive coverage.“Out of 43 feedback reviews, you can form your own idea of the product,” Rochard said. Looking for information about St. Petersburg,

SHUTTERSTOCK/LEGION-MEDIA

SPECIAL TO RBTH

DISCOVER RUSSIA

THE NUMBERS

21

million foreigners visited Russia in the first 9 months of 2012, according to Rostourism.

75 1.5

million travelers have given opinions on Trip Advisor of about 1.6 million businesses.

TripAdvisor reviews led her to the Antique Rachmaninov Hotel: “Location, comfort and price were most important, and the TripAdvisor recommendations were great,” she said.“We stayed there three times!”

St. Petersburg, which appeared in the site’s Travelers’ Choice awards section in both 2011 and 2012 as one of Europe’s best destinations, may be the exception

million people visit TripAdvisor Russia to research travel each month.

that proves the rule. Visitors to other Russian cities have found coverage lacking.

Darren Carlaw, editor of Stepaway Magazine, an online journal of stories and poems about urban exploration, used TripAdvisor to research restaurants when he visited Moscow for the first time in 2010. He found that it always seemed“to lead to the same old suggestions, which are more

Check out our new, improved travel section to find useful tips about visiting Russia.

Read more at rbth.ru/travel

about avoiding Russian cuisine than exploring it.” Carlaw described TripAdvisor’s coverage of Russia as having“a different feel” compared with other countries.

“In terms of restaurant reviews, TripAdvisor — for Moscow and St. Petersburg certainly — seems to fall into two categories: recommendations by diners who have enjoyed a Disneyfied version of Russian cuisine, and the

Marat Guelman VZGLYAD

really snowy winter could be a great way for Russia to build a niche tourist brand. The Russian winter — it’s already a Russian idea and a local brand, as well as an integrator of every conceivable, inconceivable, simple or hogwash concept of Russian identity.

Snowy winters could be for Russia what the Mediterranean is for Turkey or what classical ruins are for Italy — a bright and attractive concept that projects a unique niche in world tourism. Russia has to learn how to sell snow: It has a lot more than just oil and gas. At Lake Baikal in Siberia, local bigwigs moan about the tourist season being so short — just July and August, but the different nature preserves in the area would be much more interesting to visit during the four months of winter.This is where Russia is ahead of its competitors. With its wide open spaces and diverse natural environment, even the Finns can’t keep in front of Russia.

A snowy winter is amazingly beautiful. None of the woeful kitsch ideas from Russian architects, wannabe designers or faux-European projects can mess up the magnificence of snow-dusted cities, hills or fields.

Russian science could even pick up a few tips from winter.

There are huge domestic markets for energy-efficient building technology, as well as advanced textiles.

Russian winters lay outside politics, on the one hand; but, on the other hand, it fought on Russia’s side against the French in 1812 and in the World War II. This makes it a very acceptable patriotic brand that can also be worked in with other “distinctly Russian” concepts.

What’s Russian vodka for? It warms you up. Where do you jump after sweating it out in the Russian bathhouses?

Straight into a snowdrift. You get the idea.

A

recommendations of those who are trying to avoid Russian cuisine at all costs,”Carlaw said. He complained that TripAdvisor led him to Moscow’s Cafe Pushkin where he ended up “eating dull, overpriced food with tourists.”He suggested one reason for the site’s failure in this area: “Useful discussions of Moscow dining options take place online in Russian. Few Muscovites appear to post on TripAdvisor in English, commenting on their own city — and why should they? And so, we are often presented with an outsider’s view … as with most cities, the best results come from talking to locals.”

Karen Percy, a journalist from Adelaide, Australia, who is currently living in Russia, recently used TripAdvisor to research trips to Nizhny Novgorod and Kazan.

She found it an interesting experiment in how erratic the Russian coverage still is.“Nizhny Novgorod had better quality feedback and more establishments seemed to have reviews, with lot of pictures, addresses and Web sites,” Percy said. “In researching Kazan, there were many sights listed but very limited information. [Reviews were] contradictory, not helpful or nonexistent, [with an emphasis] on expensive, high end, Moscowstyle restaurants or low-end eateries and not much in the middle. I suspect it might take TripAdvisor quite some time to build up a solid base of reliable information in Russia.”

Percy noted that only limited numbers of foreign tourists go beyond the big cities while local travelers might not have enough experience for a critical review.

She is among the growing number of travelers in Russia to add her feedback to the Web site’s database.

Struthers said that Russia is a very important market for TripAdvisor.“As we continue focus on it, we expect we’ll see more businesses and reviews added in many areas of the country,” he said.

Tourism New Yorkers interested in visiting Russia got to check out some new destinations at a recent trade fair in the city

Making the Case for a Russian Holiday ANNA ANDRIANOVA SPECIAL TO RBTH

Representatives from more than 150 countries filled the Jacob K. Javits Center in mid-January for the NewYork Times Travel Show, an annual showcase of top vacation destinations. This year, the show celebrated its 10th anniversary and had a new addition — Russia, which was exhibiting for the first time.

Last year around 300,000 Americans visited Russia, said Nikolai Novichkov, deputy head of Russia’s Federal Agency for Tourism. Novichkov said that the majority of American visitors traveled in tour groups, but that the Russian government is launching programs to attract more individual tourists.

“We are trying to create an infrastructure where there will be no need to talk to a tour operator, and tourists will be able to book hotels and buy tickets online,”said Novichkov. The main step, he said, is to provide information in English, and there are a growing number of information centers with English assistance all over Russia.“But this is

a long ongoing process that we are working on,” Novichkov added.

The Russian exhibit at the travel show featured information on visiting Moscow and St. Petersburg as well as advice on how to take a journey on the TransSiberian Railroad. Additionally, the Federal Agency for Tourism highlighted a few new destinations: Dombai, a ski resort in the North Caucasus popular with Russians; the Museum of the Soviet Union in Vladimir Lenin’s hometown of Ulyanovsk; and the Shantar Islands off the coast of Russia’s Far East.

Dombai, located within the Republic of Karachayevo-Cherkessia, is actively trying to attract international guests to its slopes.

To get there, visitors must take a two-hour flight from Moscow to Mineralnye Vody, and from there a tourist bus to the ski resort.

Apart from breathtaking mountain views, the area is famous for its lamb kebabs and underground springs. The local administration hopes that visitors interested in Dombai might also visit their next ski destination: Arkhyz, a tiny mountain village close to the Black Sea, where a new resort is expected to open in 2015.The area is already popular with the snowboarders known as freeriders and other extreme sports enthusiasts.

History on display

ANNA ANDRIANOVA

For the first time, Russia’s Federal Agency for Tourism promoted the country at the New York Times Travel Show, an annual trade show for the tourism industry.

The Russia booth showed potential visitors what the country offers.

Ulyanovsk, in the Ural Mountains, appeals more to history buffs than those into extreme sports. After the fall of the Soviet Union, many monuments to Lenin, once elevated at the main square of every city, were dismantled. Now, after two decades, historians are afraid of losing this history.

The new museum in Ulyanovsk is being built to chronicle the saga of statues and artifacts once celebrated and now scattered.

Sergei Lakovsky, director of the Ulyanovsk Tourism Center, said, describing the importance of the new complex:“There are a lot of interesting artifacts in Russia but many of them are sitting in storage.”

And Lakovsky isn’t satisfied just with statues.“I guess the most interesting artifact that we would want to see there (in the museum) is Vladimir Lenin himself.

We think he should leave Red Square and be buried in his motherland,” said Lakovsky.

One of the important historical artifacts on display in the museum is Joseph Stalin’s smoking pipe, which became an integral part of the Soviet leader’s image. The first impression of the legendary Soviet poster “Motherland is Calling” is also in the museum’s collection. This propaganda poster encouraged

Russians to enlist during World War II.

Farther than the Far East There are still vast swaths of Russia that are relatively unexplored.

The Shantar Islands on the sea of Okhotsk in the Far East is one of those. The islands are mostly devoid of living creatures — except for bears — and the water is frozen for much of the year; the islands see the first snow as early as September. The islands are trying to build up their reputation as a popular fishing destination.

Visitors at the travel show were interested in practical issues, like the visa process and travel maps of St. Petersburg. Some of them have never been to Russia, but are planning to go during the next few years. Andrew Wiens, a sales manager from California, said:“I am looking to travel. It’s a place that I really did not know a lot about so I stopped to see what I can learn. I grew up seeing Russians as the bad guys in movies; I want to see the real Russia.”

NewYorker Keith Sherman has been to Russia, but is interested in visiting again.“I feel deep affection for the Russian people,” said Sherman, whose grandparents emigrated to the United States from Ukraine, “their culture, their music, their zest for life ... their vodka.”

Find news from Russia in your inbox!

SUBSCRIBE to top weekly news

rbth.ru/subscribe